The Ontario Court of Appeal released a decision about a deposit on 12 December 2018 in Hosseinzadeh v. Pringle.
The case is rather straightforward. The parties were troubled over the description of the property. The Purchaser was a Builder and wanted to sever the lot into two parcels.
The Listing Agent couldn’t obtain proper confirmation of the size. Generally, there are two sources in terms of “public” documents: MPAC and GeoWarehouse. MPAC is municipal assessments and GeoWarehouse is the Registry Office.
Here’s the description from both sources:
GEO 78.3 feet x 69.17 feet x 145.17 feet.
MPAC 87.64 feet and a depth of 0 feet
Not being sure, the Listing Agent tried to measure the lot dimensions himself but that didn’t help since he could not determine the location of the lot lines or reference points. This is a good thing because this never would have worked. Only a Surveyor could figure this out. However, in order to get the MLS listing rolling, the Listing Agent used his own calculation and the MPAC number in the listing.
The listing also noted that the Property was:
“Irreg Corner Lot – Depths To Be Verified” and that “Buyer/Buyer’s Agent To Verify All Measurements & Taxes.”
Hosseinzadeh, put in an Offer on the property and included the dimensions from the MLS listing, namely, he described the Property as:
“having a frontage of 87.64 feet more or less by a depth of 100 feet more or less”.
The Listing Agent was unsure of the dimensions and on behalf of Pringle, the Seller added the words:
“To be verified”
These words were added manually and inserted into the Offer above the depth of 100 feet.
This Counter-Offer was accepted by the Buyer and the deal proceeded. The sum of $100,000.00 was paid as a deposit on a $1,200,000.00 agreement.
This deposit works out to be 8.33%.
The Buyer became concerned about the dimensions of the Property when he consulted “GEOwarehouse”, which showed the property as having dimensions of 78.3 feet x 69.17 feet x 145.17 feet.
He refused to close the transaction without a substantial abatement in the purchase price.
The Purchaser then commissioned a Survey of the property dated September 12, 2017. The surveyor described the lot dimensions as follows:[T]he northerly limit being 23.706 m (77.77 feet), the easterly limit fronting Alder Road being 9.144 m (30 feet), the southeasterly rounding having a radius of 12.107 m (39.72 feet), arc of 23.372 m (76.67 feet) and chord of 19.908 m (65.31 feet), the southerly limit fronting Parkview Hill Crescent being 11.303 m (37.08 feet) and the westerly limit being 21.024 m (68.97 feet).
The Seller naturally didn’t have a survey, so, this one was new. It wasn’t really a rectangle, one corner was “rounded”.
The Purchaser brought an Application in Superior Court for the return of his deposit. This was a Summary Judgment Application which proceeded without a Trial. The Application Judge determined that the deposit was to be forfeited. This was based upon the fact that the Judge interpreted the words “to be verified”, to also include without actually saying it “by the purchaser”.
This decision was then appealed to the Ontario Court of Appeal. Here, the decision was reversed, and the deposit returned to the Purchaser. Essentially, there wasn’t really a deal, although that point was not argued.
The Court said: The motion judge made a number of findings.
First, he found that there was a significant inaccuracy in the description of the Property’s dimensions in the Agreement of Purchase and Sale.
Second, he found that a discrepancy of that magnitude fell well outside the “more or less” language in the standard form agreement. In Bouskill v. Campea (1976), 1976 CanLII 776 (ON CA), 12 O.R. (2d) 265 (C.A.), at p. 266, this court held that a discrepancy too substantial to be encompassed by the words “more or less” will allow a purchaser to resile from the transaction and obtain the return of their deposit.  Third, the motion judge found that
only the addition of the phrase “To be verified”, which he referred to as the “proviso”, distinguished the case from other cases referred to by the parties, including Bouskill. Here, the motion judge identified the issue as the interpretation and effect of the proviso.
He found that the proviso put the purchaser on notice that it was his responsibility to verify the accuracy of the lot dimensions, and that if he was unwilling to accept that responsibility, he should not have accepted the contract.
Finally, the motion judge found that the effect of the proviso was to put the risk of any inaccuracy in the lot dimensions on the purchaser.
The Court of Appeal also said: In our view the motion judge
erred in his interpretation of the proviso by finding that it imposed an obligation on the purchaser, before the agreement was signed by both parties and became binding,
to verify the dimensions of the property to his satisfaction. The proviso did not become a term of the contract until it was signed by both parties.
Nor did the proviso say “To be verified by the purchaser.”
Therefore, the proviso could not be interpreted as imposing an obligation on the purchaser to verify the dimensions before the agreement was signed and accepted.
Rather, the proviso must be interpreted as simply saying that the depth dimension of 100 ft., which all parties knew had not been taken from a survey, had to be verified.
Its accuracy was not to be taken as a representation by the vendor (or the agent). Further, there is nothing in the phrase which says that its intent or effect was to transfer the risk of the inaccuracy of the depth dimension to the purchaser, or to remove the effect of the words “more or less”, which remained in the agreement.  Based on the finding of the motion judge that without the proviso the discrepancy was outside the “more or less” flexibility of the contract,
the purchaser is allowed to resile from the agreement and receive the return of his deposit. Therefore the appeal is allowed. The order granting summary judgment to the respondent is set aside and in its place judgment will issue in favour of the appellant for $100,000, that is, the return of the deposit, along with applicable interest.  The respondent will pay to the appellant the costs of the appeal fixed in the agreed amount of $10,000, inclusive of disbursements and HST. The appellant is also entitled to the costs of the motion for summary judgment that the motion judge fixed at $27,015.68, also inclusive of disbursements and HST.
Without figuring out exactly what that shortfall was in the description, the Court of Appeal accepted the Motion Court’s view that it did not fall under the “more or less” phrase in the standard form Agreement of Purchase and Sale.
Deposits are getting a little larger. That’s why this case went to Court. The Purchaser got back his $100,000.00 plus interest, plus $27,000.00 for the Application and a further $10,000.00 for the Appeal. Obviously, this was worth appealing because prior to the appeal the Purchaser was out his $100,000.00 plus interest and he had to pay the Seller another $27,000.00 in costs. This appeal made sense.
The previous case of Bouskill v. Campea was applied. One of the basic contract elements is the “description” of the property. If that’s not clear, then, there’s no agreement in the first place. Essentially, that’s what happened here, although it would appear that this point was not argued.
How could this situation have been avoided:
- Provide that a Survey will be undertaken at the expense of one or both parties
- Make the square footage a True Condition Precedent
- Make the square footage a stated Condition
- Make the square footage a stated Warranty
- Provide a formula for decreasing the purchase price based on a square footage shortfall
- Provide a “bottom line” where each party has the right to withdraw
Certainly, they knew that there was uncertainty about the dimensions. The Purchaser was a Builder and wanted to sever the lot and build two houses. This meant that the calculations of square footage were very important.
One of the difficulties here was that the negotiations and final resolution was not struck until after midnight. Maybe, that’s not the best time to negotiate!
Brian Madigan LL.B., Broker