REAL ESTATE TRANSACTIONS – FALL 2014
Caitlin Morin
Table of Contents
1.1 INTRODUCTION ..................................................................................................7
1.2 REGULATION OF REAL ESTATE BROKERS ................................................................7
Real estate agents: ....................................................................................................................................................7
Ontario Real Estate and Business Brokers Act, 2002 ...................................................................................7
The Ontario Regulation 567/05 (under the Real Estate and Business Brokers Act, 2002) ......8
1.2 FORMATION OF THE AGENCY RELATIONSHIP ......................................................8
1.3 BROKERS ENTITLEMENT TO A COMMISSION ..................................................... 10
Luxor (Eastbourne) Ltd. v. Cooper, [1941] 1 All ER 33 (HL)............................................................... 12
H.W Liebig & Company Ltd. V. Leading Investments Ltd (1986), 25 DLR (4th) 161 (SCC) ..... 13
Rooke v. Lillicroft (1974), 48 DLR (3d) 204 ............................................................................................... 14
1.5 BROKERS OBLIGATIONS TO THE PRINCIPAL .......................................................... 15
W.F. Foster, “Dual Agency: Implications for the Real Estate Industry” ........................................... 16
Knoch Estate v. Jon Picken Ltd. (1981), 4 OR (3d) 385 (OCA) ............................................................ 17
Agent’s Statutory Obligations to the Principal .......................................................................................... 18
Agent’s Common Law Obligations to the Principal ................................................................................. 19
Agent’s Fiduciary Obligations to the Principal .......................................................................................... 19
Breach of Agent’s Obligations ........................................................................................................................... 20
D’Atri v. Chilcott, 1975......................................................................................................................................... 20
1.6 BROKERS OBLIGATIONS TO THIRD PARTIES .......................................................... 21
Agent’s Common Law Obligations .................................................................................................................. 21
Agent’s Statutory Obligations ........................................................................................................................... 21
Bango v. Holt (1971), 21 DLR (3d) 66 (BCSC) ........................................................................................... 22
Hawk v. Dixon (1975), 64 DLR (3d) 201 (OHC)........................................................................................ 22
1.7 LAWYERS AND REAL ESTATE AGENTS ................................................................... 23
Professional Conduct Handbook ..................................................................................................................... 23
2 OF THE FORM OF CONTRACTS & DEPOSITS ............................................................. 23
2.1 INTRODUCTION ................................................................................................... 23
2.2 THE FORM OF CONTRACTS .................................................................................. 24
The Statute of Frauds ........................................................................................................................................... 24
Effect of Non-Compliance with the Statute ................................................................................................. 25
Requirements of the Statute ............................................................................................................................. 26
Joinder of Documents .......................................................................................................................................... 27
Timmins v. Moreland Street Property Co. Ltd [1957] 3 All E.R. 265 (CA) ..................................... 27
The Matter of Omitted Terms ........................................................................................................................... 28
Performance Industries Ltd. V. Sylvan Lake Gold & Tennis Club Ltd. ............................................. 28
The Statute and Oral Variations ...................................................................................................................... 29
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Goss v. Lord Nugent (1833) 110 ER 713 (KB) ........................................................................................... 29
Avoiding the Statute: Doctrine of Part Performance .............................................................................. 30
Deglman v. Guaranty Trust Co. of Canada [1954] SCR 725 .................................................................. 30
Hunter v. Baluke (1998), 42 OR (3d) 553 ................................................................................................... 31
Neighbourhoods of Cornell Inc. v. 1440106 Ontario Inc....................................................................... 32
2.3 DEPOSITS ............................................................................................................ 33
When is a Deposit not a Deposit ...................................................................................................................... 33
Workers Trust & Merchant Bank Ltd. v. Dojap Investments Ltd. ...................................................... 34
The Nature of a Deposit Stipulation ............................................................................................................... 34
Tang v. Zhang, BCCA ............................................................................................................................................. 34
3 OF CONDITIONAL REAL ESTATE CONTRACTS ........................................................... 36
3.1 INTRODUCTION ................................................................................................... 36
Dynamic Transport Ltd. v. O.K. Detailing Ltd, [1978] 2 SCR 1072 .................................................... 38
3.2 NATURE AND EFFECT OF CONDITIONS ................................................................. 39
Turney v. Zhilka, [1959] SCR 578 ................................................................................................................... 39
Barnett v. Harrison, [1976] 2 SCR 531 ......................................................................................................... 40
Swan Group Inc. v. Bishop, 2013 ABCA 29 .................................................................................................. 42
3.3 GOOD FAITH PERFORMANCE ............................................................................... 43
Metropolitan Trust v. Pressure Concrete Services Ltd., [1973] 3 OR 629 ..................................... 43
Griffin v. Martens (1988) BCLR (2d) 152 (CA) .......................................................................................... 44
Wiebe v. Bobsien, 1985 BCJ (CA) .................................................................................................................... 45
Marshall v. Bernard Place Corp (2002), 58 OR (3d) ............................................................................... 46
3.4 MEETING THE CHALLENGES ................................................................................. 47
4 THE EFFECT OF THE CONTRACT ON THE PARTIES STATUS ........................................ 47
4.1 INTRODUCTION ................................................................................................... 47
4.2 STATUS OF VENDOR AND PURCHASER IN EQUITY ................................................ 47
Doctrine of conversion ........................................................................................................................................ 47
Lysaght v. Edwards (1876), 2 CH D 499 ...................................................................................................... 49
Buchanan and James v. Oliver Plumbing and Heating Ltd.................................................................... 50
4.3 CONVERSION AND ITS IMPLICATIONS FOR PURCHASERS...................................... 50
Passing of Risk ........................................................................................................................................................ 50
Rayner v. Preston (1881), 18 Ch D 1 (CA) ................................................................................................... 50
Doctrine of Frustration ....................................................................................................................................... 51
Victoria Wood Development Corporation Inc. v. Ondrey (1978), 92 DLR (3d) 229 (OCA) .... 52
Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 61 DLR (3d) 385 ................... 53
KBK No 138 Ventures Ltd. v. Canada Safeway Ltd. (2008) 185 DLR (4th) 650 (BCCA) ............ 54
Re-Allocation of Risk ............................................................................................................................................ 55
Insurance................................................................................................................................................................... 55
Wile v. Cook (1986), 42 RPR 101 (SCC) ....................................................................................................... 55
Abel v. McDonald (1964), 45 DLR (2d) 198 (Ont CA) ............................................................................ 56
Gains of a Capital Nature .................................................................................................................................... 57
4.4 CONVERSION AND ITS IMPLICATIONS FOR VENDORS ........................................... 58
V. Rankin’s Mechanical Contracting Ltd. v. First City Developments ............................................... 58
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Loewen v. Nueman [1997] BCJ No 1909 ...................................................................................................... 59
5 MISDESCRIPTIONS OF THE SUBJECT MATTER OF THE CONTRACT ............................ 59
5.1 INTRODUCTION ................................................................................................... 59
5.2 THE NATURE OF MISDESCRIPTIONS ..................................................................... 60
5.3 TYPES OF MISDESCRIPTIONS................................................................................ 60
5.4 EFFECT OF MISDISCRIPTIONS ............................................................................... 61
Misdescriptions in Particulars of Sale ........................................................................................................... 61
Wilson Lumber Co. v. Simpson (1910), 22 OLR 452 (HC) .................................................................... 61
Murphy v. Horn, [1929] 4 DLR 693 (OHC) .................................................................................................. 62
In re Puckett and Smith’s Contract ................................................................................................................. 63
Misdescriptions in the Conditions of Sale ................................................................................................... 64
Sandford v. Cox (1999) NBQB .......................................................................................................................... 64
Bouzane v. Murphy (2000) 36 RPR (PEI SC) .............................................................................................. 65
6 OF OTHER DEFECTS OF QUALITY ............................................................................. 65
6.1 INTRODUCTION ................................................................................................... 65
6.2 HOUSES TO BE, OR BEING, BUILT ......................................................................... 66
Freiser-Reid et al. v. Droumtsekas et al, [1980] 1 SCR 720 .................................................................. 67
6.3 COMPLETED “NEW” HOMES ................................................................................ 68
Ontario New Home Warranties Plan Act ..................................................................................................... 68
Grudzinski v. Ontario New Home Warranty Program (1997) ............................................................ 69
6.4 LAND AND STRUCTURES OTHER THAN “NEW HOMES” ......................................... 70
Patent Defects ......................................................................................................................................................... 70
Tony’s Broadloom & Floor Covering v. NMC Canada Inc., 141 DLR (4th) 394 .............................. 70
Latent Defects.......................................................................................................................................................... 71
Scott-Polson v. Hope (1958) (BCSC) .............................................................................................................. 72
Gronau v. Schlamp Investments Ltd (1974), 52 DLR (3d) 631 (Man QB) ..................................... 72
McGrath v. MacLean (1979), 95 DLR (3d) 144 (OCA) ............................................................................ 73
Sevidal v. Chopra.................................................................................................................................................... 74
Winnipeg Condominimum Corp. No. 36 v. Bird Construction Co. ..................................................... 75
Carlish v. Salt, [1906] 1 Ch 335 ........................................................................................................................ 76
Lash and Moneta Builders and Construction Company v. Miller (1956) ....................................... 77
Vendor’s Property Disclosure/Information Statement ......................................................................... 77
Curtin v. Blewett (1999) BCSC ......................................................................................................................... 78
Environmental Matters ....................................................................................................................................... 79
Stigmatized Properties ........................................................................................................................................ 79
Dennis v. Gray, 2011 ONSC ................................................................................................................................ 79
Lapointe v. Trang [2009] OJ (SCJ) ................................................................................................................... 80
7 OF THE MATTER OF TITLE ....................................................................................... 80
7.1 INTRODUCTION ................................................................................................... 80
7.2 SOME DEFECTS OF TITLE ...................................................................................... 81
7.3 WHAT IS A “GOOD TITLE”? .................................................................................. 82
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Pyrke v. Waddingham (1852), 68 ER 813 (Ch) ......................................................................................... 82
Mullings v. Trinder (1870) Eq .......................................................................................................................... 83
Logan v. Stein, [1958] OWN 343 (CA) ........................................................................................................... 83
7.4 VENDOR’S TITLE OBLIGATION .............................................................................. 84
Implied Title Obligation ...................................................................................................................................... 84
Yandle & Sons v. Sutton (1922) 2 Ch. 199 ................................................................................................... 85
Express Title Obligation ...................................................................................................................................... 85
Cato v. Thompson (1882), 9 QBD 616 (CA) ................................................................................................ 86
Zygocki v. Hillwood (1976), 68 DLR (3d) 55 (OHC)................................................................................ 86
McAleer v. Desjardine, [1948] 4 DLR 40 (OCA) ........................................................................................ 87
Re Hughes and Macaulay, Nicholls, Maitland & Co (1969) BCCA ...................................................... 88
James et al. v. Chiaravalle (1969), 8 DLR (3d) 131 (OHC) .................................................................... 89
Local Improvements Charges – Priority Lien Status................................................................................ 89
Note on Corporations Tax Act, RSO 1990, c C40: ...................................................................................... 90
Kolan v. Solicitor (1969), 7 DLR (3d) 481 (OHC) ..................................................................................... 90
7.5 DISCOVERING DEFECTS AND REQUISITIONS ......................................................... 91
Categories of Defects of Title ............................................................................................................................ 92
Armstrong v. Nason (1894), 25 SCR 263 ..................................................................................................... 92
Toth v. Ho (1998), OSC ........................................................................................................................................ 92
Title Searches .......................................................................................................................................................... 93
Registry Act, Title Period, and Notice of Claim .......................................................................................... 93
Re Battison and Ferell (1990) Dist. Ct. ......................................................................................................... 94
Fire v. Longtin (1994) Ont CA........................................................................................................................... 95
1387881 Ontario v. Ramsay (2004), Ont CA .............................................................................................. 95
Requisitions as to Title ........................................................................................................................................ 96
Armstrong v. Nason (1894), 25 SCR 263 ..................................................................................................... 96
Jakmar Developments Ltd. v. Smith (1973), 39 DLR (3d) 379 (OHC) ............................................. 97
7.6 POSITION OF PARTIES ON “BREACH” OF TITLE OBLIGATION ................................. 98
Rule in Bain v. Fothergill..................................................................................................................................... 98
Rescission Clause ................................................................................................................................................... 99
Vendor’s Position ................................................................................................................................................... 99
Hurley v. Roy (1921), 64 DLR 375 (OCA) .................................................................................................... 99
Mason v. Freedman, [1959] SCR 483.......................................................................................................... 100
Purchaser’s Position .......................................................................................................................................... 100
Re Hughes and Macaulay, Nicholls, Maitland & Co. Ltd. (1969) BCCA ......................................... 100
Lubienski v. Silverman, [1932] 3 DLR 320 (OSC).................................................................................. 101
Stieglitz v. Prestolite Battery Division – Eltra of Canada Ltd. (1980) 31 OR (2d) 655 (HC) 101
7.7 REMOVING TITLE DEFECTS ................................................................................. 102
8 OF THE MATTER OF THE PLANNING ACT ............................................................... 102
8.1 INTRODUCTION ................................................................................................. 102
Planning Act .......................................................................................................................................................... 102
8.2 PERMITTED DEALINGS WITH LAND .................................................................... 103
1. Registered Plans of Subdivision............................................................................................................... 103
2. Consent to Disposition ................................................................................................................................. 104
1390957 Ontario Ltd. v. Acchione ............................................................................................................... 104
Non-Retention of Abutting Lands ................................................................................................................ 105
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What Dealings Does Section 50(3)(b) Prohibit?.................................................................................... 105
Reeve Burns v. Pelkman (1989) 70 OR (Dist Ct) ................................................................................... 107
9 OF THE REGISTRY ACT AND PRIORITIES ................................................................. 107
9.1 GENERAL INTRODUCTION .................................................................................. 107
9.2 INTRODUCTION TO DEEDS REGISTRATION SYSTEM ............................................ 108
Registry Act: What and where to register ................................................................................................ 108
9.3 REGISTRATION AND PRIORITIES......................................................................... 109
Actual Notice......................................................................................................................................................... 109
Harrington v. Spring Creek Cheese Manufacturing Co. (1904), 7 OLR 319 (CA) ..................... 110
Whitehead v. Trustee of Estate of Lach General Contractors Ltd. (1974 Ont CA) ................... 110
Re McKinley and McCollough (1919, Ont CA)......................................................................................... 112
Regulating Priorities Between Competing Instruments..................................................................... 113
Peebles v. Hyslop (1914, Ont CA)................................................................................................................. 113
Paramount Theatres Ltd. v. Brandenberger (1928, Ont) ................................................................... 114
Exception to the Registration Requirement (Lease)............................................................................ 114
Plante v. Woolfe and D’Alessandro (1954, Ont)..................................................................................... 115
Protection of Interests Arising Other then by Instrument ................................................................ 116
Rose et al. v. Peterkin (1887) SCR................................................................................................................ 117
Israel v. Leith (1890), Ont CA......................................................................................................................... 117
10 OF THE LAND TITLES ACT AND PRIORITIES (in parts of Ontario) ........................... 118
10.1 INTRODUCTION ............................................................................................... 118
Land Titles Act ..................................................................................................................................................... 118
10.2 PRIORITIES AND NOTICE .................................................................................. 119
Registration as Notice ....................................................................................................................................... 119
Russo et al. v. Field et al., [1973] SCR 466 ................................................................................................ 120
Priorities and Actual Notice ........................................................................................................................... 121
United Trust Co. v. Dominion Stores Ltd. et. al., [1977] 2 SCR 915 ................................................ 122
Fraud under the Land Titles System ........................................................................................................... 123
Gibbs v. Messer, [1891] AC 248 (PC) .......................................................................................................... 123
Lawrence v. Maple Trust Company, 2007 ONCA ................................................................................... 124
10.3 ADVERSE POSSESSION ..................................................................................... 125
Gatz v. Kiziw, [1959] SCR 10 .......................................................................................................................... 126
10.4 THE ASSURANCE FUND .................................................................................... 127
Fawkes v. The Attorney General for Ontario (1903), 6 OLR 490 (HC) ......................................... 127
10.5 OFF THE RECOND CLAIMS ................................................................................ 128
11 OF THE MATTER OF TIME AND TENDER .............................................................. 128
11.1 INTRODUCTION ............................................................................................... 128
11.2 TIME PROVISIONS ........................................................................................... 129
When is Time of the Essence? ....................................................................................................................... 129
Raineri v. Miles .................................................................................................................................................... 130
Fairness and Time Provisions ....................................................................................................................... 131
Salama Enterprises (1988) Inc. v. Grewal ................................................................................................ 131
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Union Eagle Ltd. v. Golden Achievement Ltd. [1997] AC 514 (PC) ................................................ 132
Installment Contracts........................................................................................................................................ 132
Preconditions to Reliance on Time ............................................................................................................. 133
Anticipatory breach: breach of K before date set for completion; ................................................. 133
Domicile Developments Inc. v. MacTavish (1999) Ont CA ................................................................ 133
11.3 TENDER ........................................................................................................... 134
Statement of adjustment: ................................................................................................................................ 135
Whitall v. Kour (1969) BCCA ......................................................................................................................... 136
Genern Investments Ltd. v. Back (1969) Ont HC ................................................................................... 136
Leung v. Leung (1990) 75 OR (Gen Div) ................................................................................................... 137
12 OF POST COMPLETION MATTERS ........................................................................ 138
12.1 INTRODUCTION ............................................................................................... 138
12.2 THE GENERAL RULE ......................................................................................... 138
Fraser-Reid et al. v. Droumtsekas et al. ..................................................................................................... 139
12.3 PURCHASER’S REMEDIES ................................................................................. 139
COVENANTS............................................................................................................ 140
Land Registration Reform Act ....................................................................................................................... 140
Czechowski et al. v. Ford.................................................................................................................................. 140
12.5 UNPAID VENDOR’S LIEN .................................................................................. 140
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1.1 INTRODUCTION
Real estate sale differs from common law sale in that:
 The moment the purchaser signs the K, he takes on the risk, unless the K says
otherwise (caveat emptor);
 For a K dealing with land to be enforceable, it must be in writing;
 Time between initiation and completion is longer in a real estate sale
(typically one or two months).
1.2 REGULATION OF REAL ESTATE BROKERS
Real estate agents:
 Originally subject to the CML of agency  agent had no right to K on his
behalf, but only to find a P;
 Purchasers traditionally did not have agents;
 Agency is a fiduciary relationship so agent could not represent both S & P;
 Problem still arises in large firms;
 Only a licensed individual can trade in real estate, with exceptions (including
sale by owner);
 Recently, the trend has been for courts to expand the nature and scope of
duties owed by brokers to purchasers and, as a result, the significance and
purity of the agency relationship between the V and broker has been
reduced.
The Canadian Real Estate Association
o Mission statement: The national organization which represents the real
estate interest of its members and the public, enhances members’
professionalism, competency and profitability; and advocates governmental
policies which improve the industry’s market environment and the public’s
real property rights and ownership.
Ontario Real Estate and Business Brokers Act, 2002


The purpose of the Act is to protect the public;
Provides for the governance of the real estate brokerage business in Ontario
and regulates entry into the business, imposes restrictions on the right of
agents to seek the assistance of the courts in the recovery of their
commissions, regulates the methods by which the amount of commissions
may be determined, requires agents to maintain trust accounts, and provides
a range of duties to which agents are subjected in their dealings with their
principals and third parties.
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The Ontario Regulation 567/05 (under the Real Estate and Business Brokers Act,
2002)


Develops in detail various aspects of the general legislative scheme set out by
the Act;
Administered on behalf of the Ministry of Government Services by the Real
Estate Council of Ontario.
1.2 FORMATION OF THE AGENCY RELATIONSHIP
How does agency relationship come into existence?
 Express agreement;
 Purely through conduct;
 If contract of agency is not in writing, there are constraints on the agent’s
entitlement to recover commission;
 Agency is always consensual.
In general, an agency agreement may be oral or implied – but in some jurisdictions,
including Ontario, there is a clear preference for written and signed agreements
with agents.
If in agent’s agreement is in writing, it must comply with the requirements of
Ontario Regulation 580/05 (Code of Ethics), s. 11:
(1) Shall not enter a written agreement unless the agreement specifies:
o (a) Date on which agreement takes effect and will expire;
o (b) Method for determining:
 The amount of any commission payable
o (c) How any commission will be paid
o (d) Services that the brokerage will provide
(An attempt is being made in legislation to ensure that client
understands nature of agent’s role.)
(2) Date of expiration shall not be more than 6 months after the date the
agreement takes effect unless,
o (a) The date on which agreement expires is prominently displayed
on the first page, and
o (b) The buyer or seller has initialed the agreement next to the
date.
(3) Brokerage shall ensure that a written agreement that is entered into
between the brokerage and buyer or seller contains only one date of
expiration.
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Scope of agency:
1) Agents do not have authority to contract on behalf of their principals. Their
authority is limited to the authority that is expressly conferred by their
contract of agency;
2) Agents have customary authority to receive the deposit. They also have the
implied authority to represent the property they are marketing, but not to
warrant the condition of the property;
3) Two other categories of agency or representation have arisen in some
provinces (not Ontario):
a. Designated agency: one or more agents of the same brokerage are
designated in writing by the brokerage to act as sole agents for a
buyer or seller with respect to the same trade.
b. Transaction brokerage: a brokerage member provides facilitation
services to the buyer and seller in the same trade.
Types of agency K:
1) General/open K:
a. “I don’t want you to act as my agent, but if you find someone to buy
my property, I’ll pay you a commission.”
2) Exclusive/sole agency K:
a. V or P agrees that the agent will be the sole agent representing the
client. But V or P can find third party on their own.
3) Exclusive/sole right to sell:
a. V agrees to pay agent a commission should property be sold by any
means, even if agent has nothing to do with it.
(a) This is the most common type of agency contract.
i. Eliminates all competition;
ii. Agent can sue for commission or damages if principal
breaches.
All agency Ks can be further broken down into two categories:
a) Cooperative (multiple) listing agreements (expressly authorize the agent to
employ the services of agents in other firms);
b) Agreements that do not expressly authorize the agent to use the services of
other agents.
Dual agency:
 V acknowledges that the listing broker may act as dual agent. Listing broker
must inform the V ASAP;
 Problematic bc agreement attempts to get V’s consent without any
disclosure, but if implications of dual agency are not explained to V, this
consent is invalid;
 Agreement also seeks V’s consent for agent to represent more than one buyer
 only becomes potential conflict if more than one buyer wants the same
property.
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Listing agreement:
Governs the relationship between vendor and agent.
Buyer agreement:
Analogous to the listing agreement.
Agreement of purchase and sale:
Between seller and purchaser – agent is a third party to this agreement (Liebig).
Critique of listing agreement:
 SCC has commented that it’s essentially a unilateral K;
 Agent agrees to do very little;
 It could be tempting for the seller’s broker to undervalue a client’s property
as it would lead to a quick and certain sale and consequently a guaranteed
commission;
 There could be an incentive for the buyer’s broker not to get the best
possible price for the buyer, as a better deal would translate into a smaller
commission for the broker.
o Given these concerns, should the industry revisit the method of
determining the remuneration of brokers?
1.3 BROKERS ENTITLEMENT TO A COMMISSION
Requirements to collect commission:
1) Contract of agency (usually can’t be gratuitous);
2) Licensed or registered (only required if suing – s. 9 REBBA);
3) Written or other agreement (see s. 23, below);
4) The deal was completed or there was a failure due to the act of the client;
5) OR introduction of buyer and seller that was the cause of the transaction.
Legislative requirements: Ontario Regulation 567/05, s. 23
(1) Subject to subsection (2), a registrant shall not charge or collect a
commission unless
(b) the entitlement arises under a written and signed agreement,
or
(c) the entitlement arises under another agreement and,
i. the registrant has conveyed an offering in writing that is
accepted, or
ii. the registrant
a. shows the property to the buyer, or
b. introduces the buyer and the seller
(2) Unless agreed to in writing by the buyer, a registrant shall not charge or
collect a commission from a buyer in respect of a trade in real estate if the
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registrant knows that there is an unexpired buyer representation agreement
between the buyer and another registrant.
Commission:
 Parties can stipulate on what events commission will be payable in the listing
agreement (finding a willing and able buyer, obtaining an offer, etc.);
 Usually a percentage of sale price. Used to be a fixed amount. Tends to be
5% or 6%, supposed to be negotiable;
o S. 36, REBBA: commission shall be an agreed amount or a percentage,
but not both, and if there is no agreement, the rate will be that
generally prevailing in the community;
o Broker cannot keep the difference bw listing price and higher selling
price (conflict of interest);
 There is no obligation on a V to accept an offer obtained by agent;
 It is the practice for agents to bear the costs associated with the fulfillment
of their mandates whether or not they succeed in earning the commission;
however, there is no rule that precludes them from passing some or all of
these costs on to their principals;
 Agent will try to have parties pay a deposit that will reflect expected
commission.
Holdover clause:
 Listing agreements have to be for a specified period. V promises to pay a
commission even if property is sold during a specified period after the
relationship expires – usually 60-90 days.
Finders fee:
 Fee the mortgagee (bank) may offer the agent for helping mortgagor (buyer)
obtain the mortgage;
 Agents are generally not entitled to accept such a fee without full disclosure
to principal.
Buyer agreement:
 Analogous to a listing agreement. Difference is in commission: buyer’s agent
will generally go to the V for a commission. Only if unsuccessful will buyer be
expected to pay a commission.
Legislative framework sets up a monopoly:
 K is with the firm and not the agent  but legislation only allows the
individual agent to sue  given a broad interpretation so that any person
involved in the deal must be registered;
 If a member of the firm was working unlicensed, this can prejudice the rights
of the firm.
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Luxor (Eastbourne) Ltd. v. Cooper, [1941] 1 All ER 33 (HL)
 Leading case on interpreting agent contracts
Facts:
Vendor entered into an oral K with broker to sell property and receive commission.
Broker found a purchaser but the vendor decided to take the property off the market
and said no to sale. Agent argued that there should be an implied term that the V will do
nothing to frustrate the agent’s ability to obtain commission.
Issues:
Was there an implied agreement in K that the vendor would not act in a manner which
would frustrate the broker’s efforts to earn a commission?
Holding:
No.
Ratio:
There are no special rules or principles that determine the interpretation of commission
contracts. Simply look at what the parties agreed to. Vendor did not promise that he
would pay commission if the agent found a willing purchaser, only if the sale occurred.
Lord Russell: “(1) Commission contracts are subject to no particular rules or principles of
their own; the law which governs them is the law which governs all contracts and all
questions of agency.
(2) No general rule can be laid down by which the rights of the agent or the liability of
the principal under commission contracts are to be determined. In each case, these
must depend on the exact terms of the contract in question, and upon the true
construction of those terms.
(3) Contracts by which owners of property, desiring to dispose of it, put it in the hands
of agents on commission terms, are not (in default of specific provisions) contracts of
employment in the ordinary meaning of those words. No obligation is imposed on the
agent to do anything. The contracts are merely promises binding on the principal to pay
a sum of money upon the happening of a specified event, which involves the rendering
of some service by the agent.”
Viscount Simon: “The agent is promised a reward in return for an event, and the event
has not happened. He runs the risk of disappointment, but if he is not willing to run the
risk he should introduce into the express terms of the contract the clause which protects
him.”
Comments:

Commission Ks are subject to no particular rules of interpretation
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


