What Happens to a Deposit When a Purchaser Defaults on a Contract of Purchase and Sale?

A deposit is a common feature in contracts of purchase and sale, particularly in real estate transactions. It serves as a demonstration of the purchaser’s commitment to complete the transaction and provides the seller with a measure of security. But what happens to the deposit if the purchaser fails to fulfill their obligations under the contract?

Purpose of the Deposit

The deposit is typically paid by the purchaser at the time the contract is signed or shortly thereafter. Its primary purpose is to secure the purchaser’s performance and to compensate the seller in the event of a default. The deposit is usually held in trust by a third party, such as a real estate brokerage or lawyer, until the transaction is completed or terminated.

Default by the Purchaser

A purchaser is considered to be in default if they fail to complete the transaction as required by the contract. The most common default is the failure to pay the balance of the purchase price on the closing date. Other defaults may include failing to provide required documentation, breaching warranties, or not satisfying condition precedent.

Forfeiture of the Deposit

When a purchaser defaults, the fate of the deposit depends on the terms of the contract and the applicable law. In most cases, the seller is entitled to retain the deposit as liquidated damages. Courts generally uphold the forfeiture of a reasonable deposit, recognizing it as a genuine pre-estimate of the seller’s damages resulting from the purchaser’s breach.

However, if the deposit is disproportionately large relative to the purchase price, a court may find it to be a penalty and refuse to enforce its forfeiture. The key consideration is whether the deposit amount is reasonable in light of the anticipated loss from a default.

Deposit as Liquidated Damages

The deposit is often characterized as “liquidated damages,” meaning it is intended to represent the damages the seller would suffer if the purchaser fails to complete the transaction. If the seller accepts the deposit as liquidated damages, they may be precluded from pursuing further damages unless the contract expressly allows for additional recovery.

Seller’s Right to Additional Damages

If the seller’s actual losses exceed the amount of the deposit, and the contract does not limit the seller’s remedy to forfeiture of the deposit, the seller may seek additional damages. These damages are typically calculated as the difference between the contract price and the resale price, plus any consequential losses directly attributable to the purchaser’s default.

Return of the Deposit

In some circumstances, the purchaser may be entitled to the return of the deposit. For example, if the contract is terminated due to the seller’s default, or if a condition precedent in the contract is not satisfied through no fault of the purchaser, the deposit is typically returned.

Practical Considerations

The contract should be carefully reviewed to determine the specific terms governing the deposit and the consequences of default.

The deposit is usually held in trust and cannot be released to the seller without the written consent of both parties or a court order.

Disputes over the deposit may require negotiation, mediation, or litigation to resolve.

Conclusion

When a purchaser defaults on a contract of purchase and sale, the deposit is generally forfeited to the seller as liquidated damages, provided the amount is reasonable and the contract so provides. The specific outcome will depend on the terms of the contract and the circumstances of the default. Both parties should ensure they understand their rights and obligations regarding the deposit before entering into a contract of purchase and sale.

If you are currently involved in a dispute pertaining to the return of deposit, you should reach out to me at suppal@mcquarrie.com.

Prepared by,

Sunny Uppal

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Issue estoppel is a legal doctrine which can stop a legal proceeding dead in its tracks due to an issue in the legal proceeding having previously been decided by an administrative tribunal. For issue estoppel to apply, a party must establish the following preconditions:^[1]

a) The issue is the same as an issue decided in a prior “judicial decision;”
b) The prior “judicial decision” was final; and
c) The parties to the administrative tribunal proceeding and the court proceeding are the same, or their privies.

Notwithstanding the above preconditions being satisfied, the Court may still decide not to apply the doctrine of issue estoppel (thereby allowing an individual to relitigate an issue that was previously decided in an administrative tribunal hearing) if it determines relitigating the issue is in the “interest of justice.”^[2]

This article will briefly explain the preconditions that must be satisfied for the doctrine of issue estoppel to apply and when a Court will decide to exercise its discretion to not apply the doctrine of issue estoppel.  Importantly, this article relates only to the doctrine of issue estoppel as it applies to previous administrative decisions; different considerations come into play when it comes to previous court decisions.

a) The issue is the same as an issue decided in a prior “judicial decision”

The first precondition that must be satisfied for the doctrine of issue estoppel to apply is that the issue before the Court must be the same as an issue having been previously decided in a prior judicial decision. The type of “issues” which may trigger the application of the doctrine of issue estoppel are the legal conclusions and the findings of fact (and the findings of mixed fact and law) made in the previous judicial decision which were “fundamental” to the previous judicial decision. Courts have interpreted the term “fundamental” to mean necessary to arrive at the previous judicial decision.^[3]

b) The prior judicial decision is final

The second precondition that must be satisfied to trigger the application of the doctrine of issue estoppel is that the previous decision was a final judicial decision. The court will consider a prior decision to have been “judicial” when:^[4]

• The decision was made by a body capable of receiving and exercising adjudicative authority;
• The decision was required to be made in a judicial manner; and
• The decision was in fact made in a judicial manner.

