Executive Summary: Key Legal and Evidentiary Issues

• Whether a binding contract was formed at the public auction when the auctioneer declared the defendant the successful bidder.
• Admissibility of the auctioneer's solemn declaration as hearsay evidence on a summary judgment motion.
• Application of The Sale of Goods Act to an auction of real property governed by The Real Property Act.
• Reliance on the common law business records exception to the hearsay rule for the auctioneer's contemporaneous record.
• Calculation of damages and interest under the auction sale conditions, including the plaintiff's duty to mitigate.
• Entitlement of the plaintiff to elevated costs on appeal absent any allegation of litigation misconduct.

Facts of the case

In 2020, Antonio Pollichieni loaned $200,000 to Edgar and Maryann Bruce, secured by a mortgage against their property in St. Laurent, Manitoba. The Bruces defaulted on the loan in 2021. On April 3, 2023, based on the plaintiff's application, the deputy district registrar granted an order for sale of the property by private contract or public auction pursuant to section 135(3) of The Real Property Act, CCSM c R30. A public online auction was held on May 23, 2023 in Winnipeg under the direction of Jason Kaye of Kaye's Auctions, with a reserve bid of $267,803.19, reflecting the approximate amount owed by the Bruces. Attending by teleconference, Mr. Li Peng Yu, president of the defendant 6685821 Manitoba Inc., placed a bid in the amount of the reserve, and the auctioneer declared the property sold to the defendant. On May 24, 2023, the auctioneer executed a solemn declaration confirming that the auction had been conducted "in a fair, open and proper manner" and that the property had been sold to the defendant as the highest bidder. After the auction, Mr. Yu drove from St. Laurent to Winnipeg to deliver the $25,000 deposit, but stopped at the property, observed the Bruces removing items and fixtures, and contacted the plaintiff's lawyer to advise that he had changed his mind and would not proceed. The plaintiff commenced an action for breach of contract on June 6, 2023 and subsequently moved for summary judgment, which was granted in the amount of $106,857.52 plus interest and costs.

Conditions of sale and statutory framework

The order for sale incorporated several conditions under section 135(3) of The Real Property Act, including that the highest bidder would be the purchaser, that the sale was subject to a reserve bid to be announced at the sale, and that the successful purchaser was required to pay a $25,000 deposit at the time of sale and to execute an agreement to complete the purchase. Where the successful bidder attended by teleconference, the deposit and executed agreement were due within twenty-four hours of the sale. The defendant also sought to invoke provisions of The Sale of Goods Act, CCSM c S10, on the basis that the statute codifies common law principles of auction. On appeal, however, the Court emphasized that the matter concerned the auction of real property, not personal property, and that the auction was governed by The Real Property Act and the relevant common law.

Court's reasoning and analysis

The Court of Appeal applied a deferential standard of review, noting that summary judgment decisions are discretionary and that the question of whether a genuine issue requires a trial is one of mixed fact and law, reviewable only for palpable and overriding error. On the Sale of Goods Act point, counsel for the defendant conceded that any error by the motion judge regarding its applicability was harmless, and the Court agreed, focusing instead on whether admissible evidence supported the formation of an enforceable contract at the auction. Drawing on general principles of auction sales, the Court reiterated that a sale by auction involves the putting up of goods, a bid, and the fall of the hammer indicating that bidding is closed, with contract formation occurring when the auctioneer communicates acceptance of the highest bid. On the central evidentiary question, the Court held that the auctioneer's declaration was admissible under the common law business records exception to the hearsay rule, without resort to rule 39.01(4) of the King's Bench Rules. Relying on Cabral v Canada (Citizenship and Immigration), 2018 FCA 4, the Court found that the auctioneer was under a duty to conduct the auction in conformity with the order for sale, was paid for that service, and was a disinterested party with no motive to misrepresent. Mr. Yu himself conceded on cross-examination that he had no reason to dispute the accuracy of the declaration and personally believed the defendant had been the successful bidder, as evidenced by his initial conduct in preparing to deliver the deposit. On damages, the Court noted that the motion judge had already found that the plaintiff failed to mitigate his damages in part and had assessed interest at fourteen per cent based on the auction sale conditions. Given the high deference owed to damage calculations and the nominal nature of the adjustment sought by the defendant, the Court declined to interfere.

Ruling and outcome

The Court of Appeal dismissed the appeal, upholding the motion judge's conclusion that a binding contract was formed at the moment the auctioneer declared the defendant the successful bidder, and confirming the summary judgment in favour of the plaintiff, Antonio Pollichieni, in the amount of $106,857.52, plus interest and costs as ordered below. The plaintiff's request for elevated costs on appeal was refused, the Court being unpersuaded that the merits alone justified such an award in the absence of any allegation of litigation misconduct, and tariff costs of the appeal were awarded to the plaintiff instead.