No general rule can be laid down by which the rights of the agent or the liability
of the principal under commission contracts are to be determined.
Ks with brokers are not Ks of employment, and there is no obligation for the
principal to do anything unless event occurs.
The fact that a vendor can refuse to sell is a business risk that the broker can
avoid through the use of an express term.
H.W Liebig & Company Ltd. V. Leading Investments Ltd (1986), 25 DLR (4 th) 161
(SCC)
 Refers to Luxor
 Sale = completed transaction
 Highest but not very satisfactory authority on interpretation
 No commission case since Liebig has reached the SCC
Facts:
Seller gives agent, by virtue of a listing agreement, exclusive authority to sell certain
vacant lots.
Agent finds a purchaser, purchaser makes an offer, and vendor accepts.
Purchaser backs out and the deal falls through after the deposit is paid.
Vendor settles with purchaser (releases purchaser of further liability).
Agent sues vendor claiming that he earned his commission.
Vendor made two promises to pay commission: in listing agreement (with agent),
and in APS (with purchaser).
Issues:
Can the broker demand his commission even though the deal fell through (does sale
in “commission for sale” refer to a completed sale or an agreement to sell)?
Holding:
No (sale refers to completed sale).
Reasoning:
LaForest J (+ 2): SFK needs to be given reasonable interpretation. Look at common
understanding. Default: no completed sale = no commission, unless vendor
frustrates the sale. The governing agreement is the listing agreement and its
meaning is not altered by the APS.
LeDain J: strict interpretation of the terms, looking at both documents. Commission
was only payable upon a completed sale. Agent is not entitled to commission.
Doesn’t really address issues of privity or consideration.
Estey J (+ 2, dissenting): Look at K in light of the circumstances, including past
dealings. Previous terms had differed. The second agreement should be the relevant
one, because it amends the first. Can be read to say that a sale did not need to be
completed. Agent is entitled to commission.
13
 Any of these approaches can be used in practice.
Ratio:
The common understanding is the vendor is looking for an actual sale and not just
an offer. The disposal of the property is the entire purpose for entering into K with
the broker. The parties can depart from this as long as clear and unequivocal
language is used.
Note that if the vendor defaulted the broker may have been entitled to a commission
on the basis of quantum meruit.
LeDain, J. “…the event upon which the commission was payable in this case was a
completed sale. That event did not occur, not through any fault of the vendor, but
because the purchaser was unwilling to complete the sale. The agent was, therefore,
not entitled to the commission.”
Comments:
 The term “sale” in such a brokering agreement means a completed transaction
unless otherwise specified.
 If the vendor defaulted the broker may be entitled to a commission on the
basis of quantum meruit.
o Brokers must prove that it was they who effected the transaction, or
introduced the V and P, or did whatever else was demanded of them by the
terms of the K of agency;
o What matters is whether their services and acts were instrumental in
bringing about the event upon the happening of which they earn their
commissions  a factual inquiry, not about time and effort;
o Difficulties arise when the V and P introduced by an agent attempt to evade
agreements to pay the agent’s commission.
 This case deals with such situations:
Rooke v. Lillicroft (1974), 48 DLR (3d) 204
 Seller attempts to evade agreement with broker
 When is broker the cause of the transaction?
Facts:
Ptf, a broker, is asked by 3rd to list his property, a tavern.
The listing agreement is such that it will expire on a certain date and provides for a
period of sixty days following the termination of the agreement where the broker is still
eligible for a commission given certain conditions.
Ptf obtains an offer for the property but there are difficulties in closing which extend it
beyond the termination of the listing agreement.
A second offer is made without the ptf.
The dft eventually sells the property to the same parties for the same price but does not
14
pay the ptf his commission.
Issues:
Was the ptf entitled to a commission?
Holding:
Yes.
It doesn’t matter that the offer accepted is not the same as the offer obtained by the
broker. Must ask: can we say that the offer presented by the agent to the parties, in
essence, was the offer accepted? As long as the offer is substantially the same, the
broker will be the effective cause.
Ratio:
Lacourcière, J.: “… an agent “has obtained an offer in writing” in the circumstances of
this case. This is so, although the agreement in final form, under which the transaction
was closed, was not the one obtained by the plaintiff, but one clandestinely entered into
for the purpose of avoiding payment of a commission.
Once an agent has satisfied the statutory requirements, the crucial test on which turns
his entitlement to a commission, is whether his efforts have indeed brought together
the purchaser and the vendor, and were the real and efficient cause of the sale. … the
changes made by the defendant as vendor did not alter the nature of the transaction…”
“…a vendor cannot avoid payment of an earned commission by a clandestine
agreement with the purchaser for minor amendments in the terms of the
transaction.”
Notes:
o Helps explain provision of the Act that requires obtaining an offer in writing
that is accepted;
o The test is fact-oriented;
o Provides an alternative argument for a broker who no longer has a written K.
1.5 BROKERS OBLIGATIONS TO THE PRINCIPAL
Fiduciary duties: it is important to identify who is the broker’s principal, because
the broker owes that person fiduciary duties. Broker cannot let his interests
conflict with client’s interests (or let third party’s interests conflict with those of
client).
o Listing agreement establishes a direct agency relationship;
o Agent can still be in breach for acting inappropriately even if client suffers no
loss;
o Burden of disproving fiduciary relationship is on the broker once the agency
relationship exists.
15
Concurrent representation of two or more sellers:
It is in the broker’s interests to serve each of the sellers loyally, since the broker
stands to earn a commission on each sale. Additionally, brokers’ and sellers’
interests coincide: they are both seeking the highest possible price.
Concurrent representation of two or more buyers:
Greater potential for conflict. Only one buyer can buy the property and it would be
in the broker’s interest to favour the buyer prepared to pay the higher price. It
would even be in his interest to provoke a bidding war. There is a clear breach of
the broker’s obligation to negotiate the lowest price for the principal.
Dual agency relationships may arise in two circumstances:
o Concurrent representation of both V and P in a transaction; or
o Sequential representation of, say, V and then P in two transactions.
W.F. Foster, “Dual Agency: Implications for the Real Estate Industry”
Who are the agent’s principals?
o “Simply stated, an agent’s principal is a person who has engaged the agent to
represent him in a transaction.”
o “The law does not prohibit an agent from acting as a dual agent.”
o The agreement does not need to be express or constitute a contract. It may
be implied from the dealings of the parties.
o “It therefore is possible for a person to be viewed as an agent in a transaction
even though he is ignorant of his status.”
o A real estate agent may be an agent of a particular vendor or purchaser even
though he has not entered into an express agreement with him, and he may
be an agent of both parties to a transaction
o It will depend on the facts and circumstances of each case.
Vendor as Principal
o The traditional perspective “is that a real estate agent is an agent of the
vendor and [as a consequence] is in a fiduciary relationship with him.”
o Most agents derive their authority to deal with Vs and Ps from an express
agreement (listing agreement)
Purchaser as Principal
o An agent may represent a purchaser, or both parties to the transaction if he
complies with his fiduciary duty of disclosure
o They will ender an implied agency relationship with the purchaser if they
create the impression that they are representing the purchaser’s interests
Dual Agency Situations
o Now the object of regulation: Ontario Regulation 567/05 General, s. 22
Ontario Regulation 580/05 Code of Ethics, ss. 16 and 17
o In-house transactions: where both V and P are represented by members of
the same firm. Note that the agreement is with the firm and not the agent.
The firm will be the agent of both V and P and dual agency exists.
o In MLS transactions: where the V has expressly authorized the firm to
16
utilize the services of other MLS firms in marketing his property. The terms
usually make the cooperating firms the sub-agents of the V, hence their sales
staff are also sub-agents.
o In other agencies where V or P have authorized the agent to utilize subagents: such as when agent has been appointed by the P. Such agreements
need not be express. Has the same effect as MLS agreement. If one of the subagents also represents the other party, there will be dual agency.
o Purchaser’s agent remunerated by vendor: when a P’s agent, with or
without P’s authority, looks to the V for his commission, he is deemed to be
also the V’s agent. Dual agency is again present.
“Dual agency is the most common form of agency relationship which exists in
the real estate brokerage industry.”
The fiduciary duty of disclosure makes it incumbent on an agent to explain all
the implications of a dual agency to its two principals before their consent to a dual
agency relationship can be obtained.
Knoch Estate v. Jon Picken Ltd. (1981), 4 OR (3d) 385 (OCA)
 Fiduciary duties
Facts:
Vendor (GT for the estate) lists property at 2.25 million
Appoints RT as agent  multiple listing agreement allows him to assign sub-agents
(Picken and Jenkins)
Jenkins makes an offer to RT on behalf of Mantella for the estate for 2.1 million
Then sold from Mantella to Caterpillar for 3.47 million
 So Mantella and broker make huge profit instead of vendor
Jenkins gets commission on two sales (Mantella and Caterpillar)
Estate argues that Jenkins and Picken, upon submitting Mantella’s offer to RT, became
the selling agent for the estate and therefore its fiduciary
Issues:
Was there a breach of fiduciary duty to the estate? (Are sub-agents agents of the
broker?)
Holding:
No.
They have violated fiduciary duties to Caterpillar as purchaser, but not to the estate.
Reasoning:
Apply Lac Minerals test. Only contact they had with the estate was when they presented
Mantella’s offer through the trust. Agency exists in that relationship, but it’s not
fiduciary.
Jenkins had nothing to do with the V. He only dealt with V’s agent, RT. Even if he were
found to be an agent, it cannot follow that a fiduciary relationship was established.
17
Ratio:
Griffiths, JA. “… it is a question of fact in each case whether a fiduciary relationship
exists, and … it is the nature of the relationship, not the special category of actors
involved, which gives rise to the finding of a fiduciary.”
“in general, the fiduciary relationship arises when one party places a trust or
confidence in another or is dependent on the other in some significant way. … these are
the essential elements or components of the relationship.”
“…the vendor is legally entitled to expect that his or her real estate agent will faithfully
serve to promote the vendor’s interests.”
“…the mere fact that a person wears the badge of “agent” does not automatically
subject him … to fiduciary duties towards his … principal.”
He goes on to find that in this case the essential ingredients for the finding of fiduciary
duty were not present.
However, he goes on to say “Where a selling agent has direct dealings with the vendor
or renders advice with respect to an offer to purchase, he … may create a situation
wherein the vendor reposes trust and confidence in the selling agent to such an extent
as to put the agent in the position of a fiduciary.”
Notes:
Existence of a fiduciary relationship will depend on the facts of each case.
Sopinka J in Lac Minerals (quoted in Knoch):
“Relationships in which a fiduciary obligation have been imposed seem to possess
three general characteristics:
(1) The fiduciary has scope for the exercise of some discretion or power;
(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the
beneficiary’s legal or practical interests;
(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary
holding the discretion or power.
Agent’s Statutory Obligations to the Principal
Reg 580/05, Code of Ethics
o Most fall under obligation of acting with reasonable care and skill;
o To treat every person fairly and honestly;
o To promote the best interests of his client;
o To take reasonable steps to determine the material facts relating to the
acquisition or disposition and to disclose such facts to the client;
o To convey any offer he receives to his client ASAP;
o Not to knowingly make an inaccurate representation in respect of a trade;
o Cannot induce a seller or buyer to breach a contract (REBBA, s. 33);
18
o Any promises made must be enforceable and in writing (Ont Reg 567/05, s.
24);
o To honour other brokers;
o Deliver relevant documents;
o Listing agreement, s. 14: may be by electronic communication;
o But this does not apply to documents that create or transfer interests
in land that require registration;
o Duty to account for money received:
o Legislative schemes now require that all brokers have trust accounts;
o Entitlement to funds will be guided by the terms of the agreements;
o If deal falls through by nobody’s fault, the agent returns deposit from
trust account;
o If default was that of the P, deposit goes to V;
o If unclear, agent can pay deposit to court and let V and P fight over it.
Agent’s Common Law Obligations to the Principal
Nearly all of these obligations are owed by an agent to his principal whether he is
acting gratuitously or for reward.
1. Perform the mandate: list the property and offer it for sale;
2. Obligation of obedience: follow client’s wishes, if lawful (note that principal
is vicariously liable for agent’s wrongdoing);
3. Act in person: agent cannot, without permission (e.g. multiple listing
agreement), hire someone to perform his obligations;
4. Act with reasonable care and skill in the performance of agency;
5. Account for money received.
Obligations to third party/buyer: be honest, don’t misrepresent the property… be
silent or be honest. NO fiduciary obligations to third party/buyer.
Agent’s Fiduciary Obligations to the Principal
Once an agent agrees to act on behalf of a principal, he becomes a fiduciary.
Duties attached – Fiduciary CANNOT:
o Act for the other party to a transaction, even if providing different services;
o Act for competing parties (such as two buyers interested in the same
property);
o Make a secret profit;
o Sell his or her property to the principal;
o Purchase the principal’s property;
o Purchase the property his or her principal is interested in;
o Use for his own benefit information obtained in the course of the agency.
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Breach of Agent’s Obligations
Violations may expose agents to disciplinary action by the person or body charged
with the supervision of the real estate brokerage business, prosecution under the
governing legislation, loss of registration, forfeiture of any bond supplied, and
prosecution under the Criminal Code (in the case of fraud).
For an action in fraud to lie, it must be established that a false misrepresentation
was made knowingly by an agent, though in certain circumstances knowledge of
the falsity of the representation may be imputed.
Since brokers have no authority to contract with third parties on behalf of their
principals, no consideration is given to the question of the scope of a broker’s
contractual liability to third parties.
If a broker misrepresents their authority to third parties, they will incur liability for
breach of warranty of authority (Ontario Regulation 580/05 Code of Ethics, s.
37(2)).
Agents will also incur liability to their principals for their misconduct. Where an
agent acquires property in competition with the principal, for example, the courts
will impose a constructive trust on the agent in favour of the principal (Soulos v.
Korkontzilas, [1997] 2 SCR 217).
D’Atri v. Chilcott, 1975
 Obligation of disclosure
Facts:
Property was listed with listing broker firm and one of the agents wanted to buy
Purchaser disclosed that he was the agent and made the offer conditional on financing
The disclosure was in the agreement
V refused to close, saying the price wasn’t high enough
Issues:
Was the transaction fair? What are the agent’s fiduciary obligations of disclosure?
Holding:
No. The agent did not fulfill his duty to the principal.
Reasoning:
The agent had a higher duty of disclosure in that not only must the price be adequate,
but the transaction must be a righteous one and the price obtained must be as
advantageous to the principal as any other price that the agent, by the exercise of
20
diligence, could have obtained from a third party.
The market was about to go up and it was advantageous to the V to wait
1. The relationship between agent and principal is fiduciary and confidential
2. There is a duty upon such an agent to make full disclosure of all facts within
knowledge of the agent which might affect the value of the property
3. Not only must the price paid be adequate but the transaction must be a
righteous one and the price as advantageous to the principal as any other price
that the agent could have obtained from a third person
4. The onus is on the agent that those duties have been fully complied with
In this case, the agent should have recommended that the vendor obtain independent
advice.
Ratio:
Breaches can occur, provided they’ve been consented to by the principal
Agents must ensure that they have made the necessary disclosures called for
both by legislation and equity and that there is continuing disclosure where
appropriate.
1.6 BROKERS OBLIGATIONS TO THIRD PARTIES
Agent’s Common Law Obligations
o Obligations to third parties are obviously more limited in scope and
intensity;
o Classic common law obligations were only two: don’t misrepresent authority
and don’t deceive (fraud);
o Hedley Byrne added third obligation of reasonable care and skill when
conveying information to third parties  can incur liability for
misrepresenting the terms of a contract;
o Silence can sometimes constitute misrepresentation.
Agent’s Statutory Obligations
o Many of the statutory obligations are owed both to principal and third party;
o Code of Ethics ss. 3, 5, 6 obligations are owed to “every person in respect of a
trade in real estate;”
o Two qualifications: the obligation to promote and protect best interests is
owed only to the broker’s client/principal, and the agent’s obligation of
disclosure on purchasing a property owned by a third party is less onerous
than if it were acquiring its principal/client’s property (Chilcott).
21
Bango v. Holt (1971), 21 DLR (3d) 66 (BCSC)
 fraudulent non-disclosure (not discussed in class)
Facts:
Dft listed a property with a broker.
Ptf wants to acquire revenue producing property and the property is listed as “Expired
duplex permit renewable.”
Ptf purchases property only to find that the permit is not renewable.
Listing broker knew that the permit was not renewable but did not tell selling broker.
Selling broker relied on listing broker’s statements.
Issues:
Was the listing broker liable? Was the selling broker negligent?
Holding:
Yes, for fraudulent non-disclosure and thus vendor, too. Yes.
Ratio:
Ruttan, J. applies Hedley-Byrne: “… the plaintiff sought out [the broker] as a real estate
saleswoman with particular knowledge of revenue producing properties and as a person
attached to a large real estate firm, the defendant company. She purported to give him
expert advice in the course of her occupation, knowing he intended to rely on her
opinion. In such circumstances her obligation included the duty to be honest in making
any statement and the requirement to exercise such special skill and care in doing so as
was comparable of others engaged in the same occupation.”
Hawk v. Dixon (1975), 64 DLR (3d) 201 (OHC)
(not discussed in class)
Facts:
Ptf who is looking for rental properties gets in touch with a real estate broker.
Through broker ptf purchases what he thinks is a triplex.
Through broker ptf gets in touch with dft who acts as his lawyer.
After sale has closed, ptf finds out that the triplex, although it has a basement
apartment, is only allowed to be used as a two family dwelling.
Ptf was relying on the rent from the 3rd unit to pay for the purchase.
Ptf later sells the property for $1,000 more than it cost.
Issues:
Was anyone liable? If so, what’s the quantum?
Holding:
22
The broker, but since the ptfs are unable to show any loss flowing from the negligent
misrepresentation for which he should be held liable, there are no damages (P paid
$34K for property that had market value of $34K).
Ratio:
Lief, J. finds basically that on the basis of Hedley-Byrne the broker is liable as he knew
the ptf was relying on him to buy a triplex and he should have checked. Dft was not
found liable as the generally accepted practice was that the lawyer did not check the
zoning by-laws.
“The proper measure of damages would have been the difference between the
purchase price paid for the property and the actual value of the property at the time of
sale”  as these are the same, no damages.
1.7 LAWYERS AND REAL ESTATE AGENTS
Ethical considerations have become an integral part of the practice of real estate
law.
Professional Conduct Handbook
Rule 1: Integrity
Rule 2: Competence and Quality of Service
Rule 3: Advising Clients
Rule 5: Conflict of Interest
Rule 9: Fees and Disbursements
Rule 12: Advertising and Making Legal Services Available
Rule 13: Responsibility to the Profession Generally
Rule 14: Responsibilities to lawyers individually
2 OF THE FORM OF CONTRACTS & DEPOSITS
2.1 INTRODUCTION
Irrevocability: provision in s. 4 of Standard Form APS
o A binding promise to keep the offer open;
o But promise not to revoke is not binding, unless it’s in a deed, because there’s
no consideration;
o There is some disagreement as to whether the words “signed, sealed
and delivered” and the printed representation of a seal are sufficient
to constitute a document a deed;
o If V has not provided consideration for the promise, P can revoke at any time
 consideration can be anything.
23
2.2 THE FORM OF CONTRACTS
o Basic principles of K law apply (must have capacity, offer, acceptance,
consideration, intention);
o Although valid Ks relating to land may be made orally or in writing, in all
provinces (but Manitoba), such contracts have to be written or, at least,
evidenced in writing if they are to be enforceable by action;
o Exception: where the party seeking to enforce can successfully
invoke the doctrine of part performance.
The Statute of Frauds
R.S.O. 190, c. S.19, s. 4:
“No action shall be brought whereby… to charge any person… upon any contract or
sale of lands, tenements, hereditaments, or any interest in or concerning them…
unless the agreement upon which the action is brought or some note or
memorandum thereof is in writing signed by the party to be charged therewith
or some person thereunto by him lawfully authorized.”
Scope:
o Any interest that qualifies as a real interest is covered by the Statute;
o Lands, hereditaments, or any interest therein…
o All fixtures will be included in the transaction, unless contracted
otherwise;
o Same with produce of the soil;
o Deals with contracts and not gifts.
Purpose:
o Evidentiary function: reduces the risk of fraud;
o Cautionary function: check against inconsiderate action;
o Channeling function: by signing a document, the V and P have clearly
signified their intent to enter into a legally binding agreement.
Criticism:
o M. Bridge: “On examination, it becomes plain that the Statute… was anchored
in the conditions of its age, whose forensic and procedural peculiarities are
not even remotely relevant today.”
o Statute was first enacted in 1677! (and has only been repealed in Manitoba!).
Electronic K for Purchase and Sale? No.
o Electronic Commerce Act, 2000, SO 2000 c 17, s. 31(1): “This Act does not
apply to the following documents… 4. Documents, including agreements of
purchase and sale, that create or transfer interests in land and require
registration to be effective against third parties.”
24
Effect of Non-Compliance with the Statute
The statute does not render a non-compliant contract invalid; it merely renders it
unenforceable by way of an action.
Enforcement (as opposed to validity):
o Can’t sue the buyer who backs out of the deal if you only had an oral
agreement (but seller can keep the deposit);
o Act only prohibits enforcing unwritten contracts, but does not say that they
are invalid  oral contract is valid but not enforceable.
Example:
o V and P enter a written K. They agree that P will rent V a right of way over
the property. This agreement is made orally, and is not in the K. K is
therefore not, in its entirety, in writing;
o Contract becomes prima facie unenforceable;
o CML parol evidence rule: once a K has been reduced to writing, no evidence
will be received of what may have been agreed to before or at the time of its
being reduced to writing. The document speaks for itself;
o Exceptions:
o See Sylvan Lake  requirements for rectification are stringent;
o Oral evidence is permissible to address latent ambiguities;
o If dealing with a collateral K, can use oral evidence, provided that
separate oral agreement does not address interest in land;
 Collateral K dealing with chattel is permissible.
o Contract becomes enforceable by party seeking to enforce the K by waiving
the omitted term (easement in above example), by submitting to be bound by
the omitted term, or by establishing that the term contains a purely
“administrative” matter, which does not need to be in writing.
Shield but not a sword:
o Can raise it as a defence  not asking court for anything;
o Hence oral K can be of value despite being unenforceable;
o Party who wishes to set up the Statute as a defence to an action must
specifically plead the insufficiency or non-existence of the writing;
o Once a dft has specifically raised the issue in its pleadings, it is then for the
ptf to prove that the requirements of the Statute have been met;
o If a V and P orally agree to annul a written K, for example, either party can
rely on the oral agreement by way of defence should the other seek to
enforce the original K.
25
Requirements of the Statute
o Either the contract or written evidence of the contract must be in writing;
o The document must not be such as to deny the existence of a
presently binding contract, as where, for example, it stipulates that it
is “subject to contract;”
o All essential terms must exist in writing for contract to be enforceable;
o A writing that appears to meet all the requirements may still be deemed
insufficient on the ground of uncertainty of a term or terms;
o Entire K is unenforceable if it’s partially oral and only partially written.
What terms must appear in the writing (K or evidence of K)?
o Common law only 3 requirements: parties (V&P), property/subject of
agreement, and price (MacKenzie v. Walsh (1920);
o Fourth Ontario requirement: Planning Act requires that K comply with the
Act or include a clause stating that the transaction will comply with the Act
by the time of completion (s. 15 in APS);
o Terms of the K can be in more than one document, like in an exchange of
correspondence (a chain of emails but not separate correspondence);
o Implied terms:
o Completion will take place in a reasonable period, P will pay cash, and
V will convey an estate in FS free from title defects;
o Will only be implied if parties have not turned their minds to the
matter or if, having turned their minds to the matter, have not come to
an agreement on it.
Who must sign?
o Party to be charged or their agent (the defendant);
o Vendor can take advantage of this – example:
o P makes an offer, V is not prepared to accept yet;
o V orally accepts P’s written offer with P’s signature;
o When V gets a better offer, he orally accepts that one as well;
o Nothing is signed by V so P cannot enforce K against him;
o But V can sue the P who makes the best offer for specific performance,
because he signed;
 In any event, V cannot pocket both deposits.
What constitutes writing?
o Interpretation Act, s. 29(1): “… includes words printed, painted, engraved,
lithographed, photographed, or represented or reproduced by any other
mode in visible form…”
What constitutes a signature?
o Farrand in Contract and Conveyance: “The minimum that seems necessary
is that the name (or initials) of the party to be charged appear in some
26
form (hand written, type written, printed, rubber stamped) somewhere
(“subscribed” is not specified) in the memorandum provided the party
has somehow indicated that he recognized not the name as a signature
but the memorandum as being of the alleged agreement. However, this
minimum should not be taken as satisfied if the memorandum on the face
of it shows that the name in question was not inserted as a signature.”
o A signature or name typed at the end of an email message is adequate but
not any automatically inserted email signature.
Joinder of Documents
Timmins v. Moreland Street Property Co. Ltd [1957] 3 All E.R. 265 (CA)
 Rules for joinder when relying on more than one document
Facts:
Timmins (V – ptf), Moreland (P - dft)
P makes out cheque to V, cheque includes name of V’s lawyer instead of V
Cheque is signed by P
V’s lawyer issues a receipt to P, receipt is signed by V
V is suing P
o Seems to fulfill bare minimum of written requirements  P’s name is on
cheque
o You always start with a document bearing the dft’s signature (P)
o But second requirement is that document must indicate the existence of
another document  no indication of what cheque was referring to, bc
issued to V’s lawyer rather than V
Issues:
Was the cheque together with the receipt sufficient written evidence to satisfy the
requirements imposed by the Statute?
Holding:
No, the cheque is too ambiguous.
Ratio:
“In order to justify the reading of documents together for this purpose, there should
be a document signed by the party to be charged, which, while not containing in
itself all the necessary ingredients of the required memorandum, does contain some
reference, express or implied, to some other document or transaction.”
“I find it quite impossible to spell out of this cheque any reference, express or
implied, to any other document or to any transaction other than the order to pay a
sum of money constituted by the cheque itself.”
“This being a vendor’s action, the receipt was not signed by the party to be charged
and, consequently, no use can be made of any reference to the cheque which might
27
be spelt out of the receipt.”
To be able to construct a sufficient note or memorandum from two or more
documents, a number of conditions have to be met:
 Ptf must be able to produce a document (Doc A) signed by the dft;
 Doc A must have come into existence either after or contemporaneously with
the other documents that contain the other terms of the K;
 Doc A must contain an express or implied reference to either:
o The other docs which the ptf is seeking to introduce, or
o The existence of another document, which other document may be
identified by parol evidence;
 When the documents are read together they must form a sufficient writing
for the purposes of the Statute.
The Matter of Omitted Terms


As a general rule, no other evidence besides the written contract is
admissible (parol evidence rule)
Exceptions to the parol evidence rule:
o Does not apply to collateral contracts;
o Parol evidence may be used to resolve latent ambiguities in K;
o Does not apply where writing merely constitutes a note of the K
reached by the parties  parol evidence is admissible to ensure the
writing contains all the terms;
o Parol evidence is admitted to permit rectification (Sylvan Lake).
Performance Industries Ltd. V. Sylvan Lake Gold & Tennis Club Ltd.
 Rectification
 Equity prevents statute of frauds being used as an engine for fraud
Facts:
A property was to be sold by a golf course
V retained the right to buy back a parcel of the property in an option
An agreement was drawn up that contained a mistake: provided for 110 feet and not
110 yards that V could buy back
P saw it and decided not to point it out
When V decided to exercise his option, he found that the allotted parcel was very small
Issues:
What is the appropriate remedy?
Holding:
Rectification. Damages were assessed as if the V had lost the chance of building the
houses.
28
Reasoning:
Trial court and court of appeal found fraud and awarded punitive damages
SCC: damages were reduced but rectification was used
No need to prove fraud  error can be innocent or fraudulent
The goal of the court is corrective  to restore the parties to their original bargain
Here, P knew about the V’s mistake and let the V sign knowing that it would thwart his
plans
Ratio:
There is usually little scope for rectification when parties reduce their oral agreements
to written form. Rectification is an equitable remedy whose purpose is to prevent a
written document from being used as an engine for fraud. At one time, the rule was to
permit rectification only for mutual mistake, but it is also available for unilateral
mistake.
Rectification is predicated on the existence of a prior contract whose terms are definite
and ascertainable. The ptf must establish that the terms agreed to orally were not
written down properly. Equity acts on the conscience of a dft who seeks to take
advantage of an error that he knew or reasonably ought to have known about at the
time the document was signed.
The Statute and Oral Variations

