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Real Property - Breached APS (2). Zhang v. Primont Homes (Caledon) Inc.
In Zhang v. Primont Homes (Caledon) Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from a trial judgment that found the real estate professional defendants negligently misrepresented the location of a property for which the plaintiffs entered into an APS as purchasers.
Here the court considers when a plaintiff may assert tort damages in a contractual (breached APS) context:[23] The appellants’ first causation argument is that the respondents could not legally establish that they suffered any loss as a result of the misrepresentation because they did not complete the purchase. To put it another way, the respondents were required to prove that they had the right to repudiate the APS as a condition precedent to any recovery against the appellants.
[24] The appellants rely on Kaltenegger v. Cao, 2022 BCSC 2203 for this proposition. In that case, Mr. Kaltenegger sued Ms. Cao after she repudiated her agreement to buy his house. Ms. Cao took the position that she was entitled to abandon the contract because both Mr. Kaltenegger and Ms. Cao’s realtor, Mr. Liu, had misrepresented the property’s boundaries. The B.C. Supreme Court trial judge who heard both actions concluded that Ms. Cao had not proved that she was entitled to repudiate her contract with Mr. Kaltenegger and that she must accordingly compensate him for the difference between the price she agreed to pay for the house and the price he ultimately obtained for it from another buyer. Although Ms. Cao had proved that Mr. Liu made negligent misrepresentations that induced her to enter into the contract, the trial judge held that this “negligence did not entitle Ms. Cao to break her contract with Mr. Kaltenegger.” As a result, Ms. Cao was not entitled to recover any damages for Mr. Liu’s misrepresentations.
[25] Based on Kaltenegger, the appellants contend that, since the respondents did not comply with their obligations pursuant to the APS, they cannot recover any damages flowing from the appellants’ misrepresentation.
[26] I reject this argument. I am not persuaded that Kaltenegger establishes a general rule that any plaintiff who agrees to buy property based on misrepresentations of any kind by a third party, such as a realtor or lawyer, is legally foreclosed from recovering damages for that misrepresentation if they fail to complete the purchase. The result in Kaltenegger was, on my reading, specific to the facts of that case. Alternatively, if Kaltenegger does purport to establish a general rule, I reject it. The appellants have not pointed to any other authority supporting their argument on this point. Their position is moreover inconsistent with the Supreme Court of Canada’s jurisprudence on concurrent liability.
[27] The appellants are conflating the issue of causation with the respondents’ entitlement to assert a separate cause of action against the appellants because of their negligent misrepresentation. The two issues are distinct. A party who has suffered damages may have concurrent claims in contract and tort. In a case “where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, except where the contract indicates that the parties intended to limit or negative the right to sue in tort”: BG Checo, at p. 26, citing Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147. As stated in Rafuse, at p. 206, “the plaintiff has the right to assert the cause of action that appears to be most advantageous to him in respect of any particular legal consequence”.
[28] In Edgeworth Construction Ltd. v. N. D. Lea & Associates Ltd., 1993 CanLII 67 (SCC), [1993] 3 S.C.R. 206, the principle of concurrent liability was applied where a plaintiff had concurrent claims in contract and tort against two different parties. A contractor successfully bid on a road building contract and entered into a contract with the province of British Columbia for the work. It alleged that it lost money on the project due to errors in the specifications and construction drawings by an engineering firm hired by the government. The contractor sued the engineers who had done the work and their firm for negligent misrepresentation. The action was struck on the basis that the plaintiff’s sole recourse was a claim in contract against the government. Citing BG Checo, the Supreme Court of Canada allowed the plaintiff’s appeal, rejecting the argument that the plaintiff’s contract terminated any duty of care between the contractor and the engineers. In short, “the presence of a contract does not bar the right to sue in tort”: Edgeworth, at p. 217.
[29] Citing BG Checo as well as Rafuse, the Court also rejected the argument that the contractor ought to have sued the province, which could then in turn bring a third-party claim against the engineers. It held that “the notion that there is only one right way to proceed – in contract – undercuts the philosophy expressed by this Court … that plaintiffs may sue concurrently in contract and tort, provided the contract does not negate the imposition of a duty of care in tort”: Edgeworth, at p. 220.
