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Forest Hill Homes v Ou, 2019 ONSC 4332

MUST READ CASE: Forest Hill Homes v Ou, 2019 ONSC 4332

KEY WORDS: Bribes; Frustration/force majeure – Changing Market Conditions; New Build, Delayed Closing; Misrepresentation by the Seller’s sales agent; Interest Payable on Default

Summary/Key Principles:

Buyer failed to close in accordance with Agreement of purchase & Sale for property acquired for $1,699,990.00 + Adjustments totaling $1,729,820.99. Buyer paid deposits resulting in a final balance due in the amount of $1,590,820.99.

Buyer raises 4 Points in defense:

  1. Frustration/force majeure;

  2. Delay by the Seller;

  3. Misrepresentation by the Seller’s sales agent;

  4. A bribe demanded by and paid to the Seller’s agent.

Discussed in turn:

Frustration/Force Majeure: Buyer’s counsel submits that performance under the APS was made impossible due to their inability to obtain financing due to the “drastic and unforeseeable drop in the realestate market” – REJECTED

Delay: Buyer argues that the excessive delay by the Seller in setting the final closing date undermined the enforceability of the APS. – REJECTED

Misrepresentation: Buyer argues that the Plaintiff’s sales agent misrepresented the sale to them by describing the deal to them as “the opportunity of a lifetime” – REJECTED

Bribes: Buyers say that they paid bribes to the sales agent in order to be able to jump the queue of potential purchasers and sign the APS quickly – REJECTED “there is no authority for the proposition that a person who pays a bribe can have the contract rescinded as a result; rather, the cases show that it is the defrauded principal of the agent who took the bribe” [Banque Indosuez v Canadian Overseas Airlines Ltd., 1990 CarswellBC 1687, at para 120 (BC SC)].

DAMAGES: the appraised market value for the property is $1,050,000. Total purchase price under the APS was $1,729,820.99 less the deposits = Balance due in the amount of $1,590,820.99; Difference being $540,820.99 + Ancillary expenses legitimately claimed under the APS (realty taxes, gas, utilities, insurance premiums, etc.), for a total loss of $554,308.41.

INTEREST: APS provides that the Seller can charge interest in the amount of 20% of the purchase price if the Defendants fail to pay the balance due on closing. Buyer argues this is excessively onerous and should not be enforced. Buyer’s counsel submits that “the exorbitant rate of interest was never drawn to the Defendants attention, which would be required if this kind of surprisingly onerous term is to be enforced” – PARTIALLY ACCEPTED

DUTY TO MITIGATE: Buyer’s Counsel submits that the Seller failed to mitigate its loss. Seller states that the Property has been listed for sale ever since the aborted closing with the Defendants and has not sold. Buyer suggests that the Seller failed to mitigate as the seller refused the Buyer’s offer to close the deal for $1,290,000 on the designated closing date – REJECTED

OUTCOME: Buyers are liable to the Plaintiff for breach of contract. Damages payable to the Seller in the amount of $554,308.41, plus pre and post-judgment interest from October 22, 2018 at the rates authorized by the Courts of Justice Act.


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