The rule does not preclude the introduction of extrinsic evidence to
establish that the K subsequently has been varied or rescinded.
Goss v. Lord Nugent (1833) 110 ER 713 (KB)
Facts:
V was selling properties to P
K called for good title to be conveyed with all lots
P says he will accept defective title, and then backs out
V sues, relying on K that is mainly written but with oral variation dealing with
defective title
Issues:
Is the K enforceable by the V?
Holding:
No, K is unenforceable. (Cannot go back to original K because it guaranteed good
title on all lots and they do not have good title.)
Ratio:
If the only object of the informal agreement is to vary the written contract, the
variation will be unenforceable and the parties are left with the original contract.
29
Notes:
“The written contract is not that which is sought to be enforced, it is a new contract
which the parties have entered into, and that new contract is to be proved, partly by
the former written agreement, and partly by the new verbal agreement.”
Ensure that the client agrees to all the terms in the written K and that any variations
are in writing.
Avoiding the Statute: Doctrine of Part Performance
o Exception to Statute of Frauds;
o Equitable doctrine, in harmony with the maxim that Equity will not
allow the Statute to be used as an instrument of fraud;
o Where a party has performed sufficient acts, these are acceptable as a
substitute for written evidence of the K;
o Conduct is substituted for written evidence.
Promissory estoppel?
Bridge has observed that relief may also be available through the “doctrine of
promissory estoppel [which], like the equitable doctrine of part performance,
stands altogether outside the Statute … since it operates, not to vary the contract,
but to prevent one party from taking advantage in full of the rights conferred
on him by the contract. This would follow from the equitable maxim that the
Statute … cannot be used as an instrument of fraud.”
Deglman v. Guaranty Trust Co. of Canada [1954] SCR 725
 Sets out requirements for relying on the Doctrine of Part Performance
Facts:
Aunt promises nephew that if he looks after her in her old age, she will give him
property in her will
She dies and her will is silent  no provision for nephew
He sues, claiming he performed his part of the bargain and she failed in her part
Issues:
Can ptf rely on the doctrine of part performance?
Holding:
No.
Reasoning:
Court was prepared to say it was a valid K, but not of the kind the nephew was alleging.
The facts “have been found to be truly stated and I accept that; but it is the nature of
30
the proof that is condemned, not the facts, and their truth at law is irrelevant. Against
this, equity intervenes only in circumstances that are not present here…”
“the acts relied upon by the respondent in the case at bar are not unequivocally and in
their own nature referable to any dealing with the land in question…”
Ratio:
To rely on the doctrine of part performance, ptf must be able to establish that:
1) Acts were done by the ptf or a duly authorized agent acting on his behalf;
2) Acts must follow a valid K and must not be acts preparatory to performance;
3) Acts must be acquiesced in by the dft;
4) Must be unequivocally referable to the contract;
5) Acts must render it fraudulent for dft plead the Statute.
If the court is satisfied that the acts proved by the ptf satisfy the dictates of the
Doctrine, the ptf is permitted to (indeed must) introduce parol evidence of the
alleged K and establish that it is a valid and otherwise enforceable K.
Hunter v. Baluke (1998), 42 OR (3d) 553
 confirms Deglman
Facts:
Dft listed property for sale
Ptf (Wayne Gretzky and wife) exchanged offers with dft through their agent
Ptf was told that their offer was accepted except for some provisions concerning a boat
house on the property: dfts wanted to retain its possession past closing to store their
boats
Dfts signed the offer but made changes to the K regarding the boat house
Ptf said this was unacceptable  dft agreed to vary the agreement
Changes were made to the ptf’s copy
Ptf paid deposit
Dft claimed that no agreement existed
Ptf sued for specific performance
Dft seeks to dismiss ptf’s action  Statute of Frauds
Issues:
Was there part performance of the agreement sufficient to exempt ptf from the
operation of the Statute?
Holding:
No. No genuine issue for trial exists. Statute of Frauds applies.
Ratio:
Payment of deposit alone is not sufficient to constitute part performance.
Reasoning:
31
“Not all conduct will amount to an acceptance. It must be clear that what the offeree
has done is meant by way of acceptance of an offer that has been made.”
“The nature of the counter-offer and the circumstances in which it was made required it
to be accepted in writing. I therefore find that there is no genuine issue for trial as to
whether there was an oral agreement as a result of acceptance by conduct of the
purchaser’s counter-offer. Strictly speaking, such a finding would make it unnecessary
for me to determine whether there existed a sufficient note or memorandum to comply
with the provision of the Statute, or alternatively, whether there was performance to
take the case out of the Statute.”
“The counter-offer of the purchasers was not signed by ‘the person to be charged’, i.e.
the vendors at the time when the memorandum contained the term respecting the
boat-house as altered by the purchaser.”
“paying the deposit could hardly be an act to their detriment so as to make it
unconscionable to permit the vendors to rely on the Statute.”
*If Steadman is good law in Canada, it stands for the proposition that there is no
general rule that the payment of money cannot constitute a sufficient act of part
performance. However, if the payment of money is to be relied on, it has to be
money which the defendant has retained and not repaid and had not offered to
repay or cannot repay.
Neighbourhoods of Cornell Inc. v. 1440106 Ontario Inc.
 Tape recording is not a note or memorandum of agreement
Facts:
Ptf negotiated with dft to purchase land. There was an oral agreement as to the price
but not as to other essential terms. Dft sold to a third party. Ptf subsequently tape
recorded a telephone conversation with the dft in which dft allegedly acknowledged
that the parties had a deal. Ptf submitted the recording and argued that it was a note or
memorandum in writing.
Issues:
Can a tape recording of a conversation constitute a sufficient note or memorandum of
agreement?
Holding:
No.
Ratio:
“A tape recording may be a document for the purpose of production of documents
under the RCP, but it would be torturing the language beyond recognition to hold that it
32
can also be a note or memorandum in writing for the purpose of section 4 of the Statute
of Frauds.”
2.3 DEPOSITS
There is no rule of law requiring deposits in real estate Ks;
But practice goes back many years;
Look at the terms of each K  no implied term that a deposit will be paid;
APS includes provision dealing with deposit but must be filled in;
Agent will usually seek a deposit large enough to cover his commission;
The larger the deposit, the more incentive for P to go through with the deal;
o And if transaction will take years, a larger deposit is called for;
o If P defaults after paying deposit, vendor is entitled to retain any sum that
has been described as a deposit in the K, unless the K clearly stipulates
otherwise;
o Damage suffered is immaterial.
o
o
o
o
o
o
Dual purpose:
o A guarantee that the P means business;
o Part payment of the purchase price.
How to pay?
o Default: cash  unless parties agreed otherwise, V can insist on cash;
o APS: “by negotiable cheque”  less ideal for V because P can tell bank not to
cash it (certified cheque would be better for V);
o Lawyer should make sure that the form of payment is guaranteed.
To whom?
o APS: “payable to ______”  parties fill it in;
o Could be lawyer, agent, or directly to V (not recommended unless you know
and trust the V);
o Default, if K is silent: other party directly, in cash.
Interest?
o Provision in standard form says it won’t earn interest, but brokers are
generally required to discuss the interest option with the parties;
o In Ontario, interest will be payable to whomever is entitled to the deposit 
imposed by the legislative scheme in the industry.
When is a Deposit not a Deposit
Sometimes, given its size, equity will interpret a deposit as a penalty;
o Equity does not look kindly on penalties being levied on Kual parties;
o Reasonableness of a deposit is a judgment call
33
Workers Trust & Merchant Bank Ltd. v. Dojap Investments Ltd.
 Absent special circumstances, the customary deposit is 10%
Facts:
Deposit in excess of 10% is paid under K for sale
Issues:
Can deposit be forfeited by the V in the event of failure by P to complete on the due
date?
Ratio:
“In order to be reasonable a true deposit must be objectively operating as ‘earnest
money’ and not as a penalty.”
“The customary deposit has been 10%. A vendor who seeks to obtain a larger amount
by way of forfeitable deposit must show special circumstances which justify such a
deposit.”
Reasoning:
“In general, a contractual provision which requires one party in the event of his breach
of the K to pay or forfeit a sum of money to the other party is unlawful as being a
penalty”  deposits are the exception to the rule.
“a reasonable deposit has always been regarded as a guarantee of performance as well
as a payment on account, and its forfeiture has never been regarded as a penalty in
English law or common English usage.”
The Nature of a Deposit Stipulation
o If the P fails to pay the deposit, the V can sue the P for it;
o If the amount of the deposit exceeds damage suffered, V can still sue 
amount of deposit has no bearing on damage suffered (Tang);
o V can also legally refuse to continue, because P is in breach of a condition of
the K.
Tang v. Zhang, BCCA
 Principles governing deposits
Facts:
$100,000 deposit on a $2Million contract
Deposit being paid on account of damages that may be suffered  express reference to
damages in the deposit clause
Suggestion that the deposit can only be retained by V if V suffers damages
P defaults
34
V suffers no damage but wants to keep the deposit
Issues:
Can V keep the deposit despite absence of damages?
Holding:
Yes.
Regardless of the wording in the clause, the deposit can be forfeited even if the V
suffered no damage. Clearer language would be required if deposit was exclusively in
the event of damages.
Ratio:
Guiding principles on nature of deposit: one of them is that vendor can keep the deposit
if the purchaser defaults.
Mention of damages does not change the nature of the deposit. It is always
forfeitable, unless clearly stipulated otherwise in the K.
Notes:
The following general principles may be stated with regard to deposits:
1. On a general level, the question of whether a deposit or other payment made to a
seller in advance of the completion of purchase is forfeited to the seller upon the
buyer’s repudiation of the K is a matter of Kual intention;
2. Where the parties use the word “deposit” to describe such a payment, that word
should in the absence of a contrary provision be given its normal meaning in law;
3. A true deposit is an ancient invention of the law designed to motivate contracting
parties to carry through with their bargains. Consistent with its purpose, a deposit is
generally forfeited by a buyer who repudiates the contract, and is not dependent on
proof of damages by the other party. If the contract is performed, the deposit is applied
to the purchase price;
4. The deposit constitutes an exception to the usual rule that a sum subject to forfeiture
on the breach of a contract is an unlawful penalty unless it represents a genuine preestimate of damages. However, where the deposit of such an amount that the seller’s
retention of it would be penal or unconscionable, the court may relieve against
forfeiture, as codified by the Law and Equity Act;
5. A contractual term that a deposit will be forfeited “on account of damages” on the
buyer’s failure to complete does not alter the nature of a deposit, but may be construed
to mean that if damages are proven, the deposit will be applied against them. If no
damages are shown, the deposit is nevertheless forfeitable, subject always to the
expression of a contrary intention.
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3 OF CONDITIONAL REAL ESTATE CONTRACTS
3.1 INTRODUCTION
An offer to purchase subject to a condition will be less attractive to a vendor than
an unconditional offer. Therefore, a vendor may exact a higher price for a
conditional offer, or include protective provisions for the possibility of a better
offer being presented while the fulfillment of the condition is pending.
The V may require the P to either declare the offer unconditional or terminate the K
within say 48 hours after the V is presented with a bona fide offer to purchase by
another P. The V may put a limit on the time period during which the offer
remains conditional.
1) Conditions
2) Warranties
3) Innominate terms
Types of conditions:
o Promissory conditions
o By vendor: to provide good title;
o By purchaser: the payment of a deposit.
o Conditions precedent
o A situation on which the performance of the K or the existence of the K
depends;
o If the event has to occur before there is a K, there is no K for the time
being;
o Up for debate: whether obtaining financing is a true condition precedent;
o Leading case: Turney;
o Examples: planning authority approval, consent to severance, registration
of plan of subdivision, acquisition of building permit, transfer of liquor
license, surrender of lease by a tenant, financing, rezoning, sale of existing
property, acquisition of neighbouring property, landlord’s consent to
assignment of a lease.
o Conditions subsequent
o A future event that, if it occurs, can lead to the coming to an end of Kual
relations bw V and P  nobody is in breach but deal is off (terminates the
right to immediate performance and also to judicial remedy);
o Ex: Planning Act clause. If parties cannot comply, deal is off;
o Ex: Title condition (s. 10 in APS). Defects in title that the P will not accept
and V will not remedy. This provision says in this case, the deal will come
to an end and neither party will be held liable.
36
Breach of the condition:
o Gives the innocent party the right to treat the contract as ended, and to sue
for damage or specific performance. An automatic right to terminate;
o Regardless of the classification of the condition, a party seeking to escape from
contractual duties because of the non-fulfillment of the condition may be
required to have made good-faith attempts at fulfillment first.
Warranties:
o Promises which, if breached, simply give rise to an action for damages.
Innocent party cannot call off the deal: restricted to damages;
o S. 22 in APS: “seller represents and warrants to the buyer…” re:
ureaformaldehyde.
Innominate terms:
o May be a condition or a warranty, depending on the facts;
o If serious: a condition; otherwise a warranty;
o Ex: equity’s view of time if not explicitly of the essence;
o Remedy will depend on categorization.
Waiver:
o Allowing one party to a K to forego a promised advantage or dispense with part
of the promised performance of the other party provided this is simply and
solely for the benefit of the first party and is severable from the rest of the K
(Turney v. Zhilka);
o Should consider including an express right of waiver in K for P but right to waive
may be implied on the facts;
o True condition precedent may not be waived unilaterally by a party unless there
is express provision for such waiver (Barnett)  no obligation on either party to
fulfill the K if the TCP is not met;
o Turney says any condition the performance of which depends on a third
party is a TCP;
o Other conditions may be unilaterally waived.
Alternatives to waiver:
o When dealing with a condition precedent that is also a legal impediment to
the transaction, can insert an alternative method of performing the K. Ex: “I’ll
take the restaurant without the liquor license;”
o Get around non-performance and waiver if you can prove that the other
party has failed to act with reasonable diligence, if it’s their obligation 
court will permit transaction to proceed;
o Court will sometimes say that the condition was as good as fulfilled
(Beauchamp).
o Beauchamp: condition precedent called for P receiving first and
second mortgage (one for 10K, one for 2.5K)  P gets one mortgage
37
for 12K  V says condition is not fulfilled  condition was for benefit
of P, who “as good as fulfilled” it;
o Hence financing conditions don’t come under Turney although TCP.
Contract interpretation principles:
o We ought to give Ks an interpretation that accords with the reasonable
expectations of the parties, and that gives a practical, businesslike and just
result.
Dynamic Transport Ltd. v. O.K. Detailing Ltd, [1978] 2 SCR 1072
 Implied promise to do all that is necessary to satisfy the condition
precedent
Facts:
V had agreement to sell to P
V did not want to sell because the land increased in value  did not take steps to fulfill
conditions
Needed to get approval of committee for severance
P wanted the land but specific performance is not available when there has been a
breach of the Planning Act
P applied for a mandatory injunction claiming V didn’t use best efforts
Issues:
Is V under an implied obligation to try to carry out the conditions of the K?
Holding:
Yes. V’s application for consent must be carried out to its logical conclusion  court
ordered specific performance of his duty to attempt to secure the approval with
damages for loss to be awarded should the V not pursue the application in GF  if bona
fide application is refused, V will be excused from performance without liability in
damages
Reasoning:
In appropriate cases, the court will find an implied promise by one party to take all
required steps to bring about the event that will satisfy the condition
Dickson, J. “The parties created a binding agreement. It is true that the performance of
some of the provisions of that agreement was not due unless and until the condition
was fulfilled, but that in no way negates or dilutes the force of the obligations imposed
by those provisions, in particular, the obligation of the vendor to sell and the obligation
of the purchaser to buy. These obligations were merely in suspense pending the
occurrence of the event constituting the condition precedent.”
38
Ratio:
The vendor is under an obligation to act in good faith to take all reasonable steps to
complete the sale.
3.2 NATURE AND EFFECT OF CONDITIONS




Courts are prepared to make a distinction on waivability depending on who
is in violation of the condition (Laskin in Barnett);
If P fails to take steps to have the condition fulfilled (i.e. approach a bank, try
to sell his other property…), courts agree that the V can waive the condition
and insist that the P buy the property according to the other terms of the K;
P needs to take reasonable measures to fulfill the condition;
If the condition can be waived (no legal impediment), the court might order
specific performance of the main K (but not if applying Turney strictly).
Turney v. Zhilka, [1959] SCR 578
 Leading case on true conditions precedent, binding authority
 True condition precedent involves the act of an independent third party
Facts:
V agrees to sell to P
K contains a condition re: annexation and plan approval (benefits both parties, P says it’s
just for his benefit)
Date for completion of K set to be 60 days after fulfillment of the condition
Conditions are not fulfilled and P seeks to waive the conditions
Planning Act says any subdivision of land creates no interest in the property without
approval  approval by authorities is critical to the transaction  without approval,
there’s a legal impediment to the transaction
V says deal is off bc condition has not been fulfilled
P suing V for specific performance
Issues:
Can the P unilaterally waive the condition of sale in this manner?
Holding:
In this case no.
Reasoning:
SCC looks at condition to decipher its effect. This is a true condition precedent. There is
no right to waive the condition  contract depends on a future uncertain event
(annexation and plan approval). The event depends entirely on the will of a third party.
39
“Until the event occurs there is no right to performance on either side. The parties
have not promised that it will occur. In the absence of such a promise there can be no
breach of contract until the event does occur.”
“This is not a case of renunciation or relinquishment of a right but rather an attempt by
one party, without the consent of the other, to write a new contract.”
Ratio:
When the event depends on the will of a third party, it cannot be waived.
Judson, J.
“The obligations under the contract, on both sides, depend upon a future uncertain
event, the happening of which depends entirely, on the will of a third party…. This is a
true condition precedent-an external condition upon which the existence of the
obligation depends.”



