Court File and Parties

COURT FILE NOS.: CV-14-511286 and CV-13-474460 DATE: 20181005 ONTARIO SUPERIOR COURT OF JUSTICE

CV-14-511286 BETWEEN: HENRY JUNG and LONG OCEAN HOLDING LTD. Plaintiffs (Defendants by Counterclaim)/Moving Parties – and – TALON INTERNATIONAL INC. Defendant (Plaintiff by Counterclaim)/Responding Party

CV-13-474460 BETWEEN: HENRY JUNG Plaintiff (Defendant by Counterclaim)/Moving Party – and – TALON INTERNATIONAL INC. Defendant (Plaintiff by Counterclaim)/Responding Party

COUNSEL: Terry Corsianos, for the Plaintiffs (Defendants by Counterclaim)/Moving Parties Symon Zucker and Nancy Tourgis, for the Defendant (Plaintiff by Counterclaim)/Responding Party

HEARD: May 29, 2018

Dietrich J.

Overview

1These two motions for summary judgment brought by the respective plaintiffs are part of a lengthy legal history involving the former Trump Tower in the City of Toronto.

2At issue is the effect of an intervening receivership on the contractual rights and obligations of the parties to agreements of purchase and sale.

3With the approval of this court and the consent of the parties, the plaintiffs Henry Jung and his company, Long Ocean Holding Inc., bring the motions simultaneously: i) for summary judgment in an action relating to the purchase of two commercial units in the former Trump Tower (the commercial action); and ii) for summary judgment in an action relating to the purchase of one residential unit in the former Trump Tower (the residential action). In each action the plaintiffs seek a return of the deposit plus interest.

4The defendant, plaintiff by counterclaim, Talon International Inc. (“Talon”) seeks a declaration in each of the commercial action and the residential action that the plaintiffs have forfeited the deposits and are in breach of their agreements of purchase and sale.

5In addition to summary judgment in each action, the plaintiffs seek the following relief:

1. In the commercial action, Mr. Jung and his company seek (i) an order granting leave to amend their statement of claim to seek a declaration that the agreement of purchase and sale for each of the commercial units was terminated, through no fault of their own, on account of the receivership of Talon; and (ii) an order requiring the return of the deposits with interest.
2. In the residential action, Mr. Jung seeks (i) an order granting leave to amend his statement of claim to seek a declaration that the agreement of purchase and sale respecting the residential unit was terminated, through no fault of his own, on account of the receivership of Talon; and (ii) an order requiring the return of the deposits with interest.

Issues

6The issues to be decided are as follows:

1. Should the statements of claim be amended to include the additional relief sought by the plaintiff(s) in each of the commercial action and the residential action?
2. Is summary judgment appropriate in the commercial action and the residential action?
3. Are Mr. Jung and his company entitled to the return of the deposits, plus interest, on the commercial units and, if so, is Talon entitled to make any deduction from the deposits?
4. Is Mr. Jung entitled to the return of the deposit, plus interest, on the residential unit?

Factual Background

7On June 22, 2005 Mr. Jung and his company entered into an agreement of purchase and sale with Talon for the purchase of Suite 2103 (which became Suite 2004) in the former Trump Tower. The purchase price was $724,000, with a required deposit of $144,800, which was paid to Harris Sheaffer LLP to be held in trust. A closing date [1] was set for March 20, 2009. This unit would be rented out as a hotel suite.

8On August 18, 2005 Mr. Jung and his company entered into a second agreement of purchase and sale with Talon, this time to purchase Suite 1609 (which became Suite 1510) in the former Trump Tower. The purchase price was $810,000, with a required deposit of $162,000, which was paid to Harris Sheaffer LLP to be held in trust. A closing date was set for March 20, 2009. This unit would also be rented out as a hotel suite.

9On November 20, 2006 Mr. Jung entered into an agreement of purchase and sale with Talon for the purchase of Suite 5403 (which became Suite 4603), the residential unit. The purchase price was $1,392,000, with a required deposit of $278,400, which was paid to Harris Sheaffer LLP to be held in trust. A closing date was set for March 20, 2009.

