Executive Summary: Key Legal and Evidentiary Issues

• Interpretation of clause 3.4 of the promise of purchase and sale, particularly the seller’s right to a refund of special assessments if a municipal subsidy is granted.
• Application of article 1425 C.c.Q. to reconcile the literal wording of the contract with the parties’ common intention, including prevention of unjust enrichment of the buyer.
• Evidentiary assessment of whether the City of Montréal’s partial subsidy and the Syndicate’s handling of those funds resulted in any enrichment of the defendant co-owner.
• Determination of whether the conditions triggering any repayment obligation (full receipt of subsidy and existence of surplus funds after the works) had actually materialised.
• Procedural issue as to whether the claim was premature given that the subsidy had not been fully paid and related construction litigation remained pending in Superior Court.
• Consideration of the Syndicate’s legal obligations, if any, to redistribute subsidy funds or surplus amounts to co-owners as reimbursement of special assessments.

Facts of the case

Stephen Solomon and Danna Dahan sold a condominium unit to Gestion Scalbor Inc. on 23 August 2021. Prior to the sale, the building had undergone significant renovation works, which led the Syndicat de copropriété to levy several special assessments that the sellers, as co-owners at that time, were required to pay. These contributions formed the financial backdrop to the contractual dispute between the parties. The parties were aware that the building might qualify for a subsidy from the City of Montréal to defray part of the renovation costs. In that context, they negotiated and incorporated into their accepted promise to purchase a specific clause—clause 3.4—addressing how any future subsidy and any resulting surplus would be allocated as between seller and buyer. The clause expressly contemplated an “additional special assessment” in the range of $150,000 to $250,000, of which approximately 6% would be allocated to the unit in question. It stated that this assessment was calculated on the premise that the Syndicate would not receive any municipal subsidy. The sellers undertook to pay the portion of that special assessment allocated to their former unit. However, the clause further provided that if the City ultimately granted a subsidy, the sellers would be entitled to receive the portion of the subsidy attributable to the unit, on the basis that they would have “over contributed” to the Syndicate. It also foresaw that if the Syndicate had leftover funds due to over-contributions from the co-owners, the seller would be entitled to the share of any surplus corresponding to the unit. The idea, as the clause explicitly stated, was to ensure that the buyer would not be “unjustifiably enriched” if the City granted a subsidy or if the seller had ultimately overpaid into the Syndicate. Finally, the clause confirmed that the seller would not be responsible for any special assessments other than the one described. After the sale, the Syndicate proceeded with the subsidy application process. According to the evidence of a board member, the City of Montréal approved a subsidy in the amount of $85,080.80 on 17 February 2022. On 17 April 2023, the City paid a partial amount of $47,830.20 to the Syndicate. The remaining balance was withheld because of a dispute with the contractor over allegedly defective work; that dispute was still pending before the Superior Court at the time of the small claims hearing. The partial subsidy that had been received was deposited into the Syndicate’s funds. Crucially, no amounts were paid or credited back to individual co-owners as reimbursement of special assessments in relation to the works covered by the City’s contribution, and the Syndicate had no obligation under its own regime to issue such reimbursements. Subsequently, due to increased construction costs, the purchaser, Gestion Scalbor Inc., was itself required to pay an additional special assessment in or around June 2024 for the same works, reinforcing the evidence that there was no surplus of funds and that the project remained underfunded rather than overfunded.

Procedural posture and the parties’ claims

In the Cour du Québec, Small Claims Division, Solomon and Dahan sued Gestion Scalbor Inc. for a total of $7,844.90. They claimed $5,344.90 as a reimbursement of special assessments, plus $2,500 in damages for loss of time, trouble, and inconvenience. They argued that the conditions laid out in clause 3.4 had been met, at least to the extent of the partial subsidy actually received, and that they were therefore entitled to the portion of the municipal subsidy allocable to their former unit, as well as to any surplus that might be attributable to that unit. In substance, they contended that the contractual promise to pay them back if the City granted a subsidy had crystallised with the approval and partial payment of that subsidy. The defendant, Gestion Scalbor Inc., filed an amended defence challenging both the timing and the substance of the claim. It argued that the proceedings were premature because the clause in question tied any repayment obligation to conditions that had not yet been fully realised: the full receipt of the City’s subsidy and the existence of any surplus funds after the works were completed. The defendant’s position was that, at best, only part of the subsidy had been paid, that the ultimate amount due remained uncertain, and that the Syndicate had no excess funds at the time of the hearing. The defendant also raised an argument of misrepresentation, suggesting that Mr. Solomon, as a former member of the Syndicate’s board, allegedly knew the Syndicate would not reimburse co-owners for any portion of their special assessments even if a subsidy were granted, yet induced the buyer to accept clause 3.4. In its written contestation, the defendant emphasised that the contractual undertaking—titled “Undertaking of the Vendor” in the deed of sale—made any refund to the sellers contingent on (i) the receipt of the subsidy by the City of Montréal for the specific works, and (ii) the existence of surplus funds held by the Syndicate after the completion of those works. The defendant further claimed that it had been informed that the Syndicate had no surplus whatsoever and no plan to redistribute any amount to the co-owners according to their shares. Indeed, the later additional special assessment it was required to pay in 2024 was presented as clear evidence that there was a shortfall, not an overage.