A strict application of Turney would say that P couldn’t waive the
condition to obtain financing, even if he won the lottery. Condition would be
taken seriously and literally, and V could refuse to sell to P;
According to Turney, it doesn’t matter to whose benefit condition is  it can’t
be waived;
Financing conditions seem to be an exception to Turney despite being TCP
(see Beauchamp, summarized above).
Barnett v. Harrison, [1976] 2 SCR 531
 Maj applies Turney
 Dissent says look at the facts  Ask to whose benefit and whether the CP is
severable
 Most recent SCC decision on waiver of CP
Facts:
Developer (P) wishes to purchase land but makes this conditional on obtaining planning
approval, costs involved, other conditions
(Planning Act not a legal impediment because purchaser was buying the entire property)
Some conditions have a waiver and some do not (mistake)
Date for closing comes and many of the conditions have not been fulfilled
Developer waives the conditions but vendor refuses to close the sale
(Land has increased in value)
P seeking specific performance in his favour
V arguing this is a true condition precedent so cannot waive
Issues:
Can the developer waive the conditions and force closure, since it’s for his own benefit?
40
Holding:
No.
Reasoning:
Dickson, J.: The rule in Turney has been in effect since 1959 and in the interest of
certainty and predictability, the rule should remain, unless there is a compelling reason
to change it
Here, all the P had to do was put in a clause giving him the right to waive all the
conditions.
“…when parties, as here, aided by legal advisors, make a contract subject to explicit
conditions precedent and provide therein specifically that in the event of noncompliance with one or more of the conditions, the contract shall be void, the Court
runs roughshod over the agreement by introducing an implied provision conceding to
the purchaser the right to waive compliance. … if the purchaser is to be put in the
position of being able to rely on the conditions precedent or to waive them, depending
on which course is to his greater benefit, the result may be that the purchaser has been
given an option to purchase, for which he has paid nothing; if the property increases in
value, the purchaser waives compliance and demands specific performance but if the
property declines in value, the purchaser does not waive compliance and the agreement
becomes null and void in accordance with its terms.”
Laskin and Spence JJ, dissenting (would grant specific performance): “The law in Canada
is out of line with the law elsewhere governing conditions precedent.”
“Since the obligation to proceed with a site plan and seek rezoning was expressly put on
the purchaser, and since, on the evidence, the condition was one exacted by him solely
for his benefit, there is a marked difference between the present case and Turney.”
 Court can ask who benefits from the condition and whether condition is severable.
This should be determined as conflict arise. If there is no legal impediment to the
transaction, condition can go unfulfilled.
Ratio:
Turney is still good law.
Almost every condition situation involves a third party. If true condition precedent
depends on will of a third party, every CP will be a TCP;
 Maj in Barnett takes this view, while minority takes a less restrictive view;
 Minority says it’s only a true condition precedent if it benefits both parties, and if
it can’t be severed because of its effect on the rest of the K (like in Turney);
 BC Legislation has adopted Laskin’s view;
 BC Law & Equity Act: waiver of CP is allowed even if it depends on will of a
third party.
41
Swan Group Inc. v. Bishop, 2013 ABCA 29
 Illustrates the importance of categorizing the condition
Facts:
V sold P a residential condo unit and parking unit
P paid deposit of $130K
P fails to complete and V contends the agreement allows him to sue for damages and
keep the deposit
P says agreement is void ab initio by V’s breach of a TCP contained in the agreement 
entitled to treat K as ended and have deposit refunded
Condition was a clause obligating V to register the phased condominium plan by Sept
2008  not registered until May 2009
Issues:
What is the nature of the condition?
Holding:
It’s a promissory condition (not a true condition precedent).
Case remitted to trial for proceedings based on that conclusion.
Reasoning:
The difference between a “condition precedent” and a “true condition precedent” was
defined in Turney v. Zhilka as follows:
“The obligation under the contract, on both sides, depend upon a future uncertain
event, the happening of which depends entirely on the will of a third party – the Village
council. This is a true condition precedent – an external condition upon which the
existence of the obligation depends. Until the event occurs there is no right to
performance on either side. The parties have not promised that it will occur. In the
absence of such a promise there can be no breach of contract until the event does
occur.”
No indication in this case that failure to meet the condition would cause the agreement
to be null and void  not a true condition precedent
Ratio:
Turney is still good law on distinction between condition precedent and true condition
precedent.
42
3.3 GOOD FAITH PERFORMANCE
o The majority of the SCC have recognized the right of A to waive the default of B
in the performance of a severable condition intended for the benefit of A;
o There is also authority that recognizes the right of A to waive the default of B
in the performance of a severable condition intended for the benefit of B;
o A’s right is contingent on B being under an obligation to at least
try to have the condition fulfilled;
o A party who is not in breach of that obligation, but who cannot satisfy
the condition, has no implied right to waive the condition unless
expressly conferred by K.
Metropolitan Trust v. Pressure Concrete Services Ltd., [1973] 3 OR 629
 Implied obligation to seek fulfillment of condition in good faith
Facts:
Commercial property was being acquired
Agreement was conditional on the ptf/P getting a mortgage on the real estate
Mortgagee has discretion (can refuse)
Express provision that dft/V would help obtain this assignment so that the deal could go
through
V does nothing and P seeks to waive the condition regarding assignment of mortgage
V says contract can’t go forward because no mortgage (but it was his fault)
P seeks enforcement
Issues:
Did the V have an obligation to obtain the consent?
Holding:
Yes. There is an obligation to seek fulfillment of the event  to use best efforts to try
to bring it about (an implied term)
The court cannot enforce the contract and force the mortgagee to assign the mortgage
 it’s at the mortgagee/third party’s discretion
Court therefore cannot grant specific performance, but awards P damages
Ratio:
Holland, J. “… the vendor was in breach of its obligation … to deliver the consent of [the
2nd mortgagee] to the surrender of the existing lease and was in breach of an implied
obligation to use its best efforts to obtain such consent.” He goes on to find that if the
vendor had used his best efforts the consent “would have been forthcoming” and
therefore assessed damage for the breach of the obligation to obtain the consent on the
same basis as if he had breached the main K.
43
Comments:
There is an implied obligation that a party will use her best efforts to comply with a
condition precedent.
Note court can’t grant specific performance of K here, (but could grant specific
performance of best efforts to fulfill condition).
APS, s. 15: “This Agreement shall be effective to create an interest in the property
only if Seller complies with the subdivision control provisions of the Planning Act by
completion and Seller covenants to proceed diligently at his expense to obtain
any necessary consent by completion.”
Griffin v. Martens (1988) BCLR (2d) 152 (CA)
 Meaning of “satisfactory” in condition – how much discretion?
 Void for uncertainty?
Facts:
Financing condition (in favour of P), subject to obtaining “satisfactory financing” on or
before the specified date
P said he could not obtain a financing commitment he considered satisfactory
V said P did not try hard enough and never intended to, just wanted to let agreement
lapse and then make a lower offer
Issues:
What does “satisfactory financing” mean?
Reasoning:
“It is not the function of the courts to set interim agreements aside for uncertainty
because they contain a clause that is not precisely expressed. If such a clause has an
ascertainable meaning, then the courts should strive to find it.”
Agreement is not void for uncertainty. “The subject clause must be interpreted on the
basis that the P was to use his best efforts to obtain financing that was satisfactory to
him, and he was not to withhold his satisfaction unreasonably.”
Ratio:
Apply a reasonable person test to determine whether an offer is satisfactory.
Test is: “satisfactory to a reasonable person with all the subjective but reasonable
standards of the particular purchaser”
If term calls for satisfactory financing and the above test is met, purchaser must move
forward with the transaction. If financing is not satisfactory by this definition, he is
released.
44
Wiebe v. Bobsien, 1985 BCJ (CA)
 Duty to perform interim agreement in good faith
 Not void for uncertainty
Facts:
Contract subject to the sale of P’s existing property on or before a specified date
P agreed to remove this clause within 24 hours of entering an agreement for the sale of
his property
If V finds another P before then, has to give the first P 72 hrs notice to remove the
condition
P sold his home and notified V that the clause was removed  was ready, willing and
able to complete
V refused to close  before sale of P’s house, V had sent him a telegram saying that the
interim agreement was cancelled  says he was permitted to do that bc no valid K
Issues:
Was there a binding contract?
Holding:
Yes – the interim agreement was valid and enforceable.
Reasoning (Seaton JA):
“The parties intended this to be a binding contract and the court should not be quick
to release them from their promises.”
“Once the terms that the P would act in good faith and use all reasonable efforts to
sell his home are implied, the difficulties of interpretation are surmountable.”
Dissent, Lambert JA:
This case falls in the category of incurable uncertainty. “Because it leaves
unresolved the question of whether he must sell at the price he can get, on the
market, in the time allotted, or whether he is entitled to insist that the sale can only
take place at a price he considers reasonable and is willing to accept.”
“The interim agreement remained a standing offer by the V to sell at $360K,
revocable at the will of the vendor, on reasonable notice to the purchaser. The
standing offer was withdrawn in ample time before the purchaser sold his own
house. So no contract of purchase and sale ever arose.”
45
Marshall v. Bernard Place Corp (2002), 58 OR (3d)
 Sole and absolute discretion of P regarding inspection
 Cannot exercise discretion in arbitrary manner
Facts:
Condition for the benefit of P
Sale is conditional upon the inspection of property by an inspector and receipt of a
report satisfactory to him in his sole and absolute discretion
(P seems to be in total control of the acceptability of the inspector’s report)
Inspector is appointed, submits report. Report identifies minor deficiencies.
P says report was not satisfactory  can’t proceed
Goes on to buy another property that is more expensive
Issues:
Is the purchaser’s discretion absolute?
Holding:
No. It can’t be exercised arbitrarily.
Reasoning:
“the contract controls the standard to be applied to a sole discretion cause. The
determination of whether a discretionary condition imposes a subjective or objective
standard depends upon ‘the intention of the parties as disclosed by their contract.’”
No contractual discretion is absolute, in the sense of allowing an arbitrary exercise of
discretion.
“The evidence indicates that cost did not drive the respondents’ decision to rely on the
inspection condition.”
Ratio:
The person who has discretion cannot act capriciously or arbitrarily. He must act at
least honestly and in good faith.
46
3.4 MEETING THE CHALLENGES
Case law suggests other ways in which a party may be able to enforce a contract,
notwithstanding non-fulfillment of a condition precedent and the absence of an
express right of waiver:
o Establishing a subsequent express agreement conferring the right to waive;
o Establishing an implied agreement to waive;
o Provision of an express contractual alternative to cover situation of nonfulfillment of condition;
o Establishing that the non-fulfillment of the condition was due to the fault of
the party on whom the obligation to seek its fulfillment rested (Barnett);
o Establishing that the condition is not a true condition precedent
(Beauchamp);
o Establishing that the condition is as good as fulfilled (Beauchamp).
A pre-condition to waiver of conditions is that they be severable from the K. And
in the absence of an express right to waiver, the party seeking to waive must also
establish that the condition was for his sole benefit.
4 THE EFFECT OF THE CONTRACT ON THE PARTIES STATUS
4.1 INTRODUCTION
In this section, we’re assuming we have a valid and enforceable K and all conditions
have been fulfilled (or validly waived).
o
o
o
o
Possession follows legal title (APS s. 5);
Entitlement to income (rents) follows entitlement to possession;
Liability for normal expenses until completion falls to the V;
Payment of full year’s property taxes, for example, will be prorated.
Common law views V as remaining the owner until the date of completion, but in
conflicts bw law and equity, equity prevails 
4.2 STATUS OF VENDOR AND PURCHASER IN EQUITY
Doctrine of conversion
Refers to the conversion of the title in equity following the valid contract.
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o Equity does not interfere with legal ownership;
o V remains legal owner of the property until completion, but at equity, the P is
the equitable owner of the property  equity imposes a constructive
trusteeship on the V through the operation of the equitable doctrine of
conversion;
o “Equity views as done that which ought to be done”  justification for
doctrine of conversion;
o As equitable owner, P is entitled to specific performance  makes V the
trustee (bare trustee, qualified trusteeship – a limited trust analogy);
o Limited in that V has a right to be paid the purchase money and the
right to enforce his security against the estate;
o If the property is wrongfully sold by the V, the V is accountable for the
purchase money as a trustee to the P (Lake v. Bayliss).
o In interim between contract and completion, P takes the risk  no
obligation on V absent an explicit contractual obligation (see s. 14 below);
o Doctrine of waste makes V liable for any willful harm to the property;
o In conflict bw common law and equity, equity prevails.
APS, s. 14: “All buildings on the property and all other things being purchased shall
be and remain until completion at the risk of Seller”  rejects equitable approach.
In event of V’s bankruptcy:
An important consequence of the doctrine is that, if the V should become insolvent
prior to completing the transaction, the P is entitled to the land itself and is not
relegated to an action for damages and to be ranked among the V’s unsecured
creditors.
Conversion and (a) option to purchase, (b) right of first refusal
Option to purchase: a promise by the owner to sell to the promisee at the
promisee’s discretion. The owner is bound to sell if the option is exercised, but the
promisee is not bound to exercise the option. During the currency of the option the
promisee has a proprietary interest in the land which equity will enforce through
SP if the owner wrongfully refuses to honour the promise.
Right of first refusal: a promise by the owner of land, should the owner decide to
sell, to offer the land first to the promisee. During the currency of the right, the
owner still retains full control as the promisee cannot oblige the owner to sell;
consequently, the promisee is not considered to have a proprietary interest in
the land.
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Lysaght v. Edwards (1876), 2 CH D 499
 Equitable doctrine of conversion (V dies before completion)
Facts:
Deceased/V had contracted to sell property to P
V dies before transaction is complete  had a will granting real property to Y, personal
property to X
V’s estate is still bound by the K to convey real property to Y
(Before death, P was the equitable owner and V the legal owner of the title)
Issues:
Who is entitled to the property: P or Y?
Holding:
P is entitled to the property.
The moment V contracted with P, V owed a debt to P  this debt passes on to X, who
inherits V’s personal property. As far as equity is concerned, V no longer owns any real
property. Y gets nothing.
Reasoning:
Jessel, MR. “If anything happens to the estate between the time of sale and the time
of completion of the purchase it is at the risk of the purchaser.”
In respect to the vendor he goes on to say: “He is not entitled to treat the estate as
his own. If he wilfully damages or injures it, he is liable to the purchaser; and more
than that, he is liable if he does not take reasonable care of it. So far he is treated in
all respects as a trustee, subject of course to his right to being paid the purchasemoney and his right to enforce his security against the estate.”
Ratio:
Equity views as done that which ought to be done.
Notes:
 The vendor is not entitled to treat the estate as his own and if he wilfully
damages or injures it, he is liable to the purchaser; and more than that, he is
liable if he does not take reasonable care of it.
 The vendor is treated in all respects as a trustee, subject of course to his right to
being paid the purchase-money and his right to enforce his security against the
estate.
 This argument would not hold if contract was not both valid and enforceable.
49
Buchanan and James v. Oliver Plumbing and Heating Ltd.
 Physical damage to the property between K and completion
Facts:
V sells to P, and between K and completion, there’s an explosion that damages the
property caused by plumber’s negligence
V and P both sue plumber (at time of suit, deal had been completed – P had paid V, and
V had conveyed title)
Plumber’s defence against V: V suffered no damage (problematic because V still would
have suffered inconvenience, plus you can’t use your own fault as a defence, plus V is
the trustee for P so should technically collect for P and pay him the insurance funds)
Plumber’s defence against P: P wasn’t in possession and therefore suffered no damage
(trusteeship argument rebuts this as well – P could sue V to recover insurance payout)
Issues:
Is there a point in time at which the vendor will become a true constructive trustee of
the property? To what “property” does the trusteeship relate?
Holding:
Due to clause in agreement, risk was on V, who can sue the plumber.
Two avenues of recovery: V as trustee for P, and V being at risk and keeping the risk –
maintaining his right to sue.
Damages which are awarded to V as trustee are to be held in trust for the benefit of P
Ratio:
In the event of substantial damage, P has the choice: may terminate agreement (walk
away and get deposit back), or go through with agreement and take the proceeds of the
insurance (by virtue of APS s. 14).
4.3 CONVERSION AND ITS IMPLICATIONS FOR PURCHASERS
Passing of Risk
The risks associated with property ownership pass to the P once a valid and
enforceable K comes into existence.
Rayner v. Preston (1881), 18 Ch D 1 (CA)
 Property destroyed by fire between contract and completion
 Risk is on the P and K of insurance is bw V and I
Facts:
Ptf P contracted to buy the dft V’s property
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Before completion of the deal, the property was destroyed by fire
V had insured the property and was paid by the insurer
P completed the K and then sued to recover the insurance money
P’s action was unsuccessful at trial
Issues:
Can P recover V’s insurance proceeds?
Holding:
No. P can’t recover insurance proceeds because the insurance contract is between the V
and insurer: a personal contract
Ratio:
Insurance K is personal K; at common law risk is on the P
Reasoning:
Though P was a third party to the insurance K, there existed a relationship between P
and V, not with regard to the subject matter of the K, but with regard to the subject
matter of the insurance  APS
Equity decries SP of the K  V has been trustee for P from the time of the K
But even if V is a trustee of P, it does not follow that anything under the K of insurance
would pass  K of insurance is a personal contract, and unless it is assigned no action or
suit can be maintained upon it except between the original parties to it
Notes:
Two years later, the insurance company sued the V, for the return of the insurance
money. Argued that V had suffered no loss once P had paid purchase price. Insurer
succeeded.
Doctrine of Frustration
o Frustration: change in circumstances around the K that change its
fundamental nature (between date of K and date set for completion);
o Argument that K can no longer be performed according to its terms;
o Supervening event must be beyond the control of the parties and must
result in a significant change in the original obligation;
o There can be no frustration if the supervening event was contemplated by
the parties and provided for in the agreement;
o Damage to or destruction of the property, irrespective of the importance of
that attribute to the P, will not suffice to frustrate the K;
o Simply being aware of P’s plans doesn’t make V required to respect those
plans:
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o But good faith in K law would require V to let P know that what he
wants to do is impossible;
o Raises question “what is the subject of the APS?”  technically an intangible,
an estate, which can always be conveyed…
o This is the traditional view and why frustration used to not apply to
real estate Ks  now we take a broader view (but still limited).
Twin cases:
Both of these cases involve sale of land taking place while zoning laws are
undergoing change. In both cases P is buying for development purposes and V is
aware. In both, performance of K is claimed to have been frustrated bc of the change
in legislation.
Lesson for lawyers:
Make K as specific as possible about the subject matter of the APS (like CQ rather
than VW).
Victoria Wood Development Corporation Inc. v. Ondrey (1978), 92 DLR (3d) 229
(OCA)
 Loss of development opportunity does NOT constitute frustration
Facts:
Ptf agrees to buy land for development purposes  V is aware of this purpose
After signing but before closing, legislation is enacted which renders the property
useless for development
Contract just referred to the land, nothing about purpose, only discussed orally
(note Statute of Frauds problem)
Issues:
Was the agreement to buy frustrated by the legislation?
Holding:
No. To compel performance would not be ordering performance of something radically
different from what the parties agreed to.
Reasoning:
Arnup, JA. “I do not think mere knowledge of the vendor that the land was
being bought for development, or even for a particular kind of development, is
sufficient to bring into operation the doctrine of frustration when an entirely
unexpected government enactment makes the purchaser’s purpose incapable of
realisation, or so difficult that great hardship is occasioned to it in carrying out that
purpose.”
He goes on to say that there was no common venture and that therefore frustration
did not apply in this case
52
“it by no means follows that disappointed expectations lead to frustrated contracts”
(Viscount Simon in Davis Contractors Ltd.)
“we must apply to a contract for sale of land the same principles respecting
frustration of contracts as are applicable to any other contract. That exercise
requires us to consider the terms of the contract and the factual background in
which it was made, in order to see what the obligations under the contract were and
whether the supervening event has so changed the nature of those obligations that
to compel their performance, under the changed conditions, would be to order
performance of something radically different from what the two parties
agreed to under their contract.”
Ratio:
Mere knowledge of the vendor that the land was being bought for development, or
even for a particular kind of development, is insufficient to bring into operation the
doctrine of frustration when an entirely unexpected government enactment makes
the purchaser’s purpose incapable of realization.
Critical difference between these cases: how K dealt with the subject matter of the K. In
both cases, it’s land, but in VW, simply a block of land, and in CQ, a block subdivided
into 26 building lots  legislation made this subdivision impossible  K frustration
Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 61 DLR (3d) 385
 Loss of development opportunity constitutes frustration
Facts:
Ptf agreed to buy a plot of land divided into 26 building lots from dft for $156k.
The closing date is set for some 18 months later.
Dft agrees to deliver the deed to any individual lot for $6k.
Planning legislation comes into effect 1 month before closing which requires that
planning authority approval be obtained before plot can be sub-divided.
It is impossible to obtain such approval before the closing date.
Pft does not go through with sale.
Issues:
Is ptf entitled to the deposit back?
Holding:
Yes. V could not deliver the subject of the K to the P by the stipulated date  K is
frustrated. Both parties are discharged from performance and the P is entitled to
recover the deposit.
Ratio:
Evans, JA. “The supervening event must be something beyond the control of the
parties and must result in a significant change in the original obligation assumed by
53
them.”
“There can be no frustration if the supervening event results from the
voluntary action of one of the parties or if the possibility of such an event
arising during the term of the agreement was contemplated by the parties and
provided for in the agreement. … The factor remaining to be considered is
whether the effect of the planning legislation is of such a nature that the law would
consider the fundamental character of the agreement to be so altered as to no longer
reflect the original basis of the agreement.”
He goes on to find that the legislation had “destroyed the very foundations of the
agreement”.
Notes:
 There can be no frustration if the supervening event results from the voluntary
action of one of the parties or if the possibility of such an event arising during the
term of the agreement was contemplated by the parties and provided for in the
agreement.
 Frustration will apply when the effect of the planning legislation is of such a
nature that the law would consider the fundamental character of the agreement
to be so altered as to no longer reflect the original basis of the agreement.
KBK No 138 Ventures Ltd. v. Canada Safeway Ltd. (2008) 185 DLR (4th) 650
(BCCA)
 Lower floor space ratio can constitute frustration
Facts:
Property being sold for development purposes, but development purposes would be
dramatically affected by the floor space ratio
Property was advertised as having a specified floor space ratio and this formed the basis
of the price
V had knowledge of the importance of the floor space ratio – P made offer, and a
municipal official altered the ratio that applied to this development
Issues:
Does the lower floor space ratio constitute frustration?
Holding:
Yes: V can no longer deliver a property that meets the description in the advertisement
and APS. And this ratio was critical to setting the price.
Reasoning:
“the facts of the case at bar clearly distinguish it from the facts in Victoria Wood. In
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particular, the circumstances surrounding the contract demonstrate that Safeway had
more than ‘mere knowledge’ that KBK had the intention of redeveloping the property.”
“Rather, there is an intervening event and change of circumstances so fundamental as
to be regarded as striking at the root of the agreement and as entirely beyond what
was contemplated by the parties when they entered into the agreement.”
The change “did not amount to a mere inconvenience but, rather, transformed the
contract into something totally different from what the parties intended.”
Re-Allocation of Risk
Insurance
o APS s. 14 does not impose obligation to insure (“if any”) or to maintain
insurance, but because it places the risk on the V, it is wise to advise V to insure
pending completion;
o Most sensible approach is for both V and P to carry insurance in interim;
o If property is insured, insurance will extend to fixtures, which are part of the
estate being bought;
o Note that insurance K are contracts uberrima fides and as such, any
material change needs to be brought to the attn. of the insurer
(including who is in possession should P move in prior to
completion);
o Could technically insure against the kind of problem that arose in Victoria
Woods (no damage, simply loss of developing opportunity);
o The rules governing the allocation of risk and loss, particularly with respect
to matters of insurance, may be modified by statute.
o In event of substantial damage, P has options under APS insurance
clause: terminate K OR take proceeds of insurance (if any  see Wile,
below) and carry out transaction;
o Purchaser has a right to inspect the property before closing to
determine if substantial damage has taken place (Re Harkness and
Cooney 1979, Ont Co Ct).
Wile v. Cook (1986), 42 RPR 101 (SCC)
 P cannot dictate that he will only proceed on his terms/if insurance is
sufficient
Facts:
P wanted to keep the property but on his terms
Took position that he would proceed with the deal if the premises were restored to
the conditions when he signed, or if the amt of insurance was sufficient to restore
the premises to this condition
55
P taking the view that clause 14 in APS allows him to satisfy himself that there will
be an insurance payout
Issues:
Can P wait until he knows what the insurer will do before making a decision?
Holding:
No. The clause does not give P any guarantee that the V is insured or that the insurance
is necessarily collectible.
Reasoning:
La Forest, J. “…the common law is harsh on a purchaser of real property that is
damaged by fire or otherwise between the date of the agreement of sale and the
date of closing. Unless otherwise provided by the agreement, the purchaser must go
through with the purchase and pay the full purchase price. And he is not at
common law entitled to the proceeds of any insurance on the property in the
absence of express or implied arrangements for the purpose.”
“…the clause does not set forth any specific amount of insurance. Indeed, the vendor
is under no duty to take out any insurance. All the clause provides for is that if the
purchaser elects to go through with the purchase he is entitled to whatever
insurance proceeds may be owing. It does not give the purchaser any guarantee
that the insurance is necessarily collectible.”
“…the purchaser is entitled to be granted time to sort out what he is to do, and he is
also entitled to obtain the details of the insurance coverage from the vendor.” He
goes on to find that this was not what the purchaser was doing but that he was
rather trying to find out if the insurance would pay and as such the agreement did
not entitle the purchaser to wait until he knew what the insurer would do.
“he was not making the election provided for under cl. 5 of the agreement, but was in
effect dictating different terms.”
Ratio:
The clause doesn’t allow P to dictate terms upon which K will be completed. Can take
such insurance as exists and whatever amount is available, but cannot dictate that he
will only proceed on his terms.
Abel v. McDonald (1964), 45 DLR (2d) 198 (Ont CA)
 Fraud through active non-disclosure
Facts:
Between K and completion, basement floor collapses, causing visible damage
At CML, risk is on P, but APS had an insurance clause like clause 14 putting risk on V
P had access to the property
V made up excuses about why P shouldn’t see the basement
56
Deal completed and then P discovers the problem
V was innocent in that he didn’t cause damage: developer did
But V delayed P’s access to the facts by withholding information
Issues:
Who bears the risk for the sunken floor?
Holding:
The vendor (fraud). CA awards damages of $4,000 to the ptf.
Reasoning:
The evidence is sufficient “to warrant a finding of fraud through active non-disclosure
on the part of the defendants. By active non-disclosure is meant that the defendants
with the knowledge that the damage to the premises had occurred actively prevented
as far as they could that knowledge from coming to the notice of the appellants.”
“The entire weight of the evidence supports the conclusion that the damage actually
had occurred upon May 19th, and that knowledge of it was being actively withheld.”
Ratio:
The duty on the vendor as trustee is that of using reasonable care for the preservation
of the property (trial). Vendor will be found guilty of fraud in the event of active nondisclosure of damage to the premises.
Notes:
In the absence of fraudulent concealment, the P would need to establish that the V
breached his or her duty as trustee to use reasonable care to preserve the property, or
that he or she had a duty to report any insurable losses to the insurance company,
based on the purchaser’s entitlement to proceeds under the policy on such damage
occurring.
Gains of a Capital Nature
o All improvements to and increases in the value of the property accrue to the
benefit of the P;
o This does not include purely financial benefits that fall due between the date
of the K and its completion, such as a rebate in property taxes or rent paid by
a tenant;
o V is not obliged to improve the property and has no claim against P if he
does, even if expenditures are required to preserve the property;
o In the latter situation, V should give the P notice of the necessary
repairs and let the P decide whether to pay for them or let the
property deteriorate.
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4.4 CONVERSION AND ITS IMPLICATIONS FOR VENDORS
o Absent an agreement to the contrary, V is entitled to remain in possession
until the transaction is completed;
o APS s. 5 “upon completion, vacant possession of the property shall be given;”
o Vendor’s responsibility in the interim is only to use reasonable care in
preserving the property;
o Consistent w/ V’s role as a constructive trustee, steps taken to protect P’s
interest might include:
o To notify P of required repairs to P may make the necessary measures
to protect his interest, or
o To take reasonable steps to prevent further deterioration of the
property and seek reimbursement from the P for the cost involved on
completion.
V. Rankin’s Mechanical Contracting Ltd. v. First City Developments
 Vendor’s duty to exercise reasonable care and skill and put P on notice
Facts:
Period bw auction (sheriff’s sale - K) and completion
Seller (CMHC) at sheriff’s sale is the V for all intents and purposes, even though V is out
of the picture (bankruptcy)
V is aware that the property may suffer damage by freezing of pipes  damage ensues
Issues:
Is V liable to P for the frozen pipes?
Holding:
Yes. V had to at least notify P and give P the opportunity to protect against the risk.
(but CMHC was granted leave to amend its pleadings to include the issue of contributory
negligence)
Reasoning:
“A mortgagee in possession following a Sheriff’s sale has an obligation to preserve the
property so the purchaser will get what he paid for.”
“the law is clear that the duty of a mortgagee in possession to his mortgage is not to be
grossly negligent. He does not have to act as a prudent owner would.”
“CMHC’s failure to winterize the premises or, alternatively, to allow First City to do so
amounted to gross negligence. It would seem to me that the time has come for making
a mortgagee in possession liable to his mortgagor for ordinary negligence.”
Notes:
There was no standard form APS in this case. The risk passed to the P in the interim
between K and completion. Nevertheless, V had the duty to exercise reasonable care
58
and skill to put P on notice about the pipes.
Loewen v. Nueman [1997] BCJ No 1909
 Quality in water supply degrades bw K and completion
 Clause in K provides that property will be in same condition at possession
Facts:
In addition to the insurance clause in the K, a clause provides that the property and all
included items will be in substantially the same condition at possession date as when
viewed by P
Quality of the water supply decreases bw K and completion
P says property is no longer in substantially the same condition
Issue:
Can P rescind?
Holding:
No (with dissent): the change to the property occurred through no fault of the V, and
there was no fraud.
Reasoning:
“There is no doubt that the quality of the water in this home is something that an
ordinary purchaser could easily investigate.”
V had indicated on the disclosure statement that there were problems with the water
well  P could have inquired further, could have tested the water
“As we are speaking here of a patent defect in quality, P’s claim can only succeed if he
establishes fraud, or its equivalent, on the part of the V. This he has failed to do.”
Notes:
This case illustrates a method by which the risk can be allocated to the V where it is not
covered by the usual “risk” or “insurance” clause.
5 MISDESCRIPTIONS OF THE SUBJECT MATTER OF THE
CONTRACT
5.1 INTRODUCTION
o Misdescriptions are erroneous statements of fact contained in the K relating
to the physical or legal fitness of the property that result in the property to be
conveyed not conforming to the property described in the K;
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o May or may not refer to a defect – may refer to size, legal fitness, title…
o Some misdescriptions may be downplayed. Clause 9 in APS, referring to
future use  puts risk back on the P, consistent with caveat emptor. May
want to remove this clause if necessary for client;
o Note that all that is required in K is a sufficient description to identify
the property, such as address  clear and certain but not detailed;
o So V is typically not guaranteeing size, acreage, etc.
5.2 THE NATURE OF MISDESCRIPTIONS
The law depends on the status of property when the K is entered into.
5.3 TYPES OF MISDESCRIPTIONS
o If misdescription is not qualified (by words like “more or less”), then it is
automatically a breach of K  will be a remedy;
o Absence of qualifying words works to P’s benefit;
o If qualified and it’s not substantial: bound to take as is
(Wilson – alternative remedy in this case is exceptional);
o If qualified and substantial: provide a remedy  remedy will depend on
whether it’s warranty, condition, or innominate term;
o Misdescription in particulars of sale (such as size) are treated like
innominate clauses;
o Can only walk away if breach is severe;
o If misdescription is in the conditions of sale (like use of urea formaldehyde),
then have to ask if it’s a warranty, condition, or an innominate clause:
o If a condition: can walk away,
o If a warranty: entitled to damages.
Can always walk away if there’s fraud (Murphy), regardless of seriousness of
breach.
With title defects, there’s more protection  but it’s up to the P to discover them.
Misdescription may be in either the particulars of sale or the conditions of
sale:
60
5.4 EFFECT OF MISDISCRIPTIONS
Misdescriptions in Particulars of Sale
o Particulars of sale are all that is needed to constitute a valid and enforceable
K for P & S of land  conditions are read into the K;
o There may be uncertainty as to the parties, property/price, etc. But the
resolution of such problems is subject to normal contract rules and raises no
issues particular to RET.
Variation in size:
Bouskill v. Campea et al. (1976) (Ont CA): CA affirmed lower court’s decision that the
P was justified in refusing to accept property with a depth of 161 feet where the K
had described the property as having a depth of “172 feet more or less.” The
question of whether or not a variation in size is substantial enough to entitle a P to
escape the transaction is a question of fact and depends on all the circumstances of
the case, including the P’s intention in buying the property.
Land larger than accounted for in particulars:
In Raymond John Thiel et al. v. Edwin L Perepefitza et al. (Alberta CA, 1982), the land
was described in the offer as 4.8 +/- acres. V discovered before closing that the land
was in fact a little over 6 acres in area and sought to increase the purchase price.
Court held that the subject matter of the K was the parcel of land identified when the
Ps viewed it. Since the 4.8 +/- was only an estimate, the V was not entitled to
increase the purchase price.
Wilson Lumber Co. v. Simpson (1910), 22 OLR 452 (HC)
 Qualifying words (“more or less”) provide a successful defence
Facts:
Property is misdescribed as being 36 x 100 feet, more or less
Actual measurement is 36 x 98.6
P was planning to erect houses with a frontage of 20 feet and a 10 foot stairway for
access
V’s agent did not tell V about P’s plans (in law of agency, knowledge of agent is
imputed to principal and vice versa)
Normally in real estate, if someone is aware of something being critical to a K, then
one can argue that the P should be released from the K
Price of property was $12,000  P claims that he is entitled to SP and wants
reduction in price  V raises qualification as a defence
Issues:
Is the P entitled to specific performance with compensation for the deficiency?
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Holding:
No. Court gives P a choice: opt out or keep it as it stands; no option for reduction in
price. Note: this remedy is exceptional; usually the P in this case would be bound to
accept.
Ratio:
Where, in addition to the description of such a lot, there was added a statement as to
the length of its boundary lines, qualified by the words “more or less,” the seller
would not be bound to make compensation if these lines were not of the stated
length.
Reasoning:
V was in good faith
We can’t assume that the actual size played a role in setting the price
Difficult to assume how much to reduce the price of property
Qualification (“more or less”) played a role  V wasn’t warranting the size
“the words ‘more or less,’ added to the statement of the depth, control that
statement, so that neither party would be ‘entitled to relief on account of a
deficiency or surplus unless in case so great a difference as will naturally raise the
presumption of fraud or gross mistake in the very essence of the contract.”
Notes:
Qualifying words are useful to have in K if working for V, provided
discrepancy is not substantial.
Murphy v. Horn, [1929] 4 DLR 693 (OHC)
 Discrepancy is substantial + fraud
Facts:
V had bought 10 arpents of property, purports to sell property that is 16.5% larger
(10 acres)
Includes words of estimation “more or less”
V was aware of the discrepancy
Issues:
Can the P demand specific performance and compensation for the deficiency?
Holding:
Yes. Price is reduced by 16.5%  easier here because price was based on acreage.
V is guilty of fraud, acting in bad faith.
Even if there was no fraud, the deficiency was substantial
Ratio:
Raney, J. “… I have no doubt that the exaggerated statement of area was intended to
commend the property to the plaintiff.”
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“…if I had been able to find good faith on the part of the defendant, the plaintiff
would still … be entitled to specific performance of the agreement, with
compensation.”
“The general principle is well established that where a misrepresentation is made
by the vendor as to a matter within his knowledge, and even though it may be
founded on honest belief in the truth of the representation, and the purchaser has
been misled by such a misrepresentation, the purchaser is entitled to have the
contract specifically performed, so far as the vendor is able to do so, and to have
compensation for the deficiency.”
“When in a sale of land the quantity is stated …, and the price is stated in a lump sum
…, the presumption is that the price was fixed with reference to the quantity. …
this will still be the presumption though the words “more or less” be added to the
stated acreage.”
“In the absence … of any description by metes and bounds from which the purchaser
could have checked up the quantity for himself, I think the words “more or less” are
not to be construed as the equivalent of “as estimated”, or “as supposed”, but are
construed to mean, “about the specified number of acres”, and are designed to cover
small errors as sometimes occur in surveys.”
In re Puckett and Smith’s Contract
 Exclusion clause is not binding in the event of a substantial discrepancy
Facts:
Property described as possessing a valuable building opportunity
V aware that P purchasing for purpose of building
Subsequently discovered that a drain on the property detracted from the building
opportunity
Provision said “If any errors shall be found in the particulars, shall not annul the sale”
Issues:
Is P bound by the clause that takes away his right to rescind in the event of
misdescription?
Holding:
No, P is not bound by the exclusion clause.
Reasoning:
“Where the misdescription, although not proceeding from fraud, is in a material and
substantial point, so far affecting the subject-matter of the contract that it may
reasonably be supposed, that, but for such misdescription, the P might never have
entered into the contract at all, in such case the contract is avoided altogether, and the
P is not bound to resort to the clause of compensation.”
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Ratio:
When dealing with a description that does not conform with reality, notwithstanding
exclusion clause, P is entitled to compensation or to opt out, if the discrepancy is
significant and it’s the right kind of clause  has to be such that P would never have
entered the K at all (a substantial discrepancy)
Misdescriptions in the Conditions of Sale
o The law concerning misdescriptions in the conditions of sale is governed by
general contract law principles;
o A condition of sale may be either a warranty, condition or innominate term;
o Breach of which leads to different consequences.
Sandford v. Cox (1999) NBQB
 Urea formaldehyde; damages for breach of warranty
Facts:
Discrepancy dealing with urea formaldehyde  a warranty
Issues:
What are P’s remedies for breach of warranty?
Holding:
Even though P suffers no harm or loss, P is entitled to damages for the breach of
warranty
Reasoning:
“The UFFI problem therefore appears to be founded in perception and not in fact.”
“Nevertheless the Coxes provided the purchasers with a warranty. The sale would not
have been consummated had the warranty not been provided or if the plaintiffs thought
there was UFFI in the home.”
Notes:
Strangely, judge suggests that there’s no reason to worry about urea formaldehyde…
“Undoubtedly this product is not the demon it was once thought to be.”
Contractual liability is a form of strict liability
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Bouzane v. Murphy (2000) 36 RPR (PEI SC)
 Statement re: roof made outside of contract
 Negligent misrepresentation claim fails
Facts:
V stated that roof was new but only half of it had been reshingled (she was unaware,
her deceased husband had done the work)
Statement outside of K, contained in the listing agreement & not a term of the K
(and note APS includes an entire agreement clause)
After closing, P finds out the roof was not completely new
P arguing negligent misrepresentation
Issues:
Does the statement concerning the roof constitute negligent misrepresentation?
Holding:
No: there was no fraudulent misrepresentation as the V was honestly mistaken about
the roof, and plus the representations were not contained in the agreement between
the parties
Notes:
P should have taken the opportunity to have the residence inspected by a third party
In the absence of a condition or warranty, a P may possess a cause of action for the torts
of deceit and/or negligent misrepresentation in the appropriate circumstances against
the seller and its agent. Indeed, even if a P does have a contractual cause of action it
may also be able to sue in tort.
6 OF OTHER DEFECTS OF QUALITY
6.1 INTRODUCTION
Position of the parties:
o Looking here at defects which do not qualify as misdescriptions nor as
defects of title and which pre-exist the contract;
o P cannot turn to express terms in the K since the assumption is that there is
no express term covering such a contingency;
o And V cannot argue that the doctrine of conversion transfers the risk for
existing defects to the P since the doctrine only operates from the date of
K;
o As a general rule, caveat emptor applies;
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o But, law governing misrepresentation may be available to P if:
 V has made a representation re: attribute now found to be
defective;
 In which case P may be able to seek rescission of K in equity,
 And/or to seek damages at law if misrep was negligent or
fraudulent;
 P will have to prove that misrep was actionable despite
clause 25 of APS (entire agreement clause).
o When house is a completed structure, caveat emptor applies;
o But caveat emptor does not foreclose P from suing V or a third party,
such as builder or architect, whose fraud or negligence is a cause of
the defective state of the premises;
o And P can protect himself by careful inspection or by an express
warranty.
When is house considered complete?
McCluskie v. Reynolds, [1968] BCJ (BC): “The test for completion is an objective one,
to be determined on the facts. When unfinished work is merely decorative, as
opposed to structural or integral to the building’s proper functioning, the building
will be found to be completed.”
6.2 HOUSES TO BE, OR BEING, BUILT
o If property is not yet built or in the course of building, CML will imply a
limited warranty to protect the property against defects (exception to
caveat emptor);
o Includes 3 warranties: fit for habitation, proper materials, good and
decent workmanship;
o Justification: P can only inspect what exists;
o If there are plans and specifications, Lynch v. Thorne might apply and
say that an implied warranty of fitness is inconsistent with the
express provision re: specifications  but has consistently been
distinguished;
o Some jurisdictions have new homeowners warranties (including Ontario 
all vendors of new houses must offer the warranty).
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Freiser-Reid et al. v. Droumtsekas et al, [1980] 1 SCR 720
 Leading Canadian case on caveat emptor
 Completed house
Facts:
P agrees to buy a “completed” new house from V, the builder.
In the agreement was a clause that required the V to disclose any municipal or other
government orders requiring work to be done on the premises.
A municipal by-law requires weeping tiles to be installed, which the V does not do.
Deal closes and lack of weeping tiles becomes apparent after the basement floods.
If they had been installed the leaking would probably not have occurred.
Trial judge finds that house was finished and therefore an implied warranty did not
apply in respect to the house being unfinished, as deficiencies were evidence of faulty
workmanship and not incompleteness.
Issues:
Was there an implied warranty in respect to weeping tiles?
Holding:
No. But express warranty. P is entitled to damages.
Reasoning:
Dickson, J. “…if the sale of a completed house by a vendor-builder is to carry a noncontractual warranty, it should be of statutory origin, and spelled out in detail.”
However, the court went on to find that the clause was an express warranty by the V
that the house was built in accordance with all applicable by-laws and its breach entitled
the P to damages.
“…caveat emptor remains a force to be reckoned with by the credulous or indolent
purchaser of housing property. Lacking express warranties, he may be in difficulty
because there is no implied warranty of fitness for human habitation upon the purchase
of house already completed at the time of sale.”
Ratio:
Lacking express warranties, P may be in difficulty because there is no implied warranty
of fitness for human habitation upon the purchase of house already completed at the
time of sale.
Notes:
“it must be observed that the decided English and Canadian cases in this area point up
the irrationality and odd results derived from the rigid completed/incomplete
distinction.”
But any change in this regard is left to the legislature.
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6.3 COMPLETED “NEW” HOMES
Ontario New Home Warranties Plan Act
o Applies to houses to be built, in the course of construction, or which have
been completed for a limited period of time;
o s. 1: new home is strictly defined: a self-contained one family dwelling
(strictly residential), detached or undetached, buildings composed of one or
two self-contained dwellings under one ownership, home also means a condo
unit, including the common elements. Does not include building for
seasonal purposes;
o s.1: owner of the home defined as the person who first purchases the home
from V for occupancy  rules out speculation  warranty goes to first
occupant;
o s. 13: warrants that the home is constructed in a workmanlike
manner, fit for habitation, and constructed in accordance with the
Ontario Building Code;
o Creditor will be covered if they qualify as successor in title;
o Mortgagee will become vendor under s. 1 where builder defaults on a
mortgage and mortgagee sells;
o Warranty runs with the home  duration depends on which warranty
owner is seeking protection under s. 13(1) (see below);
o Act comes with an indemnity fund;
o Covers major structural defects amongst other things;
o s. 13(2) sets out exceptions: defects in material, failure by owner to
maintain adequate protection… problems that are attributable to third party.
Duration of warranty:
o 13(3): takes effect from date of completion;
o Warranty under 13(1) applies in respect of claim made within one year from
warranty taking effect (13(4));
o 13(5): warranty is enforceable despite lack of privity of K bw owner and V;
o 13(6): no waiver of warranty;
o 14(4): for major structural defects, total of 5 years warranty protection;
o During initial first year, go to builder/vendor for major structural
defects  after that year, it’s the fund, a government agency.
Bognar v. Borg (1989): APS will be illegal and unenforceable if builder fails to
register under the Act.
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Grudzinski v. Ontario New Home Warranty Program (1997)
 Meaning of “major structural defect”
 Program is miserly administered
Facts:
P purchased new home with unfinished basement
Basement was unusable because of flooding caused by cracks in the walls
P made a claim under the Program
Program denied the claim, reversed by the Commercial Appeal Tribunal
Program appealed
Issues:
Are cracks a major structural defect? (What is the meaning of “major structural defect,”
who is entitled to claim under s. 14(4), and when?)
Holding:
Cracks are a major structural defect. P is entitled to recover from the Program because
the defect precludes P from using the entire basement for any purpose – a third of the
home.
Reasoning:
“major structural defect” is defined in Reg. 892 as a defect in work or materials that
results in failure of the load bearing portion of a building, or a defect that materially and
adversely affects the use of the building for the purpose for which it was intended.
“The definition of a s. 13(1)(b) major structural defect is awkwardly worded by running
on. It provides in the same breath inclusions and exclusions and a double negative.”
Act and regulations create many difficulties of interpretation and are incoherent
“I find the denial of the use of one-third of a home easily meets the definition of
‘material.’ Further it is obviously adverse.”
“What is significant is that they were precluded from using and enjoying their basement,
one-third of their home, for any reasonable purpose.”
Ratio:
Government scheme is miserly administered…
Court adopts more generous understanding of “major structural defect”
Notes:
This case rejects previous case law that construed “major structural defect” more
narrowly as “one which renders a home virtually uninhabitable, uncomfortable beyond
reason, unsafe, or in a state of imminent collapse” (Re Mr. and Mrs. Wayne Kennedy
(1982)).
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6.4 LAND AND STRUCTURES OTHER THAN “NEW HOMES”
o Most common transactions are not sale of new homes;
o Caveat emptor is the rule;
o Ask: is problem actually a defect? Depends in part on P’s intent in
purchasing;
o A patent defect is discoverable on reasonable examination:
o If patent: caveat emptor  P must inspect, V not required to disclose;
o If latent: caveat emptor;
 Whereas CVL has warranty against latent defects.
Patent Defects
o Caveat emptor applies;
o P is assumed to have accepted the property subject to such defects;
o V is under no duty to disclose such defects as, being patent, P is assumed to
be aware of them;
o If P wishes to be protected against patent defects  make them subject of an
express contractual arrangement.
Tony’s Broadloom & Floor Covering v. NMC Canada Inc., 141 DLR (4 th) 394
 What is a defect?
 Authoritative case on defect - patent or latent
 Pushes P’s obligation a little further than was previously the case
Facts:
V selling a contaminated industrial property  V aware of contamination, P is not
P wants to buy property to build a condo building  doesn’t tell V his plan
P doesn’t inspect property before K or completion
P argues that the contamination of the property by hazardous waste material renders
the property unfit for dwelling
Issues:
Is this a defect?
Holding:
No, neither patent nor latent, because it did not impair the continued use of the land
for industrial purposes. If a defect, it is patent: discoverable by the purchaser if it had
exercised reasonable diligence
Reasoning:
The P “got exactly what they bargained for – industrial land.”
It’s common knowledge that industrial property is contaminated
Contaminants don’t necessarily preclude other industrial uses of the property
No evidence of bad faith
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Ratio:
Reasonable examination can involve more than visual inspection
Patent doesn’t mean “obvious,” just discoverable by a reasonably knowledgeable
person
If P is silent, he is assumed to have purchased the property with the knowledge of the
defect and deemed to accept the property as is.
Notes:
This case may have been decided differently had P informed V of plans to turn property
into residential building.
A V “may have a duty to warn a purchaser of dangers in or on the property which pose a
risk of physical harm to persons or property…. That principle has no application here.”
A P can include a “right of termination” clause in the agreement in order to protect
against acquiring contaminated property.
Latent Defects
o As a general rule, V is under no obligation to disclose latent defects;
o Prima facie latent defects covered by caveat emptor, with exceptions;
o Exceptions:
o If defect renders property dangerous (McGrath);
o If latent defect is actively concealed (Gronau).
o Duty of disclosure is only extended to latent defects that are potentially
dangerous and that might render property uninhabitable, and includes
obstacles to P’s purpose for purchasing, if disclosed to V;
o V is under no obligation to disclose defects of which he is unaware
(obviously). Nevertheless, on the discovery of such a defect, the P may obtain
equitable relief where the P has declared his plans for the property and the
defect so seriously prejudices those plans that it can be said that there has
been failure of consideration;
o Willful blindness? The law will impose a duty to disclose latent defects on
the V where he is not subjectively aware of those defects, but where he is
reckless as to whether or not they exist. It is up to P to prove this degree of
knowledge or recklessness.
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Scott-Polson v. Hope (1958) (BCSC)
 No implied warranty that a residential property is fit for human habitation
Facts:
Moths in the walls made house uninhabitable
P wanted to make the K unenforceable
V was unaware of the problem
P suing and claims that V was aware and ought to have disclosed
Issues:
Can P sue for rescission of the K? (Is there an implied warrant of inhabitability?)
Holding:
No and no. There is no implied warranty that the house will be fit for habitation.
Reasoning:
V was not aware of the infestation when he sold the house
This disposes of the case because in the case of a latent defect of quality (which this is),
P would have to plead and prove breach of warranty or fraud to be entitled to any
remedy at all, whether by way of damages or rescission
Ratio:
“In the case of the sale of real property there being no fraud, a latent defect of quality
not amounting to a breach of obligation to show a good title is no ground of objection
on the purchaser’s part unless the vendor expressly or impliedly warranted or
promised that the property sold should have the quality in which it is deficient.”
Gronau v. Schlamp Investments Ltd (1974), 52 DLR (3d) 631 (Man QB)
 Latent defects actively concealed  caveat emptor does not apply
Facts:
V builds an apartment house and owns it for over 10 years.
A serious crack develops at this time in one of the walls.
V hires a construction engineer who recommends that the V underpin the building and
construct extension joints, but it will be expensive
V doesn’t follow the engineers advice, has a bricklayer patch the crack with matching
bricks and places it on the market.
P buys the building and discovers the cracks after closing.
P claims this is fraud and wants K rescinded
Issues:
Can the P have the K rescinded?
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Holding:
Yes.
Ratio:
If latent defects are actively concealed by the V, the rule of caveat emptor does not
apply;
P can, at his option, ask for rescission of the K and/or compensation for the damages
resulting.
Reasoning:
“Instead of repairing the defect, the defendant decided to conceal it by as temporary
patching of the crack with matching bricks.”
“Before plaintiff could have the contract rescinded, after it has been duly completed, he
must establish that there was a warranty in the document, fraud or error.”
McGrath v. MacLean (1979), 95 DLR (3d) 144 (OCA)
Facts:
V’s property was subject to landslides from adjoining property – a potential defect
Landslide occurs rendering dwelling unsafe
P wants to avoid the transaction
P alleges that V knew of the risk of such landslides
Issues:
Does P have any recourse against V?
Holding:
No: V was unaware of the defect. As a general rule the vendor is under no obligation to
disclose latent defects (Carlish v. Salt). To this general rule, however, there are a
number of exceptions, including if the defect renders or is likely to render the premises
dangerous to the occupant.
Reasoning:
“It was apparent to the P by the examination made of the premises and by what was
said to them by the V’s agent that, by reason of the location of the lands being
purchased, there was some problem” with earth sliding onto the property retaining
wall was built for this purpose
But there was no evidence that the landslide that ended up causing substantial damage
was as a result of the natural flow of land from the adjoining hill  a tortious act of
others  no evidence that V was aware of such a danger
Ratio:
Dubin JA: “…in an appropriate case, a vendor may be liable to a purchaser with respect
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to premises which are not new if he knows of a latent defect which renders the
premises unfit for human habitation. … it is incumbent on the purchaser to establish
that the latent defect was known to the vendor, or that the circumstances were such
that it could be said that the vendor was guilty of concealment or a reckless disregard
of the truth or falsity of any representation made by him.”
Not the case here.
“I am prepared to assume that there is a duty on the V to disclose a latent defect which
renders the premises dangerous in themselves, or that the circumstances are such as to
disclose the likelihood of such danger.”
Notes:
Comes close to stigmatized property issue because property itself wasn’t “subject to
landslides”  was subject to being damaged by landslides
Dubin JA’s analysis has been questioned more than once. Some suggestion that the
principle is actually that it is the concealing of a patent defect to make it latent that
renders the activity fraudulent, rather than the fraud of actively concealing a latent
defect.
Sevidal v. Chopra
 Obligation to disclose contamination on nearby property
 Duty to disclose is continuous: it persists until completion of transaction
 Applies in the case of DANGER TO PERSONS of which V IS AWARE
Facts:
V agrees to sell to P
V becomes aware that radioactive soil has been found in the area across the street, and
that the land under their house is contaminated
V does not disclose to P
P purchases and later sells property for a loss suing V (amongst others, including govt)
Issues:
I V under an obligation to disclose any potential threats to the P before the closing even
if V does not believe that they affect his property?
Holding:
Yes. They knew about the potentially dangerous latent defect prior to the signing.
V is guilty of concealment of facts so detrimental to the P that it amounted to fraud.
Reasoning:
Radioactive material is a latent defect.
“An exception to the general rule of caveat emptor will be found where there is fraud or
fraudulent misrepresentation and, where there is such a finding, failure on the part of
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the V to disclose will give rise to a cause of action.”
Ratio:
Extends obligation to disclose to dangers to persons that exist on other people’s
property that did not exist on your own at the time of contract
Winnipeg Condominimum Corp. No. 36 v. Bird Construction Co.
 Danger to persons, liability of builder
Facts:
A torts case – falling bricks posed a danger to the occupants of the building
Issues:
May a contractor responsible for the construction of a building be held tortuously liable
for negligence to a subsequent purchaser of the building, who is not in contractual
privity with the contractor, for the cost of repairing defects in the building arising out of
negligence in its construction?
Holding:
Yes, but only because the falling bricks posed DANGER TO PERSONS
Reasoning:
“Where a contractor (or any other person) is negligent in planning or constructing a
building, and where that building is found to contain defects resulting from that
negligence which pose a real and substantial danger to the occupants of the building,
the reasonable cost of repairing the defects and putting the building back into a nondangerous state are recoverable in tort by the occupants. The underlying rationale for
this conclusion is that a person who participates in the construction of a large and
permanent structure which, if negligently constructed, has the capacity to cause serious
damage to other persons and property in the community, should be held to a
reasonable standard of care.”
Ratio:
Example of when P can recover from someone other than the V
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Carlish v. Salt, [1906] 1 Ch 335
Facts:
Vs own a building in which the wall separating it from the adjacent property has
been condemned.
Owner of the adjacent property gets notice, which requires the wall to be repaired
and the Vs to bear their share of the costs.
Vs enters into K of sale for the building with P two days after notice of the award
without saying anything about it or the fact that the wall had been condemned.
Before completion of the sale notice is served on the Vs to tear down certain
portions of the wall and shore up others.
The P found out about the award and condemnation at this time.
The P demands compensation and return of the deposit with interest
The sale does not complete and the Vs eventually tear down the house, treat the K as
abandoned and build another one in its place.
At trial the Vs showed evidence that the P intended to tear down the building and
build a new one in its place.
Issues:
Is the P entitled to have his deposit returned (did V breach any obligation to P?).
Holding:
Yes (V breached obligation with respect to a material defect in title or in the subject
matter of sale).
Ratio:
Joyce, J. “…the party wall notice and the award constituted a material fact affecting
the price to be paid, and in so far as they imposed a liability of uncertain amount at
some future time on the owner of the premises, I am of the opinion that they
constituted a latent defect not in the quality of, but in the title to, the property,
and ought to have been disclosed.”
“…mere nondisclosure on the part of the vendor, apart from circumstances imposing
a duty upon him to disclose or inform the other party, does not entitle the purchaser
to avoid the contract.”
“…the defendants concealed … a fact known only to themselves which was material
to the value of the property, and in the circumstances it would … be unconscientious
for the defendants to insist upon availing themselves of any legal advantages they
may have obtained by the contract, and in particular the retention of the deposit.”
Notes:
This case should be restricted to notices: issues that are exclusively within V’s
knowledge, that P cannot discover through reasonable inquiry.
Note that this case is from 1906. Today, a reasonable purchaser buying a property
with a common wall might be expected to make sure that there are no outstanding
work orders  hence why ratio should be limited to notices.
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Lash and Moneta Builders and Construction Company v. Miller (1956)
 Where V is aware of facts impacting property that will render property
useless for P’s needs, must disclose
Facts:
K between P and builder
P wanted to change the number of units – builder agrees to add two units
Builder fails to tell clients that local bylaws do not allow so many units  Units can’t be
rented out
Issues:
Was builder/V under a duty to disclose the bylaw issue?
Holding:
Yes.
“although it is strange that they made no enquiries for their own protection.”
Reasoning:
“What the P received was something so different as to be useless for their purposes, at
least so long as the present by-law affects their lands.”
“Where the misdescription, although not proceeding from fraud, is in a material and
substantial point, so far affecting the subject-matter of the contract that it may
reasonably be supposed that, but for such misdescription, the P might never have
entered into the contract at all, in such case the contract is avoided altogether, and the
P is not bound to resort to the clause of compensation. Under such a state of facts, the P
may be considered as not having purchased the thing which was really the subject of the
sale.”
Ratio:
V must disclose if he is aware or should reasonably be aware of the purpose for which
the purchaser is acquiring the property and is aware that the defect will prejudice the
purchaser’s plans.
Notes:
“Where the misdescription is not material or substantial, rescission cannot be had.”
Vendor’s Property Disclosure/Information Statement
o Not required by law;
o Addresses issues that should be patent  no obligation to disclose;
o Statements not considered a warranty, but rather to put Ps on
notice;
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o Liability will ordinarily be disallowed when the problem is obvious;
o If V answers statements honestly, liability will not follow even if
statements turn out to be inaccurate;
o Raises potential conflict of interest because if V’s agent has V fill this out, it
is helping the P  V’s agent owes V fiduciary duties;
o Suggestion that the purpose of the form may be to protect the agent;
o It seems to present a ripe ground for litigation.
Curtin v. Blewett (1999) BCSC
Facts:
V noticed a termite infestation and hired a pest control agency to address the problem
Pest control agency provided a 10 year warranty, agreed to periodically check in
V considered the problem solved following the treatment
V sells property to P
In agreement, they answered disclosure statement regarding knowledge of insect
infestation in the negative
Issues:
Does this constitute fraudulent misrepresentation?
Holding:
No.
The P has not established that the V’s negative representation amounted to a false
representation, or that the representation was false in fact at the time it was made, or
that they made the representation recklessly.
=
Reasoning:
“The wording of the question... is in the present tense and does not refer to past
infestations.”
Considering that two years had passed, V responded accurately with the negative reply
Ratio:
In order to establish that a K was entered into on the basis of fraudulent
misrepresentation, ptf must establish:
a) that a false representation was made by the dft;
b) that the representation was false in fact;
c) that the dft knew that the representation was false when made, or made it recklessly;
d) that the ptf was induced to enter into the K by the false representation.
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Environmental Matters
o Most jurisdictions have specific legislation governing this area;
o Environmental Protection Act in Ontario;
o Allocation of environmental liability operates as an exception to caveat
emptor.
Stigmatized Properties
o Note that whether or not something is a defect often depends on the
individual considering the matter;
o Here, reputation of property means it has been psychologically sullied;
o Issues with grow ops: more complicated bc property may have both
structural damage, given heat and humidity, and reputational issues;
o In some jurisdictions, such prior issues must be disclosed to potential buyers.
Summach v. Allen, 2003 BCCA 176: “the presence of a nude beach next door but one
to the subject property is not a defect, latent or patent. There is no duty on the
vendor to disclose the existence of the nude beach. … To allow defects to be
determined by individual preferences would open the floodgates of litigation
by remorseful purchasers and create an impossible standard of disclosure for
vendors.”
Dennis v. Gray, 2011 ONSC
Facts:
Convicted child pornographer in the neighbourhood
P has kids and is concerned  wants out of the agreement
Issues:
Is it plain and obvious that the V of a house does not have to disclose to a P with young
children the fact – which was common knowledge in the neighbourhood – that a person
convicted of child pornography lives across the street?
Holding:
No  P can avoid the transaction
“the risk of harm is implicit from the other facts pleaded”
Notes:
We have no reasonable authority on this issue
The cases on latent defect are not entirely consistent in approach
No great discussion of when caveat emptor should and should not apply in stigmatized
property cases.
Foster: it seems unreasonable to be able to say that these facts, which have nothing to
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do with the physical property, can be raised to avoid the transaction. More appropriate
to require Ps to take the necessary measures to protect themselves before entering the
agreement.
Lapointe v. Trang [2009] OJ (SCJ)
Facts:
P finds out that a suicide had taken place on the property (between K and completion)
P wants to avoid the transaction
Issues:
Is P entitled to terminate as a result of the suicide?
Holding:
No: P is required to complete the contract (he is in breach of contract at this point  V
entitled to damages).
He purchased the property on an “as is” basis.
There is no evidence of a loss of resale value. In fact, within a month of the aborted sale,
the property was sold for $2000 more than the price agreed to between L and T.
Ratio:
There is no jurisprudence to support the claim that the mere fact of a tenant’s suicide
entitles a buyer to terminate the contract.
7 OF THE MATTER OF TITLE
7.1 INTRODUCTION
o If you are occupying an estate without having an estate or interest in it, you
are trespassing;
o Estate/title retains its value after the physical object loses it (for example, by
burning down);
o When P is buying real property, he is buying both a physical and intangible;
o V cannot give better title than he himself possesses (nemo dat).
Agreement of Purchase and Sale:
o Does not include any reference to the estate or interest that V is selling;
o Can’t be a lease because of APS s. 5 (P receives vacant possession);
o Default: it’s a FS to which V has or will have good title (Armstrong, SCC);
o Onus is on P to search title to property (s. 8);
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o s. 10: title is good and free from all restrictions, charges, liens, and
encumbrances, except as otherwise provided for in the agreement;
o If P finds a title defect that he is not prepared to accept, and V can’t do
anything about it, the agreement will come to an end and the deposit
will be returned;
o There are a series of 3rd party claims/interests that P is deemed to
accept, such as utility expenses.
7.2 SOME DEFECTS OF TITLE
o If transaction violates the Planning Act, P runs the risk of acquiring no title;
o Misdecription: 10 acres “more or less,” when 4 of those acres belong to
neighbor, is a title defect;
o Defects going to the root of title suggest that the V lacks title;
o Defects of title don’t raise the specter of the V lacking title to the property;
o If with knowledge of a defect, P contracts without saying anything about title,
he is estopped from raising complaint;
o Same result of P takes possession of the property with knowledge of
the defect in title.
Potential title defects:
o V has no title whatsoever;
o V has no title to part of the property;
o V holds title as co-owner;
o V has a title to an estate or interest other than that which he has K’ed to sell;
o V has title but can only sell the property with the concurrence of 3rd party;
o V has title but it is subject to an easement, profit à prendre or covenant;
o V has title but it is subject to a financial claim.
Two categories of title defects:
1) Defects of title strictly so called: without concurrence of 3rd party, V cannot
cure the defect and give clear title;
a. Further divided into defects going to the root of title and mere
defects of title;
i. Ex: easement.
2) Matters of conveyancing: where V can remove/cure the defect;
a. V can compel bank to hand over the discharge simply by paying the
balance owing 
i. Ex: mortgage.
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7.3 WHAT IS A “GOOD TITLE”?
Agreement of Purchase and Sale:
o s. 10: “good and fee from all registered restrictions;”
o Sets out particular groups of third party claims that the P is prepared to
accept;
o Armstrong: implied term that V will make out good title in fee simple;
o Good title is not necessarily perfect but better than doubtful.
Example of not having good title:
o If one creates a contingent interest (for ex, “to A for life, then to B and C in
fee simple on attaining age 30”). If B and C are not 30 and they want to sell
their FS, question would arise as to whether they have a FS to grant: No 
their interest is contingent. They do not have an estate until they’re 30. Could
convey the contingent interest.
Why does it matter?
o P could be sued if third party has an interest in the property;
o Question of adequacy will arise in context of an action for SP:
o Should P be compelled to accept V’s title?
o Answer hinges on the quality: if good: yes, if doubtful: P may reject.
Pyrke v. Waddingham (1852), 68 ER 813 (Ch)
 If title is doubtful, court will not force specific performance
Facts:
Vendor (Pyrke) wants to force specific performance of a K of sale for a property in which
he has doubtful title on P (Waddingham)
Issues:
Can the vendor force specific performance?
Holding:
No. Title is doubtful and specific performance cannot be enforced.
Reasoning:
“If the doubts arise upon the construction of particular instruments, and the Court is
itself doubtful upon the points, specific performance must ... be refused”
“If the doubts which arise may be affected by extrinsic circumstances, which neither the
purchaser nor the Court has the means of satisfactorily investigating, specific
performance is to be refused …”
“… each case must depend upon the nature of the objection, and the weight which the
Court may be disposed to attach to it; and that, in determining whether specific
performance is to be enforced or not, it must not be lost sight of that the exercise by the
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Court of its jurisdiction in cases of specific performance is discretionary.”
Ratio:
Turner, GJ. “…the Court will not compel a purchaser to take a title which will expose him
to litigation or hazard.”
Mullings v. Trinder (1870) Eq
 Contra Pyrke
Facts:
Several years after Pyrke, Pyrke conveyed the property to trustees
Pyrke conferred on trustees power of sale
Trustees contracted to sell to P, who raised the same objection as Waddingham did in
the Pyrke case
Trustees sued for SP
Issues:
Can the vendor force specific performance (is the title marketable)?
Holding:
Yes: it’s a good title. Grants SP.
Risks involved are remote enough that court must uphold the goodness of the title.
Court agreed with Turner’s view in Pyrke of the standard of marketable title, but
disagreed with its application to this particular will
Logan v. Stein, [1958] OWN 343 (CA)
 When is threat of litigation considered a title defect?
 P will not be compelled to buy a lawsuit
Facts:
P enters into agreement with V to purchase a property together with a right of way.
Property was the dominant tenement
Owner of abutting land, servient tenement, says he will contest the right of way as being
abandoned
It was obvious that the easement was still valid
The grounds on which the suit would be based were “idle” (not substantial)
P says they ought not to be compelled to buy a lawsuit  should be excused from SP
Issues:
Is the P entitled to rescind the K given the threat of litigation?
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Holding:
No: the threat of litigation is based on idle (or insubstantial) grounds.
Reasoning:
Aylesworth, JA. “A purchaser, relying on the principle that he was not, by a decree of
specific performance, to be compelled to buy a lawsuit, must show reasonable
diligence on his part to ascertain the reasonableness of the ground of the
apprehended litigation, or of the possible or threatened litigation.”
A reasonable inquiry would have exposed the unfounded nature of the abutting
owner’s claim.
Ratio:
There are two things to look at in assessing title when litigation is threatened:
1) Probability of litigation;
2) Reasonableness of any litigation that might be pursued.
If you can say yes to both, there will be a title defect.
7.4 VENDOR’S TITLE OBLIGATION
P and V may:
o Leave V’s title obligation to be governed by the terms to be implied into K,
OR:
o Expressly define V’s title obligation in the APS.
Implied Title Obligation
o Neither APS nor Act says anything about specific estate or interest
concerned, though APS says must be “good and free from all registered
restrictions;”
o Rebuttable presumption comes in that V is selling a FS to which V has good
title (Armstrong v. Nason);
o V & P Act and APS set out vendor’s title obligations:
o s. 4(a) Act and s. 12 APS: V is not bound to produce any abstract of
title… only obliged, when requested, to produce certain docs;
o s.4(b) Act and s. 8 APS: P must conduct and bear cost of title search.
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Yandle & Sons v. Sutton (1922) 2 Ch. 199
 Only exception to Armstrong rule is defect patent to the eye
 Not the case here; defect not patent
Facts:
P purchased two separate, adjoining properties
No express provision about V’s title obligations
P discovers that the footpath on the land across both properties is a legal public right of
way, not necessarily an easement
P refuses to proceed with the transaction
V brings an action saying this was a patent defect and P was aware  deemed to accept
V sues for specific performance
Issues:
Can P refuse to proceed with the transaction?
Holding:
Yes. The fact that the right of way was public was not patent
Reasoning:
The mere existence of a path does not tell you anything about the legal implications and
title issues.
The pathway is not a defect in itself  the only defect is that which may be implied
from the existence of the path
“a patent defect, which can be thrust upon the P, must be a defect which arises either
to the eye, or by necessary implication from something which is visible to the eye”
“he is only liable to take the property subject to those defects which are patent to the
eye…”
Ratio:
Where the agreement of purchase and sale is silent as to the vendor’s title obligation,
“the law implies that it is incumbent on him to make out a good title in fee simple”
Exception: if at the time of contracting the defect is strictly-so called patent.
Not the case here.
Express Title Obligation
o Where APS contains an express term defining V’s title obligation (we see
this in standard APS, s. 10), its precise scope and the right of P to object to a
defect of title are questions of Kual interpretation;
o Where title obligation is express, P is not deemed to accept encumbrances
not covered by the K.
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Strict interpretation:
o “Stipulations exonerating the V from his obligation under a K for the sale of
land to vest in the P a good title to the subject of the sale, or limiting that
obligation, are strictly construed” (Bill v. Gutschenritter);
o Regard must be had to all of the relevant terms of the K.
Cato v. Thompson (1882), 9 QBD 616 (CA)
Facts:
P enters into agreement to purchase V’s property provided it is “a good and marketable
title” (this is written into the agreement – express title provision).
Property is subject to restrictive covenants, which P knew about prior to entering into
the agreement but wants released.
Issues & Holding:
Can the P rescind? (Yes)
Reasoning:
Lindley, LJ. “…an express bargain to make a good title cannot be modified by parol
evidence. Such evidence would be admissible in an action to reform the contract, but is
not admissible for the purpose of construing it.”
“The contract expressly stipulates that the V shall make a good marketable title.”
Ratio:
With express title obligation, knowledge at the time of contracting does not imply that P
accepts the property subject to the defects.
Notes:
Restrictive covenant is a defect of title strictly so called.
If after contracting, the P exercised acts of ownership over the property notwithstanding
the title defect, he would be estopped from objecting to the restrictive covenant.
Zygocki v. Hillwood (1976), 68 DLR (3d) 55 (OHC)
 If K does not expressly provide for good title, P cannot object
 Look at accompanying docs if referred to in agreement
Facts:
P agrees to purchase 93 acres of land.
Earlier owners had granted Hydro an easement over a 100 ft. strip of land and an
easement to a pipeline company, also over a 100ft strip.
The agreement included the phrase “provided the title is good and free from all
encumbrances, except local rates, and except as aforesaid…”
Suggestion of provisions relevant to title in survey/accompanying docs  survey
included Hydro easement
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P had inspected the premises and knew of the easements before he signed.
Issues & Holding:
Can the purchaser rescind the agreement given the existence of the easements? (No)
Reasoning:
Van Camp, J. “…the purchaser is not bound by the title when the offer is signed but is
given time in which to investigate the title.”
He goes on to find that in the agreement the vendor did not agree to remove the
easements for which the purchaser had notice and the purchaser did not require that
such easements be removed.
Ratio:
“If the contract does not expressly provide for good title, then the purchaser cannot
object to those defects of which he had full knowledge, and it must be inferred that he
agreed to assume them. If there is an express covenant to make good title, then prior
notice will not displace it…”
Notes:
P has to look at the whole contract, what is said specifically about title, and including
reference to other documents that might contain information on title.
McAleer v. Desjardine, [1948] 4 DLR 40 (OCA)
 Agreeing to accept restrictive covenants is not the same thing as agreeing to
accept past breaches of restrictive covenants
 An existing breach of a restrictive covenant can be a title defect
Facts:
P enters into an agreement to purchase property “subject to the restrictions and
covenants that run with the land”.
A building had been erected on the property in a manner which violated these
restrictive covenants
Upon learning of the breach, P refuses to proceed
Issues & Holding:
Is the P entitled to rescind the K and recover his deposit? (Yes)
Reasoning:
Robertson, CJO. “…agreement to accept the property subject to the restrictions and
covenants that run with the land did not require them to assume the burden, or the
consequences, of a past breach of these covenants or restrictions.”
“They would have to assume the burden of their future observance, but that was the
limit of their obligation.”
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Re Hughes and Macaulay, Nicholls, Maitland & Co (1969) BCCA
 Insubstantial defect of title
Facts:
P agreed to building restrictions
P searched title and discovered easements that prevented P from doing anything within
about 5 feet of the back boundary (wanted to build a pool)
P objected
Issues:
May the P rescind? (May a purchaser take advantage of an insubstantial defect of title
which the vendor cannot remedy to avoid a transaction?)
Holding:
No and no. The title defect has no effect on the property.
Reasoning:
The building restriction precluded anything from being done to that strip of land
anyway, even if the easement had not existed
“Rescission is not available to a purchaser if the portion of the land affected by the want
of title is comparatively trifling.”
“The interim agreement does provide for building restrictions, so the P cannot plead
ignorance of those zoning bylaws. In the result the easement is of no restrictive effect to
normal use and enjoyment” and so is insufficient grounds for repudiation
Ratio:
P cannot take advantage of an insubstantial defect of title to rescind the agreement.
Notes:
P could have sued for breach of K if he could prove that the easement devalued the
property.
Policy: Courts don’t want parties to take advantage of insubstantial title defects as an
excuse to rescind agreements.
Public Regulation
3 major groups:
1) Claims by federal, provincial, and municipal governments for money where
the claims are secured by a lien or charge against the land;
2) Regulation of the use of land and the location of buildings;
3) Regulation of construction, condition, and maintenance of buildings;
a. Building Code Act, RSO 1990, c B13.
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*Note that some government claims can encumber land without the necessity
of registration in the Land Registry Office  raises questions about how far the
P’s solicitor should be expected to go in endeavoring to determine that the property
is “free from all encumbrances”
James et al. v. Chiaravalle (1969), 8 DLR (3d) 131 (OHC)
 Notice dealing with an improvement to the property (contra Kolan)
Facts:
V receives notice from municipality that they intend to build a sewer along the road,
which abuts the property.
Municipality also indicates that properties abutting the sewer will be assessed as part of
the cost of building them.
V sells house to P, a builder, without telling him about the sewers and the assessment.
P wants to rescind, says increased costs are outside of his budget
Issues & Holding:
Can P rescind the K? (No. The notice did not need to be disclosed.)
Reasoning:
Parker, J. refers to Halsbury: “Disclosure by vendor: Under special circumstances … it
may be the duty if the vendor to disclose matters which are known to himself, but which
the purchaser has no means of discovering; such as a defect which will render the
property useless to the purchaser for the purpose for which, to the vendor’s knowledge,
he wishes to acquire it; or a notice served in respect of the property, knowledge of
which is essential to enable a purchaser to estimate the value; and, if the vendor fails to
make disclosure, he cannot obtain specific performance and may be ordered to return
the deposit.”
“at the time the agreement was made no charges had been assessed and there was no
possibility of forfeiture, so … the title was not affected.”
Additionally, “the value of the property was not adversely affected by the nondisclosure.”
Local Improvements Charges – Priority Lien Status
O. Reg. 586/06
33(1) Special charges imposed on land under this Regulation do not constitute an
encumbrance on the land unless they are unpaid and in arrears.
(2) Subsection (1) applies,
(a) as between the vendor and purchaser; and
(b) in respect of a covenant,
(i) against encumbrances,
(ii) for the right to convey, or
(iii) for quiet possession free from encumbrances.
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Note on Corporations Tax Act, RSO 1990, c C40:
“Where are Ontario Corporation is in arrears of taxes payable under the Act, the
Ministry of Revenue, upon registration of a notice in the proper Land Registry
Office, has a first lien and charge on property owned by the corporation or in which
the corporation has an interest.”
By virtue of s. 382 of the Municipal Act, RSO 1990, c. M.45 municipal taxes are a
special lien on land.
Zoning bylaws are not matters of title:
 if an APS contains no particular provisions dealing with zoning, and no
misrepresentations have been made by V, P must generally accept the land subject
to any zoning bylaws that affect it;
 V’s power to convey a marketable title is not affected since zoning bylaws are not
matters of title;
 “…in the case of zoning by-laws or planning controls, and …also in the case of
failure to conform with housing bylaws, to affect the marketability of the title
they must be expressly mentioned in the contract of sale as grounds for
avoidance” (Kolan).
Kolan v. Solicitor (1969), 7 DLR (3d) 481 (OHC)
 Solicitor has an ongoing duty when searching title
 Illustration of the wide range of matters that P’s solicitor must look into
Facts:
P’s solicitor prepares an offer for P to purchase a run down property.
Fearing that there might be a work or demolition order made against the property, P’s
solicitor includes clause in the agreement to this effect.
Directly after closing, the municipality issues a demolition order against the property.
P did not conduct a search of any work or demolition orders at the municipal offices.
P argues that the order was invalid.
K addressed P’s entitlement to conduct a title search
Issues:
Is P’s solicitor liable for damages?
Holding:
Yes. (P is negligent – failed to satisfy himself that there were no outstanding work
orders)
Reasoning:
The dft solicitor “knew that the P was purchasing an old building… An easy search at the
Board before closing would have enabled him to protect his client. Without saying that
such a search is normally a part of a solicitor’s duty, I am satisfied that special
circumstances obtained here which made it the duty of the solicitor in the performance
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of his contract to search at the Housing Standards Board before the date of closing.”
“Whether or not the standing order was valid, … it constituted a defect on title which
the defendant should have located prior to closing.”
“…anything preventing the vendor from giving a good and valid covenant for quiet
enjoyment is a valid objection which would entitle the purchaser to refuse completion.”
7.5 DISCOVERING DEFECTS AND REQUISITIONS
Where to conduct search?
o Land titles or registry office;
o Registry system simply records instruments that affect title  nothing re
validity;
o Registration is required to have legal title;
o Regardless of validity of the document, registration constitutes registration
of title  becomes potential patent defect because public knowledge.
What to search for?
o Any potential third party claim that can be registered;
o Might want to look into CRA  govt agency has prior claim by way of
security (even prior to any mortgage).
Requisition date:
o Mentioned in s. 8 APS, “Title Search;”
o Requisition = bringing unacceptable problem to V’s attention;
o Requisition in writing;
o Title search must be concluded by the requisition date, and objections
brought to V’s attention by that date;
o Where K is silent, V & P Act gives P 30 days;
o V & P Act says V has 30 days to object to the requisition;
o Requisition date is “of the essence”  if P fails to meet the deadline, may be
obliged to accept title with defects  will be deemed to accept defect;
o With exceptions:
1. Defects of title strictly so-called (“irremovable”):
a) Defects of title: Must be raised during the requisition period;
b) Defects going to the root of title: Must be raised prior to completion;
2. Matters of conveyancing: Must be raised prior to completion;
BUT defect in title that cannot be reasonably discovered: whenever it’s
discovered.
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Categories of Defects of Title
Armstrong v. Nason (1894), 25 SCR 263
 Precarious title may still be good; does not necessarily go to the root of title
Facts:
Title defect: estate is defeasible upon the happening of a contingency
Agreement has clause giving ten days to raise objections to the title of the property
Objection is made after ten days have passed but before closing
Issues:
Can the vendor demand specific performance?
Holding:
Yes  defect of title does not go to the root of title, so P had to object during
requisition period. Failed, therefore must perform.
Ratio:
Sir Henry Strong, “…it has been held that … an objection going to the “root of the title”,
as it has been termed, is not precluded by a condition expressed in like terms with that
under consideration.”
“In the present case the purchaser will get a present holding title accompanied with
possession, a title in fee, defeasible it is true open the happening of a contingency, and
therefore not a marketable title, but still a title, although a precarious one. The
objection here taken is therefore one which does not go to the root of the title.”
He goes on to find that the objection in this case had to be raised within the time limit
and as it was not, the purchaser is deemed to have waived this.
Toth v. Ho (1998), OSC
 Illustration of why the nature of the defect matters  affects requisition
 Closed mortgage is a title defect
Facts:
Mortgage could not be satisfied before the date set in the mortgage
Closed mortgages preclude payment until a certain date
V alleges that the mortgage constitutes defect of title
P alleges that defect constitutes matter of conveyancing
Issues:
What type of defect is this, and when must it be raised?
Holding:
It is a title defect. Therefore, it must be raised during the requisition period.
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“It is obvious that a closed mortgage by its very nature is not one which the mortgagor
can compel a discharge be granted”
Ratio:
Normally a mortgage would be a matter of conveyancing, but closed mortgages
preclude payment before a certain date  this makes it a title defect (irremovable).
Title defects must be raised within the requisition period.
Title Searches
All patented land in Ontario is governed by either the Land Titles System or the
Registry System, and the same parcel of land cannot be governed by both at the
same time.
Registry Act, Title Period, and Notice of Claim
o Deals with investigation of title, large binders of docs re dealings;
o Notice period: when one registers a notice of claim, gives notice and
preserves that claim for 40 years;
o Notice of claim says that your claim is only good if you enforce it
within those 40 years;
o Register claim within the notice period OR AFTER expiration but
before registration of a conflicting claim (say ownership not changing
for 50 yrs) (s. 115(2));
 For ex, if an easement is registered in 1970 and not renewed
and ownership changes, it will expire in 2010. We are now in
2014  we’ll look back to 1974 to see if there has been a
reference to the easement; if not, it has expired;
 Legislation says, even if there has been a reference, it’s not
automatically valid  for third party claim to be valid, must be
preserved/recognized every 40 years by filing a notice of
claim;
 Interest is preserved for another 40 yrs by filing a notice of
claim;
 Case law takes a more generous approach 
conveyance is sufficient (Ramsay and Longtin);
 Saying all that matters is that subsequent owners are
aware;
o Exception for public utility easements  if
registered by 1981, extended easement (s. 114);
o Title search period: period one has to search title;
o V must prove chain of title going back 40 years (s. 112);
o Where there has been no conveyance dealing with the FS in the past
40 years, chain commences with the most recently registered title 
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go back as far as necessary until you encounter a dealing, other than
financial claim;
o V has no better title than the weakest link in the chain going back 40
yrs;
o Only applies under Registry System.
Relationship bw expiry period/notice period and title search period:
“While the expiry period runs forward in time for forty years from the date of
registration of a claim, the title search period runs backward in time from the date
of dealing for forty years. While the expiry period invalidates claims not renewed
within its period, the title search period deems irrelevant any claims registered
before its period. Thus, the expiry period and the title search period, while different,
complement each other” (Ramsay).
Re Battison and Ferell (1990) Dist. Ct.
 Confirms 40 year limit at s. 112 Registry Act
Facts:
V and P contract in 1990
Go back 40 years: in 1987 one had a conveyance from GT to V, a registered dealing
40 year period goes back to 1950  nothing besides the 87 transaction
If we went further back, we’d find a transaction in 1924 from X to ST
Hence no record of GT ever getting title
P says V cannot prove good and sufficient chain of title, because a link is missing
(applying so-called “Prudent Approach”)
Issues:
Has V proven good and sufficient title such that P cannot rescind?
Holding:
Yes: according to the legislation, provided there a dealing within the 40 year period,
that’s where the matter ends.
Reasoning:
“These provisions (ss. 111-115) are limitation provisions. They purport to extinguish
claims. They outline the consequences of failing to register notice of one’s interest
during a 40-year period.”
Also note s. 115 RA: “Where there is a conflict between any provision of this Part and
any provision of Part I or Part II of this Act or any provision of any other Act or any rule
of law, the provision of this Part prevails.”
Ratio:
It is no longer necessary to search back more than 40 years if there is at least one valid
transaction within that time period.
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P’s obligation to search and V’s obligation to prove good title only goes back 40 years.
Fire v. Longtin (1994) Ont CA
 Never look beyond the 40 year period if there’s a dealing, even in
contentious situation; confirms Battison
 Leave to appeal to SCC refused
Facts:
Parcel of land on which there’s a septic system, causing problems in the neighbouhood
Respondents asserting that the property was theirs (wanted to put an end to the
problem)
Appellants contested
There are 2 conflicting chains of title affecting the same land
Issues & Holding:
Who has valid title? (The appellants)
Reasoning (McKinlay JA):
It appears as though the respondent has the best claim: it’s the earliest and the chain is
continuous, whereas the appellant’s chain is broken in 1939
But in both cases, they’re dealing in 1994  go back only to 1954
Only doc relevant to respondents is the 83 doc  only conveys a right of way. Despite
the fact that history suggests that it should be a FS and right of way
So title goes to the appellants, even though, looking to before 1954, title was never
originally conveyed in that chain of title
Ratio:
It’s only when you have no dealings within the 40 year period that you look beyond it
1387881 Ontario v. Ramsay (2004), Ont CA
 More generous approach to notice of claim
 As long as the claim is evidenced in a conveyance, that’s good enough
 Notice of claim, per se, is not required
Facts:
Ongoing dispute, two lines of conflicting authority
P purchased a property in 2000
Chain of title can be traced back - no problems
R claims a right of way reference in the conveyance of her property in 1986
In 2003, P brought application seeking a declaration that R’s claim had expired
Issues:
How to preserve a registered right of way from expiring under the Registry System? Can
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a registered easement be preserved under the Act, not only be registering notice of
claim, but by setting forth the claim in another registered instrument?
Holding:
Reference is sufficient  R retains right of way.
Reasoning:
“the Act seeks to promote commercial certainty; to simplify the title search process;
and, to this end, to eliminate stale claims. These objectives are not frustrated by
allowing more than one method of claims preservation. Limiting claims preservation to a
registered notice of claim would eliminate a great number of claims, some of which may
be stale claims, but it would also eliminate claims still in active use.”
Ratio:
Claim has to at least be acknowledged in a dealing every 40 years
Claim can be saved by filing a notice of claim, or through reference to the claim in a
dealing with the title
Requisitions as to Title
On discovery of a defect in the V’s title, which the P has not expressly or impliedly
agreed to accept, the P must send the V a requisition as to title to which the V
must respond;
o Must be in writing;
o Must be lodged with the V within the period expressly or impliedly allowed
the P;
o V must answer the requisition within the time provided in the K.
Armstrong v. Nason (1894), 25 SCR 263
 Defect in title that does not go to the root of title must be raised within the
requisition period
 Future contingency does not necessarily go to the root of title
Facts:
Agreement has clause which gives ten days to raise objections to the title
P objects after ten days have passed but before closing (a predecessor in title had taken
fee dependent on a contingency which had not yet happened, death without issue).
Issues:
Can the vendor demand specific performance? Did defect go to the root of title?
Holding:
Defect did not go to the root of title, bc V had valid title to a FS (albeit subject to the
contingency). So P had to raise within requisition period  he failed to do so, so he is
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deemed to accept. V can demand SP.
Reasoning:
Sir Henry Strong, “…it has been held that … an objection going to the “root of the title”,
as it has been termed, is not precluded by a condition expressed in like terms with that
under consideration.”
“In the present case the purchaser will get a present holding title accompanied with
possession, a title in fee, defeasible it is true open the happening of a contingency, and
therefore not a marketable title, but still a title, although a precarious one. The
objection here taken is therefore one which does not go to the root of the title.”
He goes on to find that the objection in this case had to be raised within the time limit
and as it was not, the purchaser is deemed to have waived this.
Notes:
Have to apply the rule against perpetuities in this type of case
Does the devise clearly violate the rule at the time of its creation? Or does the wait and
see rule apply?
If the devise violates the rule, P has nothing.
If we wait and see, there won’t be a defect going to the root of title.
Jakmar Developments Ltd. v. Smith (1973), 39 DLR (3d) 379 (OHC)
 Easement does not go to root of title
 Must requisition during requisition period
Facts:
After the stipulated time limit for objections in the agreement has lapsed the purchaser
discovers that the vendor’s title was subject to an old easement.
Issues:
Does the easement go to root of title allowing the purchaser to rescind the K?
Holding:
No  P failed to requisition during requisition period  deemed to accept subject to
easement
Ratio:
Cromarty, J. “…an objection going to the “root of the title” can be made at any time, up
to the closing of the transaction; regardless of the provisions of the contract.”
He goes on to examine case law and finds that rescission was permitted only in cases
where the vendor could convey no title at all. Based on this he finds that “…this
requisition did not go to the “root of title” and … since it was not made within the time
limited by the contract it was not properly made.”
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7.6 POSITION OF PARTIES ON “BREACH” OF TITLE OBLIGATION
Where V has agreed to give good title (or implied term kicks in) and V is unable to
deliver (there’s a defect that V cannot fix), we used to turn to the rule in Bain v.
Fothergill:
Rule in Bain v. Fothergill:
 Overturned by AVG Management, SCC (in prov under Land Titles System)
 Usually won’t apply in Ontario either because of APS and V&P Act
 s. 4 V&P Act: V has 30 days to remove objection, if unable, may cancel K
 More restrictive for P than Fothergill
 APS provides that in same scenario, agreement comes to an end and deposit
returned, and V not liable for costs or damages  still more restrictive than
Fothergill but allows return of deposit
At common law the "rule in Bain v. Fothergill" precluded a purchaser from
recovering damages for loss of his/her bargain if the vendor's breach was an innocent
failure to make out the title contracted for. The purchaser, if he/she elected to
terminate the transaction could recover only the deposit paid and, the costs incurred in
investigating the vendor's title.
Until 1979 Bain v. Fothergill was applied in Canada. However, the courts
developed a number of "exceptions" to the rule thereby permitting a purchaser to
recover damages at law from a defaulting vendor where:
- the defect relied on by the vendor was not a defect of title but merely a
matter of conveyancing;
- the vendor had not made good faith efforts to cure the defect in the title:
see Metropolitan Trust v. Pressure Concrete Services Ltd. (pp. 132-134);
- the vendor has created the defect in title subsequently to contracting with
the purchaser:
see A.V.G. Management Science Ltd. v. Barwell
Developments Ltd. (pp. 751-756);
- the defect in title comes into existence subsequently to the vendor's
contracting with the purchaser: see Wroth v. Tyler (pp. 733-734);
- the vendor, though in a position to convey the title contracted for, refuses
to complete the transaction.
In 1979 the Supreme Court, in A.V.G. Management Science Ltd. v. Barwell
Developments Ltd. observed that there was no reason to retain the rule in Bain v.
Fothergill at least in relation to land governed by land titles systems; and suggested
that the rule might also no longer apply to registry system lands.
Thus, the position in Canada appears to be that purchasers may sue vendors
for damages for title defects not falling under the protective umbrella of the
"rescission clause" in an agreement of sale and purchase. While the Court's
observations on the modern day relevance of Bain v. Fothergill were obiter, it is highly
unlikely they will be ignored by lower courts.
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Rescission Clause
Clause that says “where V is unwilling or unable to improve”  s. 10 APS;
o V’s obligation is similar to under condition precedent;
o Must use reasonable efforts to address the defect;
o V must not be the cause of the problem;
o Options available to P depend on gravity of the defect;
o Suggests that title terms are innominate;
o See Hurley, Mason;
o APS s. 10 seeks to relieve V of the obligation to incur great expense in fixing
defect  notion of reasonableness pervades.
Vendor’s Position
Hurley v. Roy (1921), 64 DLR 375 (OCA)
 V cannot act unreasonably, must use reasonable efforts to address title
defect
Facts:
V obtains land and immediately conveys it to himself and his wife in joint tenancy
Falling out ensues and V puts property on the market
V enters an agreement with P to sell the land but says his wife must sign the agreement.
(JTs each own 50% undivided interest)
A search before closing reveals the JT and a conveyance from V’s wife is demanded.
V rescinds the K although wife agrees to it
If V had been sole owner and wife’s only interest was dower (old law), his interest would
be 2/3  V mistakenly believed that was the case. When he finds out that it is not the
case, he wants to back out.
P sues for specific performance (but without both signatures, property cannot exchange
hands)
V raises discovery of JT as a defect that he is unable to deal with
Issues & Holding:
Can the V rescind the K? (No; V dealing unreasonably.)
Ratio:
Middleton, J. “…the purchaser is not concerned with the domestic difficulties of the
vendor, and so long as the vendor can carry out that which he agreed to the purchaser
has the right to have the agreement implemented.”
“This provision was not intended to make the contract one which the V can repudiate at
his sweet will.”
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Mason v. Freedman, [1959] SCR 483
 V who wants to take advantage of this clause must exercise right in GF
Facts:
V enters into an agreement to sell property to P
V makes no effort to get his wife’s consent (dower issue)
At the time of closing, V asserts that he cannot secure bar of dower from his wife,
tenders the deed without such a bar and demands payment.
P refuses to close on these terms but demands specific performance.
Issues:
Can the V rescind the K in this manner?
Holding:
No, he has to make a genuine effort to obtain the bar of dower.
Ratio:
Judson, J.:“The plain uncontradicted fact is that the husband made no genuine attempt
to obtain a bar of dower. He cannot take advantage of his own default and use the
clause to escape his obligation.”
“A vendor who seeks to take advantage of the clause must exercise his right
reasonably and in good faith and not in a capricious and arbitrary manner.”
Purchaser’s Position
o Rescission may only occur where the V is unable or unwilling to remove a
defect which the “purchaser will not waive;”
o P may not take advantage of a minor defect to avoid a transaction.
Re Hughes and Macaulay, Nicholls, Maitland & Co. Ltd. (1969) BCCA
 Insubstantial defect of title not valid grounds to rescind
Facts:
P wanted out of the transaction bc easement precluded building a swimming pool
Issues:
May a purchaser take advantage of an insubstantial defect of title which the vendor
cannot remedy to avoid a transaction?
Holding:
No  P is obliged to continue with the transaction.
Though it is true that an easement is a defect of title, it’s trivial in this case.
Plus, building a pool on that area was already prohibited by the building regulations.
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Ratio:
A purchaser may not take advantage of an insubstantial defect of title to avoid
a K.
Lubienski v. Silverman, [1932] 3 DLR 320 (OSC)
 Look at P’s motives and reasons and effect of defect on P’s property
Facts:
P was seeking to avoid his obligations because of the existence of an easement that, he
claims, precluded the V from delivering him a good title
Issues:
May a purchaser take advantage of an insubstantial defect of title which the vendor
cannot remedy to avoid a transaction?
Holding:
No  objection was being used to get out of the deal.
Simply because a defect is found does not mean the deal is automatically off.
Ratio:
Grant, JA. does not allow the purchaser to rescind the K as in his opinion the objection
to the easement in question was being used by his lawyer as a way for him to get out
of the deal and not due to any particular fear on the purchaser’s part that he would be
injured by it.
Evaluate the defect and its impact on the P, on a case-by-case basis.
Stieglitz v. Prestolite Battery Division – Eltra of Canada Ltd. (1980) 31 OR (2d)
655 (HC)
 Revisits earlier principles concerning the quality of title that Ps are entitled
to expect
 Objections are valid
Facts:
P requisitions V: there were undisclosed easements and encroachments on the
property
V unable to answer requisition to P’s satisfaction
V sought to enforce with a reasonable abatement of the purchase price
P insisted on receiving nothing short of good title, free from any encumbrances
Issues:
May a purchaser take advantage of an insubstantial defect of title which the vendor
cannot remedy to avoid a transaction?
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Holding:
The objections in this case are valid.
In the APS, the P bargained for an unencumbered title in FS
7.7 REMOVING TITLE DEFECTS
o There are mechanisms/procedures by which one can ask court to clear title
by removing easements or covenants that are no longer useful;
o Application under the V & P Act;
o Application under Rule 14.05 of the RCP;
o Registration under the Land Titles Act;
o Application under s. 61 of the CLPA;
o Committee of Adjustment Consents and Amendment to Zoning ByLaws;
o In Stykolt v. Maynard, P sent V a letter requiring the removal of all defects 
court interpreted the letter as requiring the V to search his own title and
resolve any problems  improper.
8 OF THE MATTER OF THE PLANNING ACT
8.1 INTRODUCTION
Planning Act
o All transactions concerning real estate must comply with the Act for
transaction to be legal (s. 50(21));
o Act applies to disposition of a freehold estate or a lease that creates an
interest for 21 + years (includes 20 yrs + right of renewal);
o APS s. 15 deals with Planning Act  agreement conditional on complying
with Act  cannot remove this from APS;
o A condition precedent  onus on V;
o Noncompliance with Act also constitutes professional malpractice;
o Defect of title in Planning Act goes to the root of title  defect under the Act
= V has no title to convey (s. 50(21)).
Forfar v. East Gwillimbury (Township): “While it is no doubt true that in a sense the
statute encroaches upon an owner’s use and enjoyment of private property,
nevertheless, the trend towards controlled development of large building
enterprises to protect the rights of all persons holding interests in the vicinage of
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the proposed development is now well established, and private property is now
immune from regulation essential for the public good.”
8.2 PERMITTED DEALINGS WITH LAND
2 options: registered plan, or certificate of consent:
1. Registered Plans of Subdivision
o Act s. 50 prohibits unauthorized fragmented ownership;
o V can subdivide and sell individual lots subject to s. 50(3);
o 50(3)(b): non-abutting provision
 Horizontally (50(2)) or diagonally connected properties are
not deemed to abut – must share a common boundary;
 Land is deemed to exclude mining rights under or in but not on
the land (50(2.1));
 Search title to all abutting lots to make sure that there was
never any common ownership;
 Can only sell if V or predecessor in title doesn’t or has never
owned abutting land, unless abiding by the Act (s. 50(3)):
 (a) registered plan of subdivision;
 (f) consent is given;
 (b) the person making the disposition does not retain
the fee or the equity or redemption in respect of any
abutting land (i.e. no fragmentation).
 Can get around 3(b) by selling parts of lots  s. 50(6);
 Can’t get around it by conveying two abutting lots to different
Ps at the same time;
 50.1 says this also applies to wills.
Deeming bylaw (s. 50(4)):
o Once granted, have to ask how old the plan is, and whether a deeming bylaw has been enacted  can attract after 8 yrs if by-laws have changed;
o Ex: plan approved in 2005  this means Vs can deal with their lots if they
comply with the Act (get consent or abide by non-abutting provision);
o After deeming bylaw, seller needs to sell abutting lands together or
seek consent;
o Deeming bylaws are used sparingly;
o Lands subdivided crudely will tend to attract a deeming bylaw.
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2. Consent to Disposition
o Only appropriate where a small number of lots are involved;
o Where owner of abutting lots owns them, it’s not necessary to have a registered
plan of subdivision  can approach local municipality to ask for consent to a
transaction that would otherwise violate the Act;
o Addressed in s. 53 PA.
Consent can be made conditional:
o Conditions must be satisfied within a year of conditional consent (s. 53(41));
o Consent will lapse if transaction does not take place within 2 yrs of consent
(s. 53(43));
o Once consent has been granted, it runs with the land (s. 50(12)) – enacted in
1979, and most case law has held this to be retroactive.
1390957 Ontario Ltd. v. Acchione
 Consent; illustration of an application of s. 50(6) – conveyance of remaining
part
Facts:
O owns 3 abutting lands
No consent, no registered plan
Seeks consent to sever lots 2 and 3 from lot 1
Gets consent and conveys lots 2 and 3 to herself (CLPA says individual can convey
property to herself)
Then, conveys lot 1 to A
A sells to P  P objects because there has been a violation of the Act when O sold to A
(because O owned abutting land, lots 2 and 3)
Issues:
Is P’s objection valid (was there a violation of the Act when O sold to A)?
Holding:
Yes, the conveyance from Orfi to Acchione violated s. 50: O must dispose of lots 2 and 3
Reasoning:
“The owner is not required to convey the remaining part before the consented to part,
but s. 50(6), by its terms, only applies where the remaining part is conveyed before the
consented to part. In this case, the remaining part was conveyed after the conveyance
by Orfi to herself of the consented part.”
(“the conveyance by Orfi to Orfi was a conveyance within the meaning of s. 50(6)”)
Ratio:
Illustration of application of s. 50(6).
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Notes:
s. 50(6): “Despite subsections (3) and (5), where land is the remaining part of a parcel of
land, the other part or parts of which parcel have been the subject of a consent given
under clause (3) (f) or (5) (f), the whole of the remaining part may be conveyed or
otherwise dealt with before the other part or parts are conveyed or otherwise dealt
with, provided that the remaining part is conveyed or otherwise dealt with before the
consent mentioned above lapses under subsection 53 (43).”
Acchione illustrated:
Lot 1
Lot 2
OAP
O
Lot 3
O
Non-Retention of Abutting Lands
What Dealings Does Section 50(3)(b) Prohibit?
o The restrictions on dealings with lots/blocks also apply to dealings with part
lots (s. 50(5)).
Example 1: O owns all lots
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O
O has subdivided land into 25 lots.
Options for preserving O’s rights to dispose of individual lots while conforming
with the Act:
o Can sell to P every second lot;
o O can subsequently sell his individual lots to different purchasers;
o O CANNOT sell every other plot to P as trustee:
o Legal title is split so at law there are no abutting lots;
o But O remains beneficial owner of all the lots;
o Same problem if someone is buying as your agent  Agent is acting
for O.
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Example 2:
O
o
o
o
o
o
N
1
2
If N dies and leaves lot 2 in his will to O, O now owns abutting lots;
But look at terms in the will: if N grants title to lot 2 to O simply as trustee to
administer the will, O does not “own” in every sense of the term abutting land
 as legal title, the real ownership is the estate;
But if N gives O beneficial ownership, then O couldn’t sell lot 1 without lot 2
bc of abutting lot problem  must abide by the Act (consent or plan or sell
together);
If N gives O an unrestricted power of appointment (give my estate to
whomever you choose), this is problematic, bc O can give it to himself;
If O owns lots 1 and 2 and X goes into adverse possession of lot 2 for the
purpose of acquiring adverse possession  possible but impractical loophole
to the Act.
Financing Developments:
o O has RBC finance lot 1, and BMO finance lot 2: two mortgages by two banks;
o O decides to close down lot 2, and defaults on BMO mortgage;
o BMO will seek sale of lot 2 as a secured creditor  seems fine;
o But O still has equitable title to lot 2 (legal & equitable to lot 1), so this
transaction is prohibited by s. 50 PA because O still has some form of
ownership of the two abutting lands.
Lessening of hardships:
o s. 50 attempts to lessen the hardship created by past violations of the Act;
o 50(22) deed or transfer contains a statement by the V that to the best of
the V’s knowledge, the transfer does not contravene the Act;
o Solicitor must be an Ontario solicitor in good standing;
o Make such statements with care (s. 50(25));
o And a statement by the grantee/P’s solicitor verifying that the deed
does not contravene the Act;
o This statement must be registered;
o When conducting a search, no need to go beyond these statements if
nothing comes after: start afresh (s. 50(23)).
o 50(14) excuses violations of the Act pre-1978;
o Ex: searching back 40 years from 2014 to 1974, if a violation is
discovered in 1976 that was subsequently brought within a registered
plan or consent regime, then that registered plan or consent is
sufficient and breach can be ignored.
106
Reeve Burns v. Pelkman (1989) 70 OR (Dist Ct)
 Application of 50(22) statement
 Anything short of fraud will be binding
Facts:
P raised defect of title under the Act and had come across the s. 50(22) statement
Any reasonable solicitor would have discovered the violations
Issues:
How sure do you need to be before making statements called for at 50(22) as solicitor?
Holding:
Anything short of fraud by the solicitor or grantor (or grantee) will not affect the validity
of the registered assertions.
Ratio:
The bar is quite low.
Provided there’s no fraud, even a negligent statement under 50(22) will be binding.
Notes:
Should still exercise reasonable care, because under s. 50(25), can be liable to a fine of
up to the value of the land and relevant abutting land for knowingly making a false
statement.
9 OF THE REGISTRY ACT AND PRIORITIES
9.1 GENERAL INTRODUCTION
The deeds registry system is for registering ALL documents affecting land;
o Registration says nothing about validity or about the estate or interest
being received by the grantee;
o Registration here is not required to obtain legal title;
o Search back 40 years, or longer if necessary.
The land title system restricts the documents that can be registered;
o Act of registration confers legal title on the grantee/purchaser;
o Government guarantees one’s ownership;
o No period for the search & history of title is irrelevant;
o Just one certificate with the current title on it  any third party claims will
appear on the certificate.
o Both systems exist in different parts of Ontario.
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Common objectives:
 Both allow P to evaluate title;
 By creating publicly registered documents;
 Registration = notice;
 Help order priorities to title;
o This is the parties’ incentive to register;
o Failure to register means losing priority vis-à-vis third parties;
o Another party may have priority to your claim, such as a mortgagee.
Defects in the deeds registry system:
 Makes no attempt to guarantee the validity of documents;
 (Although deeds system in Ontario guarantees one’s ownership);
 Range of issues may arise: competing claims, misdescriptions, misspelling…
 May need to search back further than under land title system.
9.2 INTRODUCTION TO DEEDS REGISTRATION SYSTEM
3 types of deeds registration systems:
1) Race to register system: first to register gets priority;
a. Ex: V contracts with P and takes out a mortgage before completion 
whoever registers first (P or mortgagee) gets priority.
2) Notice system: inquire into notice of prior claim;
a. In above example, priority is based on whether the bank had notice of
the deal with the P. If bank knew, P gets priority.
3) Mixed system: race to register, with question: did person registering first
have notice of the competing claim? Actual, constructive, implied or express?
Priority of registration prevails, unless P can prove notice of the bank;
a. Ont system, s. 71 of the RA.
If nobody has registered:
 Two competing claimants without anything else  first created gets priority
bw two equal claimants.
Registry Act: What and where to register
s. 1 “instrument”: what is being registered. A broad definition: any instrument by
which title to land is affected in any way. Includes municipal bylaws, certificates of
proceeding, etc.
 Hence a potential P has a lot of instruments to examine;
 APS can be registered, provided it contains the necessary information;
 S. 25: “an instrument shall not be registered unless it contains…”
 Reference to the lot, description of land, property identifier;
108




