Another case for the Ontario Court of Appeal to consider respecting the deposit forfeiture in a contract. The Court concluded that even though there were two additional plaintiffs who suffered losses, the entire case was rolled into one. That’s OK, that’s not a problem and that’s their own business. So, who cares!
In 1854329 Ontario Inc. v. Cairo, the Ontario Court of Appeal again considered the matter of the deposit in a real estate transaction.
Purchaser: Angelo Cairo
Vendor: 1854329 Ontario Inc.
Property: commercial building
Price: $7.25 million
Deposit: $200,000 with Offer
Further Deposit $200,000 upon waiver of condition
Total Deposits: $400,000
% of deposits : 5.5%
Closing Date: 7 April 2020
Closing failed: Vendor tendered
Resale: $6,50 million
Actual losses: $234,849.18
The purchaser admitted failure to complete the transaction but disputed the calculation of damages and the forfeiture of the deposit. The deposit itself was almost double the amount of the actual damages that were sustained,
The purchaser also argued that there were three owners and that each of them were only entitled to one third of the claim. The Vendor who litigated had powers of attorney in its favour, from both of the co-owners. The Court decided that there was no merit to that argument. They didn’t even say that it was a new, novel or interesting argument, they simply dismissed it, outright.
The Court said:
“He (the Motions Court Judge) determined that the deposit, at about 5.5% of the sale price, was commercially reasonable, not disproportionate to the respondent’s actual damages and that there was no evidence of inequality of bargaining power or of a substantially unfair bargain. Nor did the vendors act unreasonably.”
“The appellant submits that the motion judge erred by concluding that the appellant should have foreseen the risks of the pandemic when the condition was waived and that there was no evidence to support this finding.
Read as a whole, the motion judge’s reasons reveal that, by waiving the financing condition without cash in hand, the appellant assumed the risk of the transaction falling through.”
The Court of Appeal released its decision on 27 October 2022, and applied the same laws that have been applied to this type of case for hundreds of years.
If the purchaser defaults:
- They will lose their deposit in full
- Even if that amount exceeds the actual damages
- That’s the “deal” when you call it a “deposit”
- 5.5% falls well within the appropriate limits.
Brian Madigan LL.B., Broker