2008 BCSC 1778 Cassidy v. Smith

Before: The Honourable Mr. Justice Williamson

Reasons for Judgment

Counsel for the Plaintiff	David J. Taylor Scott N. Baldwin
Counsel for the Defendants	Joyce Thayer
Date and Place of Trial:	December 1 and 2, 2008
	Vancouver, B.C.

[1] On February 16, 2008, the plaintiff sold her home at 3313 Marine Drive in West Vancouver to the defendants for $1,265,000.00. The defendants paid a deposit of $80,000.00. The closing date was April 29, 2008.

[2] In circumstances that are somewhat discomforting, the husband of the plaintiff seems to have acted as a mortgage broker or something similar for the defendants. They could not arrange suitable financing. On March 17, 2008, the defendants gave notice that they would not be performing the contract. On April 1, 2008, the plaintiff accepted the repudiation of the contract.

[3] Nine days later, on April 10, 2008, the plaintiff relisted the property at $1,295,000.00. On April 21, 2008, this action was commenced. As of the conclusion of this hearing, the property had still not sold.

[4] The parties appeared, pursuant to Rule 18A of the Rules of Court, on August 5 and 6, 2008 before Savage J. of this Court. On August 26, 2008, in written reasons, Savage J. ruled that the application for judgment by the plaintiff was allowed, and the deposit of $80,000 forfeited.

[5] In this proceeding, the plaintiffs seek an assessment of damages.

[6] The plaintiff submits that as a consequence of the repudiation of the contract she has sustained significant losses. She submits that after the repudiation she moved quickly to relist the property on the real estate market and accepted the advice of professional realtors.

[7] The original contract of sale included a clause that the defendants would receive $25,000.00 upon closing, thus the net sale proceeds would have been $1,240,000.00. The plaintiff says these proceeds would have been used to pay off certain debts which she submits are associated with the lands. These include a mortgage with an outstanding amount of $896,838.00, a second mortgage with $65,000.00 outstanding and a line of credit with $697,500.00 outstanding.

[8] The remainder of the sales proceeds would have been used by the plaintiff to pay down financing associated with the acquisition of a second house. The second house, located at 2882 Marine Drive also in West Vancouver, was purchased on September 13, 2007, some five months before the contract with which this application is concerned. The contract of purchase and sale stipulated a selling price of $1,800,000.00.

[9] On February 15, 2008, the day before the date of the contract of purchase and sale with which we are concerned, the plaintiff borrowed $275,000.00 from her mother-in-law to assist in the purchase of the property which she had agreed to buy the previous September. Interest on this loan was set at 10%.

[10] On September 11, 2008, as a result of the judgment of Savage J. mentioned above, the plaintiff received the $80,000.00 deposit which had been paid by the defendants. These funds were applied against the $275,000.00 loan from the plaintiff’s mother-in-law. In this application the plaintiff, who has already received the forfeited $80,000.00 deposit, claims additional damages in the amount of $177,702.88.

Issues

[11] There are three issues:

1. Were the damages sustained by the plaintiff foreseeable?

2. What is the proper date to assess such damages?

3. Did the plaintiff properly mitigate her damages?

Foreseeability

[12] The parties agree it is trite law that damages for breach of contract should put the plaintiff in the same position she would have been in had the contract been performed. They agree damages should arise fairly and naturally from the defendant’s breach of the contract providing they are not too remote: see Hadley v. Baxendale (1854), 9 Ex. 341, 156 E.R. 145.

[13] The plaintiff submits that had the defendants not breached the contract, she would have paid off the two mortgages registered against the home, as well as the line of credit. She submits the remaining proceeds would have been used to pay down financing associated with the purchase of 2882 Marine Drive.

[14] However, when the contract was not completed, the plaintiff continued to incur monthly costs associated with holding the property and was unable to pay down any of the indebtedness associated with the purchase of the other property. She submits that it was foreseeable that she would incur these losses.

[15] She says the total carrying costs to the date of trial are $49,152.88, damages a reasonable person would have foreseen to flow from this breach.

[16] The defendants, on the other hand, say that a number of the heads of damages sought by the plaintiff cannot be said to have been within the reasonable contemplation of the parties at the time of the original contract. They rely upon a number of authorities for this statement, including Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3 at para. 55, 271 D.L.R. (4th) 1, 57 B.C.L.R. (4th) 1, 2006 SCC 30.

