COURT OF APPEAL FOR ONTARIO
ROSENBERG, CRONK and LANG JJ.A.
BETWEEN:
RHONDA BEMISTER
Appellant (Plaintiff)
and
GORDON PATTERSON and ROSE PATTERSON
Respondents (Defendants)
Peter B. Cozzi, for the appellant
Colin A. Brown, for the respondents
Heard: October 4, 2007
On appeal from the judgments of Justice J.H. Jenkins of the Superior Court of Justice dated January 12 and May 30, 2006.
ENDORSEMENT
[1]
Overview
The appellant sued the respondents to recover damages in the approximate amount of $50,000 on account of the alleged wrongful repudiation by the respondents of an agreement of purchase and sale entered into on February 7, 2004. The trial judge dismissed the action on the basis that the appellant’s failure to pay the deposit provided for under the agreement was fatal to the appellant’s claim. The appellant appeals this decision. For the following reasons, we agree with the trial judge that the appellant’s action cannot succeed. Accordingly, this appeal must be dismissed.
[2]
Background
The appellant’s claim against the respondents must be assessed in the context of the particular background and events giving rise to the agreement at issue.
3The respondents entered into an agreement with a builder to purchase a new home. They intended to finance this acquisition from the proceeds of sale of their existing home. The agreement with the builder prohibited the respondents, prior to closing, from assigning their interest in the agreement, or purporting to sell or convey their rights thereunder, absent the builder’s consent.
4After entering into the builder’s agreement, it became apparent that the respondents would be unable to close the transaction because they were unable to sell their existing home. Accordingly, the respondents consulted a lawyer and attempted to secure the builder’s consent to the release of the respondents from their obligations under the builder’s agreement. These attempts proved unsuccessful.
5Thereafter, through introductions facilitated by their lawyer, the respondents met with Marvin Alexander (an experienced real estate broker), the appellant (Mr. Alexander’s wife), and the appellant’s sister, who had expressed an interest in acquiring the property in question. The trial judge found that at this meeting, the respondents’ lawyer explained to all persons present – including the appellant and Mr. Alexander – the nature of the above-described prohibition on assignment or conveyance contained in the builder’s agreement.
6As a result of this meeting, the respondents agreed to assign their interests under the builder’s agreement to the appellant’s sister, subject to obtaining the builder’s consent to the assignment. Subsequently, when the builder’s consent was not forthcoming, the respondents’ lawyer advised the respondents to take the necessary steps to close the transaction contemplated under the builder’s agreement.
7By this time, all involved parties knew that the respondents lacked the funds necessary to complete the purchase from the builder and that they had not been able to sell their existing home. Marvin Alexander and the appellant continued to express an interest in the property. Without the involvement and in the absence of the respondents’ lawyer, they met with the respondents to discuss the matter further.
8The respondent, Rose Patterson, testified that she and her husband met with Mr. Alexander and the appellant to get papers necessary to obtain bank financing to close on the builder’s agreement. She said that the meeting lasted for only minutes and that when they arrived they were presented by Mr. Alexander with a pre-prepared agreement of purchase and sale concerning the property, which provided for the sale of the property by the respondents to the appellant. The respondents signed the agreement (the Bemister Agreement). Mrs. Patterson indicated that neither she nor her husband were advised to seek legal advice prior to signing the agreement. Nor was it suggested by the appellant or her husband that the respondents consult the lawyer who had acted for them in the preparation of the earlier assignment agreement, although this lawyer was both a friend and business acquaintance of Mr. Alexander.
9The trial judge accepted Mrs. Patterson’s evidence on these matters, and rejected the testimony of Mr. Alexander where it differed from that of Mrs. Patterson. In particular, the trial judge expressly found that when Mr. Alexander presented the Bemister Agreement to the respondents, in the presence of the appellant, he knew of the prohibition in the builder’s agreement precluding the sale of the property by the respondents without the builder’s consent.
[10]
Analysis
Against this backdrop, we agree with the trial judge that the transaction envisaged by the Bemister Agreement was “illegal”, in the sense that it was drawn or designed to defeat the rights of the builder under the builder’s agreement: see for example, Menard v. Genereux (1982), 39 O.R. (2d) 55 (S.C.).
11On the findings of the trial judge, the appellant and her husband knew that the builder’s consent to the sale of the property or to the assignment of the builder’s agreement was required. They also knew that the builder had denied consent to an assignment in favour of the appellant’s sister and that the builder was holding the respondents to their original bargain. There was no basis, therefore, to conclude that the builder’s consent to a conveyance to Mr. Alexander and the appellant would be forthcoming.
12Moreover, on the findings of the trial judge, Mr. Alexander – who was “guiding and directing [the appellant’s] decisions in this matter” – was seeking an opportunity to make a considerable profit on the transaction. He was an experienced real estate broker and, in contrast to the respondents, sophisticated.
13The appellant and her husband entered into the Bemister Agreement to advance their own interests. They were entitled to do so, as long as their actions were not designed to wrongly defeat or frustrate the known rights of an innocent third party – in this case, the builder. The illegality of the Bemister Agreement arises in this case out of an attempt to circumvent the known provisions of the builder’s agreement that protected the interests of the builder, and thereby defraud the builder. The courts will not lend assistance to a plaintiff in these circumstances by countenancing the recovery of damages for the breach of the offending agreement.
[14]
Disposition
Accordingly, for the reasons given, the appeal is dismissed. The respondents are entitled to their costs of the appeal on the partial indemnity scale, fixed in the amount of $5,000, plus disbursements and G.S.T.
“M. Rosenberg J.A.”
“E.A. Cronk J.A.”
“S.E. Lang J.A.”