Fork In the Road: Critical Considerations by Condominium Corporations in Anticipatory Failed Closings

Gilbertson Davis LLPAppeals, Appellate Advocacy, Civil Litigation, Commercial, Commercial Contracts, Condo Construction, Condo Litigation, Contract Disputes, Real Estate Litigation0 Comments

In 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, the purchasers, Ottawa Medical Square Group, entered into an Agreement for Purchase and Sale to purchase condominium units owned by the vendor, 1179 Hunt Club Inc. The value of the commercial condominium units in the Hunt Club Project was $5.6 million dollars.

Five days before closing, the purchasers, sent a request to the vendor, requesting an extension of time as the purchasers had not yet finalized their arrangements for financing.

Three days before closing, the vendor advised that it would insist on closing, and if the purchaser could not close, it would exercise its rights and remedies under the Agreement for Purchase and Sale.

On the date of closing, the vendor learned that the Land Registry Office had made an error in assigning parcel identification numbers. Although this error was ameliorated later that day, this mishap, prevented the vendor from registering the remaining condominium documents and transferring any of the condominium units.

As a result of the failed closing, the vendor applied for a declaration that the purchaser had anticipatorily breached the agreement, and that the vendor was entitled to retain the deposit, under Rule 14.05 of the Rules of Civil Procedure.

The application judge held that, the agreement came to an end when both parties were unable to close the transaction on the appointed closing date and required the vendor to return the deposit to the purchaser.

The vendor appealed this decision, and sought judicial assistance in determining: (1) whether the purchaser anticipatorily repudiated the agreement?, and, (2) did the purchaser’s repudiation excuse the vendor from its obligation to be ready, willing, and able to close the transaction on the closing date?

On the first issue, the Ontario Court of Appeal held that:

“…a mere request for an extension of time would not ordinarily amount to anticipatory repudiation. But the conversation did not end there. The purchaser sought the extension of time because it did not have the financing to complete the transaction on the appointed date. Knowing this, the vendor was entitled to refuse the purchaser’s extension request. The purchaser moved into the state of being in anticipatory breach of the agreement when it did not relent in the face of the vendor’s refusal and undertake to close on the appointed date. It is not the request for an extension that amounted to the purchaser’s anticipatory breach, but its refusal to close on the appointed date when the vendor refused the extension as it was entitled to do…”

On the second issue, the Ontario Court of Appeal held that:

“Having refused to accept the purchaser’s repudiation of the agreement, and having insisted on perfection in the purchaser’s performance, the vendor was required to render perfection in its own performance and it did not. The vendor’s failure to tender on November 28, 2017 was fatal. This strict approach is not unusual in the law, in view of the maxim “he who seeks equity must do equity”, or in life, where the proverbial caution that “he who lives by the sword dies by the sword…”

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