A decision that is made in a “judicial manner” is a decision which is reached through making findings of fact and applying an objective legal standard to those facts.^[5]

c) The parties to both proceedings must be the same, or their privies

The third precondition that must be satisfied to trigger the application of the doctrine of issue estoppel is that the parties to the current proceeding, or their privies, must be the same as those in the previous administrative tribunal decision.^[6]

Judicial Discretion

If the court determines the three preconditions of the doctrine of issue estoppel have been satisfied, the court will then decide whether the doctrine of issue estoppel ought to be applied or whether its application will give rise to an injustice. In assessing whether the application of the doctrine of issue estoppel will amount to an injustice, the court will often consider the following factors: ^[7]

• The limits on awards that the administrative body could make;
• Whether the statute granting the administrative body authority shows legislative intent to preclude civil action;
• The purpose of the administrative proceeding, including the effect that allowing a judicial body to rehear an administrative proceeding would have on the quick and inexpensive route that most administrative proceedings aim to offer;
• The convenience of hearing all of the party’s claim in one proceeding;
• The procedural differences between the administrative body and the court (i.e. discovery or cross-examination rights);
• The availability of an appeal; and
• The circumstances giving rise to the prior administrative proceedings (e.g., whether the party was vulnerable at the time of commencing the administrative proceeding).

Conclusion

In conclusion, the doctrine of issue estoppel is a legal doctrine which may prevent an individual from bringing a lawsuit against you. The doctrine of issue estoppel is triggered when (1) the issue is the same as an issue decided in a prior “judicial decision,” (2) the “judicial decision” was final; and (3) the parties to the administrative tribunal proceeding, or their privies, and the court proceeding are the same. Notwithstanding these preconditions having been satisfied, the Court may exercise its discretion to not apply the doctrine of issue estoppel if it determines that it is in the “interests of justice” that the issue be relitigated.

Need Help With Your Legal Claim?

If you’re facing a legal dispute and need guidance on issue estoppel, tribunal decisions, or litigation strategy, our experienced team is here to help. Contact us today to discuss your case and explore your options for resolution.

[1] Toronto (City) v. CUPE, Local 79, 2003 SCC 63 at para. 23.
[2] Danyluk v. Ainsworth Technologies, 2001 SCC 44 at para. 33.
[3] Danyluk v. Ainsworth Technologies, 2001 SCC 44 at para. 24.
[4] Danyluk v. Ainsworth Technologies, 2001 SCC 44 at para. 35.
[5] Metropolitan Toronto Condominium Corp No. 1352 v. Newport Beach Development Inc., 2012 ONCA 840 (CA) at para. 4.
[6] Toronto (City) v. CUPE, Local 79, 2003 SCC 63 at para. 23.
[7] Danyluk v. Ainsworth Technologies, 2001 SCC 44 at paras. 64-81.

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post Does a tribunal determination prevent someone from successfully suing you? appeared first on McQuarrie Legal Services.

In a landmark decision, the BC Court of Appeal recently ruled in favor of a BC homeowner, whose claim for an insurance payout was initially denied due to his legal cultivation of medicinal marijuana. This was made possible by the efforts of Sepideh, Partner at McQuarrie, who represented the homeowner throughout the legal battle.

The Background

In 2017, the homeowners’ home in Peachland, BC, was destroyed by an accidental kitchen fire. While the cause of the fire was undisputed—an accidental kitchen mishap—the issue arose when Gore Mutual Insurance Co. discovered that the homeowner had been legally growing medicinal marijuana in his home under a Federally regulated license. Despite the fact that the fire had no causal connection to the marijuana cultivation, the insurer refused to pay out the claim, citing exclusionary language in the policy which Gore Mutual argued permitted them to deny coverage for properties used for the cultivation of marijuana.

The Legal Challenge

In 2021, the BC Supreme Court sided with Gore Mutual. The trial judge agreed with Gore Mutual, upholding the policy’s exclusion clause that denied coverage for the fire because the homeowner was cultivating marijuana, even though the cultivation had no connection to the fire. The judge acknowledged that this outcome might seem harsh but still interpreted to the exclusionary  language to Gore Mutuals advantage, and applied in a similar Ontario Court of Appeal case where similar exclusionary language was considered.

Sepideh argued that the exclusion clause should not apply in this case because the marijuana cultivation did not cause the fire, and it was entirely legal under Canadian law. In particular, Sepideh emphasized that the homeowners’ cultivation was permitted by his federally regulated Health Canada license, allowing him to grow marijuana for medicinal purposes. Lastly, the Court of Appeal accepted that the homeowners’ circumstances permitted the court to exercise its discretion to excuse imperfect compliance with a contractual term where the strict application would create unjust and inequitable results. With this solid legal grounding, she appealed the decision to the BC Court of Appeal.

The Appeal Court’s Ruling

The BC Court of Appeal ruled in the homeowners’ favor, reversing the trial judges’ decision. The Court of Appeal found that the BC Supreme Court judge had erred in applying the exclusion clause, by concluding that it was unambiguous, therefore she was not required to resort to principles of contractual interpretation and that the exclusionary language encompassed legal marijuana activity and not considered unjust or unreasonable.  Justice Janet Winteringham, on behalf of the three-judge panel, agreed with the homeowner that the exclusion clause was ambiguous therefore requiring the court to apply the exclusion as narrowly as possible.

In delivering this judgment, the BC Court of Appeal effectively clarified that where clauses in an insurance contract are ambiguous, the ambiguity must be resolved against the insurer as the party who has the benefit of drafting the policy. After all, if an insurer wishes to narrow coverage, they are free to do so. Further, the court reminded the industry that legislation in British Columbia permits a court the power to protect the public from the loss of an interest or right due to a condition or agreement in contract. The court cited the Supreme Court of Canada where the courts held that they must look at whether the outcome of applying unjust or unreasonable insurance conditions would create an unfair or inequitable result.