10Mr. Jung and his company received confirmation from Harris Sheaffer LLP that all deposits paid by them for the commercial units were being held in a trust account in compliance with the Condominium Act, 1998, S.O. 1998, c. 19. Mr. Jung received similar confirmation regarding the deposit for the residential unit.

11There were many delays in the construction. The closing dates were not met for any of the units.

12Some three years after the scheduled closing dates for the commercial units, Mr. Jung and his company were notified that the occupancy closing date for Suite 2004 would be February 14, 2012, and the occupancy closing date for Suite 1510 would be February 24, 2012. Accordingly, Talon requested a series of post-dated cheques for each suite to cover the interim monthly occupancy fees. These fees were comprised of common element expenses, realty taxes, interest on the outstanding principal owing, and HST on each of these commercial units. These funds were intended to cover occupancy costs until the condominium corporation was registered and title could be conveyed to the purchasers. Mr. Jung and his company provided six post-dated cheques for each commercial unit. The unit transfer date for each of these units was then set for December 13, 2012.

13Following the occupancy closing dates, Suites 2004 and 1510 were rented out to paying guests of the Trump Tower. Talon collected the rent and paid Mr. Jung and his company the net income earned from those rentals. Between the respective occupancy closing date and September 30, 2012, Talon paid Mr. Jung and his company net rental income of $25,439.58 for Suite 2004 and $23,037.04 for Suite 1510. After September 30, 2012, Mr. Jung and his company did not receive any rental income payments from Talon and Talon made no request for funds or post-dated cheques to cover the monthly occupancy fees for the two commercial units.

14In May 2012 Talon provided Mr. Jung and his company with a new disclosure statement for the commercial units. Mr. Jung perceived what he believed to be a material change in the disclosure. On June 1, 2012 he and his company attempted to exercise their right, pursuant to the Condominium Act, to deliver to Talon a notice of rescission for each of the commercial units. The alleged material changes included disclosure that the Trump Tower would be 60 stories in height, as opposed to 70; the commercial units would not have a kitchen; and the Trump Tower would not be connected to the PATH (an underground concourse of shops and services and pedestrian access to a variety of other buildings including Union Station).

15When Talon provided the new disclosure statement to Mr. Jung and his company for each of the commercial units, it did not provide Mr. Jung with a current disclosure statement relating to the residential unit. The occupancy closing date for the residential unit was set for July 4, 2012 and the unit transfer date was set for December 13, 2013. Mr. Jung nonetheless attempted to exercise his statutory right to deliver a notice of rescission to Talon, which he did on February 5, 2013. He did so based on the disclosure statement he received regarding the commercial units and the fact that Talon had not provided a current disclosure statement for the residential unit.

16Talon did not accept any of the notices of rescission and did not return the deposits to Mr. Jung and his company. Instead, Talon exercised its right to bring an application in respect of each of the two commercial units and the residential unit seeking to invalidate each of the notices of rescission. The application relating to the commercial units was brought in Toronto. The application relating to the residential unit was brought in Markham. Ultimately, it was agreed between the parties that the application brought in Markham would be discontinued in favour of the residential action commenced by Mr. Jung in Toronto.

17On April 25, 2013, Justice MacKinnon of this court found that the Trump Tower project changes did not constitute a material change under the Condominium Act and the notices of rescission regarding the commercial units were void: Talon International Inc. v. Jung, 2013 ONSC 2466, aff’d 2014 ONCA 137, leave to appeal to SCC refused, [2014] S.C.C.A. 179. Consequently, Mr. Jung and his company were bound by their agreements of purchase and sale for the commercial units.

18Mr. Jung and his company then contacted Talon to arrange a date on which the transactions could be completed. The parties agreed to a unit transfer date of August 29, 2014 for both commercial units.

19A dispute then arose between the parties regarding the statements of adjustments provided by Talon for each of the commercial units. Instead of closing on August 29, 2014, Mr. Jung and his company filed a statement of claim seeking specific performance, among other things, including an alternative claim for monetary damages for their deposits. Talon responded by filing a statement of defence and counterclaim alleging that Mr. Jung and his company had breached the agreements of purchase and sale by delivering their notices of rescission, and Talon claimed forfeiture of the deposits.