[30] There is no suggestion that anything in the APS in this case precluded the respondents from suing their own real estate agent or broker for a negligent misrepresentation. There was therefore nothing preventing the respondents from suing the appellants, whether or not they chose to pursue a claim in contract (or tort) against Primont. Whether or not the respondents, by failing to close the transaction with Primont, were themselves the authors of the damages they claim against the appellants, is a separate question, to which I now turn. . 1000425140 Ontario Inc. v. 1000176653 Ontario Inc.
In 1000425140 Ontario Inc. v. 1000176653 Ontario Inc. (Ont CA, 2024) the Ontario Court of Appeal considered rescission in a fraudulent real estate transaction context:[30] A finding of fraud in the context of a real estate transaction induced by misrepresentations is sufficient reason not to allow execution of the contract to constitute a barrier to rescission: Singh v. Trump, 2016 ONCA 747, 408 D.L.R. (4th) 235, at para. 157; Redican v. Nesbitt, 1923 CanLII 10 (SCC), [1924] S.C.R. 135. As such, rescission of the APS was warranted along with equitable damages for additional expenses related to the purchase and ownership. For these reasons, we would dismiss the first ground of appeal. . 2533619 Ontario Inc. (Calibrex Development Group) v. Lucadamo
In 2533619 Ontario Inc. (Calibrex Development Group) v. Lucadamo (Ont CA, 2024) the Ontario Court of Appeal dismissed a breached APS appeal, here involving a 'timing' issue:[7] The application judge properly applied the applicable governing principles. As she correctly stated, first, where an APS has an ambiguous deadline or no fixed deadline for closing, “the law will imply a term that it must be performed within a reasonable time” and that “what is reasonable will be determined on the facts of the individual case”: see e.g., Jesan Real Estate Ltd. v. Doyle, 2020 ONCA 714, 26 R.P.R. (6th) 233, at para. 48; Ju v. Tahmasebi, 2020 ONCA 383, at para. 20. Further, she considered that “the court will readily imply a promise on the part of each party to do all that is necessary to secure performance of the contract”, citing to Dynamic Transport Ltd. v. O.K. Detailing Ltd., 1978 CanLII 215 (SCC), [1978] 2 S.C.R. 1072, at pp. 1083-84.
[8] We also agree that the application judge correctly distinguished Stamm v. Ratz, [1990] 37 C.L.R. 233 (Ont. Dist. Ct.), a decision that is not binding on this court, and that turns on its own facts. In Stamm, the court applied the governing principles referenced above in para. 7 in circumstances where there was no determined fixed or target date for completion of home renovations that could inform the determination of what was a reasonable time for the performance of the contract. The court found in the particular circumstances of the Stamm case that it was reasonable for notice of a deadline for completion to have been given. However, we do not read the decision as stipulating that notice is mandatory in every case. Rather, whether notice is fairly required is one aspect of the constellation of factors, including the relationship between and reasonable expectations of the parties and the length and explanation for the delay in performance, that informs what is reasonable in the circumstances of each case.
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[10] As the application judge found, since the appellant had taken no steps to fulfill its obligations under the APS for almost five years without explanation, by the time the appellant started to take steps in 2022, it was already in breach. It was open to the application judge to find that the target date, while not a fixed closing date, nevertheless informed what delay would be reasonable in this case, and that by its inordinate delay, the appellant had therefore failed to perform its obligations under the APS within a reasonable time. As the application judge also observed, the appellant “did not need to be put on notice that [it] was obliged to do all that was necessary to obtain approval in a timely fashion”.