Defending Rights in Insurance Disputes

Throughout the case, Sepideh’s expertise in navigating insurance law proved invaluable. With her extensive background in challenging insurance providers on behalf of plaintiffs, she has consistently demonstrated a strong commitment to ensuring that clients receive fair treatment. Whether it involves disputing life insurance denials, long-term disability coverage issues, or fire loss claims, Sepideh is known for her determination to represent individuals against unfair exclusionary clauses.

Her success in this case further solidifies her reputation as a trusted advocate for clients dealing with complex insurance matters. Sepideh is particularly focused on protecting the rights of those whose claims are unjustly denied, and her work in this case was a crucial step toward ensuring that insurers cannot deny coverage simply because of legal marijuana use.

The Broader Implications

This case sets an important precedent for the future of insurance claims involving legal marijuana cultivation. As marijuana continues to become more accepted in Canada, it is essential that the legal system reflects the changing landscape, ensuring that policyholders are not unfairly penalized for engaging in legally protected activities. This decision could have wide-reaching implications, prompting a re-evaluation of exclusion clauses in insurance policies that might inadvertently penalize individuals for legal activities.

Moreover, the ruling emphasizes the importance of having skilled legal counsel to challenge unfair insurance practices. As an advocate for fairness, Sepideh continues to lead the charge in ensuring that clients’ rights are protected, regardless of the complexities of their case.

Looking Ahead

For the homeowner, this victory marks the beginning of a much-needed resolution after years of legal battles. While it is still uncertain whether the insurer will seek further appeals, the BC Court of Appeal’s decision is a powerful statement in favor of policyholders who face unfair exclusions due to legal marijuana cultivation.

As the legal landscape continues to evolve, Sepideh and her team at McQuarrie remain committed to fighting for the rights of individuals who deserve fair treatment from their insurance providers. Whether you are dealing with an insurance claim denial or other complex legal issues, Sepideh and the McQuarrie team are here to provide guidance and advocacy.

Need Help with an Insurance Dispute?

If you’re facing an insurance claim denial or need legal guidance on a complex insurance matter, Sepideh and our team at McQuarrie are here to help. With extensive experience in challenging exclusion clauses and advocating for clients against major insurance providers, we can guide you through every step of the process.

Get in touch with us today to schedule a consultation and learn how we can assist with your case.

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post BC Homeowner Wins Appeal After Insurance Denied Payout Over Legal Marijuana Cultivation: Led by Sepideh at McQuarrie appeared first on McQuarrie Legal Services.

Default Judgements

On occasion, our client may be lucky and the opposing party (who has been properly served) has failed to file and serve a response to the claim within the time allotted.^[1] Even luckier if the opposing party willfully and deliberately failed to file a defense, took an excessive amount of time to file a response, and/or never had a claim worth investigating in the first place.^[2]

The defendant has essentially accepted the claim against them, for the debt owed or assets to be transferred. However, if this step requires any form of investigation, even though judgement has been made, the file becomes more complex as it is now an issue regarding damages, which falls under the jurisdiction of a Judge and not a Registrar.

Therefore, even before a claim is made, it is key to determine exactly what the client is looking for as there are several pitfalls that can prevent a default judgement from being obtained.

Liquidated Claims

As per Rule 3-8(3) of the SCCR, default judgement is available for claims against a defendant for a recovery of money in an ascertainable or specified amount, and can only be for the amount claimed, the interest, if any, and costs. This can extend to third parties as well, with the same limitations.

The operative test as to what constitutes a liquidated demand is expressed in Standard Oil Co. of B.C. Ltd. v. Wood (1964)^[3]:

“A liquidated demand in the nature of a debt, i.e., a specific sum of money due and payable under or by virtue of a contract. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation, beyond mere calculation, then the sum is not a ‘debt or liquidated demand,’ but constitutes ‘damages.’

Therefore, a liquidated demand only if it is a “specific sum” which is either “already ascertained or capable of being ascertained as a mere matter of arithmetic”.^[4]

Therefore, default judgements can only be allowed for cases where the debt that is easily determined by simple arithmetic, as in for the completion of a simple contract.

An example of arithmetic in a default judgement can be one where $100,000 were provided as per a contract, and only 1000 square feet of tiles priced at $8 per a square foot was provided, and the project was not completed, therefore the remaining $92,000 is due and owing. Anything more complex than this would place this claim under the jurisdiction of a judge.

As per Rule 3-8(4), the definition of a liquidated amount also extends to interest, as interest is purely a mathematical calculation on the original debt owing as it is ascertainable and specified, usually as a percentage calculation. It is good practice to include a claim for interest under the Court Order Interest Act^[5] when there was no interest defined in the contract between the parties.

