Reserving the Right to Sue to Resolve Dispute Concerning Adjustments #176

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

One problem conveyancers don't want at closing time is a dispute about the adjustments to be made between the parties. Because the amounts involved are generally small in relation to the purchase price, the main reason these disputes are not compromised is because one party doesn't want to complete.

If litigation commences, one of the defences is the failure of the other party to agree to the appropriate adjustments to be made. That happened in a case involving the purchase of a Whistler condominium pursuant to a contract of purchase containing a clause that the purchase was subject to "purchaser assuming vendor's capital account of $4, 100 on closing date." The condo was in a rental pool and each owner was required to maintain a capital account to which revenue was added and expenses deducted.

The actual amount of the capital account could not be accurately calculated until immediately after the closing date of October 3 1. Based upon available information from the Strata Council, there would be a loss of approximately $500 in the month of October which the purchaser proposed should be credited to her. This was rejected and the purchaser proposed that she accept the capital amount at $4, 1 00 and the vendor assume the October loss. Although this proposal was accepted by the vendor it was then repudiated. The purchaser then agreed to close, but reserved the right to resolve the dispute in Small Claims Court. The vendor failed to return the conveyancing documents and the purchaser sued for specific performance.

The vendor said that its sole reason for refusing to complete was the failure of the purchaser to provide a proper accounting of adjustments. This proved to be a contrived defense when the evidence established that the vendor had remortgaged the condominium just three days prior to closing. The vendor also argued that the proposal to complete which was subject to the reservation of the right to sue in Small Claims Court created a conditional acceptance. The judge rejected this argument, saying that in his view, this was a reasonable approach given the circumstances facing the purchaser.

Having rejected these arguments, the judge held that there had been an agreement on the part of the vendor to close on the basis of the vendor accepting the October loss and awarded specific performance to the purchaser. This common sense approach by the judge to the resolution of a dispute concerning adjustments is one which conveyancers may be able to use effectively to facilitate completions.¹

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Damages for mental distress in breach of contract cases have usually been rejected by the courts. That position has been changing over the past few decades and our courts are looking more readily at claims for damages for stress where a party to a contract for the sale of real estate repudiates the contract.

In one case, a purchaser repudiated a contract to purchase the home of a couple who intended to move from Calgary to Leduc. In anticipation of this move, they entered into an agreement to buy another house, committed themselves to financing, employed solicitors in connection with both properties, and arranged to terminate their employment. The result of the repudiation led to additional expenses and a loss on resale. The stress created by this was so great that problems arose between the couple with the female/spouse plaintiff experiencing facial swelling and significant stress.

In these circumstances, the judge said that for someone to succeed in claiming damages for mental distress, more than mere anxiety must have occurred. The plaintiff must establish vexation, frustration, distress and anxiety sufficient to justify the award. In this case, there were all of the above plus the physical symptoms. Damages in the amount of $7,500 were given for stress.²

	1.	Allard v. Fersch, SCBC Vancouver Registry C885445, Reasons for Judgement, dated March 16, 1990.
	2.	Taylor v. Gill, 19 R. P.R (2) 238.

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