[11] The respondent was not in breach of any obligation under the APS and had not passively acquiesced to the appellant’s breach. The respondent had no obligation in the circumstances of this case, as found by the application judge, to give the appellant another chance to cure its default. By refusing access to his property, taking the position that the APS was at an end and refusing to deal further with his real estate agent or the appellant, the respondent clearly communicated its acceptance of the appellant’s repudiation of the APS. . Switzer v. Petrie
In Switzer v. Petrie (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal against a vendor's successful breached APS action where they obtained judgment for the difference in the reduced sale price after repudiation:[2] The parties entered into an agreement of purchase and sale (the “APS”) on May 14, 2022, for a purchase price of $810,000. The appellant purchasers provided a $15,000 deposit. The closing date was to be July 14, 2022, but on July 4, the appellant purchasers notified the respondent vendors that they would not be closing.
[3] The next day, the respondent vendors re-listed the property for $699,900, which was the listing price when the appellant purchasers made their offer of $810,000. On July 19, 2022, the respondent vendors accepted an offer to purchase of $600,000 from a third party. That transaction closed on August 19, 2022. It was the only offer the respondent vendors received after re-listing.
[4] The respondent vendors brought the action below seeking damages for breach of contract for the differential between the sale price in the APS and the sale price to the third-party purchaser, plus various transaction costs of the failed transaction.
[5] The respondent vendors were successful on a motion for summary judgment. The appellant purchasers did not dispute that they breached the APS. The only live issues were whether the respondent vendors mitigated their damages and whether the matter was suitable for summary judgment. The appellant purchasers argued that the sale was improvident and faulted the respondent vendors for listing the property for re-sale below fair market value and accepting the first offer they received. The appellant purchasers also resisted the motion for summary judgement on the basis that the mitigation issue required a full trial.
[6] The motion judge found that a full trial was not necessary and granted summary judgment in favour of the respondent vendors. He was content that the price obtained on the third-party sale represented the fair market value.
[7] On appeal, the appellant purchasers renewed their argument that a trial of the issue was required and that the respondent vendors did not make reasonable efforts to mitigate their losses. We do not agree in either respect.
[8] First, with respect to the appropriateness of proceeding by way of motion for summary judgment, the motion judge made no error in determining that a trial was not necessary. It was open to the appellant purchasers on the summary judgment motion to lead expert evidence as to fair market value, or to adduce evidence as to the inadequacy of the respondent vendors’ sale efforts including by cross‑examination on affidavits. They did none of those things. Parties to a summary judgment motion are required to put their best foot forward, and a motion judge hearing a summary judgment motion is entitled to proceed on the basis that the parties have put into the record all of the evidence that would be forthcoming at trial.
[9] The appellant purchasers also argued that the motion judge should have followed the process in Marshall v. Meirik, 2021 ONSC 1687, where the motion judge, due to the “unusual circumstances” of the third party re-sale, directed the parties to adduce further evidence about mitigation efforts in a mini-trial. In our view, the motion judge made no error in not adopting the process from Marshall v. Meirik. Contrary to the appellants’ submissions Marshall does not stand for the principle that in any case where a purchaser resisting summary judgment submits, without evidence, that an inference of improvident sale could be drawn, the onus shifts to the vendor to lead evidence in a mini-trial to negate the inference. While the unique or unusual circumstances referred to in Marshall may ground a motion judge's discretionary decision to require further evidence, they do not obligate the motion judge to request further evidence nor do they reverse the onus. We see no reviewable error.
[10] Second, it was open for the motion judge to conclude that the appellant purchasers did not satisfy their onus of establishing that the sale was improvident. The motion judge did not err in declining to draw the inferences the appellant purchasers invited him to draw from the fact that the purchase price of the third‑party sale was significantly below the price that the appellant purchasers were initially (but not ultimately) willing to pay, the timeline of the resale to a third party, and the absence of any evidence of marketing efforts and negotiations with the third party purchasers in aid of securing a better price. The appellant purchasers are unable to point to any palpable and overriding error that would allow appellate interference. . Naeem v. Bowmanville Lakebreeze West Village Ltd.
In Naeem v. Bowmanville Lakebreeze West Village Ltd. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal against a granting of 'relief from forfeiture', here respecting an APS deposit:[5] The appellant’s main argument is that the motion judge applied the wrong legal test for granting relief from forfeiture. Citing Shah v. Southdown Towns Ltd., 2017 ONSC 5391 and Wang v. 2426483 Ontario Limited, 2020 ONSC 3368, the appellant submits that “relief from forfeiture is not available to a party as a remedy where the contractual breach was entirely [that party’s] fault and within [that party’s] control”.
