Executive Summary: Key Legal and Evidentiary Issues

• Whether summary judgment could fairly resolve a failed residential real estate transaction without a trial.
• Assessment of the purchaser’s conduct as an anticipatory breach of the Agreement of Purchase and Sale due to inability to obtain financing and request for an extension.
• Evaluation of the vendor’s clear acceptance of repudiation and resulting termination of the original Agreement of Purchase and Sale.
• Determination of the vendor’s entitlement to resell the property and whether the vendor properly mitigated damages on the resale.
• Calculation of the vendor’s damages, including loss on resale and bridge financing, and the proper application and forfeiture of the $70,000 deposit.
• Consideration of the purchaser’s arguments that the contract remained alive during extension discussions and that notice should have been given before resale.

Background and parties

This case arises from a failed residential real estate transaction involving a property at 147 Spring Gate Boulevard in Vaughan, Ontario. The plaintiff, Ajai Kunnath, was the vendor and owner of the property. The defendant, Ellie Cartier, was the purchaser, with Metro-Wide Realty Ltd., Brokerage, also named as a defendant. The plaintiff sued for the purchaser’s failure to close, seeking to keep the deposit and recover damages. The defendant brought a cross-motion seeking summary judgment dismissing the claim and returning the deposit.

Initial agreement of purchase and sale

The plaintiff listed the property for sale at $1,795,000 on May 5, 2022. On May 8, 2022, the defendant submitted an offer to purchase for $1,755,000 with a $70,000 deposit and a completion date of no later than August 8, 2022, at 6:00 p.m. The offer was not conditional on the defendant obtaining financing. The plaintiff accepted the offer, and the parties entered into a binding Agreement of Purchase and Sale.

Financing difficulties and amended purchase price

As the closing date approached, the defendant encountered financing problems. On August 6, 2022, through her realtor, the defendant advised that she could not complete the transaction because she could not secure the necessary financing. According to the plaintiff, the defendant indicated she could only proceed if the purchase price were reduced. The parties then entered into an Amendment to the Agreement of Purchase and Sale dated August 6, 2022, reducing the purchase price from $1,755,000 to $1,700,000. This amended price became the operative contract price against which any loss on resale would be measured.

Request for extension and the vendor’s extension letter

The financing difficulties continued despite the amended price. On August 8, 2022, the defendant sought to extend the closing date to August 15, 2022. At 5:08 p.m. on August 8, the defendant’s counsel advised that the office had not yet received any extension letter from the plaintiff and was closing for the day, indicating that any letter received would be reviewed with the client the next day. One minute later, at 5:09 p.m., the plaintiff delivered an extension letter, and at 5:12 p.m. the plaintiff urged that the letter be reviewed, pointing out that it was still before the 6:00 p.m. contractual closing time.

The extension letter set out conditions under which the plaintiff would agree to extend closing to August 15, 2022. These terms included an additional deposit of $30,000, payment of legal fees, mover fees, mortgage per diem interest, and utilities and property tax. The plaintiff also incorporated terms derived from a third party from whom the plaintiff intended to purchase another property. Critically, the letter stated that the terms were non-negotiable and that anything short of full acceptance would be treated as an anticipatory breach. It added that if the defendant did not sign the attached irrevocable direction and the plaintiff did not receive written confirmation by 5:00 p.m. on August 8, 2022, the plaintiff would consider the transaction at an end and would mitigate damages and sue for losses.

Post-closing date discussions and ultimate resale of the property

On August 9, 2022, the plaintiff followed up, and the defendant attempted to negotiate the terms of the extension. The parties continued discussions until August 22, 2022, but never reached agreement on an extension. During this period, the defendant continued to seek more favourable terms, including further price reductions and a vendor take-back mortgage, but no mutually acceptable arrangement was concluded.

On August 22, 2022, the plaintiff accepted an offer from a new buyer to purchase the property for $1,613,000, with the buyer, a real estate agent, waiving the usual commission of $37,290. Economically, the plaintiff treated this as a resale price of $1,650,290, since the commission waiver effectively increased the net value of the deal. The plaintiff was under pressure to close on another property he was purchasing, for which his own closing date had already been extended and could only be further extended to August 26, 2022. The plaintiff therefore moved quickly to relist and sell the property in order to finance his own purchase, accepting the highest offer available in the circumstances.

Use of the summary judgment procedure

The court first had to decide whether the matter could be resolved on a summary judgment motion. Under Rule 20.04(2) of the Ontario Rules of Civil Procedure, the court must grant summary judgment where there is no genuine issue requiring a trial or where the parties agree to have the matter determined in that way. Both sides agreed the case could be decided on summary judgment, and the judge found that the material facts were not in dispute and there were no credibility issues that would require a full trial. In addition, the court noted that failed real estate transactions are often suitable for summary judgment because the issues are largely documentary and legal.