20Before the commercial action could be resolved, Talon ran into serious financial trouble. Talon had defaulted on its loan to its main creditor JCF Capital ULC and was unable or unwilling to cure the default. On November 1, 2016 FTI Consulting Canada Inc. was appointed by this court as a receiver of certain assets of Talon. All proceedings against Talon were stayed, including the commercial action and the residential action. During this time, Harris Sheaffer LLP was not permitted to distribute any funds it held in trust relating to the condominium units.

21On January 4, 2017 the receiver obtained a court order authorizing a sale of the suites in the Trump Tower still owned by Talon. Mr. Jung made a bid for four suites (two commercial and two residential) but he was unsuccessful. JCF Capital ULC acquired all of the available suites in a credit bid. The available suites included the commercial units and the residential unit, which were then the subject of the commercial action and the residential action, respectively.

22On March 30, 2017 this court issued an approval and vesting order wherein the suites acquired by JCF Capital ULC were transferred to it free and clear of any security interests, excluded contracts, adverse interest and any right or claim of specific performance.

23Consequently, the claim by Mr. Jung and his company for specific performance in respect of the commercial units was rendered moot. With regard to the residential unit, there was no unit to be conveyed to Mr. Jung should he fail in his efforts to rescind the agreement of purchase and sale based on material change in the disclosure.

Analysis

Issue 1: Amendments to the Statements of Claim

24Talon submits that the pleadings may not be amended as requested by the plaintiffs because the proposed amendments have not been made in strict compliance with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 26.02(c) of the Rules specifically permits a party to amend its pleadings with leave of the court. I am prepared to exercise my discretion to allow the plaintiffs in the commercial action and the plaintiff in the residential action to amend their respective statements of claim.

25In the statement of claim by Mr. Jung and his company in the commercial action, and in the statement of claim by Mr. Jung in the residential action, the relief sought by the respective plaintiffs includes the recovery of their deposits with interest. The respective agreements of purchase and sale specifically mandate a return of the deposits, plus interest, in the case where the agreement of purchase and sale is terminated through no fault of the purchaser. The effect of the amendments sought by the plaintiffs is to make specific reference to the contractual terms on which the plaintiffs seek to rely to recover their deposits. I see no prejudice to the defendant in granting leave to the plaintiffs to amend their pleadings in this way.

Issue 2: Is summary judgment appropriate in the commercial action and the residential action?

26Rule 20.04(2) of the Rules provides that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or a defence. The Supreme Court in Hryniak v. Mauldin, 2014 SCC 7 held at para. 49:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

27A responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit or other evidence specific facts showing that there is a genuine issue for trial. Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried. A court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 26-27, aff’d 2014 ONCA 878, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97.

28The court should first determine whether there is a genuine issue requiring a trial based only on the evidence in the motion record, without using the fact-finding powers set out in rules 20.04(2.1) and (2.2). The analysis is to be done on a review of the factual record, granting summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute and summary judgment would be a timely, affordable and proportionate procedure. The evidence considered by the court on a summary judgment motion need not be equivalent to that which would be available at trial but must be such that the judge is confident that the dispute can be fairly resolved: Hryniak v Mauldin, at para. 57.

29The essential facts in these matters are not in dispute. On these motions I am able to make the necessary findings of fact and apply the facts to the law. I am satisfied that the plaintiffs have met their burden to prove that there is no genuine issue requiring a trial, in either the commercial or the residential action, regarding their entitlement to the deposits. Summary judgment is appropriate in both the commercial action and the residential action. Each of the parties has presented sufficient evidence on all points to allow me to make dispositive findings. The plaintiffs have demonstrated their entitlement to the return of the deposits, without deduction, in accordance with the terms of the agreements of purchase and sale. The agreements of purchase and sale were terminated as a consequence of the receivership. Summary judgment in these actions is a timely, affordable and proportionate means to a just result.

Issue 3: Are Mr. Jung and his company entitled to the return of the deposits, plus interest, on the commercial units and, if so, is Talon entitled to make any deduction from the deposits?