[17] The onus rests with the plaintiff to prove her damages upon a reasonable preponderance of the evidence.

[18] I am satisfied that these damages include the difference between the contract price and the market value of the property as well as the costs of maintaining the property for a reasonable period of time after the repudiation. These would include interest, taxes, hydro, fuel and so forth.

[19] However I accept the defendant’s submission that the costs associated with the property purchased by the plaintiff the previous September are too remote to be recoverable. First, the property was purchased five months before the defendants entered into the contract in dispute here. The defendants did not know about this purchase until after they repudiated the contract. Second, the loan from the plaintiff’s mother-in-law was the day before the parties entered into this contract.

[20] I accept, as counsel for the plaintiff has submitted, that it would be within the reasonable contemplation of parties that when a family home is sold, the vendors will be seeking another residence in which to reside and will likely purchase a second home. But I do not find it probable that it would be in the reasonable contemplation of a purchaser that the vendor had purchased a home some five months before, in a binding contract that did not contain “subject to” clauses, and that required bridge financing.

[21] In Godin v. Jenovac (1993), 35 R.P.R. (2d) 288, [1993] O.J. No. 2548 (Gen. Div.), the court noted at para. 59:

Clearly, the Jenovacs did not contract to purchase another property on the strength of the sale to the Godins, because the deal was already made before the Godins came on the scene. Further, although the Godins were made aware that the Jenovacs had agreed to purchase a new home, the evidence does not suggest that they knew or ought to have known that the Jenovacs needed the money from the sale of the Property in order to close the Town-Wood deal. In fact, as I have already concluded, the Jenovacs could have closed the transaction on the Town-Wood Property by obtaining funds elsewhere. Accordingly, I conclude that it was not within the reasonable contemplation of the parties that the Jenovacs would need the funds from the sale of the Property in order to close the Town-Wood deal.

[22] In this case, the plaintiff completed the contract on their earlier purchase five months before the defendants agreed to buy 3313 Marine Drive. The defendants were unaware of that earlier purchase at the time they entered this contract.

[23] I conclude that it would not be within the reasonable contemplation of the defendants at the time they entered the contract that should they breach the contract, they would be responsible for costs relating to the plaintiff’s purchase five months earlier.

Date of Assessment of Damages

[24] The plaintiff seeks a ruling that her damages be assessed at the date of this proceeding, December 2, 2008. She concedes that this is not the usual order. The parties agree the usual rule is that damages are to be measured or assessed as of the date of the breach of contract.

[25] However, there is case authority that this is not always the case. In Richter v. Simpson (1982), 37 B.C.L.R. 325, 24 R.P.R. 37 (S.C.), McLachlin J. as she then was, said at 327:

The fundamental principle in assessing damages for breach of contract is that the plaintiff is to be placed in the same position he would have been had the contract been performed. A qualification on this principle is that he is not entitled to recover losses which he could have avoided by taking reasonable steps; that is, he is obligated to mitigate his loss. While damages are most often assessed as of the date of breach, this is not an absolute rule; the Court has power to fix such other date as may be appropriate in the circumstances: Johnson v. Agnew (1979), 2 W.L.R. 487 at 489 (H.L.).

[26] In Ansdell v. Crowther (1984), 11 D.L.R. (4th) 614, 55 B.C.L.R. 216 (C.A.), Anderson J.A. reviewed the law concerning the date for the assessment of damages. At 626, he concluded:

It follows from the above that only in exceptional circumstances will the vendor be able to obtain an assessment of damages as of the date of the trial.

[27] A number of cases placed before the court indicate that in exercising its discretion as to the date at which damages should be assessed, the court may take into account the date upon which a resale of the property subject to the repudiated contract could have been made within a reasonable time after the contract’s completion date.

[28] In 100 Main Street Ltd. v. W.B. Sullivan Construction Ltd. (1978), 20 O.R. (2d) 401, 88 D.L.R. (3d) 1 (C.A.), the purchaser repudiated the contract before closing. The vendor sued for damages. The date at which the damages should be assessed was the principal issue. In considering this question, the court set out a number of propositions. These included that while ordinarily courts assess damages at the date of closing, the court may choose a date different from the date of closing by taking into account the plaintiffs duty to take reasonable steps to avoid its loss, the nature of the property and the nature of the market.