Anticipatory breach and acceptance of repudiation

A central legal issue was whether the defendant’s conduct amounted to an anticipatory breach of the Agreement of Purchase and Sale and, if so, whether the plaintiff accepted that repudiation. The court relied on prior authorities explaining that anticipatory breach occurs when a party, by words or conduct, shows an intention not to be bound by the contract before performance is due. In this case, the defendant’s inability to secure financing and her request for an extension to August 15, 2022, communicated that she could not close as required on August 8, 2022. The judge concluded that, similar to earlier cases, the breach lay not in simply asking for an extension but in the underlying inability to close due to failed financing.

The court then examined whether the plaintiff clearly accepted this repudiation. The August 8, 2022 extension letter expressly stated that anything other than full acceptance of the stated terms would be treated as anticipatory breach and that if confirmation was not received, the plaintiff would consider the transaction at an end. The judge held that this language amounted to a clear and unequivocal acceptance of the defendant’s repudiation. As a result, the contract was terminated on August 8, 2022.

The defendant argued that the deadline in the letter (5:00 p.m.) was invalid because the letter was only received after that time, at 5:09 p.m., and therefore the letter should be nullified. The court rejected that argument, emphasizing that the Agreement of Purchase and Sale itself required closing by 6:00 p.m. on August 8, 2022. The defendant’s counsel had indicated at 5:08 p.m. that the office would not be reviewing any extension terms that day. The court found that the plaintiff had been ready, willing, and able to close on the agreed date and time and, as the innocent party, was not required to formally tender after the defendant had already repudiated the agreement.

The defendant also contended that because the parties continued to discuss possible extensions after August 8, the contract could not have been at an end on that date. The court disagreed, finding that the Agreement of Purchase and Sale had been terminated when the plaintiff accepted the anticipatory breach and that later negotiations did not revive the original contract. Instead, those discussions were unsuccessful efforts to create a new arrangement or modified terms.

Right to resell and duty to mitigate damages

After finding that the original agreement was terminated on August 8, 2022, the court considered whether the plaintiff was entitled to sell the property to another buyer. The judge held that he was not only entitled but also obliged to mitigate his damages by attempting to resell the property in an arm’s-length, market-based transaction. The evidence showed that the plaintiff relisted the property, received multiple offers, and accepted what he reasonably viewed as the best deal available, taking into account both the cash price and the waived commission.

The defendant argued that the plaintiff should have given further notice to her before selling to another buyer and that the resale price was too low compared to an appraisal she obtained indicating a higher market value. The court rejected those arguments. It found that the defendant had ample opportunity from August 8 to August 22 to negotiate acceptable terms but instead sought additional concessions, including a lower price and a vendor take-back mortgage. Given the plaintiff’s own precarious position with his purchase of another property and the time constraints he faced, his decisions to relist and accept the best available offer were viewed as reasonable mitigation steps.

The defendant also pointed to the resale agreement’s condition that the new buyer’s offer was subject to the plaintiff obtaining a release from the prior Agreement of Purchase and Sale by a specified date. The court treated this as a condition inserted for the benefit of the new buyer, not as an acknowledgment by the plaintiff that the original contract with the defendant was still in force. It did not change the court’s conclusion that the initial contract had already been terminated.

Damages analysis and treatment of the deposit

The final substantive issue was the calculation of damages and the treatment of the defendant’s $70,000 deposit. The court applied well-established principles governing damages in failed real estate transactions. Generally, where a purchaser defaults, the vendor’s damages are calculated as the difference between the contract price (as amended, if applicable) and the resale price, plus reasonable carrying costs and expenses incurred in mitigating the loss. The vendor is entitled to retain the deposit, which is then credited against the total damages.

Here, the amended purchase price under the Agreement of Purchase and Sale was $1,700,000. The effective resale price was $1,650,290, consisting of the $1,613,000 sale price plus the waived $37,290 commission. The difference between these figures—$49,710—was the basic loss on resale. In addition, the plaintiff claimed costs for bridge financing needed to complete his own purchase transaction because the new sale closed later than the original contemplated closing. The court accepted a claim of $20,393.38 for bridge financing, together with $7,488.30 in fees and $1,314.81 in other costs, such as legal fees and per diem charges associated with the failed closing.

Adding these amounts, the court fixed the plaintiff’s total damages at $78,906.49. The defendant’s $70,000 deposit was to be released to the plaintiff and applied against this sum, leaving a balance of $8,906.49, which the defendant was ordered to pay.

Outcome and monetary orders

The court granted summary judgment in favour of the plaintiff and dismissed the defendant’s cross-motion for summary judgment. It held that the defendant committed an anticipatory breach of the Agreement of Purchase and Sale, that the plaintiff clearly accepted the repudiation and thereby terminated the contract, that the plaintiff was entitled to resell the property and had reasonably mitigated his damages, and that the plaintiff was entitled to apply the deposit toward his damages. The judge declared the plaintiff to be the successful party and held that he was presumptively entitled to his costs of the proceeding, inviting the parties to file further materials on costs if they wished.

In the result, the successful party is the plaintiff, Ajai Kunnath. The court awarded total damages of $78,906.49, ordered that the $70,000 deposit be released to the plaintiff and applied toward those damages, and directed the defendant to pay the remaining $8,906.49. The plaintiff is also entitled to costs of the action, but the exact amount of costs was left to be determined separately and cannot be precisely stated based on this decision alone.