Seller Successful in Damage Award following Defaulted Transaction
The Ontario Court of Appeal dealt with a rather simple and straightforward case in Vatcher v. Quazi on 7 January 2019.
The Buyer, Quazi purchased a property from the Seller, Vatcher for $730,000.00 closing in August 2017.
After the market declined and they were unable to sell their own home, they failed to complete the purchase. The Sellers sued for damages, ultimately selling the house at a lower price, namely $610,000.00 in October 2017.
Following the second sale, the Sellers pursued an action for damages. They filed an Affidavit and brought a Motion for Judgment. If there is no triable issue, and the case is rather clear, the Motions Court Judge has authority to grant a Judgment.
The Buyer filed “no material” before the Court. The case went to Motions Court on 26 January 2018, about four months afterwards. The Motions Court Judge awarded Judgment for $135,841.24 and $8,000 in costs.
Ultimately, the Buyer appealed to the Ontario Court of Appeal and that case was heard and decided on 7 January 2019, about one year later.
Arguments on Appeal
Essentially, there were three basic arguments presented:
- Procedural unfairness,
- Contract Interpretation, and
Failure to Mitigate Damages.
The Buyers didn’t have a lawyer involved in the lawsuit. They attended Motions Court on their own. They hadn’t filed any material. There was no contrary Affidavit outlining their case. They did not seek an adjournment.
The Motions Court Judge provided them with an opportunity to seek an adjournment and retain legal counsel. They didn’t do either. So, Justice Cavanagh proceeded to award Judgment.
The Court of Appeal said that there was nothing unfair.
It is noteworthy that the Buyers had a lawyer on the appeal, but that person’s hands were tied since there was no alternate Affidavits and no Transcript of the Cross-examination of the Sellers on their Affidavit. It’s a very tough case at that point!
You will appreciate that this is a rather straightforward case, and the Buyers don’t have much going for them. So, here was another argument put forward, but it was a little bit of a stretch.
The Court said:
According to the Sellers’ affidavit, the Buyers’ offer to purchase contained conditions that they did not accept and struck out.
Instead, their agent The Listing Agent) inserted a handwritten notation
“buyer to provide additional deposit of $10,000 as soon as buyer sells property located at Kennedy/Eglinton – 131 Treverton and after deal is closed we will provide the money.”
The Sellers’ evidence was that this term was inserted for their benefit as they were dissatisfied with the amount of the deposit.
The Court decided this issue as follows:
“ The motion judge concluded that the inserted words did not make the agreement conditional.
The words only addressed the deposit.
There is no reason to interfere with the motion judge’s interpretation of the agreement which was reasonable and entirely consistent with the evidence.
Again, the explanation for the failure to close the transaction at the time was that the market had declined and the Buyers were unable to get a mortgage.
The Buyers offered to negotiate a lower purchase price, but did not take the position that the agreement was conditional.”
Consequently, that simple reference to an increased deposit was a contract term. It was not a condition. It didn’t say it was a condition. The Buyers never raised this issue before but have showed up in the Court of Appeal, a year and a half later, raising it for the first time. It didn’t fly!
Failure to Mitigate Damages
The Buyers asserted that the motion judge erred in his conclusion that the respondents had mitigated their damages when:
- they sold the property for $610,000,
- in October 2017, three months after the scheduled closing,
for $120,000 less than the amount the Buyer had agreed to pay.
“We disagree. The Sellers delivered a supplementary affidavit that referred to the downturn in the market and the sale they were able to conclude.
This evidence, which was unchallenged at the motion, was sufficient to support their claim for damages and adequately demonstrated their efforts to mitigate.
For these reasons, the appeal is dismissed. Costs to the respondents fixed at $7,500 inclusive of HST and disbursements.”
While the time periods are not entirely clear, this was a case which arose out of the rise and fall of the Spring 2017 Toronto real estate market.
The Buyers put in an unconditional Offer. They needed to sell their property in order to complete the purchase. They were unable to do so. The August closing date came and went.
The Seller obviously was placed in difficulty too. The property worth $730,000.00 was sold a few months afterwards for $610,000.00.
Sometimes, the Seller will take the deposit and “move on”, but as we know here, this deposit was small, and it was never “topped up”.
The Judgment was made up as follows:
- $120,000.00 (being the difference in the purchase price),
- $15,841.24 (being additional damages, expenses and carrying costs),
- $8,000 costs, on the Motion ,
$7,500 costs, on the Appeal.
So, if you are going to fight the case, get a lawyer early. Having a lawyer only by the time it gets to appeal is way too late.
You will, of course, appreciate, that the Buyers probably were not flush with cash at the time this all transpired. This was a case of “too little, too late”.
Unfortunately, the market did turn. It would have been helpful to have filed some information about the market conditions, through Expert Witness testimony, but that opportunity was also lost.
Here are the average sale prices as reported by TREB for single family homes of all types in the GTA, including houses, townhouses and apartments starting at the beginning of 2017 until now:
Average Prices Month
$730,124 January 1st
$768,351 January 31st
You will notice significant fluctuations in 2017. The height of the market was April. Was this house purchased around that time? Afterwards, the absolute bottom of the market was August. By coincidence, that was when the first deal fell through.
In all fairness, the Property was resold in October. Likely any other month would have been worse.
Quite a sad situation for everyone, sellers, buyers, and their agents.
Key advice: Be Alert to Changing Market Conditions!
Brian Madigan LL.B, Broker