Heritage Station Inc. v Sharifzadeh, 2013 ABQB 463

Court of Queen ’ s Bench of Alberta Citation: Heritage Station Inc. v Sharifzadeh, 2013 ABQB 463 Date: 20130812 Docket: 1003 11128 Registry: Edmonton Between: Heritage Station Inc. Plaintiff - and - Hossein G. Sharifzadeh Defendant Corrected judgment: A corrigendum was issued on May 6, 2014; the corrections have been made to the text and the corrigendum is appended to this judgment. _ ________________________________________ ______________ Reasons for Judgment of the Honourable Mr. Justice Robert A. Graesser _________________________________________ ______________

Appeal from Judgment by R.P. Wacowich. Q.C., Master in Chambers on the 19 th day of November, 2012 Docket: 1103 11128 Introduction [ 1 ] This is an appeal from the decision of Master R.P. Wacowich declining to grant judgment against Hossein G. Sharifzadeh. Mr. Sharifzadeh had been noted in default and the plaintiff, Heritage Station Inc., sought

summary judgment against him. Background [ 2 ] The lawsuit arose out of a real estate transaction dated April 27, 2007. Mr. Sharifzadeh agreed to purchase a condominium unit being constructed by Heritage. The purchase price was $322,154.00 plus GST, with a deposit of $16,726.24. Possession was to be following notification of completion by Heritage. [ 3 ] On March 3, 2010, Heritage notified Mr. Sharifzadeh in accordance with the contract that closing and possession would be April 22, 2010. It is common ground that Mr. Sharifzadeh failed to close the purchase. [ 4 ] When it was apparent to Heritage that Mr.

Sharifzadeh was not going to close the purchase, it put the condominium unit back into the pool of unsold units it was marketing for sale. [ 5 ] Heritage also commenced action against Mr. Sharifzadeh on June 30, 2010 seeking damages for repudiation as well as forfeiture of the deposit. Mr. Sharifzadeh failed to file a statement of defence and was noted in default. [ 6 ] The condominium unit sold to an arm’s length purchaser on November 1, 2010 for a purchase price of $203,937.50 plus GST. [ 7 ] Judgment against Mr. Sharifzadeh was granted by Master J.L.Mason in the amount of $113,113.15. Mr.

Sharifzadeh appealed, and on July 25, 2012, Justice D.J. Manderscheid allowed his appeal and ordered a fresh assessment of damages. [ 8 ] The fresh assessment of damages was heard by Master Wacowich on November 19, 2012, and he declined to award damages beyond declaring that the deposit was forfeited. [ 9 ] Heritage appealed the Master’s decision, and filed an appraisal of the condominium unit giving values as of April 22, 2010 ($255,000), November 1, 2010 ($250,000) and January 10, 2013 ($240,000).

It also filed an affidavit of Keenan Chow, Heritage’s corporate representative, providing supplemental information to the information in the affidavit of Todd Werre sworn October 4, 2012 which had been used in the application before Master Wacowich. [ 10 ] The supplemental affidavit describes marketing efforts by Heritage for unsold units in the project during 2010, as well as efforts made to improve the exterior appearance of the project. The supplemental affidavit notes that Heritage spent $390,072.74 to market the project between April and October, 2010.

It also described the ultimate sale of the condominium unit as being the first and only offer made on the unit to the time of sale. [ 11 ] Heritage seeks a number of items of damage: 1. the difference between eventual selling price and price to be paid by Mr. Sharifzadeh (less deposit $322,154.00 minus $16,726.24 minus $203,937.50 equals $101,490.26 2. interest on the indebtedness at Heritage’s borrowing rate: $9,583.32; 3. utilities: $204.94; 4. property taxes: $307.32; 5. condominium fees: $121.52; 6. cleaning costs: $500.00; and 7. commission on the aborted sale: $805.39. [ 12 ] Mr.

