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Greco v. Padovani, 2019 ONSC 4105 (CanLII)

Excellent review of Deposits/Relevant precedents & principles:


Failed Real Estate Transaction – applicant brings an application for a declaration that they are entitled to deposits paid by the Respondent pursuant to the APS, totaling $400,000.

Summary/excerpts of Sections pertaining to Deposits (excerpts/Summary):

“...It is well established that a deposit is intended for forfeiture to the vendors upon the purchaser’s breach of contract. Furthermore, a deposit may be forfeited without proof of damages.”

“In De Palma v. Runnymede Iron & Steel Co., 1949 the Court of Appeal held that “where the sale of land does not close due to a default by the purchaser, the vendor is entitled to the deposit without having to prove actual damages.”

“The Court of Appeal adopted the following statement from Howe v. Smith, (1884), 27 Ch. D. 89, by Fry L.J.:

Money paid as a deposit must, I conceive, be paid on some terms implied or expressed. In this case no terms are expressed, and we must therefore inquire what terms are to be implied. The terms most naturally to be implied appear to me in the case of money paid on the signing of a contract to be that in the event of the contract being performed it shall be brought into account, but if the contract is not performed by the payer it shall remain the property of the payee. It is not merely a part payment, but is then also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract.”

“In Pleasant Developments Inc. v. Iyer, 2006, the Divisional Court summarized the legal principles applicable to deposits:

The law is clear that a deposit may be forfeited without proof of damages. See DePalma v. Runnymede Iron & Steel Co., 1949 CanLII 73 (ON CA), [1950] 1 D.L.R 557. In other words even in the case where the vendor resells at a purchase price that is high enough to compensate for any loss from the first sale, the vendor may nevertheless retain the deposit. See Perell and Engell, Remedies and the Sale of Land, 2nd ed at p. 186.”

“While I accept that the language of the contract is not by itself determinative, the use of the word “deposit” will imply that the payment is intended for forfeiture upon the purchaser’s breach. See Perell and Engell, supra, at p. 187”

“The common law position is that if the agreement is silent and the purchaser defaults, the deposit, by it very nature is forfeited to the vendor. See Salavatore et al, Agreement of Purchase and Sale (Toronto: Butterworths, 1996) at p. 61. See also: Benedetto v. 2453912 Ontario Inc., 2018 ONSC 4524 (CanLII), at paras. 25-28; Tibor Urac v. Mohamed Ferawana, 2017 ONSC 385 (CanLII), at para. 32.”

“Even if the amount paid is characterized as a non-refundable deposit, if the amount of the deposit is out of all proportion to the losses suffered, the court may order the deposit be returned: Dovbush v. Mouzitchka, 2016 ONCA 381 (CanLII), at para. 31, and cases cited therein.”

“To obtain relief from forfeiture on this basis, the Respondent is required to establish i) the forfeited sum was out of proportion to the damages suffered; and ii) it would be unconscionable for the vendor to retain the money: Varajao v. Azish, 2015 ONCA 218 (CanLII), at para. 11; Redstone Enterprises v. Simple Technology, 2017 ONCA 282 (CanLII), at para. 20”.

"….In Azzarello v. Shawqi, 2018 ONSC 5414 (CanLII), Nishikawa J. reviewed a number of cases that considered whether the deposit was disproportionate to the sale price. She stated, at para. 66:

Courts have found that deposits in the amount of 4.8 percent, 20 percent, and 25 percent of sale price were not unconscionable: Signal Chemicals Ltd. v. Dew Man Marine Trade Inc., 2011 ONSC 3951 (CanLII), 8 R.P.R. (5th) 151, at para. 16 (citations omitted). The percentage is not determinative, but is merely a factor. In Redstone, the deposit was approximately 7 percent of the purchase price and was found not to be commercially unreasonable. InMikhalenia, at para. 46, the deposit was $100,000.00 on a total sale price of $1,300,000.00 (6.67 percent) and was found not to be unconscionable. In this case, the $75,000.00 deposit was approximately 4.8 percent of the $1,555,000.00 purchase price."

FULL CASE:…/20…/2019onsc4105/2019onsc4105.html…

Do not construe as legal advice. Consult your attorney to qualify your scenario!

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