Executive Summary: Key Legal and Evidentiary Issues

• The central issue is whether a vendor is entitled to retain the entire deposit when a purchaser wrongfully repudiates a real estate purchase and sale agreement.
• Both parties filed motions for summary judgment; the motion judge found the Gliddens had wrongfully repudiated the Agreement of Purchase and Sale, a finding not challenged on appeal.
• At first instance, the motion judge ruled the Lockharts could only retain the deposit to the extent of their proven damages ($18,294.12), with the remainder to be returned to the Gliddens.
• Disputed on appeal was whether the common law of deposits — and the specific forfeiture clause in the APS — required the full $50,000 deposit to be forfeited to the vendors.
• Under established common law, where a vendor retains a forfeited deposit and claims damages, only damages exceeding the deposit amount may be recovered; because the Lockharts' damages were less than the deposit, no separate damages claim remained.
• Relief from forfeiture was not pleaded by either party, and the Gliddens' argument that accepting repudiation rendered the APS null and void was rejected by the Court of Appeal.

Facts of the case

In 2023, David and Cathy Lockhart (the "Lockharts") listed their home in Irishtown, New Brunswick for sale through a realtor. On July 3, 2023, Curtis Karl Glidden and Tracy Carol Glidden (the "Gliddens") submitted an offer to purchase the property for $800,000 with a $25,000 deposit, using a standard Agreement of Purchase and Sale ("APS") form used by realtors in New Brunswick. The Lockharts countered with an offer to sell for $875,000 with a $50,000 deposit, which the Gliddens accepted. The deposit was paid to the Lockharts' realtor and held in trust.

On the afternoon of August 21, 2023 — the scheduled closing day — the Gliddens raised a title objection based on two encumbrances they wanted discharged that same day. The Lockharts requested an extension of the closing date, which the Gliddens refused, causing the transaction to fall through. The Lockharts relisted the property and ultimately sold it at a lower price, incurring total damages of $18,294.12. They filed a Notice of Action against the Gliddens and the realtor seeking recovery of the full deposit and their total damages. The Gliddens counterclaimed for the return of the deposit. By consent, the realtor paid the disputed deposit into court and the claims against him were withdrawn.

Contractual clauses at issue

The APS contained several key clauses governing the deposit. Clause 4(a) provided that the deposit would be held in trust, credited toward the purchase price on completion, with the buyer paying the balance on closing. Clause 19(h) stated that if the buyer defaulted on completion, "any money paid hereunder shall be forfeited to the Seller without interest or penalty by way of liquidated damages," or the seller could, at its option, compel the buyer to complete the sale. Clauses 19(i) and 19(j) addressed the scenario where the agreement became "null and void," requiring all deposits to be returned to the buyer — provisions the Court of Appeal ultimately found inapplicable on the facts of this case.

Reasoning and analysis

Both parties filed motions for summary judgment. The motion judge found that the Gliddens had wrongfully repudiated the APS — a finding not challenged on appeal. She further concluded, however, that the Lockharts could only retain the deposit to the extent of their proven damages, with the remaining portion ($31,705.88) to be returned to the Gliddens. Her reasoning drew on Tang v. Zhang, Azzarello v. Shawqi, and Bang v. Sebastian, characterizing the deposit as functioning either as pure security (where no loss is suffered) or as part payment toward damages (where a loss is suffered), and that allowing the Lockharts to keep the full deposit plus recover damages would constitute double recovery.

On appeal, the Court of Appeal of New Brunswick, per Robichaud J.A. (Quigg and LaVigne JJ.A. concurring), found that while the motion judge correctly identified the deposit as a "true deposit" and correctly rejected double recovery, she misapplied the governing legal principles. The Court clarified that the common law rule against double recovery operates differently: when a vendor retains a forfeited deposit and claims damages, only damages exceeding the deposit amount can be recovered. Since the Lockharts' damages ($18,294.12) were less than the $50,000 deposit, they had no residual damages claim — but they remained entitled to the entire deposit. The Court further rejected the Gliddens' argument that the Lockharts' acceptance of repudiation, rather than pursuit of specific performance, rendered the APS null and void and triggered the return-of-deposit provisions under clause 19(i). Relying on established principles from Johnson v. Agnew, the Court confirmed that accepting a repudiatory breach terminates the contract but does not rescind it ab initio, meaning clauses 19(i) and 19(j) were simply not engaged.

Ruling and outcome

The Court of Appeal allowed the appeal, set aside the lower court's judgment, and ordered that the Lockharts — the successful party — were entitled to a judgment for the entire $50,000 deposit held in court, together with any interest that had accrued in that account. The Lockharts were also awarded costs of $3,000.