CITATION: Kandasamy v. Merseyside Holdings Ltd., 2016 ONSC 2205
COURT FILE NO.: 14-517503
DATE: 20160408
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THAVACHELVAM KANDASAMY
Plaintiff
– and –
MERSEYSIDE HOLDINGS LTD. and
BRYON C. COHEN
Defendants
Garett Schromm, for the Plaintiff
Manuel Jesudasan, for the Defendants
HEARD: October 1, 2015
stewart j.
ENDORSEMENT
[1] The Defendant, Merseyside Holdings Ltd. (“Merseyside”), has brought this motion pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and seeks summary judgment dismissing the action as against it.
[2] The Plaintiff, Thavachelvam Kandasamy (“Kandasamy”), submits that there are genuine issues raised in the action that require determination by trial.
[3] The Defendant, Bryon Cohen (“Cohen”), has been included as a party only as the holder of the funds which form the subject matter of the action and takes no position on this motion.
Background Facts
[4] Merseyside is in the business of real estate investment in Ontario and the owner of 1600-1662 Midland Avenue, a two unit commercial property in Toronto.
[5] On December 7, 2012, Kandasamy entered into an Agreement of Purchase and Sale with Merseyside for the purchase of the property. Kandasamy failed to close the sale and has brought this action for recovery of the $50,000 which he paid to Merseyside in accordance with the Agreement of Purchase and Sale and which is being held in trust by Cohen.
[6] The Agreement of Purchase and Sale includes the following term:
DEPOSIT: Buyer submits upon acceptance Fifty Thousand Dollars (CDN $50,000) by negotiable cheque payable to Bryon C. Cohen, in Trust, Barrister & Solicitor to be held by him in trust without interest completion or other termination of this Agreement and to be credited toward the Purchase Price on completion. The Buyer agrees to pay the balance of the purchase price to the Seller as more particularly set out in Schedule A attached.
[7] The Agreement of Purchase and Sale further states (in Schedule “B”) that Kandasamy would have no claim against a deposit previously paid by other would-be purchasers if the transaction did not close. However, Kandasamy would derive the benefit of a partial credit toward the purchase price if the transaction did close. This provision states:
DEPOSIT CLAUSE
Buyer represents that he has previously advanced the sum of $100,000.00 to Kopalsingam Jeykanth and Kasinathan Ravendra Kumar as deposit monies for their purchase of the Property herein pursuant to an Agreement of Purchase and Sale previously signed by them with the Seller. After all conditions were removed that transaction was not completed due to the inability of these Purchasers to produce the funds necessary to close that transaction. Seller represent that $50,000.000 at that amount is currently deposited with Homelife GTA Realty Inc. and $50,000.00 was paid directly to the Seller.
Seller us prepared to accept the sum of $100,000.00 so paid as a further deposit against the Purchase Price herein. Buyer confirms, acknowledges and agrees that he has no claim as against the Seller and no privity of contract with the Seller with respect to this deposit to be credited to this transaction, in the event this transaction does not close.
[8] The Agreement of Purchase and Sale further specified that time was of the essence and that any time limits may be extended by further agreement in writing.
[9] The Agreement of Purchase and Sale was conditional upon Kandasamy’s obtaining satisfactory financing by January 24, 2013. It required that Kandasamy must provide notice in writing that the condition had not been satisfied within the said time period, failing which the condition would be deemed to have been satisfied.
[10] The initial closing date was February 13, 2013.
[11] Although there are some typographical errors in the above provisions, their meanings can be easily discerned when read in context.
[12] No notice that the financing condition had not been satisfied was provided to Merseyside by Kandasamy. Accordingly, it was deemed by the contract that such condition had been satisfied.
[13] On February 12, 2013, Kandasamy’s solicitor wrote to Merseyside’s solicitor asking for an extension to March 4, 2013 to close. Merseyside agreed to extend the closing date to March 4, 2013, as requested.
[14] On February 26, 2013, Kandasamy advised his solicitor in writing that he had decided not to proceed with the closing of the transaction because he had not been able to secure financing. He instructed his counsel to try to recover the deposit paid which he expressly acknowledged in his correspondence was contractually non-refundable.
[15] On February 26, 2013, Kandasamy likewise advised the solicitor for Merseyside that he would not be able to close the deal. The transaction did not close as a result of Kandasamy’s default.
[16] Kandasamy’s solicitor wrote to counsel for Merseyside to advise that the persons who had originally agreed to arrange for funding for the purchase had backed out of the deal. As a result, Kandasamy was unable to arrange for the financing required to close the transaction and had decided not to proceed. A request was made for return of the deposit on ethical or compassionate grounds.
[17] Merseyside refused Kandasamy’s request to return the deposit and took the position that it was legally entitled it to retain the deposit pursuant to the Agreement of Purchase and Sale.
Issue: Is there any genuine issue raised that requires a trial?
[18] In Hryniak v. Mauldin 2014 SCC 7, the Supreme Court of Canada determined that a trial will not be required if a summary judgment motion can achieve a fair and just adjudication by providing a process that allows the motions judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.