30For the reasons that follow, I conclude that Mr. Jung and his company are entitled to the return of their deposits, plus interest, for each of the commercial units, being Suite 2004 and Suite 1510 in the former Trump Tower. Talon is not permitted to make any deductions from those deposits.

31In its motion materials, Talon submits that Mr. Jung and his company are not entitled to the return of their deposits on the commercial units on the basis of an anticipatory breach of the agreements of purchase and sale. It submits that the breach occurred when the purchasers delivered their notices of rescission in respect of each of the commercial units in June 2012. At the hearing, Talon did not pursue this argument. It is difficult to see how such an argument could have succeeded. In pursuing rescission of the agreements of purchase and sale, Mr. Jung and his company were simply attempting to exercise their statutory rights pursuant to the Condominium Act. Section 74(6) of that Act permits a purchaser to rescind an agreement of purchase and sale prior to accepting a deed in registerable form (e.g., on the unit transfer date) if a notice to the purchaser contains a material change or the vendor fails to disclose a material change. The deeds to the commercial units could not be put into a registerable form until August 29, 2014. This was the unit transfer date agreed to between the parties once all appeals in the litigation relating to the rescission had been exhausted. That occurred when the Supreme Court of Canada denied leave to appeal on July 24, 2014. Mr. Jung and his company could not be said to be in breach of the agreements of purchase and sale on the unit transfer date of December 13, 2012, as advanced by Talon.

32Furthermore, in a letter dated August 1, 2014, following the rescission litigation, Talon’s lawyers wrote to the solicitor for Mr. Jung and his company confirming Talon’s intention to complete the agreements of purchase and sale for the commercial units and directing the purchasers to deal directly with Harris Sheaffer LLP. Talon did not declare an anticipatory breach of contract. Instead, it confirmed that it was prepared to close the transactions.

33Accordingly, any alleged anticipatory breach was waived by Talon or cured by Mr. Jung and his company when both parties agreed to proceed with the closing and set a unit transfer date of August 29, 2014. An anticipatory breach does not in itself terminate or discharge a contract. The innocent party may elect to treat the contract as continuing: Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733, 369 D.L.R. (4th) 347, at para. 25.

34Talon now submits that Mr. Jung and his company breached the terms of the agreements of purchase and sale for the commercial units when they failed to close on August 29, 2014 and instead brought an action for specific performance. Consequently, Talon submits, Mr. Jung and his company forfeited their deposits. I find Talon’s assertion that the plaintiffs’ action for specific performance was itself a breach of the agreements of purchase and sale and a default giving rise to forfeiture untenable.

35The agreements of purchase and sale for each of the commercial units contain the following provision regarding a default by the purchaser:

25. (a) In the event the Purchaser is in default with respect to any of his or her obligations contained in this Agreement or in the Occupancy Licence on or before the Unit Transfer Date and fails to remedy such default forthwith, if such default is a monetary default and/or pertains to the execution and delivery of documentation required to be given to the Vendor on the Closing Date, or within five (5) days of the Purchaser being so notified in writing with respect to any other non-monetary default, then the Vendor, in addition to (and without prejudice to) any other rights or remedies available to the Vendor (at law or in equity) may, at its sole option, unilaterally suspend all of the Purchaser’s rights, benefits and privileges contained herein and/or unilaterally declare this Agreement and the Occupancy Licence to be terminated and of no further force or effect, whereupon all deposit monies therefore paid, shall be retained by the Vendor as its liquidated damages, and not as a penalty, in addition to (and without prejudice to) any other rights or remedies available to the Vendor at law or in equity.…

(b) Notwithstanding subparagraph (a) above, the Purchaser acknowledges and agrees that if any amount, payment and/or adjustment which are due and payable by the Purchaser to the Vendor pursuant to this Agreement are not made and/or paid on the date due, then such amount, payment and/or adjustment shall, until paid, bear interest at the rate equal to eight (8%) percent per annum above the bank rate as defined in subsection 19(2) of Ontario Regulation 48/01 to the Act at the date of default.