Other Claims

Issues arise when trying to obtain a default judgement for unliquidated claims, these are amounts that are not fixed by an account, nor ones ascertained by a simple calculation. Tort claims pleading non-pecuniary damages for “pain, suffering, loss of enjoyment of life and loss of amenities,^[6]” damage to property, punitive (punishment for wrongdoing) cannot be secured with a default judgment alone and the plaintiff must prove their claim for damages.^[7]

If the claim against a defendant is neither specified nor ascertainable at the time of the claim, under Rule 3-8(5) the plaintiff may still obtain a default judgement against the defendant. However, when a client is asserting claims and requesting these sorts of damages in their pleadings, it is key to inform the client that the process will be longer, because even if the judgement has been obtained, an Assessment of Damages would be required.^[8]

The Assessment may include expert evidence, witnesses, and documentary evidence. It is exceedingly rare for general damages to be awarded for inconvenience, mental distress or punitive damages in contract cases outside of insurance, employment and intellectual property cases where these sorts of damages can be demonstrably justified.^[9]

As per Rule 3-8(6) of the SCCR, the plaintiff’s claim with respect to a default judgment can also include detention of goods, require the delivery of the goods, have the value of the goods be assessed at a later date, and costs. As the value of the goods can be ascertained (even if it has to be a later date), they are treated as liquidated assets and under the jurisdiction of a Registrar to allow a default judgement. Shares of a company may appear to be assets that can be detained, however their actual value would also have to be assessed prior to the payment order being made.

It is important to inform the client of these additional steps, and the time and money that might be required to complete a claim. If the client is already tight on funds, the assessment process can extend the claim into the years.

It is also important to take note if the claim pleads damages in a liquidated amount and makes an alternative claim for damages in an unliquidated amount, default judgment could still be available for the liquidated amount.^[10] You may still obtain default judgment on a claim for the money that is in a specific ascertainable amount, and the SCCR do not preclude a party from doing so where the claim is coupled with a claim in the alternative. In the case of Global, the amounts held as security in the court that was determined to be ascertained were released on default judgement, however the amounts that required further assessment remained in the courts.^[11]

As stated by Justice Weatherill in Interior Lumbermen’s Pension Plan (Trustees of) v. Moore, 2016 BCSC 89:

“Where the former rule referred to a claim “solely for recovery of a debt or liquidated demand”, Rule 3-8(3) refers to an action that “includes a claim for recovery of money in a specified or ascertainable amount”. The language in the old rule is exclusive; the language in Rule 3-8(3) is inclusive.”

Third-Party Claims

A defendant may commence a third party proceeding against any person, whether or not that person is a party to the action, if the party alleges one or more of the matters set out in SCCR 3-5(1):

a) The party is entitled to contribution or indemnity from the third party;

b) The party is entitled to any relief against the third party relating to or connected with the original subject matter of the action; or

c) A question or issue relating to or connected with any relief claimed in the action, or with the original subject matter of the action, is substantially the same question or issue as between the party and the third party and should properly be determined in the action.

If the defending third party, who have been provided a third-party notice, does not file a response to the notice within 42 days after being served, the party that issued the third-party notice can apply for default judgment as per Rule 3-5(16) of the SCCR.

Default judgment against third parties are given the same reverence as those against a defendant, and can be struck out if there is a meritorious defence.^[12]

Need Help With Your Legal Claim?

If you’re navigating a legal claim and aren’t sure if you qualify for a default judgment—or if you’re facing complications with liquidated or unliquidated claims—reach out to us today. Our experienced legal team can help you assess your case, explain your options, and guide you through the process to ensure the best possible outcome.

Contact us now to schedule a consultation and get the legal support you need.

[1] Rule 3-8(1), Supreme Court Civil Rules (the “SCCR”).
[2] Miracle Feeds v. D. & H. Enterprises Ltd. (1979), 10 B.C.L.R. 58 (B.C. Co. Ct.) at 61
[3] Standard Oil Co. of B.C. Ltd. v. Wood (1964)47 W.W.R. 494 at p. 497 (B.C. Co Ct.), cited in Busnex Business Exchange Ltd. v. Canadian Medical Legacy Corp., 1999 BCCA 7, para 8 (“Busex”).
[4] Busex, para 9.
[5] (RSBC 1996) Chapter 79.
[6] Jackson v. Lai, 2007 BCSC 1023 (B.C. S.C.) at para. 134.
[7] Besic v Kerenyi, 2011 BCSC 1277 at para 7.
[8] Rule 3-8(12),(13) of the SCCR.
[9] Evocation Publishing Corp v Hamilton, 2002 BCSC 1797.
[10] Global Fleet Management Inc. v. Deltaura Canada Inc., 2020 BCSC 1938 (“Global”).
[11] Global para 16.
[12] Crosato v. George (1984), 6 C.C.L.I. 316 (B.C. S.C.).

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post Default judgment for a liquidated claim, other claims, third-party claims, and the test on each appeared first on McQuarrie Legal Services.

There are frequent situations where purchasers and sellers get cold feet and may not want to complete a contract. Time is often of the essence in these agreements, and when an agent for the seller or the buyer fails to properly assign the contract before the completion date, the other party may have grounds to rescind the contract. This can lead to significant legal disputes.

Background:

In the context of real property transactions, it is common practice that parties entering into a contract may be required to provide an assignment of contract in certain circumstances, particularly when there are obligations to transfer property interests. When a contract stipulates that time is of the essence, the timely provision of necessary documents—such as an assignment of contract—becomes critical for the completion of the transaction.

In any scenario, where the party (or the party’s representatives) fail to provide the required assignment of contract prior to the completion date, the opposite party can, as a result, assert that the contract is terminated. The failure to provide the assignment within the prescribed timeframe could be considered a material breach of the contract.

Key Legal Considerations:

A. Time is of the Essence

The contractual terms explicitly provided that “time is of the essence,” meaning that any delay in fulfilling obligations, such as the provision of the assignment of contract, can result in a breach. When time is of the essence, failure to meet deadlines specified in the agreement often gives the non-breaching party the right to terminate the contract or seek other legal remedies. This principle is well-established in case law and acts as a strict condition precedent in performance-based agreements.

