Executive Summary: Key legal and evidentiary issues

• Whether the defendant remained personally liable under a pre-incorporation agreement of purchase and sale

• Whether the corporation took sufficient action to adopt the agreement under section 21 of the Ontario Business Corporations Act

• Whether the plaintiff took reasonable steps to mitigate damages after the defendant failed to close

• Whether the plaintiff properly proved damages for loss of rental income, legal fees, and carrying costs

• Whether summary judgment was appropriate based on the absence of any genuine issue requiring a trial

• The plaintiff succeeded in part and was awarded damages of $80,000 for the failed transaction

Facts of the case

Esquire Rose Investments Corporation owned property at 225 Cumming Street, Thunder Bay. Matthew Moxness offered to purchase the property for $1.3 million “on behalf of a corporation to be formed.” The parties entered into an agreement of purchase and sale and Moxness paid a $20,000 deposit. After inspection, Moxness attempted to renegotiate the purchase price and requested a closing extension to conduct an appraisal. The plaintiff refused the extension but offered to assist in expediting the appraisal process. Moxness ultimately notified the plaintiff that he would not be able to close. A corporation was later formed by Moxness, but no communication was made to the plaintiff regarding any intent for the corporation to adopt the agreement. The plaintiff then sold the property to another buyer for $1.2 million.

Outcome

The court found that Moxness remained personally liable because the corporation had not adopted the agreement in accordance with section 21 of the Ontario Business Corporations Act. The plaintiff was found to have taken reasonable steps to mitigate damages. The court awarded $80,000 in damages, representing the $100,000 price difference between the original agreement and the subsequent sale, minus the $20,000 deposit already retained. Claims for loss of rental income, legal fees, and carrying costs were denied due to insufficient proof. Summary judgment was granted as the matter could be fairly and justly decided without trial.