Nearly every area of life in Canada has been impacted by COVID-19, and like most people who have bought or sold residential real estate in Canada over the course of the pandemic know, housing prices are no exception. For example, the Globe and Mail reported just last month that housing prices in the greater Toronto area increased 17.8% in 2021 alone. One of the reasons housing prices have gone up is because there’s greater competition for individual houses. It’s natural to assume that when people are paying more for houses, there could be a greater chance of real estate litigation in the event that things turn sideways. A recent decision from the Ontario Superior Court of Justice, Cannon v. Gerrits, looks at a situation where the vendors of a house refused to accept a deposit based on their understanding of the form that the deposit came in. The misunderstanding was the difference between what their real estate agent told them and what the contract said. We’ll see as we read on what side the court’s decision fell on.

House Sells, but a Deposit is Required

The defendants, in this case, were the vendors in a real estate transaction. They owned a piece of residential property in Oshawa, Ontario, and had lived there for 25 years before putting it on the market. They hired “SL”, a real estate agent, to assist with the process. SL told the vendors that the house would likely entice a bidding war. The vendors said they were under the impression that an offer to purchase the property would be accompanied by a “substantial deposit” which would be in the form of a certified cheque.

The plaintiffs made an offer of $1,100,000 on the house. The vendors said they were pressed by SL to accept the offer, and so they entered into an agreement of purchase and sale for the purchase of the property. The agreement, signed on June 11, required that a deposit of $100,000 by “negotiable cheque” be delivered to the vendors within 24 hours of the acceptance of the agreement.

Plaintiff Delivers Personal Cheque

The day following the acceptance of the offer, the plaintiff delivered a personal cheque for $100,000 as required by the terms of the agreement. It was at this point the vendors demanded that they be provided with a certified cheque. They said once again that this was what their real estate agent had told them they would be provided with.

For whatever reason, this information did not make its way back to the plaintiffs, and by June 14 the vendors had still not received a certified cheque. That evening the vendors advised their real estate agent that they no longer wanted to proceed with the sale of the property. Once again, the plaintiffs were not made aware of this and delivered a certified cheque to the vendor’s brokerage on the morning of June 15. They were made aware of the vendors’ decision to terminate the sale three days later.

Plaintiffs Claim Interest in Land

The plaintiffs claimed an interest of the land in the form of a certificate of pending litigation (“CPL”). This would prevent the vendors from selling the property to another purchaser until the matter could be properly litigated in court. They stressed that it was a unique piece of property, and they had been looking for a four-bedroom house in Oshawa that backed onto a park.

The vendors claimed that a CPL should not be granted, stating the property is not unique, giving the court a list of similar properties in the area. They also took the position that there is no matter to try because the plaintiffs had not provided them with a certified cheque, and the vendors had the right to terminate the agreement.

The court pointed to a 2019 decision from the Ontario Superior Court of Justice, Canadian Western Trust Company v. 1324789 Ontario Inc., which states that the first issue the court must determine is whether the plaintiff’s interest in the land meets the threshold requirement, which is whether the claim to an interest of land is reasonable and raises a triable issue.

The court found the threshold test had been met because an agreement of purchase and sale was signed. The next step the court had to take was an analysis of factors, including:

•   whether the plaintiff is a shell corporation;

•   whether the land is unique;

•   the intent of the parties in acquiring the land;

•   whether there is an alternative claim for damages;

•   the ease or difficulty in calculating damages;

•   whether damages would be a satisfactory remedy;

•   the presence or absence of a willing purchaser; and

•   the harm to each party.

The court is able to exercise its discretion on these factors, with none of them being determinative on their own. The qualities of the house were enough to warrant its uniqueness in relation to what the plaintiffs wanted in a house.

The court considered the vendor’s position that the plaintiffs’ failure to deliver a certified cheque was enough to terminate the agreement. However, the court pointed out that the agreement itself did not call for a certified cheque. Instead, it required simply that a “negotiable” cheque be provided, with a personal cheque falling under that requirement. While the real estate agent may have said a certified cheque would be provided, that simply was not what the contract bound the parties to.

While the court was not tasked with making the ultimate decision as to whether the agreement of purchase and sale is enforceable, it did grant the motion, freezing the sale of the land pending trial.

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