o P should register the moment he enters a valid K with V, then V
cannot deal with a bank  bank deemed to have notice;
Assignment of the agreement can be registered;
If no written agreement (valid but unenforceable oral K), P can bring
litigation against V and register a certificate of pending litigation;
If P obtained title through adverse possession, can initiate litigation to
prevent V from selling  register certificate of pending litigation;
S. 22(8): can register a notice of an instrument where the instrument does
not meet the registration requirements (overturns Whitehead);
o Not to be confused with a notice of claim;
o Notice of an instrument is valid for 1 year – can be renewed.
Where? s. 20: “The land registrar, in a book in the required form… shall enter under
a separate and distinct head each separate lot or part of a lot of land…”
9.3 REGISTRATION AND PRIORITIES
Actual Notice
s. 70 RA: “After the grant from the Crown of land, and letters patent issued
therefore, every instrument affecting the land or any part thereof shall be adjudged
fraudulent and void against any subsequent purchaser or mortgagee for valuable
consideration without actual notice, unless the instrument is registered before
the registration of the instrument under which the subsequent purchaser or
mortgagee claims;”
s. 71 RA: “Priority of registration prevails unless before the prior registration there
has been actual notice of the prior instrument by the person claiming under the
prior registration.”  when there are competing documents.
Only actual notice can impact priorities;
 Courts have been ruthless in holding registration of anything other than
“the instrument,” under which a registrant charges a later party with actual
notice, to be ineffective to give notice to the later party;
o The mere fact that an instrument is not registered does not affect the
P’s claim against the V  only against 3rd party w/ competing claim;
 s. 74 (“registration of the instrument constitutes notice”) does not refer
to actual notice, just notice. Implicit in the interpretation of the term notice is
that it be “actual;”
o If you have not registered first, need to prove that the subsequent
owner was aware of your claim;
o Priority of registration prevails in Ontario: if subsequent owner
registers first, priority of registration prevails, unless prior owner can
prove prior actual notice of the bank.
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Harrington v. Spring Creek Cheese Manufacturing Co. (1904), 7 OLR 319 (CA)
 Meaning of “actual notice”
 A narrow view of “actual notice”
Facts:
A (dominant tenement) had an easement over property of B (ST) to access water
supply
An oral easement, effective in equity
A sold his property to H  at the time, A obtained from B a deed reflecting A’s
easement
Parties fail to register the instrument
H then sells to dft and hands over the unregistered document
B dies, leaving property to A, who sells to ptf, his brother
Ptf registers his deed of conveyance and denies dft access to the easement
Ptf brings an action declaring dft not entitled to continue with the easement
Issues & Holding:
Did ptf have actual knowledge of the instrument (Does awareness of the pipes
constitute actual notice)? (No.)
Reasoning:
It was obvious that ptf knew of the arrangement regarding the easement
Ptf had knowledge of some arrangement, and maybe some knowledge that a
document existed  but this does not amount to “actual notice”
One must show that there is a document and what the document says.
Ratio:
“What we must find … is that [the plaintiff] had knowledge of the deed conferring
the title to the easement, not merely that the defendant was in fact in the enjoyment
of such an easement.”
“Actual notice is knowledge, not presumed as in the case of constructive
notice, but shewn to be actually brought home…”
Whitehead v. Trustee of Estate of Lach General Contractors Ltd. (1974 Ont CA)
 Registration of the assignment only constitutes constructive, not actual,
notice
 Overturned by s. 22(8) RA
Facts:
- P entered into a contract to purchase land from V
- After some time, but before completion, P had invested a deposit and several
installments into the deal
- P assigned the property to himself and registered notice of the assignment
(but not the initial K)
110
-
V had several creditors, one of which received a mechanics lien on the
property
They registered the lien and V went bankrupt
P argues he registered notice of his ownership of the property, while the
creditors argue that P only registered insufficient information (the
assignment, but not the initial K)
Issues:
- Does the registration of the assignment constitute actual notice of the
agreement of purchase and sale, or does it only constitute constructive notice
of such agreement? [Constructive notice; creditors win]
Reasoning:
- Principle: The registration of the assignment of purchase and sale is not the
same as registration of the agreement of purchase and sale b/c if only the
former was provided, the title searcher could not ascertain the terms of the
initial agreement from the registry (i.e. insufficient information)
Application in this case, the P did not register the actual notice of the instrument
under which they claim interest (they could have done so by annexing the initial
agreement to the assignment)
Notes:
- The purchaser’s agreement could not be registered, but the V registered a
document which said he transferred his interest – an assignment – which simply
refers to another document
o Therefore, C only has actual knowledge of a document which
discusses another contract
- Reason: when one registers, the whole point is to allow for others to go over the
documents
- S. 22(8): this dispute arose prior to the enactment of s. 22 of the Registry Act,
which provides greater means of registering a notice of assignment (it must be
renewed every year), so now it’s a non-issue
- S. 113: registering a notice must be renewed every year (22(9)), but if one
registers a purchase agreement, then under s. 113, it doesn’t need to be renewed
for another forty years (per notice period).
- Later case (attached to constructor’s door) - purchasers couldn’t register APS
b/c didn’t comply with statute – they tacked the APS to the doors of the building
– this worked (substitute way of providing actual notice of the agreement) – b/c
contractors had to see them when they worked on the project
- S. 22 was only introduced in 1972 and, consequently, in searching title to
property under the Registry Act one may still encounter registered assignments
similar to those in this case.
111
Re McKinley and McCollough (1919, Ont CA)
 No actual notice of trust-based claim in registry = no priority over
subsequent claimants
Facts:
- P searched title and found that within the past forty years, one of the
previous owners held the title to the property in trust (i.e. as a trustee) and
then disposed of the property
- However, there was no trust documents registered (terms weren’t disclosed)
- Thus, P raises the issue as an objection to title and demands V demonstrate
that the trustee had the power to sell the property
- V argued there is no requirement to answer that demand
Issue & Holding:
- Is V required to demonstrate what the P demands? [No]
Reasoning:
- Every effort has been made to determine the nature of the trust, which
occurred many years ago, but to no avail
- It is presumed at this point that P would be purchasing valid title free of any
beneficiary claims and free of s. 70(1)
- “In trust” was just constructive notice
- Dissent: if the trustee didn't actually have the power of sale, then the P who
purchased the land from the trustee didn't actually acquire any title; under
the principle of nemo dat
o P should be able to walk away from deal if V can’t justify
- Explanation of the holding (the textbook): the trust does not affect the
title b/c it lacks actual notice. Since there was no actual notice of the terms
of the trust in the registry, then it is not relevant to future owners.
Beneficiaries have no claims on the land b/c the terms of their claims don’t
exist in full in the registry. No actual notice of trust-based claim in registry =
no priority over subsequent claimants
- Key is idea of actual notice of the document – either registered in some
manner or physically shown to the later competing claimant in the
circumstances
- Prof: so 70 and 70(1) is talking about knowledge of the instrument and
knowledge of the contents of the instrument
o If you can’t bring that home, then you can’t prove they had actual
notice
Ratio:
Registering a transfer to another “in trust” constitutes constructive notice, not actual
notice, therefore a future bona fide purchaser for value has good title regardless of the
terms of the trust (unless he actually knows what they are).
112
Regulating Priorities Between Competing Instruments


