Listing, Cancelled, the Effect of; Buyers Limited Remedy After Closing, to Rescind Transaction #283

The decision concerning the effect of the cancellation of a listing contract upon the holdover clause, which was discussed in Column #279, was based upon oral reasons for judgment provided by one of the lawyers involved in the proceedings. Since then a transcript of the Supreme Court of British Columbia decision, which overturned the provincial court decision, has been obtained. In view of the interest expressed as a result of Column #279, the reasons for judgment in both courts are repeated below:

The provincial court judge stated in reference to the holdover clause that, "It is merely semantics as to whether the contract was expired or cancelled. It came to an end." She went on to find that commission was payable, to which the supreme court judge said:

"With respect, I conclude that the learned provincial court judge erred. The obligation of the seller to pay a commission, after the term of the contract, ended when the contract was cancelled and the agreement was brought to an end. I do not think it is a semantical distinction to talk of termination and cancellation in these circumstances. If a listing contract is alive and terminates, then the obligation continues. But if there is a cancellation, as there was in these circumstances, and that cancellation is accepted, bringing the agreement to an end, the obligations of the parties come to an end. That might not deal with the situation where there was a vested entitlement to a commission as at the date of cancellation, but that is not the case here."

In response to those who wondered where the 90 day holdover period referred to in the column came from, it is from the Victoria Real Estate Board's listing contract.

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Once the sale of a property has closed through the transfer of title to the buyer, a buyer who claims misrepresentation by the seller has very few remedies to have the transaction reversed and the purchase price repaid. One of the few remedies arises when, as a result of a mutual mistake, the buyer receives something totally different from what he expected to buy and the seller expected to sell. If the facts fit within this statement of the remedy, the judge must then decide whether it be unfair to the seller to "unscramble the egg".

This remedy was the basis for a buyer's attempt to reverse the purchase for $170,000 of a cottage on Georgian Bay in Ontario. The buyer did not obtain a survey prior to purchase and four years elapsed before he had the property surveyed. It was discovered then that 95% to 99% of the cottage was built on the 66' road allowance between the property and the shoreline. The evidence was clear that the seller was not aware of the encroachment.

The judge was satisfied that this was a case of mutual mistake, both parties believing that what was being sold was the land and a cottage, but what the buyer received was vacant land. The buyer was entitled to rescission, provided the equities favoured the buyer. The argument in favour of the buyer was that if the transaction was not reversed, the seller would have been paid for a cottage he did not own and the seller was left with a cottage that could not be sold and might have to be destroyed.

The arguments in favour of the seller were that by the time this matter came to trial, eight years had elapsed, during which the seller had conducted his financial affairs on the basis that the sale was final. In addition, the buyer now wanted to shift to the seller the risk arising from the buyer's failure to obtain a survey.

The court decided that the equities favoured the seller and refused to reverse the transaction, based mainly upon the delay, partly upon the failure of the buyer to obtain a survey, but also because of "the strong public interest in the finality of property transactions."¹

The majority of cases in which the doctrine has been applied, are ones where the area of property purchased was substantially less than the parties understood was being conveyed. (Nine acres instead of 14; 84' frontage instead of 160'.) However, in one British Columbia case, a seller was ordered to repay the purchase price to the buyer, when the property purchased was found to be unsuitable for the buyer's use, because the seller had knowingly exaggerated the actual water recovery rate of a well.²

	1.	Holmes v. Walker, 35 O.R. 3(d), 699.
	2.	Sedgemore v. Block Bros. Realty Ltd., (1985), 39 R.P.R., 38.

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