[29] At 421, the court went on to say that as a general rule, in a falling market the court should award the vendor damages equal to the difference between the contract price and the “highest price obtainable within a reasonable time after the contractual date for completion following the making of reasonable efforts to sell the property commencing on that date”.

[30] These propositions were considered favourably in a subsequent decision of the Ontario Court of Appeal, 642947 Ontario Ltd. v. Fleischer (2001), 56 O.R. (3d) 417, 209 D.L.R. (4th) 182 (C.A.).

[31] Are there exceptional circumstances here? Acting on the general rule, described above, that in a falling market the court should award the vendor damages equal to the difference between the contract price and the highest price obtainable within a reasonable time after the completion date, I would assess damages at a date sometime after the April 29, 2008 completion date, but before the date of these proceedings.

[32] I conclude three months after the breach is a reasonable period. Damages will be assessed as of June 17, 2008.

Mitigation

[33] Given that assessing damages at the date of closing may not fairly compensate the innocent party where, as here, the vendor has made efforts to resell in a falling market, the question of mitigation arises. The plaintiff submits that she acted reasonably and diligently after the repudiation. She took advice from real estate professionals, she relisted the property for sale promptly at a reduced price and she commenced this action without delay.

[34] As noted, the defendants repudiated the contract on March 17, 2008. The closing date was some five weeks later on, April 29, 2008. The plaintiff accepted that repudiation on April 8, 2008 and nine days later, relisted the property at $1,295,000.00, the contract listing price.

[35] On August 18, 2008, the plaintiff obtained two “current market evaluations” from realtors. The first noted the following:

The market is in a period of transition. The sales when achieved are taking longer, and for the most part selling below the assessed value.

I would say that a correction has been taking place for most of this year and values have diminished upwards of 20%.

I would suggest a listing range of $1,030,000 to $1,070,000.

[36] The second stated:

The current market remains challenging for sellers and there are many recent sales that indicate a price correction in the amount of 10-20% from prices earlier in the year.

The recent sale of 2572 Marine Drive has an assessment of $1,418,000 and the selling price was $1,350,000. This is the best comparable sale as it sold on July 17, 2008.

I believe the selling range of your property to be from $1,070,000 to $1,100,000.

[37] On August 26, 2008, the plaintiff received the judgment of Savage J. Two weeks later, on September 10, 2008 the plaintiff reduced the listing price of the property to $1,090,000.00.

[38] In my view, long before this time the plaintiff would reasonably have understood that the market was falling. She had received no offers since she relisted the property on April 10, 2008.

[39] Her reluctance to react to the falling market is evidenced by her response to the two evaluations received August 18, 2008. Given that she had received no offers, it was not reasonable in the circumstances to list the price higher than the range provided by the first realtor, and near the top of the range provided by the second. I note that on September 19, 2008, counsel for the plaintiff obtained a third appraisal which set the value at $1,050,000.00.

[40] In this regard, I have in mind the reasoning of Wallace J. of this court in Hargreaves v. Spence (1984), 45 B.C.L.R. 367 (S.C.), a case in which the plaintiffs claimed damages resulting from the defendant’s breach of his agreement to purchase the plaintiffs’ home. In Hargreaves, the vendors listed the property for sale immediately after the repudiation. The listing price was reduced from time to time because there were no offers to purchase the land in what the learned trial judge described at 374 as a “drastically declining real estate market that pertained during 1981 and into 1982”. He found that the offering price was above market value. He concluded the following at 374:

While one will never know with certainty, in my opinion their failure to list the premises at the market value (or marginally below it) negated the probability of an alternate offer being made, particularly in view of the declining real estate market. Accordingly I find that although as of the date of the breach the vendors properly recognize they should take immediate steps to take an alternative offer, they failed to act reasonably in so doing and as a consequence liability for any loss sustained after that date cannot be imposed upon the defendant.

[41] In this case, the plaintiff relisted the property nine days after accepting the repudiation at the same price at which she had listed it prior to the defendants offer to purchase. Nevertheless, having no offers at all, within a few weeks the plaintiff would reasonably understand that the price was too high or the market was falling.