Looking at time at which actual notice must be acquired in order to have an
impact on priority;
Given that RET are drawn out over a long period of time, a prospective P
must be notified of other claims before moving too far ahead in their
dealings.
Peebles v. Hyslop (1914, Ont CA)
 Critical time for actual notice is prior to #2 entering a Kual agreement
Facts:
- 12 August 1910:
AP, owner, sells timber and right of way to H
- 14 February 1912: AP, owner, purports to sell entire farm to CP
- 4 May 1912:
CP gets first actual notice of the sale of 12 August
(timber) to H  note AFTER APS
- 7 May 1912:
CP registers sale of 14 February to it
- 8 November 1912: Sale to H is registered
- CP is suing H for trespass
Issue & Holding:
- What are H’s rights? [CP wins]
Reasoning:
- Where a subsequent purchaser has actual notice of a prior unregistered
instrument before the execution of the subsequent deed, and the subsequent
deed is obtained for the very purpose of being registered in order that by the
terms of the Act an unregistered instrument may be avoided, it is competent
for the Court of law to give equitable relief by virtue of the statute, and
declare that the Act shall not be used fraudulently in aid of a person with
such actual notice.
- Section 71 applies when the registration of both instruments is in question.
Such is not here the case
- The claim as pleaded fits exactly into the parameters of s. 70
Ratio:
The RA will not be used in a fraudulent manner. Where CP had actual notice of H’s
rights, such rights will be protected
Notes:
- It would seem that the critical time for actual notice is prior to #2
creating a contractual agreement
- Court is saying that actual notice on completion is too late
113
Paramount Theatres Ltd. v. Brandenberger (1928, Ont)
 Time of actual notice must be before completion as once the K is binding,
actual notice cannot affect the priorities
Facts:
- T (lessee) enters agreement with V for future lease (no actual possession here)
- V dies and his estate enters into an APS with P, who pays deposit to acquire
property but the K was not yet executed fully
- Neither agreement is registered
- T provides P with actual notice
Issue & Holding:
- Is the notice effective? [No]
Ratio:
Once there is a K and payment has been made, notice at this point is ineffective
Notes:
- Notice Deadline: actual notice anytime after the subsequent arrangement is
reached (i.e. K is signed) is ineffective; after all, it's the K that creates binding
obligations on the parties. Thus, under s. 70(1), actual notice must be before a
competing K comes into existence. And since s. 71 must be consistent with s.
70(1), the interpretation applies to both
- Court says actual notice by payment of deposit is untimely because one has
already committed oneself
o Prof: this leaves the question whether the actual notice has to be prior
to the K in order to be successful
-
Prof: there are 3 potential situations when nobody registers:
o Essentially, except for competition between law and equity, the first in
time prevails
o If both register, then priority of registration prevails unless before prior
registration there has been actual notice of the prior instrument before
the person claiming prior registration;
o S. 72 makes the first fraudulent and void against the 2nd, unless the 1st is
registered before the 2nd
114
Exception to the Registration Requirement (Lease)
s. 70(2) RA: “This section does not extend to a lease for a term not exceeding seven
years where the actual possession goes along with the lease, but it does extend to every
lease for a longer term than seven years.”
Plante v. Woolfe and D’Alessandro (1954, Ont)
 If a lease is for a term of less than 7 years and there is actual possession by
the tenant, then a subsequent P or mortgagee is put upon inquiry by the
possession of the tenant and is thus affected with constructive notice
 Falls squarely within s. 70(2)
Facts:
- W, a landlord, entered into a short-term lease (5 years) with Pl with right to
renewal
- W had given Pl a right of first refusal
- W wanted to sell the property and received an offer from D
- W accepted
- W belatedly wrote to Pl and asked if he wanted to exercise his right of first
refusal
- Pl said he wants to buy
- The first instrument is the lease with Pl, and the second is the agreement
with D
- Now Pl wants to enforce his right of first refusal
Issues & Holding:
- Does plaintiff’s claim have priority over D’s? [Yes]
- Does the exception in 70(2) apply? [Yes]
Reasoning:
- Principle: Once a purchaser knows that the property is in the possession of a
tenant, it is his duty to inquire from the tenant as to the terms of the lease. If
a lease is for a term of less than seven years and there is actual possession by
the tenant, then a subsequent purchaser or mortgagee is put upon inquiry by
the possession of the tenant and is thus affected with constructive notice
- Application: in this case, D knew before he entered into the K with W that Pl
was a tenant with actual possession, and he failed in his duty to inquire from
Pl about his terms
Notes:
- Question: is notice of a tenancy the same as notice of the terms of the
tenancy (right to first refusal)? The court says that once you are aware that
there is a tenant, one should make reasonable inquiries as to the terms of
the tenancy. P2 should have inquired
- Hypothetical: What would have happened if D had inquired and found out
that it was 10-year lease and then registers, knowing 70(2) does not apply?
115
-
o This is an issue because 70(2) only protect leases of 7 years or less.
Unless he saw the instrument, then there is no actual notice. It seems
advisable in this situation, to register before you make inquiries about
the tenant in possession (worst case scenario is that its less than 7
years and therefore you just wasted your time). It seems you can use
the system to further your interest (as P2) by registering at any
time. Ignore what you know to take advantage
With a lease, actual possession is substitute evidence for registration
o It was obvious there was a tenant and a lease involved, so D should
have made inquiries as to who the individual is and what the terms
are
Protection of Interests Arising Other then by Instrument