In Samra Bros. Roofing & Insulation Ltd. v. Funk,1995 CarswellBC 253 (BCCA) at para. 20, the court made note of the essentiality of time in standard contracts of purchase and sale, and held that

The rule that when time is of the essence of a contract, a breach of a time clause is a breach of a condition of that contract, is subject to at least two exceptions:

(a) it does not apply when the party seeking to enforce the time clause contributed to its breach…; [and]

(b) it does not apply when there has been a change of the completion date after the execution of the contract and that and the other circumstances of the case make it unconscionable for the party seeking to enforce the time condition from doing so.

Court further noted that the more general rule is that a party to a real estate contract who acts in bad faith when performing the contract cannot benefit from having so acted.

B. Privity of Contract

I. Failure to Provide Assignment of Contract:

The contract [of purchase and sale] requires the seller to provide an assignment of contract prior to the completion date. Despite this contractual obligation, where the seller or the buyer fails to deliver the assignment in a timely manner, and as the assignment is a critical component of the overall transaction, this failure constitutes a fundamental breach of the terms of the contract. In cases where a party to the contract fails to perform a fundamental obligation, the other party may terminate the agreement.

Gupta v. Gill, 2024 BCSC 193, is a key case that highlights the issue of privity of contract in real estate transactions. In this case, the court addressed the assignment of a purchase contract to a corporate defendant and ruled that there was no “privity of contract” between the vendor and the assignee. As a result, the court dismissed the claim against the assignee. Since the assignee was not a party to the original contract, the court found it unjust to allow the corporate defendant assignee to be included in the litigation.

In British Columbia, it is well-established that if a party seeks to pursue a claim directly against the assignee—whether a corporation or an individual—and the assignee did not sign the Contract of Purchase and Sale, no privity of contract exists between the party and the assignee. As a result, any claim made against the assignee in such circumstances is likely to be dismissed.

Similarly, in Main Acquisitions Consultants Inc. v. Prior Properties Inc., 2021 BCSC 1449, the court affirmed that the failure of agents to properly assign the contract can impact the enforceability of the agreement. The court emphasized that without a perfected assignment, a party that is not in privity with the original contract cannot claim performance or pursue legal action against the vendor

In the recent case of Bene (Oval) Development Ltd. v. 1148538 B.C. Ltd., 2024 BCSC 2080, the Court addressed the issue of improper assignment of contractual rights and its effect on contract enforceability. The case highlights that when the conduct of the parties, including claims and counterclaims, creates uncertainty due to improper assignment, the courts may void the contract. The court’s analysis of whether the contract was void for uncertainty underscores the significant implications of failing to properly assign interests before the completion date.

II. Oral vs. Written Assignment of Your Contract: What You Need to Know?

In real estate transactions, one critical issue that can arise is the assignment of contract—specifically, whether it can be done orally or must be documented in writing. Can you assign your contract to a third party, such as family members or friends, through an oral agreement (also known as an “equitable assignment”), or does the assignment need to be formalized in writing (a “statutory assignment” under the Law and Equity Act, RSBC 1996 c. 253) with express notice given to the seller?

In British Columbia, the courts have generally been flexible, allowing for oral, written, or even partially oral assignments, but they stress the importance of following the express terms outlined in the contract, especially when it comes to notifying the seller. Understanding these nuances is vital when drafting a Contract for Purchase and Sale to avoid the costly and often unnecessary pitfalls of litigation.

In the case of Rakhra v. Jhutty, 2012 BCSC 882,the court held that the lack of proper notice rendered the assignment unenforceable, which is directly applicable to situations where agents fail to properly assign contracts before completion. The Court stressed on a written notice in this because the Contract itself required that from the parties. Therefore, buyer in this case could not have made an equitable (“oral”) or statutory assignment without a clear written notice to the seller. This case underscores the necessity of express written notice to the vendor for a valid assignment under s. 36(1) of the Law and Equity Act.

However, the court also clarified that if the seller receives notice in writing, their consent is not necessary for the assignment to be valid. In such cases, providing timely written notice before the completion date would eliminate the need for seller approval.

You can also give a notice of waiver to do away with the requirement of a written notice to the Seller. For a waiver to be effective, the waiving party must have both full knowledge of its rights and an unequivocal and conscious intention to abandon those rights: Dunn v. Vicars, 2009 BCCA 477 (B.C. C.A.) at para. 45.

On the other hand, the Court, in Gauraya v. Kalia, 2019 BCCA 367, gave effect to a verbal/oral assignment by the Buyer even when no notice was given to the Seller. The Court relied on the express terms of the Contract for Purchase and Sale to hold that the assignment of the Buyer right to purchase of the property was ana equitable assignment within common law and thus, valid between the assignor and assignees. The provisions of the Law and Equity Act did not override the expectations of the parties expressed in their agreement. This was due to the following provision in the contract that allowed the buyer to assign the contract without further notice to the seller, demonstrating how careful contract drafting can avoid disputes over assignment:

The Buyer reserves the right to assign this contract in whole or in part to any third party without further notice to the Seller.

Ultimately, whether you’re buying or selling real property, it’s wise to consult a lawyer to ensure your Contract for Purchase and Sale is legally sound and to prevent any future issues related to contract assignment.

Conclusion

In numerous cases, courts have held that a material breach of an agreement (such as the failure to provide a necessary assignment or document) can result in the termination of the contract, especially where time is of the essence. The non-breaching party is typically entitled to treat the contract as void and may seek damages for any losses suffered as a result of the breach.

