Tang et al. v. Zhang et al.

• Jurisdiction: British Columbia
• Judge: Newbury, Hall, Low, Tysoe and D. Smith, JJ.A.
• Date: 17 January 2013
• Citation: (2013), 332 B.C.A.C. 304 (CA),2013 BCCA 52
• Court: Court of Appeal (British Columbia)

Tang v. Zhang (2013), 332 B.C.A.C. 304 (CA);

    569 W.A.C. 304

MLB headnote and full text

Temp. Cite: [2013] B.C.A.C. TBEd. FE.013

Min Chih Tang and Mei Kuen Tsang (appellants/plaintiffs) v. Tong Zhang and West Coast Realty Group Ltd., carrying on business as Sutton Group-West Realty (respondents/defendants)

(CA039703; 2013 BCCA 52)

Indexed As: Tang et al. v. Zhang et al.

British Columbia Court of Appeal

Newbury, Hall, Low, Tysoe and D. Smith, JJ.A.

February 5, 2013.

Summary:

The plaintiffs/sellers entered into a standard form contract to sell a residential property for $2,030,000, to the defendant/buyer. The buyer paid a deposit of $100,000 to the defendant real estate agency. The buyer failed to complete the purchase on the completion date. The sellers terminated the contract. They took the position that, pursuant to clause 12, the deposit became "absolutely forfeited" to them "on account of damages". The agency retained the funds in trust. The sellers sued and, in the meantime, sold the property at a higher price.

The British Columbia Supreme Court, in a decision reported at [2012] B.C.T.C. Uned. 214, held that the buyer was entitled to the return of the deposit, applying Agosti v. Winter (2009) (B.C.C.A.). The sellers appealed on the ground that "[t]he trial judge erred in failing to interpret the deposit under clause 12 of the standard form contract for residential purchase and sale as absolutely forfeited without proof of damages."

The British Columbia Court of Appeal, on the standard of correctness, allowed the appeal. Agosti was wrongly decided. The court declared the deposit, together with any accrued interest, forfeited to the sellers and ordered the real estate agency to forthwith release the funds to them.

Contracts - Topic 3672

Performance or breach - Repudiation - Forfeiture of monies paid - [See first Sale of Land - Topic 7744 ].

Contracts - Topic 4046

Remedies for breach - Liquidated damages and penalties - Whether deposit or amount specified is a penalty or liquidated damages - [See first Sale of Land - Topic 7741 ].

Contracts - Topic 4052

Remedies for breach - Liquidated damages and penalties - Forfeiture of deposit - What constitutes deposit - [See first Sale of Land - Topic 7741 ].

Sale of Land - Topic 826

The contract - Definitions - Deposit - [See second Sale of Land - Topic 7744 ].

Sale of Land - Topic 7741

Remedies of vendor - Forfeiture of deposit - General - The British Columbia Court of Appeal stated that "the mere use of the word 'deposit' does not preclude a court from considering whether the payment is in fact a penalty against which relief from forfeiture may be granted." - See paragraph 26.

Sale of Land - Topic 7741

Remedies of vendor - Forfeiture of deposit - General - The British Columbia Court of Appeal stated that the amount of a "deposit" must not be excessive - "[M]erely by labelling a payment as a 'deposit', the parties to a contract do not immunize it from judicial scrutiny, whether as being penal (in which case relief is available at common law) or unconscionable (in which case relief is available in Equity, as codified by s. 24 of the Law and Equity Act ...) - The buyer in the case at bar did not contend that the $100,000 deposit was penal or unconscionable (purchase price was $2,030,000), but that the phrase "on account of damages" in the relevant clause of the standard form contract created the "prerequisite of damages" in order for the deposit to be "absolutely forfeited" - See paragraph 27.

Sale of Land - Topic 7741

Remedies of vendor - Forfeiture of deposit - General - The British Columbia Court of Appeal was asked to resolve an apparent conflict between two decisions of the court dealing with the interpretation of "deposit" clauses in standard form contracts regularly used by real estate agents in the province - The two decisions under consideration were Williamson Pacific Developments Inc. v. Johns, Southward, Glazier, Walton and Margetts (1997) and Agosti v. Winter (2009) - The court stated five general principles with regard to deposits - Applying those principles to the case at bar, the court concluded that Agosti was wrongly decided and should no longer be followed - In the end result, the court declared the deposit forfeited to the sellers - See paragraphs 30 and 31.

