Developer's Receivership Rescinds Sale Agreement

In 2005, a buyer named Jung purchased two unbuilt commercial condominium units from the developer of the Trump International Hotel in downtown Toronto.  Prior to the closing date – which had been delayed for three years – Jung was given a revised disclosure statement indicating the development would have only 60 stories, rather than the 70 stories initially promised. He was also told that the commercial units would not have a kitchen as originally envisioned, and that the hotel would not be connected to the nearby network of underground walkways.

The developer disagreed with Jung that these were “material changes” giving him the right to rescind the agreements under condominium law. The court resolved the dispute in the developer’s favour and the notices of rescission Jung had purported to submit to the developer were declared void.

After affirming an intent to close, the developer set a new 2014 closing. However, Jung objected to the statement of adjustments he received, since it called for him to pay occupancy fees, and calculated the interest very unfavorably. The developer refused to amend it to Jung’s satisfaction and the matter headed for court again, this time with Jung requesting the return of his deposit.

Meanwhile, the developer ran into financial difficulty and a receiver was appointed on November 1, 2016.  As part of that receivership process the court ordered the units transferred to the developer’s main creditor free and clear of any security interest, excluded contracts, adverse interests and any right or claim of specific performance. The transfer included the commercial units that the developer had agreed to sell to Jung.

Once the receiver was discharged, the developer no longer owned the units; this meant Jung could no longer obtain specific performance.  He therefore brought a motion to ask for the return of his deposit, which was successful.

The motion judge characterized the developer’s statement of adjustments to be “aggressive and overreaching”, and ruled that Jung was not wrong in refusing to close.  He was merely exercising his right to insist on fair and accurate information in the statement of adjustments.

Moreover, Jung neither breached the agreements, nor forfeited the deposits. The agreements remained valid and in force when the receiver was appointed, but were repudiated once the units Jung wanted were sold to a third party.  That termination arose through no fault of Jung’s and he was entitled to have his deposits back.

The Court of Appeal rejected the developer’s appeal of the motion judge’s ruling. The developer offered no basis on which to challenge the conclusions that the statement of adjustments was in error, that it was “aggressive and overreaching”, and that Jung had been justified in refusing to close. The motion judge was correct in finding that the agreements were terminated as a consequence of the receivership and not because of anything said or done by Jung.

The developer’s appeal was dismissed and Jung remained entitled to the return of his deposits, with interest.  See:  Jung v. Talon International Inc., 2019 ONCA 644.