If you’re navigating a real estate transaction and facing issues around the assignment of contract, it’s essential to understand your rights and remedies. Failure to meet time-sensitive obligations can have significant consequences for both parties involved, and legal precedents support the notion that a breach of assignment requirements can lead to contract termination.

Ensuring your contract is airtight is key to avoiding unnecessary headaches. Seeking professional legal advice can help you navigate potential pitfalls and secure a smooth transaction.

If you need help navigating the process or have other legal questions, our team is here to assist you on your case. Reach out today for professional legal advice tailored to your situation.

📞 Contact us today at 604.581.7001 to schedule a consultation.

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post Can a purchaser rescind a Contract of Purchase and Sale if the contract is not properly assigned by the either party before the completion date? appeared first on McQuarrie Legal Services.

In legal proceedings, personal service is the standard way of notifying someone about a legal action. However, what happens when personal service becomes impossible or impractical? This is where substituted service comes into play. Under SCCR Rule 4-4(1), parties can seek alternative methods of service when personal service is either impracticable or when the individual being served is intentionally evading service. But how do you prove that these conditions are met?

In this blog post, we’ll break down what you need to show to successfully obtain a court order for substituted service, and explore the legal principles and case law that guide this process.

What Is Substituted Service?

Substituted service is a legal alternative to personal service, where the court allows a different method of serving legal documents. According to SCCR Rule 4-4(1), substituted service may be granted when:

1. Personal service is impracticable, or
2. The person to be served is evading service.

This rule allows for flexibility, but the court needs sufficient evidence to justify this alternative. Let’s take a deeper look at both scenarios.

1. Proving Impracticability of Personal Service

Under SCCR Rule 4-4(1)(a), if personal service is impracticable due to the party being hard to find or difficult to locate after diligent efforts, substituted service may be ordered. To convince the court that personal service is impracticable, you must provide clear evidence that:

Steps to Prove Impracticability:

• Process Server Attempts: Show that the process server made reasonable and documented efforts to locate and serve the individual. This should include when and where the attempts were made.
• Multiple Attempts: Document at least two or more distinct, non-cursory attempts to serve the individual. Simply knocking on the door once won’t suffice; the attempts must be meaningful and persistent.
• Title Search: If the individual resides at a particular address or owns property, conduct a title search to gather information that can support your efforts to locate them.
• Likelihood of Success: Demonstrate that alternative methods, such as service by email or posting to the individual’s residence, are likely to succeed.
• Excessive Costs: If personal service is excessively costly, this should be clearly shown. For example, serving a foreign defendant may incur significant costs that justify requesting substituted service.

Precedents for Impracticability:

• Chana v. Niwa (2023 BCSC 200): The court allowed substituted service via the defendant’s Facebook wall after multiple attempts to serve documents at their last known address.
• De Carvalho v. Zhang (2021 BCSC 2117): In this case, service by traditional means was impractical due to the defendant’s outdated address in China. The court allowed service through WeChat, a commonly used social media platform.
• R. v. P.R.T.W. (2021 BCPC 374): After several attempts by the process server, the court permitted service via priority post and email instead of personal service.
• Zhange Estate v. Yin (2024 BCSC 1164): The court allowed substituted service via email, citing the defendant’s extended absence from the region and their prior involvement in the action.

2. Proving Evasion of Service

Another ground for substituted service is when the party to be served is intentionally avoiding service, as per SCCR Rule 4-4(1)(b). To demonstrate this, you must show that the person being served is aware they are being served but is intentionally evading it.

Steps to Prove Evasion:

• Awareness & Avoidance: Evidence must show that the person being served was aware of the service attempts and purposefully avoided them. For example, if they failed to answer the door when the process server arrived, or they intentionally missed service at times they would likely be home.
• Circumstantial Evidence: Evasion can often be inferred through actions like walking away when seeing someone they don’t recognize outside their home. A direct admission of evasion is not necessary; circumstantial evidence is sufficient.
• Patterns of Evasion: If there is a consistent pattern of evasion, such as repeatedly being absent at reasonable times when the process server arrives, this will help support the claim of evasion.

Precedents for Evasion:

• Re Application 20240726 (2024 CarswellBC 3194): The court confirmed that evasion does not require direct admission. Circumstantial evidence, like walking away when the process server is in the area, can be enough to prove evasion.
• McKinley v. Law Society of British Columbia (2018 CarswellBC 4089): A lawyer’s refusal to cooperate with service was deemed as evasion. The court held that her actions amounted to deliberately avoiding service.

Key Takeaways: Evidence is Key

Whether you are proving impracticability or evasion of service, it is essential to provide documented evidence of your efforts. This might include:

• Detailed affidavits from process servers describing when and where attempts were made.
• Documentation of a title search to demonstrate efforts to locate the person.
• Clear evidence showing that alternative service methods (like email or social media) are likely to succeed.
• Proof that service costs are excessive, especially for foreign parties.

Without sufficient evidence, the court may not grant a substituted service order.

Conclusion

Substituted service offers a valuable solution when personal service is impossible or impractical. However, to secure an order for substituted service under SCCR Rule 4-4(1), you must be able to demonstrate either the impracticability of personal service or the evasion of service. With the right evidence—ranging from process server attempts to patterns of evasion—you can present a strong case for why substituted service is necessary.

Need Assistance with Substituted Service?

