Buyer breached duty of good faith by failing to obtain builder's consent to assignment
The Superior Court of Justice of Ontario has ruled against a buyer who failed to take reasonable steps to completely assign his interest in a real estate contract in favour of third parties.
In Chandran et al v. Pannu et al., 2022 ONSC 3278, the respondent, Gurkirat Singh Pannu, and the builder, Poetry Living (Ellis Lane) Ltd, signed a purchase and sale agreement. Under the agreement, the respondent agreed to buy a pre-construction property in Caledon, Ontario, from the builder. Moreover, if the respondent wishes to assign his interest in the agreement, he should first obtain the builder’s consent and pay the assignment fee for the consent given.
The respondent subsequently assigned his interest in the agreement to the applicants, Vikram Chandran and Chithra Vijayan. However, he failed to request the builder’s consent to the assignment because he left for India due to an illness in his family.
The respondent later amended the agreement with the builder, substituting his realtor’s wife as a buyer, Mandeep Gill. In his email to the applicants’ lawyer, the respondent’s lawyer admitted that the respondent had failed to request the builder’s consent to the assignment. Gill purchased the property and became its registered owner.
In their application, the applicants argued that the respondent failed to take all reasonable steps to complete the assignment, breaching the duty of good faith he owed them.
Meanwhile, the respondent claimed he was free to substitute Gill as the purchaser of the property since the builder had not consented to the assignment. He also claimed that he agreed to the assignment based on a $5,550 fee, not the higher amount of $35,000, which the builder purportedly later demanded.
The Superior Court, in its decision, granted the application and ordered Gill to transfer the property title to the applicants upon their payment of the purchase price balance.
According to the court, the respondent breached his duty of good faith to the applicants by failing to obtain the builder’s consent to the assignment and pay the assignment fee. Since the respondent left for India seven months after he entered the assignment with the applicants, the court noted that he should have obtained the builder’s consent to the assignment before leaving.
“In fact, the respondent made no reasonable efforts to obtain the builder’s consent to the assignment, as is clear from the email from his lawyer to the applicants’ lawyer,” Justice David Price wrote.
The court also held that when the respondent amended the agreement with the builder to substitute Gill as the property buyer, he further breached his duty of good faith owed to the applicants.
“The applicants were at all times ready, willing, and able to comply with the assignment and the agreement, and were deprived of the opportunity to do so solely by reason of the respondents’ having amended the agreement by substituting Gill as the purchaser of the property,” Justice Price wrote.