



COURT OF APPEAL FOR ONTARIO

CITATION: Bilotta v. Booth, 2020 ONCA 522

DATE: 20200825

DOCKET: C67721

Huscroft, Zarnett and Coroza
    JJ.A.

BETWEEN

Carmine Bilotta and Rosina
    Bilotta

Applicants/Respondents by
    Counter-Application

(Respondents)

and

Kimberly June Booth and Donald
    James Booth

Respondents/Applicants by Counter-Application

(Appellants)

Christopher Lee, for the appellants

Julian Binavince, for the respondents

Heard: in writing

On appeal from the orders of Justice
    Howard Leibovich of the Superior Court of Justice, dated October 21, 2019, with
    reasons reported at 2019 ONSC 5956.

Huscroft J.A.:


[1]

The Booths appeal from the order of the application judge declaring that
    they breached their agreement of purchase and sale with the Bilottas, requiring
    them to return the Bilottas $30,000 deposit, and permitting the Bilottas to
    proceed to trial for any additional damages they may have suffered.

[2]

I conclude that the application judge erred in finding that the Booths
    breached the contract. As I will explain, the Bilottas had no right to
    terminate the contract. Their refusal to close on the required date, following
    rejection of the Booths reasonable offers to extend the closing date,
    constituted a repudiation of the contract. As a result, the Booths were
    entitled to accept the repudiation, terminate the contract, and sue for
    damages.

[3]

I would allow the appeal for the reasons that follow.

BACKGROUND

[4]

As the application judge noted, with one exception, the facts in this
    matter are not in dispute. The application judge set out the timeline, which I
    repeat here for convenience.

·

April 24, 2017  The Bilottas entered into an
    agreement of purchase and sale to buy the Booths house for $750,000. The deal
    was to close on July 7, 2017.

·

June 23, 2017  The Booths basement was
    flooded. There was one to two inches of water in the basement. The Booths
    contacted a contractor who conducted some emergency repairs.

·

June 28, 2017  The Booths insurer provided a
    report describing the repairs needed and the additional costs. The emergency
    contractor was paid $6,979.72. The Booths were paid $14,745.76 by the insurance
    company for the remaining repairs. There was a $500 deductible. The Booths
    advised their lawyer (Not Mr. Lee who was not representing the Booths during
    the relevant time period) of the damage on June 28, 2017.

·

July 6, 2017 at 1:20 p.m.  Counsel for the
    Booths wrote to counsel for the Bilottas (not Mr. Binavince, who was only
    retained after the deal collapsed) advising that there was a flood and that the
    insurer had issued a cheque for $14,745.65, in addition to a $500 deductible.
    The Bilottas were asked how they wanted to proceed with the repairs. Counsel
    for the Booths stated in the letter that he had advised counsel for the
    Bilottas orally about the damage the day before.

·

July 6, 2017 at 4:15 p.m.  Counsel for the
    Bilottas wrote back and advised they wanted to inspect the house with a
    qualified home inspector. Counsel alleged that a material defect had been
    covered up and complained about receiving less than 24 hours notice before
    closing. Counsel for the Bilottas asked for at least a one-week extension to close
    the deal, and if more time was needed then $500 per day as compensation.

·

July 6, 2017 at 5:29 p.m.  Counsel for the
    Booths claimed that counsel for the Bilottas were verbally told about the water
    damage on July 4, 2017 at 11:50 a.m. Counsel for the Booths offered to also
    hold back in trust an additional $10,000, to address any costs not covered by
    the insurance proceeds. The Bilottas were offered the opportunity to inspect
    the home on July 7
th
. Counsel for the Booths asserted that there was
    no substantial damage and advised that they would attend on July 7
th
to close. The adjusters report was enclosed.

·

July 7, 2017 at 12:55 p.m.  Counsel for the
    Bilottas complained again about the last-minute notice and reiterated their
    request for inspection of the house with a qualified home inspector and
    contractor. Counsel for the Bilottas made two offers:

i)

They would purchase the property after the repairs were completed.
    Once completed, the Bilottas would then have a right to inspect the property
    and if not satisfied renegotiate the purchase price. The closing would have to
    be extended and the Bilottas compensated for the expenses of the extension; or

ii)

The deal could close on the scheduled day of July 7
th
,
    with a reduction in price of $50,000.