Sharifzadeh argued before the Master and on the appeal before me that Heritage was limited to the amount already paid by Mr. Sharifzadeh (the deposit). Alternatively, he takes the position that the damages claimed should be eliminated or reduced because of the inordinate delay between the agreement (April 27, 2007) and the closing date established by Heritage (April 22, 2010). Mr. Sharifzadeh objects to the utility costs as unsubstantiated. Cleaning costs should not be awarded as the unit would have to have been cleaned for the transaction with Mr. Sharifzadeh, which did not close.

Interest has not been adequately proven. The original commission is described as a “sunk cost” which cannot be recovered because it would have been incurred had the transaction proceeded.

Issues [ 13 ] Both parties agree that the issues on this appeal are: 1. the standard of review on appeals from the Master; 2. the test for admission of fresh evidence on an appeal; 3. whether the appraisal and affidavit of Keenan Chow be admitted as evidence on this appeal; and 4. the amount of damages to be assessed against Mr. Sharifzadeh. Relevant Contract Provisions 6.

Interest on Overdue Payments To pay interest to the Vendor on overdue payments as required to be paid pursuant to this Agreement at the Prime Rate of the Canadian Imperial Bank of Commerce plus Four (4%) percent per annum from the date due until paid in full. 7. Anticipated Closing Date The anticipated date for completion of the Unit is November 1, 2008. Upon the Vendor having substantially completed the Unit, the Vendor shall give the Purchaser thirty five- (35) days notice in writing of the actual date of possession (the “Closing Date”).

Notwithstanding the foregoing, if the Vendor is unable to grant possession on the Closing Date, the Closing Date shall be deemed to be postponed to the date on which such possession is actually granted. The Purchaser acknowledges that the Closing Date is an estimate only and the Vendor shall have no liability or responsibility if such estimate Closing Date is not reached, even by a substantial degree.

If the Vendor shall be unable to substantially complete the Unit for occupancy within a reasonable period of time after the designated Closing Date, the Vendor may, at its sole option, return any deposits it holds and the Vendor shall not be liable to the Purchaser for any damages in that regard. The Purchaser shall not be entitled to take possession of the Unit until the balance of the purchase price, together with adjustments as herein provided, have been paid.

Prior to accepting possession, the Purchaser may inspect the Unit together with a representative of the Vendor, and any such taking of possession shall be conclusive evidence as against the Purchaser that at the time thereof, the Unit (save as shown on a deficiency list in writing to be agreed upon by the Purchaser and the Vendor before the Purchaser takes possession of the Unit) was in good and satisfactory condition and that all undertakings, if any, of the Vendor in respect of the unit and the condition thereof have been fully satisfied and performed by the Vendor.

The Vendor shall rectify the deficiencies, if any, contained in the said list within a reasonable time. 20. Termination of Agreement In the event that the Purchase: (

a) fails to pay any Deposit when due; or (

b) fails to pay the balance of the Purchase price due on or before the Closing Date; or (

c) fails to comply with any of the other provisions of this Agreement; or (

d) becomes insolvent or bankrupt before the Closing Date; The Vendor may, at its option, terminate this Agreement on seven (7) days written notice and retain all monies paid by the Purchaser hereunder as an agreement pre-estimate of liquidated damages and expenses of the Vendor, in which event the Purchaser’s rights to the Property and any of the monies paid hereunder shall cease and determine and the Purchaser shall, if he has taken possession of the Unit, forthwith vacate the Unit within seven (7) days after Notice to do so has been served on the Purchaser and the Vendor shall promptly inspect the Unit and if in the opinion of the Vendor, any redecoration or repair thereto is required to restore the Property to its condition at the date of possession the same may be effected by the Vendor at the sole cost of the Purchaser and the Vendor may deduct the cost thereof from the Purchase Price held by the Vendor and/or demand payment of such costs from the Purchaser.

The Purchaser further agrees that nothing contained in this Clause shall affect or abrogate any other rights or remedies the Vendor may have in law or in equity in respect of the default. Preliminary Observations [ 14 ] While Mr. Sharifzadeh argued that his damages should be lower because of the delay between the purchase agreement and the condominium unit being completed and ready for occupancy, that argument is a potential defence to the claim and a possible argument that it was Heritage in default and not Mr. Sharifzadeh. Mr.