Contractual clause at issue and interpretive framework

The heart of the legal dispute lay in the interpretation and application of clause 3.4 of the promise of purchase and sale. That clause was drafted in English and carefully structured to deal with a hypothetical scenario in which no subsidies were paid, as well as the opposite scenario where subsidies and possible over-contributions might arise. In particular, it stated that the seller would pay the unit’s portion of a large special assessment triggered by the renovation project, but retained the right to the unit’s share of any future subsidy or surplus that might later materialise. The clause expressly articulated a policy concern: avoiding unjust enrichment of the buyer if the seller’s contributions turned out to have been excessive because of a subsidy or surplus. The court approached this clause through the lens of article 1425 of the Civil Code of Québec, which mandates that judges seek the “common intention” of the parties rather than adhering strictly to the “literal meaning” of the terms used. It noted that there was a divergence between the parties’ alleged common intention (the negotium) and the wording as set down in the contract (the instrumentum). In such circumstances, the court may look beyond the plain language to ensure that the true shared intention prevails. To support this approach, the court cited the Court of Appeal’s decision in Richer c. Mutuelle du Canada (La), Cie d’assurance sur la vie, which affirms that judges may depart from even clear contractual language when its literal sense is incompatible with the contract as a whole and with the evident intention of the parties. The judge then focused on the specific phrase within clause 3.4 stating that “[t]he idea is that the buyer should not be unjustifiably enriched should the City end up granting a subsidy to the Syndicat or should the seller have ultimately over contributed.” This wording was treated as a key indicator of the parties’ shared objective: to prevent the buyer from benefiting from a subsidy or surplus that would, in effect, refund contributions originally borne by the seller. The core legal question thus became whether the factual scenario before the court corresponded to the situation of unjust enrichment that the parties had sought to regulate.

Findings on enrichment, conditions and prematurity

On the evidence, the court found that no enrichment of the defendant had occurred. The partial subsidy received by the City was paid into the Syndicate’s general funds and not distributed to the co-owners, nor credited against their contributions to the special assessments. Furthermore, the Syndicate had no obligation, contractual or statutory, to reimburse co-owners from subsidy funds or to allocate any surplus back to them. At the time of the hearing, there was no proof of any “leftover” or “excess” funds that could trigger the clause’s contemplated return of money to the sellers. To the contrary, the need for an additional special assessment in June 2024 for the same works indicated that the project was underfunded rather than overfunded. In light of these facts, the court held that the conditions for applying clause 3.4 had not materialised. Without an actual enrichment of the buyer stemming from a subsidy or from the seller’s over-contribution, there was no basis under the clause or under the broader principles of unjust enrichment to order a reimbursement to the sellers. The defendant’s argument that the claim was premature also carried some weight. While the judge did not rest the decision solely on prematurity, he accepted that the subsidy had not been fully paid and that the final financial position of the project remained unsettled due to the ongoing Superior Court litigation with the contractor. That uncertainty underscored the conclusion that any alleged entitlement under clause 3.4 was, at best, speculative at the time of the small claims action. Accordingly, the court determined that the necessary contractual conditions for a payment to the sellers—full or determinable subsidy, existence of surplus, and demonstrable enrichment of the buyer—were not present.

Ruling and overall outcome

The Cour du Québec, Small Claims Division, dismissed the action instituted by Stephen Solomon and Danna Dahan against Gestion Scalbor Inc. It concluded that clause 3.4, interpreted in light of article 1425 C.c.Q. and the parties’ evident intention to prevent unjust enrichment of the buyer, did not operate in the circumstances because there was no enrichment of the defendant and no surplus funds generated by the municipal subsidy. The court therefore rejected the sellers’ claim for reimbursement of special assessments and for damages relating to time, trouble, and inconvenience. As a result, the defendant, Gestion Scalbor Inc., emerged as the successful party. The judgment ordered that each party bear its own costs, and no damages, costs, or monetary award of any kind were granted in favour of the defendant. In other words, the total amount ordered in favour of the successful party was $0, and any precise monetary figure for costs in its favour cannot be determined from the decision since costs were simply left where they lay.