·

July 7, 2017 at 3:05 p.m.  Counsel for the
    Booths wrote back and offered to hold back $50,000 in trust to ease any
    concerns that the insurance proceeds would be inadequate to cover the costs of
    the repairs. Counsel also offered to extend the closing, at no cost to any party,
    until July 14
th
to allow the Bilottas time to conduct an inspection.
    They also agreed to pay the cost of storing the Bilottas belongings that would
    have been stored in the basement. Counsel for the Booths stated that the Booths
    were prepared to close that day and asked that the Bilottas advise of their
    position by 4:00 p.m.

·

July 7, 2017 at 3:49 p.m.  Counsel for the
    Bilottas reiterated his position set out in his letter earlier that day.

·

July 7, 2017 at 4:52 p.m.  Counsel for the
    Booths wrote again, saying that they are ready to close that day and offered a
    two-week extension until July 21
st
, and were willing to pay the
    Bilottas $250 a day and their related expenses.

·

July 10, 2017 at 2:39 p.m.  Counsel for the
    Bilottas stated that he forwarded the Booths July 7
th
proposal to
    his clients and was awaiting instructions. It is unclear which July 7
th
offer counsel for the Bilottas was referencing. He asked if they could inspect
    the house on the morning of July 11, 2017.

·

July 10, 2017 at 3:36 p.m.  Counsel for the
    Booths wrote and stated that because the sale did not close on July 7
th
,
    they were seeking a full release from the Bilottas so that the house could be
    relisted.

[5]

The Booths sold the house over one year later for $100,000 less than the
    Bilottas had agreed to pay.

The application judges decision

[6]

The Booths and Bilottas each filed applications arguing that the other
    was responsible for breach of their agreement of purchase and sale. The Booths
    sought $128,536.21 in damages, reflecting the $100,000 shortfall on the sale of
    the house in addition to related expenses of $28,536.21, while the Bilottas
    sought the return of their $30,000 deposit in addition to a trial on an action
    for additional damages they claim to have suffered.

[7]

The only factual issue in dispute between the parties was this: when did
    the Booths, through their counsel, inform the Bilottas about the flood damage
    that occurred on June 23, 2017? The application judge found that they were not
    notified until July 6, the day before the sale was to close.

[8]

The application judge found that the insurance clause in the agreement
    of purchase and sale included two implied terms. The first was that the buyers
    were entitled to timely notice in the event that anything happened to the house
    prior to closing, and the second was that the buyers were entitled to a
    meaningful opportunity to inspect the house in order to permit them to make an
    informed decision concerning their option, in the event of substantial damage,
    to terminate the contract or accept the proceeds of the insurance and complete
    the purchase. The application judge found that the Booths offer to allow the
    Bilottas to inspect on closing day, July 7, was not sufficient time and was not
    a meaningful opportunity to inspect. He found that the Booths failure to
    satisfy the implied terms, rather than the Bilottas failure to close on July
    7, breached the agreement.

[9]

The application judge found, further, that the Booths did not act in
    accordance with the duty of good faith set out in
Bhasin v. Hrynew
,
    2014 SCC 71, [2014] 3 S.C.R. 494. Although the Booths did not lie to the
    Bilottas, the lateness of notice of the damage they provided undermined the
    Bilottas legitimate contractual interests and did so in bad faith. The
    application judge noted the Booths suspicion that the Bilottas were using the
    complaint about the damage to obtain a reduction in price, but this did not
    relieve the Booths of their requirement to provide timely notice of the damage
    and an opportunity to inspect.

[10]

The
    application judge concluded that the Booths breached the contract and ordered
    the return of the Bilottas $30,000 deposit. He also ordered a trial on any
    additional damages the Bilottas may have incurred, should they wish to pursue
    it.