If you need help navigating the process of substituted service or have other legal questions, our team is here to assist you on your case. Reach out today for professional legal advice tailored to your situation.

📞 Contact us today at 604.581.7001 to schedule a consultation.

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

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With over 30 years of invaluable legal experience, Rajdeep brings extensive experience to McQuarrie in the litigation aspects of real estate, commercial, corporate, insurance, foreclosure and construction.

Join us in welcoming Rajdeep and the wealth of experience he brings to our team.

To read Rajdeep’s biography, visit: Rajdeep S. Deol* – Teams – McQuarrie Legal Services

To connect with Rajdeep, feel free to use the contact form below:

The post Welcoming Rajdeep Deol to the Dispute Resolution & Litigation team at McQuarrie! appeared first on McQuarrie Legal Services.

Are you entitled to an order requiring the local government to immediately stop bylaw enforcement proceedings?

An abuse of process is a legal doctrine designed to prevent the misuse of the court’s procedures in a manner that is unfair to a party or brings the administration of justice into disrepute. This doctrine is flexible and can be applied in various contexts, including in the context of bylaw enforcement where the doctrine could potentially allow the court to order a local government to immediately stop bylaw enforcement proceedings.

In the context of local governments, the abuse of process doctrine is designed to prevent a local government from inflicting “abuse” against an individual (or a group of individuals). A local government’s conduct or processes may be considered “abusive” in situations where a fundamental principle of justice underlying the community’s sense of ‘fair play and decency’ has been violated or where the enforcement proceedings have become so ‘oppressive or vexatious’ that to continue the proceedings would harm the integrity of the administration of justice.^[1] This may occur when a local government has:^[2]  

• acted in bad faith or pursuant to an improper motive; or
• engaged in conduct that is so “exceptional in nature that it demands the local government explain itself.”

Generally speaking, there are two categories of “abuses” when it comes to the doctrine of abuse of process. These categories are as follows:^[3]

1. an abuse that compromises the fairness of an accused’s trial; or
2. an abuse that risks undermining the integrity of the judicial process.

Importantly, should an accused successfully establish that the local government has engaged in an abuse of process, the Court will then embark on an inquiry into the reasons underlying the local government’s abuse and require the local government to explain its conduct. If the local government fails to provide an explanation, an adverse inference may be drawn against the local government.^[4]

The logical questions that follow from the above are: (a) At what point, or in what circumstances, will a local government’s conduct, and/or a local government’s process, amount to an ‘abuse’ that triggers the doctrine of abuse of process and (b) when will the court order a local government to immediately stop bylaw enforcement proceedings.
 
a) At what point, or in what circumstances, will a local government’s conduct, and/or a local government’s process, amount to an ‘abuse’ that triggers the doctrine of abuse of process?

There is no legal test a Court will look to in determining whether an ‘abuse’ has occurred. Rather, the court will look at a host of potential factors. Prosecutorial misconduct and improper motivation are just two factors (instructive rather than determinative) the court will consider.^[5] The following are some circumstances in which the court may find that a local government has engaged in an abuse of process: 

• the local government commences a municipal prosecution to recover a civil debt;
• a bylaw officer engages in illegal conduct;
• the local government reneges on a consent plea order; and
• the local government deliberately destroys/hides evidence.

b) When will the court order a local government to immediately stop bylaw enforcement proceedings due to the local government’s abuse of process?

The court’s focus in abuse of process cases is to remedy the harm caused by the local government’s abuse. The court will only order that a local government immediately stop bylaw enforcement proceedings in the “clearest of cases.”^[6] The test the Court will use to determine whether a stay of proceedings is warranted in the circumstances is as follows:^[7]

1. there must be prejudice to the accused’s right to a fair trial, or the integrity of the justice system, that “will be manifested, perpetuated or aggravated” through the conduct of the trial, or its outcome;
2. there must be no alternative remedy capable of redressing the prejudice; and
3. where there is still uncertainty over whether a stay is warranted after steps 1) and 2), whether a balancing of the interests in favor of granting a stay (such as denouncing misconduct and preserving the integrity of the justice system) outweigh the interest that society has in having a final decision on the merits.

Conclusion

To summarize, if the Court finds that a local government’s conduct and/or local government processes have violated principles of fundamental justice (i.e. the community’s sense of fair play and decency, ‘oppressive or vexatious proceedings,’ etc.) and/or Charter guarantees (i.e. unreasonable delay, etc.), the court will determine the local government’s conduct amounts to an abuse of process. The local government will then need to justify its conduct. The court has various remedies available to it to remedy harm that has been caused by the local government’s abuse. Only in the “clearest of cases” will the court order that a local government immediately stop bylaw enforcement proceedings.

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[1] R v. Nixon, 2011 SCC 34.
[2] R. v. Delchev, 2015 CarswellOnt 7679.
[3] R v. Babos, 2014 SCC 16 at para. 31.
[4] R v. Delchev, 2015 CarswellOnt 7679 at para. 55.
[5] R v. Keyowksi, 1988 CarswellSaska 273 (S.C.C.) at para 3.; Canada (Attorney General) v. Barnaby, 2015 CarswellQue 3758 (S.C.C.).
[6] Canada (Minister of Citizenship & Immigration) v. Tobias, [1997] 3 S.C.R. 391 (S.C.C.); R v. Regan, 2002 SCC 12 at para. 17; R v. Berube, 2012 CarswellBC 2467 (B.C.C.A.).
[7] R v. Babos, 2014 SCC 16 (S.C.C.) at para. 32.

