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Damages - Assessment of Damages. Marshall v. Hall [damages]
In Marshall v. Hall (Ont Divisional Ct, 2025) the Divisional Court allowed a vendor plaintiff appeal, here from an APS breach action, here on a damages issue:The Best Indicator of Market Value of a Property is what an Arm’s Length Purchaser Will Pay for the Property in the Open Market
[45] The trial judge rejected the proposition that the best indicator of market value of a property is what an arm’s length purchaser will pay for the property in the open market. As I will explain, this is a proposition which should have represented the starting point for the judge’s analysis.
[46] It is well-established that, as a general principle, where a purchaser fails to close a real estate transaction and the vendor takes reasonable steps to sell the property in an arm’s length sale to a third party in mitigation of damages, and there is nothing improvident about the sale, the difference between the two sale prices will be used to calculate the damages: Arista Homes (Richmond Hill) Inc. v. Rahnama, 2022 ONCA 759, at para. 9.
[47] There is no authority for the trial judge’s assertion that “absent exceptional circumstances, a resale below fair market value may not constitute “reasonable steps”, as such would render an unfairness to the defendants”, the effect of which would be to reverse the burden of proof
[48] Rather, as explained by Kimmel J. in Marshall v. Meirik, 2021 ONSC 1687, at para. 29, the onus is on the plaintiff to establish the resale price which will presumptively be the fair market value of the property:The damages formula is relatively straightforward. It is the original purchase price under the APS (which is known) less the market value of the Property on the assessment date, and then subject to further adjustment to account for mitigation considerations, if applicable. See 100 Main Street [100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 1978 CanLII 1630 (ON CA), 20 O.R. (2d) 401 (C.A.)] at para. 55. In describing the onus on a plaintiff to prove their damages, the Court of Appeal in 100 Main Street said (at para. 81):Included 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. [49] In Palladino v. Durham, Sutherland J. was faced with conflicting expert appraisal evidence on the market value of a property. One appraiser opined that the fair market value of the property in question was $625,000. The other appraiser put the value in a range between $675,000 - $700,000. Following 37 days on the market after the original sale transaction had failed to close, the vendors accepted an offer of $625,000 in what the court described as a “down market”. In concluding that the price paid for the property by an arm’s length purchaser on resale was the best indicator of fair market value, Sutherland J. referred to the decision of the Nova Scotia Court of Appeal in Royal Bank v. Marjen Investments Ltd. (1998), 164 N.S.R. (2d) 293, 491 A.P.R. 293, 155 D.L.R. (4th) 538, 1998 NSCA 37, at para. 31:When the property has been resold, however, and, particularly, when subjected to vigorous marketing efforts … the Court should generally not depart from the selling price. Appraisal reports are a best guess, albeit by a person experienced in the real estate field. It is the market that actually determines the value of the property. [50] The trial judge pursued a different approach in his analysis. After framing as “the main issue in this case” whether the court should accept or reject that the $635,000 resale price was the fair market value of the property at the time of the resale, he then engaged in what he described as a credibility assessment between the views of Paul Marshall and Les Otto on fair market value, concluding that he preferred the evidence of Mr. Otto.
[51] The trial judge expressly declined to apply the proposition enunciated in Palladino because he considered the facts and conclusions in that case to be different than the case before him. The decision in Marshall v. Meirik was not referred to by the trial judge at all (the Court of Appeal’s decision in Arista Homes had not yet been released).
[52] The appellants submit that, there being no finding by the trial judge that the sale of the property was not at arm’s length or improvident, the trial judge erred by relying on the opinion of fair market value given by a real estate appraiser called by the respondents to determine damages, rather than the evidence of what an arm’s length purchaser was prepared to pay.
[53] I agree. Unless the defendant can prove that the sale was not to an arm’s length third party, or that it was improvident (i.e., the vendors were thriftless, imprudent, prodigal, careless, wasteful or shortsighted), the resale price is the presumptive fair market value. In such circumstances, there is no need for expert appraisal evidence. This court affirmed that approach in Eyelet Investment Corp. v. Song, 2024 ONSC 2340 (Div. Ct.), at para. 72, citing Arista Homes.
[54] It can readily be seen why the resale price should the “normal measure” of damages in the absence of compelling reasons to do otherwise. In Marshall v. Meirik, Kimmel J. alluded to the “subjective variability of the expert appraisal evidence”, which she attributed to the experts’ “different points of emphasis”. Or, as Bateman J.A. in Marjen put it (at para. 31), “[a]ppraisal reports are a best guess, albeit by a person experienced in the real estate field. It is the market that actually determines the value of the property”.
[55] It was an error of law for the trial judge to bypass the resale value as the presumptive fair market value of the property, and instead to launch into a search for fair market value based on a credibility assessment between Paul Marshall and the respondents’ expert.
[56] As a result, the trial judge’s assessment of fair market value of $675,000 cannot stand: the correct assessment of the appellants’ damages, subject to mitigation, should have been the difference between the price agreed to in the APS ($701,000) and the eventual sale price ($635,000) - namely, $66,000.
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