Sharifzadeh lost the ability to make those arguments when he failed to defend the action. Analysis

1. Standard of Review [15] It is clear from Bacheli v. Yorkton Securities Inc., 2012 CarswellAlta 940 (C.A.), that the standard of review on appeals fromthe Master is correctness. 2. Admission of Fresh Evidence on Appeals from the Master [16] Rule 6.14(3) states: 6.14(1) If a master makes a judgment or order, the applicant or respondent to the application may appeal the judgment or order to ajudge.

(2) A notice of appeal in Form 28 must be filed and served within 10 days after the judgment or order is entered and served andreturnable within a reasonable time, not exceeding 2 months, after the date the notice of appeal is filed.

(3) An appeal from a master’s judgment or order is an appeal on the record of proceedings before the master and may also be based onadditional evidence that is, in the opinion of the judge hearing the appeal, relevant and material. [17] The rule has been interpreted in Gudzinski Estate v. Allianz Global Risks US Insurance Co., 2010 CarswellAlta 59 (C.A.)and Twinn v. Sawridge Band, 2010 CarswellAlta 104 (Q.B.) as requiring that the new evidence be “relevant and material”. The commonlaw approach to fresh evidence on appeals has no application. 3.

Do the Expert Valuation and the Affidavit of Keenan Chow Meet This Test? [18] Is evidence of value beyond the sale price relevant and material to the assessment of damages? The answer must be yes. Isevidence of how the plaintiff marketed the condominium project in general and the condominium unit specifically relevant and materialto the assessment of damages? The answer to this must also be yes. Thus the additional evidence filed in support of the appeal meets thetest under Rule 6.14(3) and is admissible. 4. Assessment of Damages [19] Mr.

Sharifzadeh argues that the contract specifies that the vendor’s remedy for default by the purchaser is limited to recoveryof the deposit. Paragraph 20 of the contract refers to the deposit as being an “agreed pre-estimate of liquidated damages and expenses ofthe Vendor”. He cites Lozcal Holdings Ltd. v. Brassos Developments Ltd., 1980 ABCA 72 , [1980] A.J. No. 857 (C.A.). In thatcase, the vendor sued the defaulting purchaser for the difference between the original purchase price and the eventual sale to a newpurchaser.

The defaulting purchaser sought to limit the vendor’s claim to the amount of the deposit. [20] McGillivray C.J.A. held at paragraph 5 that absent contrary wording in the contract, the vendor would be entitled to retain thedeposit even if he sold the land at an increased price.

If he sold at a loss, he would be entitled to recover the loss, minus the deposit. [21] He noted at para. 19 that regardless of the words used by the parties in the contract (penalty, liquidated damages, forfeited),the court must still determine whether the amount so described in the contract is a “genuine pre-estimate of damages”, or a penalty, or alimitation on the depositor’s liability.

That is a question of construction, “to be decided upon the terms and inherent circumstances ofeach particular contract.” [22] At para. 23, he stated: In my view, if the intention were to limit the purchaser’s liability, that could have been easily said, and the court should not import intothe words: as liquidated damages, (particularly when they appear in a printed form), any such intention.

It seems to me that very muchmore express language is required. [23] The Court of Appeal allowed the vendor’s appeal, holding that the vendor was not limited to the amount of the deposit, andcould recover the difference between the original purchase price and the eventual sale price, plus interest for the deferred time beforeclosing. [24] Mr. Sharifzadeh also cites J.G. Collins Insurance Agencies Ltd. v. Elsley Estate, [1978] 2 S.C.C. 916, relating to principlesof construction of penalty clauses.

There, the Supreme Court held that: It is now evident that the power to strike down a penalty clause is a blatant interference with freedom of contract and is designed for thesole purpose of providing relief against oppression for the party having to pay the stipulated sum. It has no place where there is nooppression. If the actual loss turns out to exceed the penalty, the normal rules of enforcement of contract should apply to allow recoveryof only the agreed sum.

