Relief from Forfeiture #166

Feb 01, 1991

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By Gerry Neely
B.A., LL.B.

Another deposit returned to a purchaser who was in default, but this time it was because the vendor benefitted from the purchaser's breach of contract. A purchaser who failed to close on the completion date because of insufficient funds, sued for the return of a $50,000 deposit paid September 1989 upon the proposed purchase price of property for $2.45 million.

At virtually the last moment, the purchaser found a third party who was prepared to complete the transaction. However, it was too late on the closing date to not only complete the registration of the transfer to the third party, but to do the post registration search required by the third party. The vendor must have had good financial and legal advice because it refused to close or to extend the closing date and in December 1989, it accepted an offer of $3.1 million.

All of the purchaser's technical arguments in support of its denial that it defaulted were rejected, but it still recovered almost all of the deposit.

The judge held that he had the power to relieve against forfeiture of money paid as a deposit despite the purchaser's default. The circumstances which apply are where the sum forfeited is out of all proportion to the loss suffered and it would be unconscionable for the vendor to retain the money.

Since the vendor profited by over $650,000 because of the purchaser's default, both circumstances were applied to deny to the vendor the right to retain the deposit. The vendor was able only to recover its taxed costs from the deposit.

The judge observed that there was no provision in the contract of purchase which required the vendor to allow for a post registration search. Instead it was the responsibility of the purchaser to ensure that sufficient funds were with his lawyer in time, not only to register the documents, but to obtain the post registration particulars so that funds could be paid before midnight on the completion date.1

***

Section 48 of the Real Estate Act supported a purchaser's successful action for specific performance brought against a vendor who refused to proceed with a sale. The vendor had asked that the purchaser's deposit which was in the hands of the agent, be paid to the vendor to enable him to pay it as a deposit upon the vendor's purchase of a house. The purchaser was prepared to see the deposit paid to the vendor's solicitor, but not to the vendor directly.

Having received this response, the vendor refused to close. When the purchaser sued for specific performance, the vendor's argument was that he was entitled to receive the deposit. The court was easily able to deny that argument by confirming that the real estate agent was holding the deposit as a stakeholder under Section 48.

The only basis upon which the vendor would have been entitled to receive the deposit before closing was if the Contract of Purchase and Sale contained a clause to that effect.

The purchaser was entitled not only to specific performance, but also to payment by the vendor of an occupation rent because the vendor continued in possession of the premises beyond the closing date.2

  1. Tanus Developments Ltd. v. Vanguard Properties Ltd., SCBC Vancouver Registry C900000, February 13 and 14, 1990.
  2. Niceley v. Sagness, SCBC New Westminster Registry C900276, July 26, 1990.

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