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While navigating and understanding your legal rights or responsibilities can feel overwhelming, the Dispute Resolution and Commercial Litigation Department at McQuarrie is here to help.

Please feel free to contact us with any questions or concerns you may have related to your legal rights.

The post Understanding Abuse of Process in the context of Bylaw Enforcement appeared first on McQuarrie Legal Services.

Ian has practiced law in Metro Vancouver for over 40 years. He specializes in corporate commercial work, both as a solicitor and as a litigator. He has developed expertise in construction litigation and personal injury work and established Kinman Mulholland, now Kinman & Associates, which operated out of New Westminster.

Ian Kinman was born in Nigeria in 1958. After living in Africa, he and his family moved to the United Kingdom. In 1966 the family moved to Saskatchewan, where Ian completed his Junior High. He went on to complete his High School in central Alberta; and thereafter attended college in Washington State and obtained a Bachelor of Arts in History. In 1983 Ian graduated with his Law Degree from the University of British Columbia.

His hobbies include travel, music, the Seattle Seahawks, and nature study, with an emphasis on bird watching. These interests have taken him to a wide variety of different places across the globe, including countries in Asia, Africa, Europe, and South Africa.

Join us in welcoming Ian to McQuarrie!

To read Ian’s biography, visit: https://beta.mcquarrie.com/teams/ian-kinman/

To connect with Ian, feel free to use the contact form below:

The post Welcoming Ian Kinman to the Commercial Litigation team at McQuarrie! appeared first on McQuarrie Legal Services.

In a world where a simple click can send your thoughts echoing through cyberspace, the power of sharing information—both good and bad—has never been greater. And as Aunt May said: “With great power there must also come great responsibility.”

Ever heard of defamation? It’s Teatime’s dark side. If you post something about someone else that tends to lower or harm their reputation in the eyes of “reasonable people” then that’s “defamatory.” Heads up: You can get sued for dishing the dirt.

Before you retreat to your digital cave, the courts have carved out exceptions or defenses to the tort of defamation in an effort to balance the right to freedom of expression with the undeniable value associated with our reputations. These defenses include justification (truth), fair comment, responsible communication, absolute privilege and qualified privilege.

Let’s talk about “qualified privilege.”

In certain circumstances of “qualified privilege” you can say/post otherwise defamatory statements about someone else. The British Columbia Supreme Court described qualified privilege as follows:

Qualified privilege is founded in the public interest to promote the giving and receiving of frank and uninhibited information from particular sources in circumstances where the public interest requires that free exchange…the privilege arises where the occasion is such that the community benefits from the fact that the communication may be freely made.^[1]

A “privileged occasion” has been defined by the courts as:

… an occasion where the person who makes a communication has an interest or a duty, legal, social or moral, to make it to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it. The reciprocity is essential.^[2]

Essentially, you need to prove that you had a solid reason to share the statement with the recipient and in turn, they had an interest in hearing it. However, your belief that you were duty-bound won’t cut it if it’s just you who believes it. As the British Columbia Supreme Court has indicated, the test is objective:

The issue is not whether the defendant had a right to make the communication or thought that he or she had a duty to make it, but rather whether a reasonable person would feel compelled by a duty to make the communication.^[3]

However, proving qualified privilege isn’t the end of it. If your tea was served with a heaping spoonful of malice (i.e., saying something out of spite, or where you knew the statements were false or were recklessly indifferent as to their truth), the law won’t be on your side.

As the Supreme Court of Canada has explained, the

…legal effect of the defence of qualified privilege is to rebut the inference, which normally arises from the publication of defamatory words, that they were spoken with malice. When the occasion is shown to be privileged, the bona fides of the defendant is presumed and the defendant is free to publish… However, the privilege is not absolute and can be defeated if the dominant motive for publishing the statement is actual or express malice.^[4]

Also, if you shared more than you needed to, the law won’t be on your side either. The Supreme Court of Canada used the case of Trucker v Douglas, [1952] 1 SCR 275 as an example where the defendant’s comments went beyond what was “germane and reasonably appropriate.”^[5]

Conclusion

With defamation claims, the truth isn’t always enough, and good intentions won’t save you if you overstep your boundaries. So, before you spill the tea or beans, think twice.

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^[1] B(P) v E (RV), 2007 BCSC 1568 at para 339 citing Sapiro v Leader Publishing Co (1926), 20 Sask LR 449 (SKCA). More recently cited in Dong v Hofer, 2018 BCSC 77 at para 92.

^[2] Hill v Church of Scientology of Toronto, [1995] 2 SCR 1130 at para 143 citing Adam v Ward, [1917] AC 309 (HL) at p 334.

^[3] B(P) v E (RV), 2007 BCSC 1568 at para 344 citing Halls v Mitchell, [1928] SCR 125 at 134.

^[4] Hill v Church of Scientology of Toronto, [1995] 2 SCR 1130 at para 144.

^[5] Hill v Church of Scientology of Toronto, [1995] 2 SCR 1130 at para 150.

While navigating and understanding your legal rights or responsibilities in the context of a defamation claim can feel overwhelming, the Dispute Resolution and Commercial Litigation Department at McQuarrie is here to help.

Please feel free to contact us with any questions or concerns you may have related to your defamation claim or defence.

The post Spilling the Tea: Defamation and the Defence of Qualified Privilege appeared first on McQuarrie Legal Services.