The party imposing the penalty should not be able to obtain the benefit of whatever intimidating force thepenalty clause may have in inducing performance, and then ignore the clause when it turns out to be to his advantage to do so. A penaltyclause should function as a limitation on the damages recoverable, while still being ineffective to increase damages above the actual losssustained when such loss is less than the stipulated amount. As expressed by Lord Ellenborough in Wilbeam v.

Ashton: “Beyond thepenalty you shall not go; within it, you are to give the party any compensation which he can prove himself entitled to.” Of course, if anagreed sum is a valid liquidated damages clause, the plaintiff is entitled at law to recover this sum regardless of the actual loss sustained(at page 937).

[25] In the context of the present discussion of the measure of damages, the result is that an agreed sum payable on breachrepresents the maximum amount recoverable whether the sum is a penalty or a valid liquidated damages clause. [26] Mr. Sharifzadeh also cites Taylor v. Gill, [1991] A.J. No. 133 (Q.B.), Blue Label Beverages

(1971) Ltd. v. CentennialPackers Ltd., [1986] A.J. No. 243 (Q.B.), Raymer v. Stratton Woods Holdings Ltd., (ON CA), [1988] O.J. No. 404(C.A.), E. & B. Mortgages Ltd. v. Skrivanos, [1980] B.C.J. No. 2176 (S.C.) and Bucci Xenex Project Ltd. v. Ramasiuk, [2010] A.J. No.654 (Q.B.), 2010 ABQB 389. [27] In each of Taylor, Blue Label Beverages and Raymer, the purchase agreement provided for forfeiture of the deposit on thefailure of the purchaser to close as liquidated damages, together with wording allowing the vendor to pursue other remedies.

In E. & B.Mortgages, the purchase agreement spoke only of forfeiture of the deposit as liquidated damages, with no reservation of other rights.

InBucci Xenex, the purchaser’s default was to result in the forfeiture of the deposit as a genuine pre-estimate of the vendor’s damages withno reservation of rights, while default on the vendor’s part allowed the purchaser to withdraw the deposit and “take whatever remediesthe Purchaser may have at law”. [28] In Taylor, Deyell J. awarded damages beyond the $4,000 deposit, including the cost of holding the property beyond theclosing date and mental distress damages for breach of contract. [29] Gallant J. dealt with a $150,000 deposit in Blue Label Beverages.

He found that the vendor was not limited to recovery of thedeposit (on a purchase price of $3,450,000).

He held that the parties had failed to limit the amount of damages to the amount of thedeposit, and found that the parties in their agreement had clearly worded it in a manner that “is manifest that the intention of the partieswas that the Vendor was not so limited.” (at pages 12 and 13). [30] He awarded damages including interest on the cash to close at the plaintiff’s cost of borrowing, insurance premiums, propertytaxes, utility costs and payment of the second commission on sale. [31] Raymer, an Ontario decision, considered whether the vendor should be limited to a $7,000 deposit.

Having regard to thewording in the agreement, the Ontario Court of Appeal held at para. 16: The deposit in this case cannot be seen as a pre-estimate of damages as referred to in Lozcal Holdings, supra.

In my opinion, to concludethat forfeiture of the deposit was intended to cover all damages for breach of contract is to give no effect whatsoever to the words "inaddition to and without prejudice to any other remedy available to the vendor" found in para. 10. [32] Damages were awarded in the amount of the difference between the selling price and what the vendor got on the second sale,less the amount of the forfeited deposit. [33] In E. & B. Mortgages, Esson J. awarded damages for loss of the bargain, rather than merely the $1,000 deposit as had beenargued for by the defaulting purchaser.

There, there was no reservation of additional rights provision and merely wording that the depositwould be “absolutely forfeited to the vendor as liquidated damages”. [34] Most recently, in Bucci Xenex, Tilleman J. concluded that the vendor was not entitled to more than the deposit. He found thatthe deposit was not a penalty, and it was not too low. He held that the absence of wording “unlimiting” the vendor’s remedies, thevendor was limited by the deposit. [35] Mr.