[6] We disagree. The motion judge correctly referred to and relied on the factors set out by this court in Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374, which has been followed in numerous other cases: see e.g., Ching v. Pier 27 Toronto Inc., 2021 ONCA 551; Azzarello v. Shawqi, 2019 ONCA 820, leave to appeal refused [2019] S.C.C.A. No. 521; Rahbar v. Parvizi, 2023 ONCA 522, 485 D.L.R. (4th) 239. Redstone directs judges to consider two main factors: (i) whether the forfeited deposit is “out of all proportion to the damages suffered” by the vendor; and (ii) whether it would be unconscionable for the vendor to retain the deposit. As Lauwers J.A. explained in Redstone, at para. 30:The list of the indicia of unconscionability is never closed, especially since they are context-specific. But the cases suggest several useful factors such as inequality of bargaining power, a substantially unfair bargain, the relative sophistication of the parties, the existence of bona fide negotiations, the nature of the relationship between the parties, the gravity of the breach and the conduct of the parties. [7] Significantly, Redstone does not make it a precondition for obtaining relief from forfeiture that the party seeking relief demonstrate that they were not to blame for the contractual breach. Although the would-be buyer’s conduct will often be highly relevant to the question of whether it would be unconscionable to permit the vendor to keep the deposit, it is only one factor to be considered.
[8] As Pepall J.A. noted in Ching, at para. 78:[R]elief from forfeiture is an equitable and discretionary remedy. Absent a legal or palpable and overriding error, it is not for this court to substitute its discretion for that of the trial judge. [9] We are not persuaded that the motion judge in this case committed any palpable and overriding errors. Citing Redstone, she correctly noted that “[a] finding of unconscionability must be exceptional and strongly compelled on the facts of the case”. She found that this high standard was met on the facts here.
[10] One factor the motion judge relied on was her conclusion that the appellant is a sophisticated party that is “in the business of negotiating agreements of purchase and sale with prospective homebuyers”, whereas the respondent “is a widow who worked two jobs while undergoing cancer treatment in order to save enough money to put the deposit down on a home for her family”. Another factor she took into account was that the appellant had apparently suffered no loss as a result of the transaction not closing.
[11] Perhaps most significantly, however, the motion judge was sharply critical of the appellant’s conduct in the years before the transaction fell through. After extending the closing date twice in accordance with the notice provisions of the APS, the appellant purported to extend the “firm” closing date of May 14, 2018 to a date in March 2019, despite giving the respondent insufficient notice.
[12] When the respondent then requested a few months later to have the closing date pushed back further to late April or the first week of May 2019, the appellant replied that the date could not be moved past April 23, 2019, or else the respondent would lose her right to compensation for the delay in completing the house. The motion judge found as a fact that when the respondent agreed to the April 23, 2019 closing date she “was not told, nor was she aware, that she did not have to sign the amendment and that the APS was voidable at this juncture.” The motion judge found further that the appellant’s representative had “deliberately” misled the respondent “into thinking she had no choice but to set a new date”.
[13] In our view, the motion judge was entitled to conclude as she did, on the facts as she found them, that it would be unconscionable to permit the appellant to keep the deposit. . Mouralian v. Groleau
In Mouralian v. Groleau (Ont CA, 2024) the Ontario Court of Appeal considers the test for forfeiture of a contractual deposit, here respecting an real estate APS:[6] The motion judge properly considered the applicable two-part test for forfeiture from Stockloser v. Johnson, [1954] 1 Q.B. 476 (C.A.): (1) whether the forfeited deposit was out of all proportion to the damages suffered; and (2) whether it would be unconscionable for the seller to retain the deposit.
