Deposit Must Be Credited
This is an issue that arises from time to time. If you are already in the Court of Appeal, you might as well raise it, but on occasion a lower Court gets it wrong and you have to appeal in order to rectify the decision.
This was the case in Azzarello v. Shawqi released 16 October 2019 by the Ontario Court of Appeal.
This was a defaulted real estate deal. The Superior Court Judge on a motion ordered that the deposit of $75,000 paid by the purchaser be forfeited and not credited toward the damage award.
Does the Deposit get Credited to the Buyer on Account of Damages?
The Court answered: “yes”.
The Court referred to several other cases which had been considered previously and this case which stand for the proposition:
Dobson v. Winton & Robbins Ltd., 1959 (SCC)
Tang v. Zhang, 2013 BCCA
Redstone Enterprises Ltd., v. Simple Technology Inc., 2017 ONCA
Benedetto v. 2453912 Ontario Inc., 2019 ONCA
Azzarello v. Shawqi, 2019 ONCA
The answer to this question should be quite clear. However, in this case, the Judge hearing the Motion in Superior Court and in Ashrafi v. Carrar, the Trial Judge in Small Claims Court both made the same simple error. In Ashrafi, the case was rectified in Divisional Court, and here it went to the Court of Appeal.
Consistently, on the issue of deposits:
- The party in default will forfeit the deposit
- Proof of damages is not required
The deposit will have to be credited against damages, should the innocent party sue for damages that exceed the deposit
So, to keep it simple. There is a deposit of $10,000.00 and a loss of $25,000.00. Seller is entitled to the $10,000.00 without any proof at all. The $25,000.00 of losses must be proven in Court. If that’s the case, then the Seller gets the $10,000.00 deposit and is entitled to another $15,000.00. The Seller does not get to keep the $10,000.00 deposit and then get another $25,000.00 on top of that, which would amount to $35,000.00. This is the mistake made by the lower Court Judges in both Ashrafi and Azzarello.
Hopefully, this matter is now resolved for once and for all. And, don’t forget, the Supreme Court of Canada already decided this point in 1959.
Brian Madigan LL.B., Broker