The Ontario Court of Appeal recently decided a case about a commercial real estate deal, centred on issues of rescission and receivership, involving a former Trump International Hotel.

What Happened?

In the summer of 2005, the buyer and his company (together, “the buyer”) and the seller corporation (“the seller”) entered into two agreements of purchase and sale (“the agreements”) for two commercial condominium units in the former Trump International Hotel.

The purchase price for the first unit was $724,000, with a required deposit of $144,800. The purchase price of the second unit was $810,000, with a required deposit of $162,000.

The deals were set to close on March 20, 2009. Following delays, the occupancy closing dates were scheduled for February 2012.

In May 2012, the seller provided the buyer with a revised disclosure statement for the commercial units. The disclosure statement indicated, among other things, the Trump International Hotel would have only 60 stories instead of 70, the commercial units would not have a kitchen, and the Trump International Hotel would not be connected to the PATH (a network of underground walkways in downtown Toronto).

The buyer considered these to be material changes and delivered notices of rescission on June 1, 2012 under s. 74(7) of the Condominium Act (“the Act“). In response, the seller brought an application under s. 74(8) to invalidate the notices of rescission. A 2013 court found the changes were not “material changes” as defined in the Act and declared the notices of rescission void.

After that, the seller affirmed its intention to close the purchases and the parties agreed to a unit transfer date of August 29, 2014. The buyer subsequently objected to the statements of adjustments provided by the seller. In the alternative, the buyer sued for the return of the deposits.

The seller counterclaimed for the forfeiture of the deposits, alleging that the buyer had breached the agreements by delivering the notices of rescission and failing to close the transaction.


However, the action and counterclaim were stayed on November 1, 2016, when a receiver was appointed after the seller had run into financial difficulty. On March 30, 2017, the Superior Court issued an approval and vesting order, transferring units to the seller’s main creditor free and clear of any security interest, excluded contract, adverse interest, and any right or claim of specific performance. The transfer included the commercial units that the seller had agreed to sell to the buyer.

As the seller no longer owned the commercial units, when the receiver was discharged and the stay of the buyer’s action expired, the buyer could no longer obtain specific performance. The buyer brought a motion for summary judgment on their alternative claim for the return of their deposits plus interest.

Lower Court Decision

The motion judge rejected the seller’s argument that the buyer’s delivery of the notices of rescission constituted anticipatory breaches of the agreements.

She also found that the buyer was entitled to refuse to close the transactions on August 29, 2014. She described the seller’s statements of adjustments as “aggressive and overreaching”. The motion judge concluded that the buyer “had no obligation to close in the face of erroneous statements of adjustments” and in refusing to close, “[was] merely exercising their right to insist on fair and appropriate statements of adjustments.”

Because the motion judge found that the buyer had not breached the agreements, the agreements remained in force when the litigation was stayed by the appointment of a receiver. The motion judge reasoned that the receiver had repudiated the agreements when it sold the units to a third party. She concluded the agreements had been terminated “through no fault of the purchasers”, and therefore s. 19 of the agreements mandated the deposits should be returned to the buyer with interest.

Court of Appeal Decision

Regarding the notices of rescission, the court rejected the seller’s arguments that notices under s. 74(7) of the Act were not delivered within the required time, and if in time, the notices of rescission constituted anticipatory breaches of the agreements. The court stated:

“These arguments […] have no merit. As the motion judge found, [the seller] affirmed its intention to complete the transactions and set August 29, 2014 as the closing date. All issues related to the notices of rescission became irrelevant when [the seller] affirmed it would close the agreements, thereby waiving any alleged anticipatory breaches.”

The court also rejected the seller’s argument regarding the buyer’s failure to close. The seller had argued that the buyer had breached the agreements by failing to close the transactions on August 29, 2014 and that this breach resulted in the termination of the agreements, and consequently the agreements were no longer binding on the seller when the receiver subsequently conveyed the units to the third party. The seller also argued that, by then, the deposits had already been forfeited.

The court found that there was no basis to interfere with the motion judge’s conclusion that the erroneous statements entitled the buyer to refuse to close the transactions. It found that the buyer’s action for specific performance (commenced on the scheduled closing date) was consistent with his willingness to close the transactions on a proper basis. The failure by the buyer to close the transactions on August 29, 2014 did not terminate the agreements.

As a result, the court dismissed the seller’s appeal and upheld the motion judge’s order for the return of the deposits to the buyer, with interest, for the commercial units.

Get Advice

Commercial real estate transactions often involve significant sums of money and can also involve complex legal issues. Such deals should never be entered into or finalized without the assistance of a knowledgeable real estate lawyer with significant experience advising commercial real estate parties.

At DBH Law in Calgary, our commercial real estate lawyers regularly provide purchasers and sellers with the advice they need to ensure the efficiency of transactions while proactively planning for the future to avoid costly disputes down the road. We have been representing clients in commercial real estate transactions for more than 25 years.

Contact the experienced commercial real estate team at DBH Law in Calgary to see how we can help you through your commercial real estate transaction. We can be reached online or by phone at 403.252.9937.