The Statements of Adjustments

36The statements of adjustments that Talon provided to Mr. Jung and his company included charges and interest that, in the purchasers’ view, were incorrect and unlawful. These charges included occupancy fees for the entire period during which the rescission matter was being litigated including 11 percent interest on the balance owing for each of Suite 1510 and Suite 2004 from December 13, 2012 to August 29, 2014, and charges for HST.

37The purchasers objected to these amounts on the following basis:

• The purchasers ceased paying occupancy fees on October 1, 2012, being the same date on which Talon ceased paying them any rental income.
• Interest would only be owing if the plaintiffs had defaulted on their obligations under the agreements of purchase and sale, which they denied.
• Long Ocean Holding Ltd. was HST exempt.

38On August 21, 2014, through their counsel, Mr. Jung and his company responded to the statements of adjustments and challenged certain entries. They pointed out that HST did not apply; occupancy fees should not have been charged while the litigation relating to the rescission matter was underway and during which period the plaintiffs received no rental income from the units; no interest was owing because there had been no default by the plaintiffs of their obligations under the agreements; and, in any event, an interest rate of 11 percent could not be supported. Counsel for the purchasers advised Talon that if the statements of adjustments were not revised to reflect proper adjustments by August 26, 2014, then the purchasers would commence an action for specific performance.

39Talon did not compromise on its statements of adjustments other than in respect of the HST. Talon submits that because the plaintiffs did not close on the commercial units on the closing date (December 13, 2012), at which time they were asserting their right of rescission, they were in breach of contract. Talon submits that this failure to close justifies its entitlement to occupancy fees, as well as interest, throughout the period while the rescission application and related appeals were being heard by the courts.

40Instead of closing on August 29, 2014, Mr. Jung and his company filed their statement of claim in the commercial action seeking, among other things, the following:

• an order for specific performance requiring the defendants to convey legal title to the commercial units to Mr. Jung and his company, with appropriate adjustments being made to the statements of adjustments; or, in the alternative,
• an order requiring Talon to repay the deposits plus interest to Mr. Jung and his company.

41Mr. Jung and his company submit that they, in good faith, were attempting to close the purchases of the commercial units but could not do so until there was an agreement on the statements of adjustments. I agree. Suing for specific performance is consistent with the plaintiffs’ willingness to close the transactions and is contrary to a desire to bring the agreements of purchase and sale to an end.

42Talon filed a statement of defence and counterclaim in the commercial action dated September 11, 2014. It claimed that it was only prepared to close the transactions for the commercial units if Mr. Jung and his company paid the charges set out in the statements of adjustments. It counterclaimed seeking a declaration that the plaintiffs had forfeited their deposits and a declaration that the plaintiffs were in breach of their agreements of purchase and sale. I find that the agreements of purchase and sale were not breached by Mr. Jung and his company when they filed their statement of claim on August 29, 2014 instead of closing the transactions. They were merely exercising their right to insist on fair and appropriate statements of adjustments.

43I find that Talon was aggressive and overreaching in its effort to include in the statements of adjustments occupancy fees for the commercial units, which included interest on the alleged amount owing for each suite, and HST. A statement of adjustments is intended to take into account adjustments for property taxes, utilities and other payments that affect the property itself. Talon chose to include in the statements of adjustments all occupancy fees, plus interest, without any offset for the rental income from the commercial units. This position cannot be supported.

44Talon had not been treating the commercial units as occupied by Mr. Jung and the company since September 30, 2012. On October 1, 2012 Talon ceased to request post-dated cheques for occupancy fees and ceased to pay any rental income from the commercial units to Mr. Jung and his company. Talon’s position on occupancy of the commercial units did not change when Mr. Jung and his company delivered their notices of rescission or following the finding that these notices were void. Talon could have treated the commercial units as occupied by Mr. Jung and his company, in which case they would be liable for the occupancy fees, but also entitled to the rental income. Alternatively, Talon could have declared an anticipatory breach of the agreements when Mr. Jung and his company ceased to pay the occupancy fees on the final determination of the rescission matter and treated those agreements as at an end. Talon did not do so. It held Mr. Jung and his company to the agreements.

