The appellants (sellers) appealed a decision granting the respondent (purchaser) rescission of an agreement of purchase and sale and return of the deposit.
The dispute concerned the interpretation of an illegal substances clause in a standard form Ontario Real Estate Association/Toronto Real Estate Board Agreement of Purchase and Sale.
The purchaser discovered after execution that the property had previously been used as a marijuana grow-operation and sought to terminate the agreement.
The application judge found the sellers had breached their representation and warranty in the clause.
The Court of Appeal reversed, holding that the sellers' representation and warranty regarding the property's prior use was limited to their knowledge and belief as it existed at the time of execution of the agreement, not at closing.
Since the sellers did not know about the prior use at execution, no breach occurred.