[7] The motion judge assumed that the first part of the test was made out, primarily because the respondent did not suffer a loss, and turned to the question of unconscionability. Having considered a variety of indicia of unconscionability, she determined that it would not be unconscionable for the respondent to retain the deposit. She was not persuaded that the appellant lacked capacity to sign the APS. She found that there was no inequality of bargaining power: the parties had never met when the APS was concluded, the respondent was unaware of the appellant’s circumstances, each party had an agent advising them, the APS was negotiated at arms-length, and the appellant had some past experience buying real estate. Moreover, the motion judge observed that the appellant did not seek to repudiate the agreement at any time until her financing fell through and had admitted on cross-examination that she had intended to complete the transaction. Relatedly, the motion judge concluded that the bargain between the appellant and the respondent was not improvident, as reflected by the appellant’s stated intention to close the transaction. . Eyelet Investment Corp. v. Song
In Eyelet Investment Corp. v. Song (Div Court, 2024) the Divisional Court considered an interesting arbitration mess, where the arbitrator asserted a radical degree of independence that did not accord with the views the appeal judges involved. An arbitrator-sympathetic characterization is that of cultural differences between the judicial and the arbitration 'benches'. It's a useful and even entertaining read, although at the end the CA puts it's foot down firmly on the side of law.
Here the court considers the determination of damages in the context of a failed APC:[2] The appellant Eyelet Investment Corp. builds and sells new residential houses. It sold houses to the respondents pursuant to separate but virtually identical agreements of purchase and sale. When the market soured, the respondents advised the builder that they did not intend to close their purchases. The builder accepted the buyers’ repudiation of their contracts and resold the houses at a loss. It also incurred carrying costs for each house that it would not have incurred had the respondents closed their purchases as they had agreed.
[3] The builder treated the buyers’ deposits as forfeited and commenced legal proceedings against the buyers to recover the remaining losses it sustained by their alleged breaches of their agreements of purchase and sale.
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[72] The Court of Appeal has been clear with its approach to assessing damages in a failed real estate transaction. In Arista Homes (Richmond Hill) Inc. v. Rahnama, 2022 ONCA 759, at para. 9, the Court of Appeal held:[9] 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: 642947 Ontario Ltd. v. Fleischer (2001), 2001 CanLII 8623 (ON CA), 56 O.R. (3d) 417 (C.A.) at para. 41; 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 such circumstances, there will be no need for expert evidence: Marshall v. Meirik, 2021 ONSC 1687, at para. 30, aff’d 2022 ONCA 275. [73] The Court of Appeal has also been clear about the issue of mitigation in a real estate context. In Tribute (Springwater) Limited v. Atif, 2021 ONCA 463, at para. 14, the Court of Appeal held that where a buyer alleges that the vendor failed to mitigate its damages, the buyer bears the onus to prove on a balance of probabilities, “both that the plaintiff failed to make a reasonable efforts to mitigate, and that mitigation was possible: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at paras. 24, 45.”
[74] A buyer’s deposit is held as an earnest to bind the buyer to her bargain. It is applied in reduction of the vendor’s damages in most cases to avoid double-recovery. But it is not relevant to mitigation of damages in this context. . Nhem v. Simpson
In Nhem v. Simpson (Div Court, 2023) the Divisional Court considered (and allowed) an appeal relating to a standard OREA APS provision regarding utility easements, here where the lower court allowed an application to terminate the APS at the hands of the purchaser for failure to remove an easement:[1] This appeal arises from a terminated agreement of purchase and sale for a residential property in Penetanguishene. Ms. Nhem terminated the purchase agreement when a title search of the property disclosed the existence of an easement in favour of Consumer’s Gas permitting the construction and maintenance of a natural gas pipeline across the rear yard of the property, and the Simpsons failed to remove the easement from title. Ms. Nhem commenced an application seeking the return of the deposit. ...
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[3] The principal issue on the appeal is whether the application judge committed a palpable and overriding error in finding that the purchase agreement did not provide sufficient notice of the easement. In my view, the application judge erred in so finding and I would allow the appeal.
[4] The parties used the standard OREA agreement of purchase and sale, which provided, at para. 10:Provided that title to the property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in this Agreement and save and except for… (c) any minor easements for the supply of domestic utility or telephone services to the property or adjacent properties ... . ....
