A recent decision of the Ontario Court of Appeal in Jung v. Talon demonstrates at least three ways out of an agreement of purchase and sale with return of deposits. The Ontario Court of Appeal considered appeals in two related cases. The first case, “A.” involved Jung and a numbered company as the purchasers of two commercial condominium units at the Trump International Hotel. The second case, “B.” involved Jung as the purchaser of a residential unit in the same property. The developer in both cases was Talon.
In A., Talon delayed closing and ultimately scheduled a later occupancy date. It then provided a revised disclosure statement indicating changes in the condominium building and the commercial units. Jung took the position that these were material changes which entitled the purchaser to rescission under s. 74(7) of the Condominium Act, 1998 and he delivered Notices of Rescission. In response, Talon brought an Application in the Superior Court of Justice to invalidate the Notices on the basis that the changes were not material. The Application judge held that the changes were not material and declared the Notices void. Then Talon affirmed its intention to close and the parties agreed to a new closing date. Jung then objected to the Statements of Adjustments given by Talon and sought abatements of price for the changes. When Talon did not change the Statements of Adjustments to Jung’s satisfaction, Jung sued for Specific Performance with those changes and abatement of purchase price or, return of deposits. While the litigation was underway, Talon went into receivership and once the receiver was discharged, Talon did not own the property so Jung could not get specific performance. Jung then proceeded by way of Summary Judgment Motion for the alternative relief, return of deposits.
The Motion judge granted Summary Judgment because the receiver repudiated the agreement when it sold the commercial units to a third party and therefore the agreement was terminated through no default of the purchaser.
In the appeal of the Summary Judgment Motion by Talon, its main argument was that Jung breached the agreement by failing to close and the case should have proceeded to trial to determine the validity of the Statements of Adjustments. The Ontario Court of Appeal upheld the Motion judge’s finding that Jung had no obligation to close on August 29, 2014 in the face of an erroneous Statement of Adjustments. Determination of the issue of validity of the Statements of Adjustments unnecessary to decide in a trial because when the receiver conveyed the commercial units to a third party, it was impossible to close the transactions on any basis.
In B., Talon also delayed the transfer date. Jung claimed that the Agreement of Purchase and Sale was not binding because Talon failed to deliver a current disclosure statement or alternatively, Jong gave Notice of Rescission under s. 74(7) of the Act because of material changes which Talon failed to disclose. These material changes were the same as in A. re the commercial units. The litigation was stayed when the receiver was appointed on November 1, 2016. The receiver conveyed the unit to the creditor. When the stay was lifted, Jung brought a Summary Judgment Motion.
The Summary Judgment Motion Judge held that Jung had no obligation to close while asserting the right of rescission under the Act. Asserting a right under the Act did not amount to breach of the agreement. The Ontario Court of Appeal upheld the Motion judge’s decision and emphasized the consumer protection context of the Act. The disclosure of changes by Talon had to be clear and in strict compliance with the Act. Ultimately, as in the case of A., the agreement was terminated by no default of the purchaser, the deposit for the residential unit had to be returned to Jung.
If you require legal representation with respect to rescission or return of deposits, please contact us for an initial consultation.