Court of Appeal States that Placing Oneself in Position to Close Transaction not Waiver of Deficiency

Andrew Ottaway, B.A. (Hons.), LL.B.Appeals, Appellate Advocacy, Business Law, Business Litigation, Civil Litigation, Commercial and Contract Litigation, Commercial Contracts, Commercial Litigation, Contract Disputes, Real Estate Litigation, Sale of Business Disputes0 Comments

In 1418885 Ontario Ltd. v. 2193139 Ontario Limited, 2018 ONCA 54, the appellant entered into an agreement of purchase and sale to buy a property from the respondent.  The property included residential apartments.  The appellant sought confirmation from the respondent that the residential apartments were permitted use under the existing zoning by-law.  The respondent maintained that the residential apartments were “a legal non-conforming use”.  However, the planning authority indicated that there was a possible problem with the residential apartments.  The appellant’s lawyer advised the respondent’s lawyer that the purchase deposits had to be returned if the issue was not resolved.

In spite of the residential apartments issue, the appellant and respondent moved towards the closing date by exchanging draft documentation and related material.  However, on closing date, the appellant’s lawyer advised the respondent’s lawyer that the appellant would not be closing because of the residential apartments issue.  The deal did not close and the respondent refused to return the deposit.

The appellant brought a claim for return of the deposit.  The respondent relied upon the doctrine of waiver, arguing that the appellant had by its waived the issue with the residential apartments.  The appellant brought a motion summary judgment motion.   The motion judge dismissed the appellant’s motion and action, finding that the elements of waiver had been established, being: (1) a full knowledge of the deficiency that might be relied on and (2) an unequivocal and conscious intention to abandon the right to rely on it.  

On appeal, the Court of Appeal disagreed. While it was clear that the appellant had (1) a “full knowledge” of the residential property deficiency, the issue was whether the appellant had (2) communicated an “unequivocal and conscious intention” to abandon the deficiency.  The Court of Appeal stated that the fact that the appellant proceeded right up to the date of closing as if it would close the transaction did not amount to an unequivocal act constituting waiver;  It was consistent with the appellant placing itself in a position to close the transaction if it decided to waive the deficiency or some other solution came about.  Neither of those things occured.  The Court of Appeal allowed the appeal and gave judgment for the appellant.

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About the Author
Andrew Ottaway, B.A. (Hons.), LL.B.

Andrew Ottaway, B.A. (Hons.), LL.B.

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