Reddy v. 1945086 Ontario Inc., 2019 ONSC 2554
Decision Date: April 29, 2019
The applicants are 605 people who entered into Agreements of Purchase and Sale with the defendants in 2016 to purchase units in the as-yet unbuilt Cosmos Towers. The Agreements contained a provision permitting certain types of early termination of the contracts. (These provisions are required by law.) One permitted reason for termination of the contract is the failure of the vendor to secure financing on satisfactory terms. The vendor must agree to “take all commercially reasonable steps within its power” to satisfy the early termination conditions. The Agreements also contained a Proviso that the vendor has the sole and absolute discretion regarding termination conditions. In 2018 the defendants informed the applicants that the Cosmos Towers projects had been cancelled because they couldn’t secure funding. All of the deposits made by the purchasers were refunded.
Justice Penny noted that the reasonableness and good faith of the defendants with regard to securing satisfactory financing were not in question. The applicants argue that 1) the defendants had no right to claim for themselves absolute discretion over the termination conditions in the Proviso; 2) that the termination was therefore a breach of contract; and 3) that they are entitled to damages. Justice Penny provided a number of arguments for why the correct interpretation of the Proviso was that the vendor did in fact have the right to terminate the project if they could not secure funding despite having taken all reasonable efforts. Therefore the termination was not a breach of contract and the applicants are not entitled to damages.
Comment: Justice Penny noted that such early termination conditions protect purchasers from being involved in projects that are insufficiently funded and at risk of failure.
About the image: Photo by Markus Schriebl. https://commons.wikimedia.org/wiki/File:Cosmos-Fohnsdorf.jpg#/media/File:Cosmos-Fohnsdorf.jpg