45I also find that it was inappropriate for Talon to charge interest (at a rate of 11%) on the entire amount allegedly owing for each of the commercial units. At best, interest would have been payable on the difference between the occupancy fees and the rent, if the former exceeded the latter. Further, Talon declined to substantiate its claim for interest at a rate of 11% for the entire period in question.

46I find that the plaintiffs acted in good faith in their attempts to negotiate fair and reasonable statements of adjustments with a view to closing the transactions on a timely basis. They had no obligation to close in the face of erroneous statements of adjustments. Mr. Jung and his company were not attempting to resile from their obligation to purchase the commercial units. Their commitment to purchase units in the Trump Tower is further evidenced by their bid to purchase units from the receiver.

47The total amount sought for occupancy fees, including interest, on the two commercial units exceeded $445,000. Talon submits that Mr. Jung and his company ought to have tendered and then litigated the disputed adjustments following the closing. I disagree. It would not have been reasonable to expect Mr. Jung and his company to pay the nearly half a million dollars above the negotiated purchase price for the two commercial units as adjustments on closing. On the contrary, I find that it would have been reasonable for Talon to close the transaction on the basis of statements of adjustments that did not include the disputed occupancy fees and interest. Talon could then have pursued the additional amounts allegedly owing in an action for breach of contract following the closing.

The Receivership

48The plaintiffs seek a return of the deposits for the commercial units. The procedural and transactional history related to the commercial units is relevant when assessing whether the deposits should be returned. As previously noted, when the court-appointed receivership occurred, the plaintiffs’ action for specific performance was stayed. In the course of the receivership, Talon sold the commercial units to its main creditor in a credit bid. Consequently, Talon could no longer close the transactions with Mr. Jung and his company for Suites 2004 and 1510. It no longer owned the units. Once the stay was lifted, Mr. Jung and his company brought a summary judgment motion seeking partial judgment on their claim in the form of a return of the deposits for the commercial units.

49In support of their claim, Mr. Jung and his company rely on s. 19 of the agreements of purchase and sale for the commercial units. This provision states:

19. In the event this Agreement is terminated through no fault of the Purchaser, all deposit monies paid by the Purchaser towards the Purchase Price, together with any interest required by law to be paid, shall be returned to the Purchaser; provided however that the Vendor shall not be obligated to return any monies paid by the Purchaser as an Occupancy Fee. In no event shall the Vendor or its agents be liable for any damages or costs whatsoever and without limiting the generality of the foregoing, for any loss of bargain, for any relocating costs, or for any professional or other fees paid in relation to this transaction. This provision may be pleaded by the Vendor as a complete defence to any such action. [Emphasis added.]

50In light of the court-appointed receivership and subsequent sale of the commercial units, I conclude that the agreements of purchase and sale were terminated through no fault of the purchasers, and the deposit monies should be returned to Mr. Jung and his company. A court-appointed receiver is not bound by existing contracts that were made by the debtor, and a receiver may elect to repudiate contracts entered into by the debtor: 144 Park Ltd., Re, 2015 ONSC 6735, 48 C.L.R. (4th) 212, at para. 19, and SHS Services Management Inc./Gestion Des Services SHS Inc., Re, 2015 ONSC 2798, 32 C.B.R. (6th) 273 at para. 31.

51The Supreme Court of Canada defined “repudiation” in Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423 at para. 47 as follows:

Repudiation ... occurs “by words or conduct evincing an intention not to be bound by the contract....” (S. M. Waddams, The Law of Contracts (4th ed. 1999), at para. 620).... The effect of a repudiation depends on the election made by the non-repudiating party…. [If] the non-repudiating party accepts the repudiation, the contract is terminated, and the parties are discharged from future obligations.

52In this case, the receiver repudiated both agreements of purchase and sale when it sold the commercial units to a third party during the credit bid. This act evinced the receiver’s intention not to be bound by the contracts as it rendered Talon unable to tender the units and close the agreements of purchase and sale.

