



COURT OF APPEAL FOR ONTARIO

CITATION: Liu v. Qiu, 2022 ONCA 232

DATE: 20220321

DOCKET: C69556

Feldman, Tulloch and Miller JJ.A.

BETWEEN

Biao Liu

Plaintiff (Respondent)

and

Dong Jin Qiu

Defendant (Appellant)

Sara J. Erskine and Adrienne Zaya, for
    the appellant

Ran He and Christopher Tan, for the
    respondent

Heard: February 28, 2022 by video conference

On appeal from the judgment of Justice Breese
    Davies of the Superior Court of Justice, dated May 14, 2021, with reasons at
    2021 ONSC 3461, and from the costs order, dated July 19, 2021, with reasons at
    2021 ONSC 5047.

REASONS FOR DECISION

[1]

The parties are two young men who agreed to
    enter into a joint venture partnership where they would purchase a residential
    property in Toronto for $1.2 million plus closing costs, knock down the home on
    the property, build a new home, and sell it. The financial terms were that each
    partner would contribute half the purchase price, which amounted to $621,203.01
    including closing costs, and then share the profits 50/50.

[2]

At trial and on appeal, the appellant disputed
    that an agreement had been reached. However, the trial judge found that the
    essential terms of the agreement were as described above, and were sufficient
    to form a binding partnership agreement. We would not interfere with this
    finding.

[3]

The parties met through the respondents
    business. The respondent had a car detailing business and also sourced high-end
    cars for purchase. The appellant was a university student from China who had
    paid the respondent a $40,000 deposit for a Lamborghini sports car the
    respondent agreed to locate for him to purchase.

[4]

Their partnership agreement was reached by text
    and audio message discussion. The appellant authorized the respondent to take
    his portion of the deposit for the property from the $40,000 the appellant had
    given for the Lamborghini. However, the day after the respondent made an offer
    to purchase the agreed property, including a $60,000 deposit, the appellant
    advised that he no longer wished to be part of the joint venture. The offer to
    purchase was made and accepted by the vendor on December 6, 2016, with a
    closing date of January 16, 2017.

[5]

After the appellant repudiated the contract, the
    respondent found a new partner for the project, Zhen Yang. However, the terms
    of the partnership agreement had changed. Mr. Yang contributed $410,000, for a
    50% share of the profit of the venture, instead of the $621,203.01 that the
    appellant had agreed to contribute.

[6]

The respondent financed the purchase with a
    mortgage for $710,000. The property and the mortgage were held in his wife and
    fathers names. The respondent proceeded with the construction of a new home on
    the property. He decided to move into the home with his family for at least one
    year in order to make it his principal residence for income tax purposes,
    thereby incurring no capital gains tax obligation when the home is eventually
    sold. By the time of trial, and this appeal, the respondent had not sold the
    new home.

[7]

Having found that the appellant and respondent
    entered into a binding agreement, and that the appellant breached the
    agreement, the next issue was the measure of damages. The trial judge found
    that because the respondent paid $211,203.01 more for his 50 percent interest
    in the assets and profits of the partnership than he would have paid under the
    agreement with [the appellant], she was satisfied that [the respondent]
    suffered damages in the amount of $211,203.01 because [the appellant] breached
    their partnership agreement.

[8]

The appellant submits that the trial judge erred
    in fact and in law in her finding regarding the measure of damages. The
    respondents position is that the trial judges approach to the assessment of
    damages is correct. We agree with the appellant that the trial judge erred in
    her approach to the assessment of damages.

[9]

While it is true that the respondent was
    required to contribute an extra $211,203.01 to purchase the property, that
    amount was not a payment that he lost, but rather, it was part of the
    investment that he will recover when the property is sold.

[10]

He financed his portion of the investment
    through a mortgage. The amount of the mortgage he was obliged to take was
    increased by $211,203.01 because of the new deal he made with Mr. Yang, where
    Mr. Yang was contributing more than $200,000 less than the appellant would have
    contributed. However, when the home is eventually sold, the original capital
    investment by both the respondent and Mr. Yang will be recouped, the mortgage
    will be discharged, and the profits on the sale after all expenses will be
    shared 50/50.

[11]

Therefore, the trial judge erred in fact and law
    in concluding that the respondent suffered damages in the amount of the extra capital
    he became responsible for investing in the project.

[12]

The appellant further submits that the
    respondent in fact suffered no damages as a result of the appellants breach.
    We reject that submission. The respondent was obliged to incur the cost of
    borrowing the extra $211,203.01.
[1]

[13]

The next issue is how to properly quantify the
    respondents damages, since he has not yet sold the house and therefore the cost
    of financing through the mortgage is ongoing.

[14]

It is clear from the record that it was not part
    of the parties agreement that the respondent would live in the home for one
    year or any other period of time after it was constructed. In our view,
    therefore, a reasonable cut-off date for the respondents damages period should
    be the date of trial.

[15]

The damages are therefore to be quantified by
    multiplying $211,203.01 by the mortgage rate obtained by the respondent for the
    period beginning on the date of the mortgage and ending on the first day of
    trial. We leave the calculation to the parties. As the trial judge did, we
    reduce the calculated amount by $40,000, the amount of the deposit for the Lamborghini
    car that the appellant paid the respondent, and that he retained.

[16]

The appellant also appeals the costs awarded by
    the trial judge in the amount of $45,757.27, including substantial indemnity
    costs from the date of an offer to settle. We will address the issue of costs
    of the trial once we know the amount owing for damages from the appellant to
    the respondent, if any.

[17]

The parties are requested to calculate the
    amount of the damages and provide it to the court within two weeks of the
    release of these reasons. If the parties are unable to agree on the costs of
    the trial, they may make written submissions of up to three pages, also within
    two weeks of the release of these reasons.


[18]

The appeal is therefore allowed with costs to
    the appellant in the amount of $10,706.42, inclusive of disbursements and H.S.T.

K.
    Feldman J.A.

M.
    Tulloch J.A.

B.W.
    Miller J.A.





[1]
The
    court was told that t
he issue of mitigation of damages and whether the
    arrangement the respondent made with Mr. Yang met his onus to take all
    reasonable steps to mitigate his damages was not raised at the trial.