Sharifzadeh argues that the wording in clause 9 is ambiguous, and having regard to Justice Tilleman’s alternate analysisin Bucci Xenex, ambiguity should be construed against the drafter (at para. 84) distinguishing it from the result in Lozcal Holdings. [36] With respect to this argument, I do not find that the wording in clause 20 is in any way ambiguous. I can see no

interpretationof that clause other than that Heritage expressly “unlimited” its remedies, or reserved the right to pursue remedies beyond the deposit. [37] To find otherwise would be to completely ignore the clear wording in clause 20: The Purchaser further agrees that nothingcontained in this Clause shall affect or abrogate any other rights or remedies the Vendor may have in law or in equity in respect of thedefault. [38] I can find no wording in the purchase agreement that suggests or could be interpreted as suggesting that the parties intendedthat the vendor’s remedies on the purchaser’s default would be limited to keeping the deposit. [39] As a result, the defendant’s arguments fail, and I find that the plaintiff is not limited to retaining the deposit.

I do not need toconsider Tilleman J.’s distinguishing of Lozcal. That leads to the assessment of damages. Damages [40] The plaintiff seeks the full amount of the losses it says it incurred: the difference between the price Mr. Sharifzadeh agreed topay and the ultimate selling price, less the deposit. [41] I am satisfied that Dobson v. Winton and Robbins Ltd., (SCC), [1959] S.C.R. 775, accurately states theapplicable law in situations where damages are sought because of the resale of land: (

a) the measure of damages is the difference in price between the original contract price and the resale price; and (

b) the vendor bears the onus of demonstrated that the sale was effected reasonably. [42] Heritage relies on the statement in the Canadian Encyclopedic Digest, CED Sale of Land XI.9(e):

649 Where a bona fide resale has been effected after the breach of contract, the vendor’s measure of damages is the difference betweenthe first contract price and that obtained on the resale. 650 In order for the vendor to establish a bona fide resale at the best possible price, he or she must show that all efforts were made toobtain he highest possible price. [43] I accept those statements as correct. [44] Here, the difficulty with the evidence for Heritage is the appraisal evidence put forward [45] As stated by Heritage, damages for breach of contract are calculated so as to put the plaintiff in the same position as if thecontract had been performed. [46] Having regard to the onus on Heritage to demonstrate that the sale was effected reasonably, Heritage cites Panarctic Oils Ltd.v.

Menasco Manufacturing Co., 1983 CarswellAlta 481 (C.A.) at para. 53: 53 In matters of mitigation the actions taken by a Plaintiff must be reasonable and based on reasonable criteria but they will not bejudged to a nicety against the best course which hindsight might disclose. A defendant judged liable as a tortfeasor, after denying allconnection with the mishap, may not then appear at a later date to complain that the injured party did not adopt the best course tominimize damage unless the course taken was unreasonable. In Banco de Portugal v.

Waterlow [1932] A.C. 452 at 506, Lord MacMillansaid: Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment themeasures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the partywhose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which havebeen taken to meet it, but such criticism does not come well from those who have themselves created the emergency.

The law is satisfiedif the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedialmeasures and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest thatother measures less burdensome to him might have been taken. [47] One difference here is that with the resale of property, the onus of taking reasonable steps is on the vendor (claimant) whereaswith mitigation issues generally, the onus is on the wrongdoer to show that the claimant has not acted reasonably. [48] The question thus is whether Heritage has met the onus on it.

Having regard to Mr. Chow’s affidavit evidence, I am notsatisfied that Heritage acted reasonably when it accepted the first offer, apparently without countering, at a price nearly 20 percent lowerthan the market value established by their own expert.

Undoubtedly, keeping the property on the market for longer would have involvedhigher carrying costs, but the $50,000 difference in the ultimate sale price accounts for a lot of carrying costs. [49] Without more evidence as to the marketing of other units in the condominium project, what prices they yielded and otherpertinent information, I do not see that Heritage has met the burden on them. [50] Accordingly, I find that they should recover the difference between the initial sale price to Mr. Sharifzadeh and the marketvalue of the property when it was sold in November, 2010, less the deposit retained by Heritage.