53Once a contract has been repudiated, the innocent party is faced with a right of election to accept or reject the repudiation: Komorowski v. Van Weel (1993), 12 O.R. (3d) 444 (S.C.) at para. 57. Pursuant to Onni Development (Victoria Hill Nine) Corp. v. Shahi, 2015 BCSC 100, [2015] B.C.W.L.D. 2501, at para. 76, an innocent party can communicate its acceptance of repudiation by initiating court proceedings. Accordingly, Mr. Jung and his company communicated their acceptance of this repudiation when they moved for a declaration that the agreement was terminated pursuant to s. 19 of the agreements of purchase and sale. Upon Mr. Jung and his company’s acceptance of the repudiation, the agreements of purchase and sale were terminated.

54In light of this termination, the provisions of the agreement of purchase and sale govern. “The question as to the right of the purchaser to the return of the deposit money must, in each case, be a question of the conditions of the contract”: McCann v. Temiskaming Hotel Co., [1943] O.R. 337 (C.A.) at p. 352 citing Lord Justice Bowen in Howe v. Smith (1884), 27 Ch. D. 89. Section 19 of each agreement of purchase and sale stipulates that deposit monies shall be returned to the purchaser if the agreement is terminated “through no fault of the purchaser.” I am satisfied that this is the case here. Mr. Jung and his company had no control over the appointment of Talon’s receiver, or the receiver’s decision to sell the commercial units in a credit bid. Once the units were sold, Talon was no longer capable of executing the agreements, as it was unable to tender the units. The purchasers accepted the receiver’s repudiation of each agreement only when performance of the contract became impossible. Accordingly, the termination of the agreements was through no fault of the purchasers, and they are entitled to the return of the deposit monies as set out in s. 19.

55The purchasers are also entitled to interest on the condominium unit deposits. Section 82(7) of the Condominium Act states that if a purchaser is entitled to a return of money upon a termination of the agreement of purchase and sale, interest on that money is to be paid at the prescribed rate.

56I find that Mr. Jung and his company are entitled to the full amount of the deposits without any deduction on account of occupancy fees or other charges by Talon. Once the rescission proceedings were underway, both parties to the agreements of purchase and sale treated the commercial units as no longer being occupied by Mr. Jung and his company. It was reasonable for Mr. Jung and his company to take this position. A notice of rescission under the Condominium Act renders the agreement of purchase and sale void ab initio: John Patrick Ormond v. Richmond Square Development Corp. (2003), 2003 ONSC 9551. A notice of rescission can be subsequently invalidated, as was the case for Mr. Jung and his company, but this does not mean that the invalidation operates retroactively.

57Talon also treated the agreements of purchase and sale as void once the rescission proceedings were underway, as it did not treat the commercial units as occupied by Mr. Jung and his company. It did not request any additional occupancy fees and did not remit any share of the rental income from the units to Mr. Jung and his company.

Issue 4: Is Mr. Jung entitled to the return of the deposit, plus interest, on the residential unit?

58For the reasons that follow, I conclude that Mr. Jung is entitled to the return of the deposit, plus interest, on the residential unit.

59Talon informed Mr. Jung that the occupancy closing date for the residential unit, Suite 4603, would be July 4, 2012. As requested, Mr. Jung provided a series of post-dated cheques to Talon for the occupancy costs for the next six months pending transfer of legal title to the unit to him. Once Talon cashed the post-dated cheques for the residential unit, it did not request any additional occupancy fees from Mr. Jung for that unit.

60On December 20, 2012 Talon set the unit transfer date for the residential unit as February 7, 2013.

61On February 5, 2013 Mr. Jung sent Talon a notice of rescission demanding a current disclosure statement and seeking the return of his deposit based on material changes in the disclosure. Talon did not deliver a current disclosure statement to Mr. Jung. It responded by initiating an application seeking a declaration that the notice of rescission was void. Ultimately, as agreed between the parties, Talon abandoned its application when Mr. Jung commenced the residential action by filing a statement of claim on February 19, 2013.