ISSUES ON APPEAL

[11]

The
    Booths submit that the application judge erred:

1)

in finding that implied
    terms were part of the standard form agreement of purchase and sale;

2)

in failing to consider
    whether breach of the implied terms permitted termination of the agreement;

3)

in finding that the Booths
    breached the agreement; and

4)

in finding that the Booths
    breached the duty of good faith.

DISCUSSION

[12]

The
    insurance clause in the agreement of purchase and sale is key to the outcome of
    the appeal.

[13]

The
    parties entered the Ontario Real Estate Associations standard form agreement
    of purchase and sale, which includes the following insurance clause:

All buildings on the property and all other
    things being purchased shall be and remain until completion at the risk of the
    Seller. Pending completion, Seller shall hold all insurance policies, if any,
    and the proceeds thereof in trust for the parties as their interest may appear
    and
in the event of substantial
    damage, Buyer may either terminate this agreement and have all monies paid
    returned without interest or deduction or else take the proceeds of any
    insurance and complete the purchase
. [Emphasis added]
.

[14]

In
Wile v. Cook
, [1986] 2 S.C.R. 137, the Supreme Court interpreted a
    similar insurance clause in the Nova Scotia Real Estate Associations standard
    form contract and set out principles relevant to this appeal.

[15]

In
Wile
, a fire destroyed the building the day before its sale was to
    close, leading the parties to extend the closing date by two weeks. During this
    time, the buyers solicitor inquired about insurance coverage and learned that
    the insurance company might deny liability on the basis that the fire was the
    result of arson. The buyers solicitor requested that the closing date be
    extended further but this request was rejected, and the sellers solicitor also
    refused to provide details of the insurance coverage. The buyers solicitor
    then prepared a statutory declaration stating that the buyer would proceed with
    the sale once the premises were restored to the same condition as when the agreement
    of purchase and sale was signed or once it was determined that the insurance
    proceeds were sufficient for this purpose. Neither party tendered on closing.

[16]

The
    insurance clause in
Wile
stated:

All buildings and equipment upon the real
    property shall be and remain at the risk of the Vendor until closing. Pending
    completion of the sale, the Vendor will hold all insurance policies and the
    proceeds thereof in trust for the parties as their interests may appear and in
    event of damage to the said premises, the Purchaser may either have the
    proceeds of the insurance and complete the purchase, or may cancel the
    Agreement and have all moneys theretofore paid returned without interest.

[17]

This
    clause is substantially similar to the insurance clause in this case, albeit
    that it permitted termination for mere damage, as opposed to substantial
    damage. La Forest J. explained the operation of the insurance clause at p. 143:

I have no doubt that when damage ensues to the property subject
    to the agreement, such as occurred in this case, the purchaser is entitled to
    be granted time to sort out what he is to do, and he is also entitled to obtain
    the details of the insurance coverage from the vendor.

In effect, the contract included implied terms
    associated with the insurance clause in order to facilitate the buyer in making
    an informed election whether to complete the purchase or terminate the
    agreement.

[18]

The
    court noted that, although the buyer was concerned about whether the insurer
    would pay given the evidence suggesting arson, the insurance clause did not
    allow him to wait to see whether the insurer would pay before completing the
    purchase. Thus, the buyers statutory declaration was an attempt to vary the
    terms of the agreement of purchase and sale, and so constituted a repudiation
    of the agreement. As a result, the seller was entitled to accept this
    repudiation and terminate the contract.

[19]

In
    this case, the Bilotttas were advised on July 6, prior to closing, that the
    insurer had issued a cheque for $14,745.65 to cover the flood damage (in
    addition to a $500 deductible) and were provided with the insurer adjusters
    report describing the repairs required and the additional costs. They knew, or
    ought to have known, that the damage was not substantial  a matter they
    concede on appeal. As a result, there was no election to be made between
    terminating the agreement or accepting the insurance proceeds and closing: the
    election arose only in the event of substantial damage having occurred. For
    this reason, the Bilottas did not require a reasonable time to assess their
    position, as the purchaser did in
Wile
; there was no election to be
    made under the insurance clause because there was no substantial damage.

