Executive Summary: Key Legal and Evidentiary Issues

• Central dispute concerned whether the buyer's full deposit should be forfeited after breaching a real estate purchase agreement.

• The Agreement of Purchase and Sale was unconditional, placing full closing obligations on the buyer.

• Defendant conceded both breach and damages, narrowing the dispute to the balance of the deposit.

• Plaintiff claimed entitlement to entire deposit regardless of actual damages, based on settled common law principles.

• Defendant sought relief under s. 98 of the Courts of Justice Act, arguing forfeiture was excessive and unconscionable.

• Court applied the Stockloser test and found the forfeiture proportionate and not unconscionable, denying relief.

Facts and outcome of the case

The background and failed transaction

This case involves a failed real estate transaction between Arista Homes (Boxgrove Village) Inc. and Ding Ding. On September 6, 2016, Mr. Ding agreed to purchase a home located at 101 Luzon Avenue in Markham, Ontario, from Arista for a total price of $1,386,286.92. A deposit of $100,000 was paid, along with $7,280.68 for extras, totaling $107,280.68.

The Agreement of Purchase and Sale (APS) was firm, without any condition related to financing. The transaction was initially set to close on November 1, 2018, but was extended at Mr. Ding's request to November 30, 2018. Despite the extension, Mr. Ding failed to close the transaction on the new date.

Arista resold the property for $1,380,000, resulting in a direct loss of $6,286.92. When carrying and other incidental costs were included, the total loss reached $27,788.42. Mr. Ding acknowledged the breach and accepted Arista’s calculation of its damages. He also conceded that Arista was entitled to recoup this amount from the deposit.

The legal issue and parties' positions

The legal dispute turned on whether Arista was also entitled to retain the remaining $79,492.26 of the deposit beyond its actual losses. Arista moved for summary judgment, arguing that it was entitled to the full deposit under common law principles, which permit a seller to retain a deposit when a buyer defaults on a property transaction.

Mr. Ding opposed, relying on section 98 of the Courts of Justice Act to seek relief from forfeiture. He argued that allowing Arista to keep the full deposit would constitute a windfall. He proposed that the excess deposit should be used to pay legal fees and any accrued interest, with the rest refunded to him.

The court's analysis and conclusion

Justice A.A. Casullo heard the summary judgment motion and determined that the matter was suitable for resolution without a full trial. The court applied the two-part test from Stockloser v. Johnson, asking (1) whether the forfeited sum was out of proportion to the damages, and (2) whether its retention would be unconscionable.

On the first question, the court found that the deposit, representing 7.7% of the purchase price, was within a reasonable range when compared to previous decisions that upheld deposits of up to 25%. Since Mr. Ding's actual losses were relatively minor, the court considered proportionality in terms of purchase price rather than damages and concluded the deposit was not excessive.

Regarding unconscionability, the court noted that Mr. Ding was not vulnerable, was professionally sophisticated, had legal representation, and actively engaged in negotiations. There was no inequality of bargaining power or misleading conduct by Arista. The facts did not meet the high threshold of unconscionability required by case law, particularly when contrasted with more compelling cases such as Naeem v. Bowmanville Lakebreeze West Village Ltd.

Justice Casullo dismissed Mr. Ding’s application for relief from forfeiture and granted summary judgment to Arista Homes. The full deposit, including the contested $79,492.26, was awarded to Arista. The issue of legal costs was left open, with the parties invited to arrange a costs hearing if they could not agree.