If there’s an instrument, s. 70, 71 dealing with the registration requirement
will apply  otherwise, s. 72 applies;
Legal estates or interests trump unless holder has been guilty of negligence
or fraud;
Ex: where P pays a deposit, equity places a security interest on the P
(purchaser’s lien)  if V defaults, P has the right to order the sale of the
property for the return of the deposit  equitable security interest.
s. 72: “No equitable lien, charge or interest affecting land is valid as against a registered
instrument executed by the same person, the heirs or assigns of the person, and tacking
shall not be allowed in any case to prevail against the provisions of this Act.”
 Whether this wipes out the common law notice is a question of interpretation;
 At CML, it can be any form of notice – does not need to be actual.
2 other situations where interests can arise other than via instrument:
 These things fall outside of the Registry System because there’s nothing to
register  hence common law rules apply.
1) Possessory titles:
a. Adverse possession: title springs up  ask court to recognize claim;
i. At CML, owner can only sell what he himself possesses. If V
tries to sell to P when there’s an AP, AP has legal title and P
only has equitable  legal trumps in absence of fraud.
2) Dower/matrimonial claims:
a. Matrimonial property = right to consent to or veto disposition;
i. Language of dower is still used out west but it’s modified by
statute;
ii. Won’t appear in the title to the property  right exists in the
other party – 3rd party must inquire;
iii. s. 21 Family Law Act: “No spouse shall dispose of or encumber
an interest in a matrimonial home unless….”
116
1. Transaction in contravention of s. 21 may be set aside
under s. 23, unless the P was bona fide P for value
without notice and made the relevant inquiry.
Rose et al. v. Peterkin (1887) SCR
 Traditional priority rules apply when dealing with estates and interests
created otherwise than by instrument
Facts:
P appeared to convey the title to his property to McF
By parol evidence, it was established that the transaction was to be a mortgage only
(Title only conveyed by way of security)
McF conveyed to R, who had notice of the arrangement bw P and McF
P is seeking a reconveyance of the title from R
But provision made no reference to notice
Holding:
P was aware of the details of the equitable charge, so he had notice
R’s equitable estate is valid
Reasoning:
Where one is dealing with equitable estates and interests created otherwise than by a
document, have to apply the traditional priority rules
The holder of the second estate or interest has priority if the holder of the second estate
is a bona fide purchaser for value without notice
Even though the wording of s. 72 would support giving priority to P, can’t apply s. 72
here but must fall back on the common law equitable rules governing priorities
Equitable estate will not be invalid
Ratio:
An equitable owner with the right of redemption can recover from a 3 rd provided the 3rd
had either actual or constructive notice.
Israel v. Leith (1890), Ont CA
 An easement which arises by law does not fall under the Registry Act and all
that matters is priority in time
 Subsequent bona fide P for value without notice is of no relevance
Facts:
2 lots, 2 houses, with same owner (V)
Water supply to both came from the same pipe
V sold lot 2 to P (DT)
Later, V sold lot 1 to Q (ST)
Q doesn’t want to go on supplying water to P from his property  cuts off supply
117
P sues Q, saying an easement had been created, based on rule in Wheeldon v. Burrows
Issues:
In what circumstances is the matter of notice irrelevant to the ordering of priorities
between estates and interests arising other than by way of instrument and those arising
under an instrument?
Holding:
Because there was a preexisting user, on the sale of the dominant tenement (Lot 2),
there arises an easement over the ST  these easements run with the land
Q bought a property subject to an easement, which was not disclosed on the search of
title  there’s no provision in the Registry Act that deals with this
Ratio:
An easement which arises by law does not fall under the Registry Act and all that
matters is priority in time. Therefore, a subsequent bona fide purchaser for value
without notice is of no relevance.
10 OF THE LAND TITLES ACT AND PRIORITIES (in parts of Ontario)
10.1 INTRODUCTION
Land Titles Act
3 Principles:
1) Mirror principle: certificate of title should mirror the state of the title; all
third party claims, etc. Anything expired should be expunged from the
document  history is irrelevant.
2) Curtain principle: the document is all you need to look at. Curtain seeks to
provide that the register of the certificate of title is the sole source of
information for purchasers.
3) Insurance principle: if somebody loses their property because of the system
(through fraud, for ex.), they will be compensated by the state fund;
s. 57: claims against fund.



In essence, on registration, one receives legal title and the state guarantees it;
Cert of title specifies: estate, interest, municipality, record of transfer;
No land title system has lived up to all of these objectives  but still a vast
improvement on the registry system.
118
Registrable documents:
 APS cannot be registered, but can register a notice of the APS (a caution)
o (s. 71(1.1)).
Application for first registration:
 Anyone who is entitled to the FS or has a significant interest in the FS estate
can ask to have the property brought under the system;
 You will ask for it to have an absolute, qualified, or possessory title;
o Possessory: claim is based on adverse possession;
o Qualified: if on a search, there are any doubts as to whether all 3rd
party claims have been discovered, will receive a qualified title. The
first disposition of the qualified title to a P will cure the qualification
(s. 66);
o Absolute: free from doubts. There may still be third party claims, but
we are aware of them all.
Procedure on first registration (s. 41):
 s. 45: property is subject to 3rd party claims: those that appear on the
register, and claims deemed not to be encumbrances  idea being that any
3rd party whose interests might be affected has the opportunity to register;
 s. 44: list of third party claims, which are deemed to exist against every
property. Not encumbrances [3rd party claims that can be registered], but
will affect title despite not appearing on the certificate of title;
o Contra mirror principle?
o Rights and liabilities that are listed in 44 are valid even if
unregistered;
o Taxes, some easements, liens, leases under 3 years with occupation,
construction liens, rights of expropriation, rights under traffic
legislation, family law rights of spouses  must search OUTSIDE of
the system;
 Must also search for potential violations of Planning Act (s. 50
of PA is preserved here).
Boundaries:
 If certificate of title is going to genuinely reflect the title, survey is critical;
 But note LTA s. 44(1)(3).
10.2 PRIORITIES AND NOTICE
Registration as Notice


Issues of notice: s. 72;
Parties are only deemed to have notice of encumbrances listed in the
register;
119

United Trust complicates the matter  LTA did not abolish notice.
Priorities:
 s. 78: documents are registered in the order in which they’re accepted for
registration  this order controls priorities;
o (4): when registered, an instrument is deemed to create/transfer the
estate or interest;
o (4.1): s. 4 does not apply to fraudulent instruments;
o (5): the order of registration can be controlled by the parties;
o (5): priority determined by order of registration and not order of
creation, despite any notice;
 Race to register? Overlooks actual notice  gave rise to United
Trust.
Transfer (s. 86 & ff):
 Principles set out here only apply where the P is for valuable consideration;
o No reference to notice here  validity of transfer turns on whether
P paid (fraudulent P will not have given value);
 s. 87: transfers title subject to encumbrances, rights and interests;
 s. 88: qualified title becomes absolute.
Registering restrictions:
 s. 118: essentially restrictive covenants;
 s. 119: whether the particular interest/restriction will run with the land.
Most positive covenants will not run with the land, only negative covenants;
 s. 128: if instrument cannot be registered or agreement is oral, may apply to
the land register for the registration of a caution.
Executions:
 s. 136: system in which creditors seek to recover debts.
Russo et al. v. Field et al., [1973] SCR 466
May register notice of the lease (s. 111)
 Registration of notice, provided other documents are annexed, serves as
actual notice of the instrument referred to
Facts:
Ptfs Russos operated a hairdressing business in a mall
Lease had a non-competition clause
Dfts Field was selling wigs in the mall  competition?
Ptfs arguying that dft is competing
Issues:
Does notice a lease in the Title certificate also include notice of its contents? [Yes]
120
Reasoning:
It is logical to conclude under the Land Titles System that registration of a notice, which
directs one to the lease (when you register notice of a lease, you also deposit the lease),
and the lease includes contents like a non-competition clause, 3rd parties are deemed to
have that knowledge
F should have searched the registry, searched the lease and would have found the
clause
Spence, J. “… the Land Titles Act should be interpreted so as to carry out the very
evident intention that a tenant could protect his interest by registering a notice of the
lease upon the abstract and … practical considerations would suggest that a provision
for registering a notice of lease should be construed to embrace notice of its
contents.” To not do so would make the certificate meaningless.
Ratio:
The provision for registering a notice of lease should be construed to embrace notice
of its contents.
Notes:
s. 111: “A lessee or other person entitled to or interested in a lease or agreement for a
lease of registered land may apply to the land register notice of the lease or
agreement…”
In Whitehead, registration of the assignment did not constitute notice of the K  but
the K itself had not been deposited.
Priorities and Actual Notice
o The very nature of the land titles system, which provides for express
assertions and affirmations of the ownership of particular interests, makes
the question of priorities less critical than it is under the registry system;
o Ontario scheme rules out express, implied, or constructive notice;
o What’s the difference between express and actual notice?
o Possibly, express notice falls short of actual notice in not requiring
knowledge of the details of the document.

