Jul 2, 2019

BLANEY’S APPEALS: ONTARIO COURT OF APPEAL SUMMARIES (May 21 - 24, 2019)

Birchcliffe Core-Harbour Inc. v. Pinnock, 2019 ONCA 417 (CanLII)

[Doherty, Benotto and Huscroft JJ.A.]

COUNSEL:

D. Taub and J. Preece, for the appellant

O. G. Barnwell, for the respondents

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Breach of Contract, Damages, Expectation Damages

FACTS:

The appellant purchaser and respondent vendors had entered into an Agreement of Purchase and Sale (“Agreement”) of a property to which the respondents did not hold title. For this reason, they were unable to deliver unencumbered title to the appellants as promised in the Agreement. The appellants had provided a deposit of $25,000 and ended up paying a further $187,500 over and above the agreed-upon price in order to purchase the property from the mortgagee.

While the motion judge awarded damages for breach of contract to the appellants, she limited the damages to the amount of the deposit, $25,000. The motion judge stated that the further sum could only be recovered for a loss of bargain, which she said did not exist between the appellant and respondent in this case.

The appellant sought leave to appeal to the Court of Appeal on the issue of whether there was a loss of bargain in this case and, if so, what amount of damages the appellants would be entitled to under such a finding. The respondents cross-appealed in respect of their position that the appellants were cause for the breach of the Agreement.

ISSUES:

(1) With respect to the main appeal, did the motion judge err in limiting the amount of damages awarded to the appellant?

(a) Did the motion judge err in finding a breach in the Agreement between the respondent vendor and appellant purchaser?

(b) Did the motion judge err in finding that there was no loss of bargain between the respondent vendor and appellant purchaser?

(2) With respect to the cross-appeal, did the motion judge err in finding that the appellant purchaser’s conduct was not the cause of the respondent’s failure to close the transaction?

HOLDING:

Appeal allowed. Cross-appeal dismissed.

REASONING:

(1) Yes. The motion judge should not have limited the amount of damages awarded to the appellant to the amount of the deposit.

(a) No. The motion judge found that the respondent vendors could not deliver unencumbered title as they had promised in the Agreement, and were therefore in breach of the agreement with the appellant purchaser. The Court of Appeal found no error in that finding.

(b) Yes. The motion judge stated that the remedy of damages for a breach of contract to compensate for a loss of bargain presupposes that there was a bargain to begin with. Here, the motion judge found that the economic consequences of the failed Agreement merely caused the illusion of a loss of bargain, but no actual loss of bargain. The Court disagreed, and found that there was a real bargain, not an illusion of a bargain.

The motion judge had also found that as a condition of recovering damages for the difference in the price agreed upon with the respondents and the higher price eventually paid, the appellant was required to show that the respondents “appropriated the benefit” otherwise available to the appellant. The Court disagreed, stating that damages for loss of benefit are measured by the higher price paid by the appellant purchasers, independent of any benefit that may have been flowed to or been bestowed upon the respondent vendors.

As a result, the Court ruled that the appellant was entitled to the difference between the agreed-upon purchase price and the price eventually paid for the same property, which was $187,500, in addition to $25,000 deposit.

(2) No. The respondent vendors’ arguments on the cross-appeal were all premised on the assertion that the appellant purchaser’s improper conduct disabled the respondents from being able to close the transaction under the terms of the Agreement. The Court deferred to, and accepted, the motion judge’s finding of fact, which rejected those arguments. Regardless of the conduct of the appellant purchaser, the respondents’ negative equity in the property meant they were never in a realistic position to provide clear title to the appellants.

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