The calculation is thus $334,524.71minus $250,000.00 minus $16,726.24 equals $67,798.47. [51] Damages for breach of contract are generally assessed at the date of trial, although the equities of the circumstances dictatewhether damages should be assessed at the date of the breach (where for example the claimant has failed to mitigate) or at some othertime. [52] As noted in Ansdell v. Crowther, (BC CA), 1984 CarswellBC 220 (C.A.), “the courts are empowered to fixdamages as of the date found to be appropriate in the circumstances” (at para. 29). [53] Here, nothing turns on when to assess damages.

There is no indication that Heritage could have received a larger price for thecondominium unit anytime earlier than when it sold the unit. Other Damages [54] Mr. Sharifzadeh objects to the other items of damages claimed by Heritage on the basis that they are not recoverable underthe principles in Hadley v. Baxendale, (1854) 9 Ex. 341 (H.L.). [55] I disagree.

There is nothing unforeseeable, at the time of the making of the contract, that if the purchaser defaults, the vendormay suffer a loss on resale, will lose interest on the net sale proceeds, may have carrying costs until the property is resold (such asmortgage payments, property taxes, utility costs, insurance costs and condominium fees) and may have to pay another commission to arealtor. [56] Mr. Sharifzadeh’s objections are not well founded. [57] Mr. Sharifzadeh also argues that the damages have not been properly proven as the documentation is lacking. I disagree.

On asummary judgment application such as this, the sworn evidence of the claimant together with corroborating documentation shouldgenerally suffice in the absence of a serious contest. [58] I find that the following damages are recoverable:

1. utilities $204.94 2. property taxes $307.32 3. condominium fees $121.52 4. interest on outstanding indebtedness $9,583.32 [ 59 ] I am not satisfied that the cleaning costs are recoverable, as the unit would have had to have been cleaned in any event before Mr. Sharifzadeh took possession had he closed. That cleaning did not have to take place as it was clear that he was not going to close. [ 60 ] The interest on outstanding indebtedness was documented by way of a letter from CIBC Commercial Banking to Heritage dated December 4, 2009 and calculations in Mr. Werre’s affidavit of October 4, 2012.

It supports the $9,583.32 claimed representing interest on the cash to close at the mortgage rate applicable to the loan against the entire condominium project. That is an appropriate calculation of Heritage’s carrying costs, on the reasonable assumption that if Mr. Sharifzadeh had closed, Heritage would have paid down the mortgage by the amount of the cash to close. [ 61 ] I agree with Mr. Sharifzadeh that the commission paid to the realtor involved in the sale to him is not recoverable. Heritage would have had to pay that had Mr. Sharifzadeh closed.

Heritage might have advanced a claim for a commission paid on the subsequent sale and while it put forward evidence that it incurred marketing costs with respect to the entire project, no costs were specifically attributed to the unit in question, and there was no evidence to suggest that the marketing costs would have been lower but for having to resell Mr. Sharifzadeh’s unit.

Summary [ 62 ] Heritage is awarded damages against Mr. Sharifzadeh in the following amounts: 1. loss on resale $67,798.47. 2. utility costs $204.94 3. property taxes $307.32 4. condominium fees $121.52 5. interest on outstanding indebtedness to October 31, 2010: $9,583.32 Total: $77,835.57. [ 63 ] Heritage shall have prejudgment interest on that amount from November 1, 2010. [ 64 ] Heritage is also entitled to its costs of this action. Heard on the 11 th day of June, 2013 Dated at the City of Edmonton, Alberta, this 9 th day of August, 2013. Robert A. Graesser J.C.Q.B.A. Appearances: Michael J. Cooper Ogilvie LLP

for the Plaintiff Heritage Station Inc. Darcy Christian McAllister Cleall for the Defendant Hossein G. Sharifzadeh _ ________________________________________ ______________ Corrigendum of the Reasons for Judgment of the Honourable Mr. Justice Robert A. Graesser _________________________________________ ______________ The spelling of the defendant’s name in the style of cause has been corrected.