[42] Her reluctance to act reasonably in these circumstances and reduce the price is demonstrated by her response to the August 18, 2008 “current market evaluation” discussed above. She was then advised that the market was in a period of “transition” and remained “challenging for sellers”. She would have known that there was a “price correction” in the amount of 10%-20%. Nevertheless, she did not reduce the price until September 8, some three weeks later, and then did not reduce it to the range suggested in one of the evaluations. Instead, she reduced it to a number close to the top of the range in the other evaluation.

[43] The plaintiff says that these steps were taken, or not taken, with the advice of realtors and should not be grounds for concluding that the plaintiff failed to mitigate. I am not persuaded. Given the above information it would have been reasonable to reduce the price within a reasonable period after the repudiation of the contract.

[44] I note that at trial the plaintiff sought, in reply, to rely upon evidence adduced as a result of requests for information during the Examination for Discovery of the plaintiff herself. This evidence concerned discussions “approximately two months after the property was relisted” between the plaintiff and her realtor concerning whether the listing price should be reduced. Counsel for the defendants submits this evidence is inadmissible given Rule 40(27)(a)(i) of the Rules of Court which states:

27(a) If otherwise admissible, the evidence given on an examination for discovery by a party . . . may be given in evidence at trial, unless the court otherwise orders, but the evidence is admissible only against

(i) the adverse party who was examined.

[45] The plaintiff submits correspondence forwarded to counsel in response to outstanding discovery requests is not the same as discovery testimony, and should be admitted after consideration of fairness, necessity, and reliability. Counsel founds this submission upon the judgment in R. v. Kelawon, [2006] 2 S.C.R. 787. In the alternative, he seeks leave to introduce a new affidavit from the plaintiff setting out the same information.

[46] I need not decide this point however, for if I concluded that the challenged evidence were admissible, in the circumstances of this case it would not change the result. These discussions took place close to the date that I have concluded damages should be assessed. Further, I find that impugned evidence that “reducing the listing price in the summer when foot traffic was low was not a good idea” is not persuasive given that at the listed price there had been no offers in the period from April through to mid-June.

[47] I have therefore fixed June 17, 2008, as the date at which damages are to be assessed.

[48] For the purpose of assessing damages, what is the market price as of that date? As stated by Wallace J. in Hargreaves, supra, one will never know with certainty. Utilizing the evidence available, I have considered two approaches to assessing the loss to the plaintiff as of June 17, 2008. The first is to start with the contract price as of the date of breach of $1,240,000. The average of the two real estate evaluations received on August 18 is $1,067,500, a difference of $172,500 from the original listing price. Using these two prices, which are five months apart, and working backwards, I conclude the reasonable market price as of June 17 would be approximately $1,135,000.

[49] A second approach is to take the average of the two proposed August 18 listing price as a percentage of the listed price at the date of breach (about 92.5%), and again work backwards to June 17. This yields a similar number.

[50] The assessment of damages is not a mathematical calculation. That is particularly so in this case, as it is impossible to know with precision for what price the residence might have sold in June. Nevertheless, the above figures and approaches, considering the available evidence, give an approximate indication. Given my conclusion that a reasonable market price on June 17 would be approximately $1,135,000 and my finding that the contract price on the date of breach was $1,240,000, I assess the plaintiff’s damages under this head as of June 17, 2008 at $105,000.

Result

[51] I find that the defendants are liable to the plaintiff. Damages are to be assessed taking into account the following:

1. The defendants are not liable for the increased financial costs related to the purchase of the plaintiff’s property at 2282 Marine Drive.

2. The defendants are liable to the plaintiff for the reduced market value of 2213 Marine Drive in the amount of $105,000.

3. The defendants are liable to the plaintiff for monthly carrying costs for 3313 Marine Drive such as interest, insurance, property tax, fuel and utilities from the closing date of the contract, April 29, 2008, until and including June 17, 2008.

[52] Counsel may agree upon the amount of the carrying costs. If they are unable to agree, they will have liberty to apply. The $80,000 already forfeited will be subtracted from the total damages set out in para. 51(2) and (3) above.

[53] The plaintiff will have ordinary costs.

“Williamson J.”

Citation:	*Cassidy v. Smith,*
	2008 BCSC 1778