Sale of Land - Topic 7742

Remedies of vendor - Forfeiture of deposit - Deposit defined - [See second Sale of Land - Topic 7744 ].

Sale of Land - Topic 7744

Remedies of vendor - Forfeiture of deposit - Circumstances resulting in forfeiture - The British Columbia Court of Appeal was asked to resolve an apparent conflict between two decisions of the court dealing with the interpretation of "deposit" clauses in standard form contracts regularly used by real estate agents in the province - "The issue ultimately comes down to a narrow one: where a buyer fails to complete the purchase as required (thus effectively repudiating the contract), and has paid a 'deposit' that the contract states is to be forfeited to the seller 'on account of damages', must damages be proven in order for the seller to retain the deposit? The question stands to be resolved by reference not only to the rules of contractual interpretation but to the purpose and nature of deposits at common law." - In the end result, the court concluded that Agosti v. Winter (2009), was wrongly decided, and declared the deposit forfeited to the sellers - See paragraphs 1, 31.

Sale of Land - Topic 7744

Remedies of vendor - Forfeiture of deposit - Circumstances resulting in forfeiture - The British Columbia Court of Appeal was asked to resolve an apparent conflict between two decisions of the court dealing with the interpretation of "deposit" clauses in standard form contracts regularly used by real estate agents in the province - The court stated that "a 'true' deposit - i.e., a payment that is not simply a part payment of the purchase price ... is 'non-refundable' by definition, and that 'absolutely' as a qualifier of 'non-refundable' does not add anything except emphasis. To this extent, it was perhaps unnecessary for this court in Williamson to rely on the phrase 'absolutely non-refundable' to support the conclusion that the deposit in that case was forfeited by the defaulting buyer. This is not a 'presumption' ... but simply a matter of definition - the interpretation of a word used in a contract in light of its meaning at common law, subject always to the expression of a contrary intention." - See paragraph 25.

Sale of Land - Topic 7744

Remedies of vendor - Forfeiture of deposit - Circumstances resulting in forfeiture - The plaintiffs/sellers entered into a standard form contract to sell a residential property - The defendant/buyer paid a deposit to the real estate agent, but failed to complete when required, thus effectively repudiating the contract - The sellers took the position that the deposit became "absolutely forfeited" to them "on account of damages", pursuant to clause 12 of the contract - The sellers sold the property to a third party at a higher price - The British Columbia Court of Appeal declared the deposit forfeited to the sellers - The phrase "on account of" was intended to mean that in any action by a seller to recover damages against a defaulting buyer for breach of contract, the amount of the deposit would be counted toward, or "on account of", such damages - "The phrase forecloses double recovery if damages are proven. As the sellers contend, this is not inconsistent with the nature of a deposit as a 'guarantee' of performance which encourages contracting parties to complete their contracts in accordance with their terms. The fact that no damages were suffered in this case is irrelevant to that principle and the terms of the contract can be read harmoniously." - See paragraphs 28 and 29.

Sale of Land - Topic 7745

Remedies of vendor - Forfeiture of deposit - Repayment by vendor of excessive "deposit" - [See second Sale of Land - Topic 7741 ].

Sale of Land - Topic 8903

Remedies of purchaser - Relief from forfeiture - When available - [See second Sale of Land - Topic 7741 ].

Sale of Land - Topic 8906

Remedies of purchaser - Relief from forfeiture - Where contract terminated by purchaser's breach - [See third Sale of Land - Topic 7744 ].

Cases Noticed:

Williamson Pacific Developments Inc. v. Johns, Southward, Glazier, Walton and Margetts (1997), 92 B.C.A.C. 267; 150 W.A.C. 267; 35 B.C.L.R.(3d) 180 (C.A.), consd. [para. 2].