[7] Paragraph 10 of the purchase agreement provides that the title to the property is good and free from all registered restrictions, charges, liens, and encumbrances “except as otherwise specifically provided in this agreement” and other specified exceptions. That the property was subject to a registered easement was specifically and clearly disclosed in the purchase agreement. Further, the respondent in appeal did not establish that para. 10(c) did not apply, that is, that the pipeline did not fit within the category of “minor easements for the supply of domestic utility services to the property.” The home on the property included several gas appliances, so on the inspections undertaken by the respondent in appeal, it would have been evident that the property was serviced with gas. With respect, it was a palpable and overriding error for the application judge to conclude that the respondent in appeal did not have notice of the easement in the purchase agreement. . 3 Gill Homes Inc. v. 5009796 Ontario Inc. (Kassar Homes)
In 3 Gill Homes Inc. v. 5009796 Ontario Inc. (Kassar Homes) (Ont CA, 2023) the Court of Appeal considered (and dismissed) an appeal from a breached APS case, here where the purchaser missed funding the closing by 35 minutes but the court held the APS breached - largely on the strength (and the parties' behaviour) of a 'time is of the essence' APS provision:ANALYSIS
[17] While the outcome for the respondent was indeed harsh, it was not unconscionable or unfair. The wording of the contract and the warnings provided by the respondent beforehand were clear. ...
[18] No such error was made by the application judge.
[19] The appellant argues that the application judge misinterpreted the APS, in particular by finding that the requirement of completing the closing through the electronic registration system as set out in article 14.02(d) of the APS was “clear and unambiguous.” If interpreted in the context of the entire APS document, the appellant contends, payment was not required by 3:00 p.m. on January 28, 2022 but rather, by the end of business at 5:00 p.m. on that calendar day. Further, if payment was due by 3:00 p.m., the appellant submits the only consequence of failing to convey the funds in time was the right of the respondent to refuse to release the deed for electronic registration, not the termination of the APS.
[20] We are not persuaded by these submissions. The same arguments were put to, and rejected by, the application judge.
[21] In our view, the wording of article 14.02(d) of the APS was clear and meant that where, as here, electronic registration was mandatory, the funds due on closing had to be received by 3:00 p.m. on the closing date. It would be an unwarranted intervention into the freedom of contract for a court to alter the APS and its closing time.
[22] We also do not accept the appellant’s related argument that the application judge erred by citing and relying on the regulation that made electronic registration mandatory in the absence of any evidence that Mr. Gill was aware of this regulation when he signed the contract for the appellant. Contrary to this argument, the parties had put their minds to the possibility of mandatory electronic registration and the contract clearly stated that if electronic registration was mandatory – as it in fact was on the scheduled closing date – the parties were agreeing to follow the process for effecting the transfer of the property that was set out in the contract.
[23] This ground of appeal fails.
[24] As this court stated in Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 31: “A ‘time is of the essence’ clause is engaged where a time limit is stipulated in a contract. The phrase ‘time is of the essence’ means that a time limit in an agreement is essential such that breach of the time limit will permit the innocent party to terminate the contract.”
[25] The appellant submits that the “time is of the essence” clause was not strictly enforced in a series of transactions between the parties, including with respect to prior missed deadlines under the APS at issue in this appeal. While the prior conduct of the parties treated deadlines as flexible (and the respondent previously missed a number of deadlines for the completion of the project without the consequence of the APS being terminated), the application judge found that the amending agreement to the APS dated November 15, 2021 changed this state of affairs. It was open to the application judge to treat the amendment as a starting point from which the closing deadline of 3:00 p.m. on January 28, 2022 was to be treated as firm.
[26] The exchanges between the parties in the days prior to January 28, 2022, which included reminders by the respondent of the closing time, and an extension sought by the appellant and refused by the respondent, all reflect what the application judge found to be a shared understanding that the closing date and time was to be enforced. Further, article 16.02 of the APS made clear that the default by the appellant in failing to deliver the funds owing by the closing time justified the respondent in treating the APS as terminated.
[27] The application judge’s reliance on the “time is of the essence” clause in the APS reveals no error, and this ground of appeal fails as well.
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