[19] In my opinion, the facts and circumstances of this case are such that a fair and just adjudication can be made without resorting to the delay and expense of a trial.
[20] There is no disagreement that Kandasamy failed to complete the transaction and is thereby in breach of the Agreement of Purchase and Sale.
[21] Kandasamy disputes whether he agreed that the deposit would be forfeited upon his breach of the Agreement.
[22] Kandasamy further asserts that the principle of contra proferendum should apply to the interpretation of the deposit provisions of the Agreement of Purchase and Sale and he therefore should not be bound by them.
[23] Kandasamy also argues that the deposit provision amounts to a penalty and should not be enforced or given effect by this court.
[24] In order to resolve to issue of the deposit provision, the interpretation that would appear to promote or advance the true intent of the parties at the time of entry into the contract must be determined, looking at the contract as a whole.
[25] Evidence of the context of the contractual relationship may be considered to ensure that its interpretation is not commercially unreasonable. However, to the extent that the terms of the contract are clear and unambiguous, extrinsic evidence about the subjective intent of the parties is inadmissible.
[26] In this case, the $50,000 is clearly described in the agreement as a “Deposit.” While 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: Iyer v. Pleasant Developments Inc., 2006 CanLII 10223 (ON SCDC), 2006 Carswell Ont 2050 (Div. Ct.)).
[27] A deposit is, by its very nature, forfeited because deposits at common law are meant to secure the performance of a contract, and are distinguished from payments on account of the purchase price. Where a deposit is paid, there is an implied term that it the contract is not performed by the payor it should remain the property of the payee (see: De Palma v. Runnymeade, 1949 CanLII 73 (ON CA), [1950] O.R.1). The common law position is that if the agreement is silent and the purchaser defaults, the deposit, by its very nature, is forfeited to the vendor.
[28] Both parties are presumed to understand the legal implications of the terms chosen by the contract. The deposit clause, in fact, employed standard language. Counsel for Merseyside advised Kandasamy to get advice before entering into the contract and tendering a deposit, and Kandasamy did so.
[29] Further, the deposit clause in Schedule B is consistent with the forfeit of the $50,000 upon the purchaser’s breach. The Schedule B deposit clause deals with the $100,000 paid under a previous agreement with other parties and states that that amount will be applied to the purchase price as a “further deposit” against the purchase price and that the “Buyer confirms, acknowledges and agrees that he has no claim as against the seller and no privity of contract with the seller with respect to this deposit to be credited to this transaction, in the event this transaction does not close.”
[30] The Schedule B deposit clause therefore suggests that the parties understood the normal meaning of a deposit and is consistent with an interpretation of the contract which would require that the $50,000 be forfeited as a deposit in the event of Kandasamy’s breach of the agreement.
[31] Because the meaning of the relevant portions of the contract is clear and unambiguous, no recourse to the principle of contra proferendum is required. It is likewise not necessary to have recourse to any evidence outside of the four corners of the contract to reach this conclusion. Were that considered necessary, Kandasamy’s admissions of his understanding of what would happen to the $50,000.00 at the time of the breach would support the conclusion that he was well aware of his contractual obligations and the consequences of a breach by him.
[32] Kandasamy has not pleaded the equitable doctrine of relief from forfeiture in his Statement of Claim nor has he alleged therein that the deposit is a penalty. Merseyside submits that, even if he did so, no claim for relief from forfeiture could succeed.
[33] The Courts will award relief from forfeiture of the purchaser’s deposit only where it is established that the sum is out of all proportion to the losses suffered and that it would be unconscionable for the vendor to retain the money. Where these requirements are not made out, the Courts will allow the forfeiture of the deposit without an inquiry into the extent of the vendor’s damages (see: Iyer, supra).
[34] On these facts, Kandasamy cannot meet the onus required to establish an entitlement to relief from forfeiture. The deposit was proportional to the losses which the parties could expect that Merseyside would suffer, and did suffer, as a result of a breach. It is not unconscionable, or even unfair or unethical, for Merseyside to retain the deposit.
[35] Indeed, I consider that Merseyside’s retention of the deposit is the expected result of the failure of Kandasamy to close this commercial transaction.
Conclusion
[36] For these reasons, summary judgment in favour of Merseyside is granted. The action is dismissed.
Costs
[37] If the parties cannot agree on the subject of costs, written submissions may be delivered by Merseyside within 20 days of the date of release of this decision, and by Kandasamy within 15 days thereafter.
STEWART J.
Released: April 8, 2016
CITATION: Kandasamy v. Merseyside Holdings Ltd., 2016 ONSC 2205
COURT FILE NO.: 14-517503
DATE: 20160408
ONTARIO
SUPERIOR COURT OF JUSTICE
THAVACHELVAM KANDASAMY
Plaintiff
– and –
MERSEYSIDE HOLDINGS LTD. and
BRYON C. COHEN
Defendants
ENDORSEMENT
Stewart J.
Released: April 8, 2016