Agosti v. Winter (2009), 278 B.C.A.C. 80; 471 W.A.C. 80; 312 D.L.R.(4th) 712; 2009 BCCA 490, not folld. [para. 2].

Williamson Pacific Developments Inc. v. Johns, Southward, Glazier, Walton and Margetts, [1996] B.C.T.C. Uned. 734; 24 B.C.L.R.(3d) 169, refd to. [para. 3].

Vanvic Enterprises Ltd. v. Mack (1985), 66 B.C.L.R. 211 (C.A.), refd to. [para. 7].

JEL Investments Ltd. v. Boxer Capital Corp. et al. (2011), 303 B.C.A.C. 79; 512 W.A.C. 79; 2011 BCCA 142, refd to. [para. 16].

Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62; 164 W.A.C. 62; 49 B.C.L.R.(3d) 317 (C.A.), refd to. [para. 16].

Jacobsen et al. v. Bergman et al. (2002), 163 B.C.A.C. 266; 267 W.A.C. 266; 2002 BCCA 102, refd to. [para. 16].

Reardon Smith Line Ltd. v. Hansen-Tangen, [1976] 3 All E.R. 570 (H.L.), refd to. [para. 16].

Hundley v. Garnier (2012), 320 B.C.A.C. 281; 543 W.A.C. 281; 2012 BCCA 199, consd. [para. 16].

Banton v. March Brothers (1911), 45 S.C.R. 338, refd to. [para. 18].

Howe v. Smith, [1881-5] All E.R. Rep. 201; 27 Ch. D. 89 (C.A.), consd. [para. 19].

Ex parte Barrell (1875), Law Rep. 10 Ch. 512, refd to. [para. 20].

Palmer v. Temple (1839), 9 Ad. & El. 508; 112 E.R. 1304, refd to. [para. 21].

Hughes and Macaulay, Nicolls, Maitland & Co., Re (1969), 10 D.L.R.(3d) 86 (B.C.S.C.), refd to. [para. 22, footnote 2].

Collins v. Stimson (1882-3), 11 Q.B.D. 142, refd to. [para. 23].

Snell v. Brickles (1914), 49 S.C.R. 360, refd to. [para. 24].

Waugh v. Pioneer Logging Co., [1949] S.C.R. 299, refd to. [para. 24].

Dojap Investments Ltd. v. Workers' Trust & Merchant Bank Ltd., [1993] 2 All E.R. 370; [1993] 2 W.L.R. 202 (P.C.), refd to. [para. 24].

Conner v. Bulla et al. (2010), 297 B.C.A.C. 20; 504 W.A.C. 20; 2010 BCCA 457, refd to. [para. 25].

Linggi Plantations Ltd. v. Jagatheesan, [1972] M.L.J. 89 (P.C.), refd to. [para. 26].

Stockloser v. Johnson, [1954] 1 All E.R. 630 (C.A.), refd to. [para. 26].

Coal Harbour Properties Partnership v. Liu et al. (2006), 230 B.C.A.C. 78; 380 W.A.C. 78; 2006 BCCA 385, refd to. [para. 27].

Dimensional Investments Ltd. v. Canada, [1968] S.C.R. 93, refd to. [para. 27].

Peachtree II Associates - Dallas L.P. et al. v. 857486 Ontario Ltd. et al. (2005), 200 O.A.C. 159; 76 O.R.(3d) 362 (C.A.), refd to. [para. 27].

Authors and Works Noticed:

DiCastri, Victor, The Law of Vendor and Purchaser (3rd Ed. 1998), § 378, 388, 772, 829, 857-8 [para. 24].

McManus, John D., The Law of Contracts (2005), p. 980 [para. 24].

Swan, John, Canadian Contract Law (2006), p. 487 [para. 24].

Counsel:

W.J. McMillan and J.A. Morris, for the appellant;

K.S. Mukai, for the respondent, Tong Zhang.

This appeal was heard at Vancouver, British Columbia, on January 17, 2013, before Newbury, Hall, Low, Tysoe and D. Smith, JJ.A., of the British Columbia Court of Appeal. In reasons written by Newbury, J.A., the Court of Appeal delivered the following judgment, dated February 5, 2013.