Receiverships, Recessions and Trump Hotel?: Jung v. Talon International Inc., 2019 ONCA 644
This case is an excellent example what happens when a deal goes sour as a result of the seller running into financial troubles. In this case a receiver is appointed to manage the condo units that were subject to a purchase and sale agreement.
The respondents and Talon International Inc (“Talon”) entered two agreements for purchase and sale for two commercial condominium units. Subsequent to the agreement, Talon informed the respondent of some changes to the units: (1) the units do not have kitchens; and (2) the hotel is only 60 stories as opposed to 70 stories that was prescribed in the agreement.
The responded delivered notices of rescission under s 74(7) of the Condo Act. In response, Talon brought an application under s 74(8) to invalidate the notices of rescission. MacKinnon J. found the changes are not “material changes under the act” and declared the notices void. Leave to appeal to the SCC was dismissed.
Following the litigation, Talon affirmed its intention to close the purchases. The respondents then objected to the statement of adjustments Talon has sent as it had payment of occupancy fees and inaccurate interest charges. The respondents also sought abatements to the price for the changes in the development.
The respondent sued for specific performance to force Talon to make the appropriate revisions to the statement of adjustments, and abatements to the purchase price for each unit. In the alternative, they sued for the return of the deposits.
Talon counterclaimed for the forfeiture of the deposits, alleging that the respondents breached the agreements by delivering notices of recessions and failing to close the transaction.
Talon ran into financial trouble and a receiver was appointed. The Superior Court issued an approval and vesting order to transfer the units to Talon’s main creditor free of any interests.
When the receiver was discharged the stay of the respondents’ action expired but they could not sue for SP. They brought a motion for summary judgment for the return of their deposits based on a clause in the agreement that stipulated that if the agreement failed through no fault of the purchaser, the deposits will return back to the purchaser.
The motion judge disagreed with Talon’s argument that delivery of the recession notices were anticipatory breaches. She reasoned that the respondents were exercising their statutory right pursuant to the Condo Act. Also, Talon affirmed to complete the transaction after the rescission litigation.
Talon also argued that the respondents were contractually required close the transactions. The motion judge disagreed as she held that the statements of adjustments were not appropriate. The respondents acted in good faith and had no obligation to close the transaction in the face of erroneous statements of adjustments.
The motion judge held that the contract remained in force when the litigation was stayed by virtue of the appointment of the receiver. She said this sale “evinced the receiver’s intention not to be bound by the contracts as it rendered Talon unable to tender the units and close the agreements”. She concluded the agreements had been terminated “through no fault of the purchasers”, and therefore s. 19 of the agreement, which mandated the deposits should be returned to the respondents with interest, should be followed.
Talon’s main issues in this appeal were:
1. The notices of rescission were not delivered within the required time, or alternatively, the notices of rescission were anticipatory breaches of the agreements; and
2. The respondents breached the agreements by failing to close, and in any event, the motion judge should have ordered a trial of issues to determine: the validity of the statements of adjustments, and whether the appellants were entitled to abatements of the purchase price.
1. Notices of Rescission
The Court of Appeal held that Talon’s argument could not stand because he had affirmed his intention to close the deal after the rescission litigation.
2. Respondents’ failing to close and the ordering of a trial to determine the issues
Talon argues the motion judge should have ordered a trial of the issues to determine the validity of the statements of adjustments and the respondents’ claim for abatements. Talon points out that the motion judge made no findings with respect to the respondents’ claim for abatements and argues, at the very least, that any entitlement to abatements was a genuine issue for trial.
The Court of Appeal agrees with the motion judge that the finding of fact of the erroneous statements of adjustments were sufficient grounds for the respondents not being obligated to comply with the contract. Based on this, there was no reason to further resolve the issue of abatements. Therefore, there was no genuine for a trial to determine.
Appeal dismissed: the deposited should be returned back pursuant to the contract.