One could assume that constructive notice, implied notice, express notice
would all have the same effect as actual notice is deemed to have under UT
for two different interests:
o Except, must also take into account s. 72 LTA: no one is deemed to
have knowledge of any instrument that’s not registered;
 So maybe implied notice doesn’t exist for two different
interests.
121
United Trust Co. v. Dominion Stores Ltd. et. al., [1977] 2 SCR 915
 Relevance of notice to the land titles system; LTA did not abolish notice
Facts:
UT was negotiating with a V for the purchase and sale of a building owned by V
At the time, the building was leased by DS
UT was aware of the lease, so it was subject to condition precedent: get rid of tenant
DS was not prepared to relinquish lease
Lease was of such duration that it required registration under Land Title System (more
than 3 yrs), but DS had not registered
UT was the first to register  changed locks on the building
UT saying although they had notice, that doesn’t matter under land titles system
Issues:
What role, if any, did actual notice have?
(As P was a purchaser for valuable consideration, does he take free of the lease
(pursuant to s.87 LTA) even though he knew of the lease?)
Holding:
No UT had actual notice, so DS’s interest is preserved. The LTA did not abolish notice
requirement.
If you can bring home actual notice to some entity that registers first, and therefore has
priority strictly on registration, then you’re safe.
Ratio:
Majority:
If the legislature sought to override the common law principles, would have to do so
explicitly (basic principle of statutory interpretation)
Interests registered affecting the same estate or parcel of land, ran according to the
order of registration
Here, we are not talking about the same interests
Things would have been different if DS had also tried to enter an APS for same thing
Minority (Laskin):
The Land Titles System was introducing a brand new system, and provided the P had
given value, whether aware or not of notice, they registered first, so they get priority
Their lease had been going since the 1930s and they chose not to register
By not registering, they lose out
Notes:
 Both the majority and minority said this does not constitute fraud
 It wasn’t until this case came along that the judiciary had to confront “actual”
notice under the land titles system in Ontario
 Does it still have to be actual notice of all the particulars? We can assume so
122

Lawrence v. Maple Trust on United Trust: “although not couched in those terms,
it appears that the majority subscribes to the theory of deferred indefeasibility, a
theory which permits the common law to remain a part of the law of Ontario,
unless expressly abrogated. Indeed, the majority explicitly states that the
common law principles of real property are not abrogated absent clear and
unequivocal language to that effect in the Act.”
Fraud under the Land Titles System


s. 155: registration does not cure an instrument that would otherwise be
viewed as fraudulent and void;
o No info here about what impact fraud has on innocent P down the road;
s. 156: person who fraudulently procures registration has committed an
offence.
Gibbs v. Messer, [1891] AC 248 (PC)
Facts:
The Messers went back to Scotland from Australia
They gave a lawyer named Cresswell power of attorney, which he abused
Using the P of A, he conveyed property from the Messers to Cameron
Cameron was a fiction
Through Cameron, Cresswell arranged with MacIntyre for a mortgage
MacIntyres lent the money and took security of the property
Cameron defaults and MacIntyre seeks to foreclose
Messers find out
Both original owner and mortgagee are innocent
Issues:
Who has title in the properties (does the encumbrance affect the title)?
Holding:
No  MacIntyre had not dealt with the registered owner.
Ratio:
One has to be dealing with a real (registered) person in order for the title to not be
defeasible.
Reasoning:
Lord Watson, “It is clear that the registration of the name of … a fictitious and
nonexisting transferee, cannot impede the right of the true owner … to have her name
restored to the register.”
“… every one who purchases, in bona fide and for value, for a registered proprietor, and
123
enters his deed of transfer or mortgage on the register, shall thereby acquire an
indefeasible right, notwithstanding the infirmity of the author’s title.”
“Those who deal, not with the registered proprietor, but with a forger who uses his
name, do not transact on the faith of the register; and they cannot by registration of a
forged deed acquire a valid title in their own person, although the fact of their being
registered will enable them to pass as valid right to third parties who purchases from
them in good faith and for onerous consideration.”
“Although a forged transfer or mortgage, which is void at common law, will, when duly
entered on the register, become the root of a valid title, in a bona fide purchaser by
force of the statute, there is no enactment which makes indefeasible the registered
right of the transferee or mortgagee under a null deed.”
“the duty of ascertaining the identity of the principal for whom an agent professes to act
with the person who stands on the register as proprietor, and of seeing that they get a
genuine deed executed by that principal, rests with the mortgagees themselves; and if
they accept a forgery they must bear the consequences.”
He goes onto find that the purchaser or mortgagee has a duty to ensure that the
proprietor is really the one who is registered in the act and therefore, if they accept a
forgery they must bear the consequences.
Notes:
When there is a non-existant person in the chain of title, the person coming after cannot
have a good title
If Cresswell had registered the property under his own name, then mortgagee would be
dealing with a real person, although dishonest, and there would have been a real
mortgage for MacIntyre, overriding the interests of the Messers
 Court in Lawrence, below, quotes a professor who notes that the theory of deferred
indefeasibility has prevailed in Ontario since Gibbs.
Lawrence v. Maple Trust Company, 2007 ONCA
 Adoption of deferred indefeasibility in Ontario
Facts:
Lawrence owns a registered property
An imposter pretends to be Lawrence, and transfers the property to Wright
Wright was also an imposter (fraudulent but a real person)
Wright paid off the small extant mortgage, and went to Maple Trust to mortgage the
property
When Maple Trust did a title search, they found the registered owner as L (though
fraudulent)
Maple Trust said that they had prior claim over the property, and that Lawrence should
just get compensation from the Fund
Fraudulent parties take off  conflict is bw two honest parties, Lawrence and MT
124
Issues:
Who retains title to the property between Lawrence and MT?
Holding:
Lawrence  Court adopts deferred indefeasibility approach
Reasoning:
We have a choice between:
1) Immediate indefeasibility: whenever an individual deals with a registered
owner, they get a valid title to the property—it doesn’t matter if you are dealing
with fraud or not;
 This approach reads s. 155 as subject to s. 78(4) (instrument registered deemed
to be effective).
2) Deferred indefeasibility: where the first innocent party dealing with the
fraudulent party does not get title. In this instance, they could still “pass on”
good title by selling it, even though they themselves do not have good title. That
further conveyance “cures” the defect. Only the second innocent P would get
indefeasible title  this is the system in Ontario
“By interpreting the Act in accordance with the theory of deferred indefeasibility, the
law encourages lenders to be vigilant when making mortgages and places the burden of
the fraud on the party that has the opportunity to avoid it…”
Notes:
 Under common law principles, nemo dat would apply
 Under registry system, if nothing happened after MT for 40 years, you would
have valid title, otherwise you would not
 The first decision gave MT immediate indefeasibility  outrage ensued.
Mortgagee is least cost avoider.
10.3 ADVERSE POSSESSION
o A strict application of the mirror principle would mean that if the certificate
is going to reflect the true state of the owner’s title, there is no room for
adverse possession;
o If the title is brought under the Land Titles System before the 10 year
mark required for adverse possession in Ontario, you cannot acquire it
through adverse possession;
o Holder of title through adverse possession with 10+ years should race to
register before owner seeks to take it under the act.
125
Liability of registered land to easements and certain other rights
s. 44(1) LTA: “All registered land, unless the contrary is expressed on the register,
is subject to such of the following liabilities, rights and interests as for the time
being may be subsisting in reference thereto, and such liabilities, rights and
interests shall not be deemed to be encumbrances within the meaning of this Act:
(3) Any title or lien that, by possession or improvements, the owner or person
interested in any adjoining land has acquired to or in respect of the land.”
 Operates to preserve, after land has been brought under the act, AP that has
crystalized prior to first registration.
No title by adverse possession, etc.
s. 51(1) LTA: “Despite any provision of this Act, the Real Property Limitations Act or
any other Act, no title to and no right or interest in land registered under this Act
that is adverse to or in derogation of the title of the registered owner shall be
acquired hereafter or be deemed to have been acquired heretofore by any length of
possession or by prescription.”
Gatz v. Kiziw, [1959] SCR 10
 Application of s. 44(1)(3)
 AP must crystalize before first registration
Facts:
Respondent fences off a section, which includes a portion of the adjacent property
Respondent remains in continuous and open possession for over 10 years
Appellant purchases the adjacent lot more than ten years after the AP began
Claim arises after the first registration under the LTA
Issue & Holding:
Does the respondent hold an interest in the land by virtue of adverse possession? (No.)
Ratio:
The LTA more or less abolished adverse possession.
Reasoning:
Judson, J. finds that s.44(1), para. 3: “…protects only possessory titles in existence at the
date of first registration”
Foster, Prof. The adverse possession must “crystallise” before the time of 1st
registration under the LTA for the adverse possessor to retain any interest.
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10.4 THE ASSURANCE FUND

The statutory requirements for successful claims under the Fund are quite
stringent.
Compensation from Fund
s. 57(4):
“A person is entitled to compensation from the Assurance Fund if,
(a) the person is wrongfully deprived of land or of some estate or interest in land by
reason of,
(i) the land being brought under this Act,
(ii) some other person being registered as owner through fraud, or
(iii) any misdescription, omission or other error in a certificate of ownership
or charge or in an entry on the register;
(b) the person has demonstrated the requisite due diligence…;
(c) the person is unable under subsection (1) or otherwise to recover just
compensation for the person’s loss; and
(d) the person makes an application for compensation within the time period
specified in subsection (5.1  within six years from the time of having suffered the
loss).
Fawkes v. The Attorney General for Ontario (1903), 6 OLR 490 (HC)
 Illustrates the difficulties confronting claimants under the Fund
Facts:
A property owner is tricked into parting with his land for valueless consideration
(worthless bonds)
Issues:
Is P entitled to be compensated by the assurance fund?
Holding:
No. Problem is not a fault of the LTA, so the fund is not engaged.
“Her act was a disposition of the land, a voluntary thing, and it is not to be called a
deprivation of it.”
Ratio:
No claim against the compensation fund if ptf willingly parted with his property, even
when the consideration was worthless.
Gullibility does not activate compensation.
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10.5 OFF THE RECOND CLAIMS





Variety of off the record claims that might exist under either system
illustrates the breadth of the lawyer’s responsibility to search, and that the
land titles system mirror is not without its flaws;
There are claims to land that are effective, even though not registered under
the registry system and land titles systems, and even though a good faith P
was not aware of them;
The priority of these off the record claims must be determined by
interpreting the legislation establishing the claim and by reconciling that
legislation with the priorities provisions of the RA and LTA;
There are three main groups:
o Adverse possession claims;
 s. 44(1) LTA;
o Financial claims (government and private);
 s. 136 LTA;
o Claims under regulatory legislation;
 s. 18(1), 21(1) Family Law Act; s. 382 Municipal Act.
Other potential claims include:
o Claims that are effective unless extinguished by a later registered
claim acquired for value without actual notice;
o Claims that arise because a registered document is invalid, illegal, or
fraudulent;
o Claims about boundaries;
o Claims that arise by operation of law.
o Executions of secured creditors  addressed in Land Titles Act;
o Family law stuff is covered under s. 44 LTA;
o Public claims: municipality is a secured creditor if owner does not pay taxes;
o Would only find by searching outside of the registry office in the
municipality, or calling the tax office;
o Also need to inquire into marital status of the titleholder.
11 OF THE MATTER OF TIME AND TENDER
11.1 INTRODUCTION
o If there is no fixed date, the rule is a “reasonable” time;
o Fixed date is normal in APS but not essential term;
o APS s. 5 “Completion Date;”
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o APS s. 19: “Time shall in all respects be of the essence;”
o APS s. 20: Tender: by bank draft or certified cheque;
o Tender and time are inextricably woven in the K.
11.2 TIME PROVISIONS
When is Time of the Essence?
3 potential time issues (law & equity sometimes disagree):
1) No time stipulated: law implies a term, “within a reasonable time;”
a. Law & equity agree on this.
2) Where time is clearly stipulated but NOT of the essence:
a. Categorization is important: condition or warranty? If only a
warranty, innocent party can only sue for damages (no termination).
If a condition, breach allows innocent party to terminate and sue;
b. Time is generally viewed as a condition at law;
i. CML court would grant damages and allow party to terminate.
c. Equity tends to view as innominate term;
i. Court of equity would say, give defaulting party reasonable
time to complete;
ii. But will consider the facts: if you’re buying a ski chalet,
reasonable to complete by winter;
iii. And will recognize that if the innocent party suffered damage
through the other’s failure to complete on the stipulated date,
the innocent party will be entitled to recover damages (but not
to consider himself discharged).
1. Equity prevails in conflict.
3) K provides for time and says that it IS of the essence
a. Law & equity agree on this:
i. It’s a condition  failure to comply gives innocent party right
to either terminate or affirm.
Ontario Mercantile Law Amendment Act, s. 15:
 Recognizes the continuance of the equitable principles governing
time/problems that can arise.
Reasonable time & warning letter:
 Will depend on the facts and circumstances;
 Innocent party should give faulty party 30 days notice in writing that unless
defaulting party completes within X days, innocent party will treat time as
being of the essence and terminate the K;
o Not considered unilaterally modifying, but stipulating what is
reasonable;
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
o Notice must be sufficiently explicit to convey to the other party what
is being required to be done and the consequences of not doing so
within the time prescribed (i.e. that the party giving the notice will
treat the contract as at an end);
o Risk is that if innocent party terminates, faulty party can say time
given was not reasonable  not in default  other party breached;
o See McTavish;
Issue a second notice to be safe.
Strict interpretation:
Danforth Heights Ltd. v. McDermid Bros: “any alleged waiver of time must be of a
definite character and fully proved.”
Raineri v. Miles
 Time stipulated but NOT of the essence
 Principles of law and equity both apply in this case
Facts:
APS between V and P, to be completed on a specified date
V was purchasing the property from third party purchaser, trying to raise money for a
deal with a mortgagee  set to close on 12 July
In neither case was time for completion expressed to be of the essence
3rd party didn’t get financing  couldn’t complete the deal with the other property,
therefore default on APS with the V
V is not in a position to convey the property to P
P is suing V for lost expenses
V’s breach was caused by default of 3rd party  3rd party joined in the litigation, bc will
have to indemnify the V
And P can’t sue 3rd party directly because of privity of K
V argues that time that P gave V was unreasonable (equitable argument)
Issues:
Does the failure by a party to a K for the sale of land to complete the contract on or
before the stipulated completion date amount to a breach of contract even where the
time for completion was not originally, and has not become, capable of being regarded
in equity as “of the essence”?
Holding:
Yes; V is in breach of K  liable in damages to P
Reasoning:
“The principle which in my opinion emerges from the authorities to which I have
referred is that breach of a contractual stipulation as to time which is not of the essence
of a contract will not be treated as a breach of a condition precedent to the contract,
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that is as a breach which would entitle the innocent party to treat the contract as
terminated or which would prevent the defaulting party from suing for specific
performance. Nevertheless it is a breach of the contract and entitles the injured party to
damages if he has suffered damage. “
Ratio:
Equity does not condone breach of the time stipulation
Notes:
As a general rule, what causes a party to default is not important at law or equity
(though other party may be contributorily negligent)
Principles of law and equity both apply
Fairness and Time Provisions
Salama Enterprises (1988) Inc. v. Grewal
 V granting P extensions may make time no longer of the essence
Facts:
Completion date set for October 1
P was not in a position to complete  granted an extension to November 1
P seeks further extension of 1 week, V grants
Then P seeks a further extension of 1 day and V refuses: says time is of the essence per
APS
Action for specific performance
Issues:
Is time no longer of the essence because the vendor has granted extensions?
Holding:
Time is not of the essence. The facts don’t justify finding that time remains of the
essence. V should have put P on notice.
Reasoning:
Facts don’t warrant equity taking a position…
“This does not mean that the V was without a remedy. When the P failed to complete
on time, the V could have given notice that he required completion by a reasonable date
after which he would probably be entitled to withdraw from the transaction.”
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Union Eagle Ltd. v. Golden Achievement Ltd. [1997] AC 514 (PC)
 Strict application of legal approach to time being of the essence
Facts:
Property is in Hong Kong
P pays a deposit to V
K said “time in every respect is of the essence of the agreement”
Called for completion on 20 September before 5pm
P was TEN MINUTES LATE to tender
V said the deal is off, I’m forfeiting your deposit
Issues:
Should equity intervene to absolve the P from the contractual consequences of having
been ten minutes late (and to decree the V’s specific performance)?
Holding:
No  V is entitled to rescind the agreement.
Reasoning:
“The present case seems… to be one to which the full force of the general rule applies.
The fact is that the purchaser was late. Any suggestion that relief can be obtained on the
ground that he was only slightly late is bound to lead to arguments over how late is too
late, which can be resolved only by litigation. For five years the vendor has not known
whether he is entitled to resell the flat or not. It has been sterilized by a caution pending
a final decision in this case. In his dissenting judgment, Godfrey JA said that the case
‘cries out for the intervention of equity.’ Their Lordships think that, on the contrary, it
shows the need for a firm restatement of the principle that in cases of rescission of an
ordinary contract of sale of land for failure to comply with an essential condition as to
time, equity will not intervene.”
Installment Contracts



Equity plays a critical role with mortgages;
Even if mortgage says that mortgagee can seize on default of payment, equity
would protect P’s interest in equity of redemption, and would grant P
additional time to rectify the breach;
There is no such protection in a long-term/installment APS;
o Will look at how many payments P has made, case by case;
o Look at facts and unconscionability;
o If V waited until P made 90% of payments  unconscionable;
o And if V never complained until P made 90% of payments 
unconscionable.
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Preconditions to Reliance on Time
Anticipatory breach: breach of K before date set for completion;
 When breach is fundamental (e.g. time is of the essence), innocent party has
options:
1) Accept the breach and initiate an action for specific performance or
damages (court would grant SP as of date of time of completion of K);
2) Reject the breach/affirm the K: the deal is still on.
a. By choosing this option, you retain your remedial options (can sue
as of completion date if time is of the essence);
b. Can reject and then, later, accept the breach;
c. This is what Domicile Development does, below:
Domicile Developments Inc. v. MacTavish (1999) Ont CA
 Anticipatory breach
 For a party to rely on time of the essence, must be ready, willing and able to
complete at the time specified
Facts:
DD (V/builder) sells to McT (P)
K called for completion on 15 September; time is of the essence
P tells V “I’m not going to perform by that date”  Anticipatory breach
V rejects the breach
P writes another anticipatory breach letter to V and V again refuses
15 September rolls around and neither party is willing to complete
House was not ready to be sold
Then V resells to a third party and is suing for damages to compensate for the difference
bw resale price and price in McT contract (lost about $85K in a falling market)
P takes the view that V cannot sue
Both are in breach of K, but provoked by P
Issues:
Who is in breach?
Holding:
DD  by choosing to reject the breach/affirm the contract, he enforced all of the terms
of the K. When DD was not in a position to perform the K, he was in breach
DD rendered it impossible for McT to perform the K by selling to a third party
Reasoning:
After the 15th, DD never did anything to let it be known to McT that he was terminating
the K
McT was not even given the opportunity to perform
DD was not ready, willing and able to perform  breach of K
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“Because it did not reinstate time of the essence by setting a new closing date, DD was
not entitled to end its agreement with McT. Therefore, in failing to give McT an
opportunity to close the transaction after September 15, DD itself breached the
agreement. Because of DD’s breach, McT could no longer be held liable.”
“Having decided to keep the agreement alive and then having been unable to carry out
its part of the bargain on closing, DD could not continue to hold McT liable without also
giving McT a further and reasonable opportunity to perform. Requiring that time of the
essence be reinstated by giving notice of a new closing date is sensible and produces a
just result.”
“To be effective the new closing date must be reasonable.”
“to avoid any dispute the notice should state that time is of the essence of this new
date.”
11.3 TENDER
The best evidence of being ready, willing and able to complete is to tender;
 Payment and conveyance are concurrent obligations: performance by each
party is a condition of the performer’s ability to insist upon performance by
the other party;
 There is no absolute obligation to tender; tender is simply evidence (albeit
of the best sort) of a party’s capacity for timely performance, and any other
adequate evidence will suffice.
Tender:
 May be defined as the demonstration by a party of its willingness and ability
to perform the contract;
o Such a demonstration is sometimes essential to be able to choose
among the full range of remedies;
 APS s. 16: V prepares the deed of conveyance; P would prepare the
mortgage;
o V & P Act, s. 4(e): “conveyance shall be prepared by the vendor and
the mortgage, if any, by the purchaser and the purchaser shall bear
the expense of registration of the deed and the vendor shall bear the
expense of the registration of the mortgage, if any.”
 All documents must be completed and in registrable form so that nothing
more is required of the tendering party;
 V would also have to discharge the mortgage, come with insurance policy if
assigning to P, and a statement of adjustments, etc.
Tender of what?
 APS s. 20: tender – by bank draft or certified cheque;
 Where K is silent, P has to tender in cash;
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



Currency Act: sets out rules for valid payment;
o s. 8: any number of bank notes is acceptable: could pay in a million
five dollar bills if tendering in cash;
Tender used to have to be perfect: if there were any glitches, even if off by
five cents, the other party could reject it  no longer the case;
APS s. 11: electronic payment  Electronic Payments Act will govern;
o Will only apply where V and P both retain a lawyer.
APS s. 12: document and discharge:
o Many of these transactions on completion function on lawyers’
undertaking;
o Often, P might pay the price, but to the V’s lawyer in escrow  V
might need P’s cash to get a discharge on his mortgage.
Tender on whom?
 APS s. 20: on P or P’s agent;
 If K is silent: tender on the other party personally;
o Tender at other party’s residence, place of business, or wherever you
can find her.
Tender when?
 APS s. 5: 6pm is time of completion;
 If K is silent as to time, one has the entire day set (24 hours);
 Normally one would try to tender during business hours;
o Try in the evening if necessary and bring a witness.
Statement of adjustment:
 Should reflect the complete financial picture as of the date of completion bw
P and V;
 V might have to credit or charge P with certain payments (including deposit);
 P will get a statement of adjustment that includes the price of anything
credited against P  V or P will pay the other a portion of these, depending
on who is indebted to whom;
 If V has not paid property taxes for that year, it will become a liability for P;
o P can ask for taxes attributable to when V had possession to be
deducted from the purchase price.
 V & P Act s. 4(d): includes list of items to be adjusted as of date of closing;
o Taxes, local improvement rates, insurance premiums, rents and
interest shall be adjusted as at the date of closing;
o If an item is not mentioned in the Act or in the APS, no adjustment will
be made;
o If it’s a rental property and V has received full year’s rent, P would
have to pay a portion of that rent equal to the proportion of the year
when it will belong to P.
 APS s. 7: GST; s. 17: Residency;
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
APS s. 18: requires adjustment of public and private utility charges and cost
of fuel;
o If K is silent, the Act kicks in  does NOT cover utility charges and
cost of fuel.
Whitall v. Kour (1969) BCCA
Tender is not always a pre-condition to the right of an innocent party either to treat
himself or herself as discharged under the contract upon the failure of the other to comply
with a time stipulation in a contract or to seek the assistance of equity in enforcing the
contract
“In this case, the fact that no tender was made is of but little consequences, because the
learned Judge found, on uncontradicted and unassailed evidence, that the respondent was
at all times up to and including the day of trial so ready, able and willing…”
Genern Investments Ltd. v. Back (1969) Ont HC
 Tender does not need to be perfect
Facts:
No specific place for closing was asserted in the agreement
V alleges that tender at 9 pm by cheque that was drawn up by the solicitors for the V in
favour of the solicitors of the P’s assignee, was improper
Issues:
Does the V have an express right to waiver for a minor defect in tender?
Holding:
No  V must perform.
Reasoning:
“the defendants’ rights have in no way been impaired by the particular form of the
certified cheque which was tendered”
“Even if there was some imperfection in the tender of the cheque which, in my opinion,
there was not, it would appear that the defendants, by objecting solely on the ground
that tender was made too late, waived all other objections to tender.”
 note that for this reason, some lawyers never make specific objections to tenders on
them. They only say, “The tender is bad and I refuse to close.”
Ratio:
As a general rule, tender must be made personally on the purchaser or his/her agent
duly appointed for this purpose under the contract. Tender must be made on the date
set for completion and at the time, if any, indicated in the contract. If no such time was
agreed to then during normal business hours unless unusual circumstances intervene in
136
which event a valid tender may be made at any time up to midnight on the completion
date.
Purchaser must only use best efforts and it is not necessary that the other party is
actually reached.
Leung v. Leung (1990) 75 OR (Gen Div)
 Cannot seize upon minor defect in tender to get out of agreement
Facts:
There were some technical difficulties with a mortgage that could not be completed on
time
No time stipulated for closure, and no express stipulation about tendering at the
registry office, just an understanding
P fails to register at the registry office
V said the deal is off (some suggestion that the market was rising so V wanted to look
for a better deal)
Issues:
Is the imperfect tender grounds for rescission?
Holding:
No. As long as the defect in the mortgage can be cured by midnight, tender would be
good.
Ratio:
As long as tender is nearly perfect, it will be good enough
Reasoning:
It is unlikely that the courts will permit a party to seize upon minor defects in a tender
by the other to avoid his/her obligations under a contract, especially where this would
work an injustice.
There were also issues with the cheque, bc it was made out to a 3rd party, who signed it
over to V (court said this is acceptable)
“In contracts for the sale of land where the agreement did not contain any provision as
to time, place or mode of tender, a P could properly tender on a V at any convenient
time before midnight on the day set for completion in the contract.”
“The uncontradicted evidence before me established that the custom of real estate
practice in Ontario does not require the word ‘day’ in the contract to be construed as
meaning only the hours during which the relevant land registry office is open.”
“I find there was no evidence that the V’s interest would in fact be prejudiced by
accepting a corrected second mortgage after 4:30 p.m. on April 1, 1986.”
137
Notes:
Real issue here was bad faith of V:
“since neither the vendors nor Goldberger acted in good faith in their completion of the
contract, I conclude that the vendors were not entitled to rely on the ‘time of the
essence’ clause to refuse to close the transaction on April 1, 1986. Therefore, the
vendors were in breach of the contract and accordingly in these circumstances there
was no need for the purchaser to tender on the evening of April 1, 1986.”
12 OF POST COMPLETION MATTERS
12.1 INTRODUCTION



More likely to arise under the Registry Act;
Can sue for breach of a term post-completion;
o Maybe V has not been paid (cheque bounced but P now has title), or
equivalent consideration turns out to be worthless;
Defect in quality or title might become apparent after completion;
o Urea formaldehyde is covered in standard APS: can still sue.
12.2 THE GENERAL RULE

Traditional position: Doctrine of merger;
o The risk is on the P  based on doctrine of merger;
o Says that the deed would subsume the APS, and the APS would no longer
have any effect;
o If you notice a post-completion defect, look at the deed;
o If deed doesn’t deal with it: you’re out of luck;
o That was the case under Frazer Reid.
Allen v. Richardson: The traditional view is that the agreement merges with the deed
and it is the latter document which, after completion, regulates the rights and
obligations of the parties – that is, the doctrine of merger, as it is called (erroneously
perhaps), operated.
138
Fraser-Reid et al. v. Droumtsekas et al.
 Presumption is now against merger
Facts:
New houses case
Some of the warranties in the APS that touched on the defect weren’t in the deed
P had no recourse
Holding:
There is no presumption of merger.
Ratio:
Fortunately for purchasers, the traditional position has been rejected by the
Supreme Court:
There is no presumption of merger. The proper inquiry should be to
determine whether the facts disclose a common intention to merge
the ... [term in the agreement] in the deed; absent proof of such
intention there is no merger.
The presumption now is against merger.
Notes:
P’s remedial options are still limited; see below.
12.3 PURCHASER’S REMEDIES




If P has been negligently induced to enter the K, he or she will have an action
in negligent misrepresentation – a tort action;
But note APS s. 25: entire agreement clause;
o This makes it harder to make a negligent misrepresentation
argument;
If ptf can establish fraud  can get rescission;
If ptf can establish total or virtual failure of consideration;
o Such as if P only bought half of the stated acreage;
o This is an easier case than, say, a leaky roof;
o Failure of consideration goes to the ROOT of contract.
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COVENANTS
Land Registration Reform Act



Series of warranties here from V to P that can be inferred;
Differences based on whether V is a trustee or a settlor;
Attaches to the transfer of freehold or leasehold estates:
1) V warrants that he has the right to convey the land to the trustee;
2) P shall have quiet enjoyment of the land  no adverse possessors;
a. Note quiet enjoyment deals with title – that no 3rd party will come
and interfere, like adverse possessor  can always fall back on total
failure of consideration or fraud if such is the case;
3) V will issue documents required;
4) V has not done or permitted anything to be done to encumber the property –
no outstanding mortgage (NOTE: should always search title on date of
completion as well, bc V can take out a mortgage in the interim);
5) V releases P or V’s existing claims on the land.
Czechowski et al. v. Ford
 Deemed acceptance
Facts:
After finding potential breach (adverse possessor), P goes on ignoring the defect
Issues:
May a purchaser, post-completion, object to a defect of which he/she was aware at
the time of completion?
Holding:
No: this amounts to deemed acceptance
Notes:
Deemed acceptance post completion is like when P is aware of a title defect and
takes possession  deemed to accept title subject to that defect
12.5 UNPAID VENDOR’S LIEN

Situation of an unpaid V who handed over title to the P;
o At equity, unpaid V has an equitable lien against the property,
which can lead to the sale of P’s property;
 Lien arises automatically;
o Would fall under s. 72 RA: legal title trumps equitable interest if P
sells to P2 before V exercises his equitable lien;
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o First in time will prevail;
o But if P2 registers first, the registration provisions in the Registry Act
come into play;
o If P2 is an innocent 3rd party P for value without notice of the lien, the
unpaid V is out of luck;
 Any form of notice brought to P2 would be enough to save V’s
lien.
Reverse is also true:

P will have an equitable lien if P pays purchase price and V fails to deliver
title.
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