62In his claim, Mr. Jung seeks to nullify the agreement of purchase and sale based on material change in the disclosure and failure of Talon to deliver a current disclosure statement as required by the Condominium Act. Mr. Jung also claims a return of the deposit, plus interest, among other relief. In response, Talon filed a statement of defence and counterclaim in which it seeks a declaration that Mr. Jung breached the agreement of purchase and sale and forfeited the deposit.

63Again, Talon asserts that Mr. Jung was in breach of the agreement of purchase and sale when he failed to close on February 7, 2013, notwithstanding that Mr. Jung had given notice of rescission prior to that date. For the reasons cited above, I find that Mr. Jung had no obligation to close the sale of the residential unit while he was asserting his right of rescission under the Condominium Act. The assertion of a right of rescission does not amount to a breach of contract.

64Mr. Jung, in good faith, delivered his notice of rescission and commenced his action based on what he perceived to be a material change in the disclosure. He could not have known with certainty the extent of the material change because he had not been provided with a current disclosure statement despite his request for one and his legal entitlement to it. Based on the disclosure given to him regarding the commercial units, he would have known that there were some changes in the disclosure (e.g., the change in the height of the Trump Tower and the fact it would not be connected to the PATH). He would not have known whether there were additional changes in the disclosure relating to the residential unit that could be material. At the time that Mr. Jung delivered this notice of rescission, his route of appeal from Justice MacKinnon’s decision, which found that there was no material change with respect to the commercial units, had not yet been exhausted.

65Talon’s receivership followed the exchange of pleadings in the residential matter. The receiver sold the residential unit to JCF Capital ULC in the credit bid. Mr. Jung now seeks the return of the deposit, plus interest, for the residential unit.

66The agreement of purchase and sale for the residential unit contains the following provision regarding termination:

20. In the event this Agreement is terminated through no fault of the Purchaser, all deposit monies paid by the Purchaser towards the Purchase Price, together with any interest required by law to be paid, shall be returned to the Purchaser, provided, however, that the Vendor shall not be obligated to return any monies paid by the Purchaser as an Occupancy Fee. In no event shall the Vendor or its agents be liable for any damages or costs whatsoever and without limiting the generality of the foregoing, for any loss of bargain, for any relocating costs, or for any professional or other fees paid in relation to this transaction. This provision may be pleaded by the Vendor as a complete defence against any such claim. [Emphasis added.]

67Based on the reasons cited above with respect to the commercial units, I conclude that the agreement of purchase and sale for the residential unit was terminated through no fault of the purchaser. The agreement for purchase and sale of the residential unit was repudiated when the receiver sold the unit to a third-party creditor. Mr. Jung accepted the repudiation when he moved for partial summary judgment of his claim and sought the return of the deposit. The agreement was thereby terminated.

68This termination occurred through no fault of Mr. Jung. The receiver’s appointment and the subsequent sale of the residential unit were not within Mr. Jung’s control. Accordingly, the termination of the agreement was through no fault of Mr. Jung and he is entitled to the return of the deposit together with interest at the rate prescribed in the Condominium Act.

Conclusion

69Summary judgment is granted to the respective plaintiffs in each of the commercial action and the residential action. The counterclaims of the defendant in each of the commercial action and the residential action are dismissed.

70Mr. Jung and Long Ocean Holding Ltd. are entitled to the return of the deposits made on each of the commercial units, being Suite 2004 and Suite 1510 in the former Trump Tower. The deposits shall be returned together with interest calculated at the rate prescribed in s. 82 of the Condominium Act.

71Mr. Jung is entitled to the return of the deposit made on the residential unit, being Suite 4603 in the former Trump Tower. The deposit shall be returned together with interest calculated at the rate prescribed in s. 82 of the Condominium Act.

Costs

72The moving parties have succeeded on their motions and are entitled to costs. The parties have agreed that costs of $25,000 will be payable to the successful party and Talon shall pay this amount to Mr. Jung and Long Ocean Holding Ltd., as they may direct, forthwith.

Dietrich J.

Released: October 5, 2018

Footnote

1A closing date is distinct from a unit transfer date. In the context of condominium sales, the former is the date on which the purchaser takes occupancy. The latter is the date on which legal title is transferred and the purchaser becomes the registered owner.