Purchaser materially induced to enter into agreement of purchase and
sale on strength of illegal substances clause — Sellers’ representation
substantial and material — Agreement of purchase and sale void ab initio — Purchaser entitled to remedy of rescission and return of deposit.
The agreement of purchase and sale (“APS”) for a residential property provided that the sellers represented and warranted that to the best of their
knowledge and belief, the property had not been used for the growth or manufacture of illegal substances. Before closing, the purchaser discovered that the
property had housed a marijuana grow operation in 2004. The sellers were
unaware of that fact when the APS was made. The purchaser refused to close
and demanded the return of his deposit. The sellers refused to agree to the
termination of the APS and brought an application for declarations that
the APS was a firm and binding contract, that the purchaser had breached the
APS and that the deposit had been forfeited. The purchaser applied for declarations that he was not required to complete the transaction, for the return of
his deposit and for related relief.
Held, the purchaser’s application should be allowed; the sellers’ application
should be dismissed.
The illegal substances clause was a representation which was a statement of a
present fact, to the best of the sellers’ knowledge and belief, that was intended
to be relied upon when made and upon which the purchaser was entitled to continue to rely, at least until closing, while the APS was an executory contract.
The representation was substantial and material. The purchaser was materially
induced to enter into the APS on the strength of the illegal substances clause.
The APS was void ab initio. The purchaser was entitled to the remedy of rescission and to the return of his deposit.
Cases referred to
Guarantee Co. of North America v. Gordon Capital Corp.,  3 S.C.R. 423,
 S.C.J. No. 60, 178 D.L.R. (4th) 1, 247 N.R. 97, 126 O.A.C. 1, 49 B.L.R. (2d)
68, 15 C.C.L.I. (3d) 1, 39 C.P.C. (4th) 100,  I.L.R. I-3741, 91 A.C.W.S. (3d)
796; John Levy Holdings Inc. v. Cameron & Johnstone Ltd.,  O.J. No. 3183
(C.A.), affg  O.J. No. 1592, 26 R.P.R. (2d) 130, 35 A.C.W.S. (3d) 134 (Gen.
Div.); Lysaght v. Edwards (1876), 2 Ch. D. 499; McGrath v. MacLean (1979),
22 O.R. (2d) 784,  O.J. No. 4039, 95 D.L.R. (3d) 144,  1 A.C.W.S.
155 (C.A.); Panzer v. Zeifman (1978), 20 O.R. (2d) 502,  O.J. No. 3456,
88 D.L.R. (3d) 131,  2 A.C.W.S. 327 (C.A.); Petersen v. Matt,  O.J.
No. 745, 2014 ONSC 896 (Div. Ct.); Sevidal v. Chopra (1987), 64 O.R. (2d) 169,
 O.J. No. 732, 41 C.C.L.T. 179, 2 C.E.L.R. (N.S.) 173, 45 R.P.R. 79,
5 A.C.W.S. (3d) 448 (H.C.J.); Singh v. Trump,  O.J. No. 5285, 2016 ONCA
747, 76 R.P.R. (5th) 177, 408 D.L.R. (4th) 235, 62 B.L.R. (5th) 216, 271 A.C. W.S.
(3d) 503; Toronto-Dominion Bank v. Leigh Instruments Ltd. (Trustee of), 
O.J. No. 1787, 51 O.A.C. 321, 4 B.L.R. (2d) 220, 40 C.C.E.L. 262, 29 A.C. W.S. (3d)
622 (Div. Ct.)
Authorities referred to
Swan, Angela, and Jakub Adamski, Canadian Contract Law, 3rd ed. (Markham,
Ont.: LexisNexis, 2012)
APPLICATIONS by the purchaser and sellers for relief in relation to an agreement of purchase and sale.