[20]

In
    some cases, there may be a legitimate dispute about the nature or scope of
    damage to a property  about whether or not it is substantial and so gives
    rise the buyers election under the insurance clause. In such circumstances,
    the seller may be required to provide the buyer with a reasonable opportunity
    to inspect in order to determine whether the election arises. But that is not
    this case. There was no substantial damage, nor was there a breach of contract
    that would otherwise have entitled the Booths to terminate.

[21]

The
    application judges finding that the Booths acted in bad faith is not supported
    by the record and cannot be upheld. That finding would not permit the Booths to
    terminate the contract in any event.

[22]

In
    my view, the Booths acted reasonably, even assuming that they could have
    informed the Bilottas of the damage earlier than they did. The key point is
    this: after they informed the Bilottas of the flood and the insurance details,
    the Booths made two offers to extend the closing on terms that were reasonable
    and that protected the Bilottas contractual interests. Neither offer was
    accepted by the Bilottas, who attempted to change the agreement. The Bilottas
    offer to close on July 7 was contingent on obtaining a $50,000 reduction in the
    agreed price, and their alternative offer to close after the repairs had been
    completed was contingent on their right to inspect the property and to
    renegotiate the purchase price if they were not satisfied. Neither offer was
    accepted by the Booths. As a result, the agreement remained on foot and the
    Booths were entitled to insist on performance in accordance with its terms. The
    Bilottas were required to close on July 7.

[23]

The
    Bilottas submit that the Booths repudiated the contract on July 10 by advising
    that the contract was at an end, and that they terminated the contract and
    communicated their decision to the Booths on October 3 and 17, when they sought
    the return of their deposit and reimbursement for damages. Alternatively, the
    Bilottas submit that their subsequent commencement of the application sufficed
    to communicate their election to terminate the contract.

[24]

This
    argument misstates what occurred.

[25]

The
    Bilottas are the ones who repudiated the contract  not the Booths. They were
    advised of the insurance monies that had been paid, provided with the insurance
    adjusters report describing the required repairs and the additional costs, and
    twice offered extensions of the closing. Their refusal to accept an extension
    of the closing followed by their failure to close on July 7 was a clear repudiation
    of the contract. The Booths were entitled to accept this repudiation and
    terminate the contract or reject it and keep the contract alive. They elected
    to accept it and terminate the contract and did so in their July 10
    correspondence.

[26]

In
    summary:

1)

the Bilottas were not entitled to terminate the contract pursuant to
    the insurance clause, as the damage caused by the flood was not substantial;

2)

the Booths did not breach the contract;

3)

the Bilottas repudiated the contract when, after they refused to
    agree to extend the closing date, they failed to close in accordance with the
    agreed date of July 7, 2017; and

4)

the Booths were entitled to accept the repudiation, terminate the
    contract, and sue for damages.

CONCLUSION

[27]

I
    would allow the appeal and set aside the decision of the application judge.

[28]

The
    Booths are entitled to damages representing the difference between the contract
    price and the amount they realized on resale of the house. The application
    judge found that difference to be $100,000. The $30,000 deposit is to be
    credited against that amount: see
Azzarello v. Shawqi
, 2019 ONCA 820,
    at paras. 49 to 55.

[29]

The
    application judge made no findings concerning the Booths claim for
    consequential losses of $28,536.21 and it is not clear whether these losses are
    contested. I would encourage the parties to agree on the amount of
    consequential losses owing. If they cannot do so, they may make brief 3-5 page
    submissions, along with supporting documentation, to this court by September
    18, 2020.

[30]

The
    Booths are entitled to their costs of the application and the appeal, including
    any supplementary submissions that may be required concerning consequential
    losses. If the parties cannot agree on costs, they may make brief 3-5 page
    submissions by September 18, 2020.

Released: August 25, 2020 (G.H.)

Grant
    Huscroft J.A.

I agree. B.
    Zarnett J.A.

I agree. S.
    Coroza J.A.


