11 三月

加拿大court case:买家有权享有所买的但还没有交接的房产

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加拿大court case:买家有权享有所买的但还没有交接的房产

Agreements of Purchase and Sale: Equitable Interests

 Lysaght v Edwards (1876) and the Remedy of Specific Performance

  • As soon as a contract becomes enforceable, the buyer has an equitable property right and the vendor has a right to the money. Therefore, buyer is somewhere between a mere trustee and a mortgagee
  • Vendor has the right to possession until they get the money. The vendor holds the estate in trust for the buyer

Facts

A man agrees to sell his mansion to another man, but before the transaction is completed he dies. His will leaves the house to his wife, and his heirs want to prevent the sale. Lysaght sought specific performance of the conveyance of real estate given that the agreement for purchase and sale had been signed, the vendor had died prior to the closing date, and the heirs wished to cancel the sale: said he had an equitable interest.

Issues

What is the nature of the interest the purchaser holds, and what is the vendor’s relation to the purchaser once the agreement of purchase and sale has been entered into?

Held

For the P. Vendor was required to fulfil the specific obligations greed upon in the contract

Reasoning

  • Vendor becomes a trustee to the benefit of the purchaser until the transfer occurs and the sale closes. vendor has a responsibility not to destroy the property and to take reasonable measures to ensure it’s not destroyed
  • Purchaser has an equitable interest in land: courts of equity distinguished not only in terms of what they look at, but also distinct set of damages. Equitable remedies typically not monetary (common law = damages) – they make u do stuff
  • Presumed (most likely) that remedy when vendor violates agreement of purchase and sale is specific performance
  • Pretty unique to land, not often applicable to transfers of chattels, personalty. Almost never avail for services (would require supervision and follow-up). Realty conceived as ‘unique’: no two parcels of land are identical.

 

卖家毁约不交接的索赔处理

I.              Some fundamentals

1.      Specific performance and equitable interests in land

An agreement for purchase and sale typically calls for the land in question to be conveyed on a designated date. The period between the time at which the agreement is signed and the closing date is used for

various purposes, such as determining the validity of the vendor’s title, securing financing, and arranging for relocation. During this pre-closing period, the purchaser may choose to lodge a notice on the title to ensure that no subsequent dealings with the land will adversely affect that party’s interest.It has long been understood that once the agreement has been executed, that is, even before legal title passes on the closing date, the purchaser has more than just a contractual right against the vendor. The purchaser is said to hold an equitable interest in the property.

 

As a corollary, the vendor is treated as a constructive trustee; the purchaser is the cestui que trust.

The trust is an unorthodox one, for during its operation the vendor is not stripped of all beneficial entitlements to the land. Absent a contractual term to the contrary, the vendor continues to have a right of possession, and is entitled to any rents and profits generated prior to closing. The principal duties of the vendor as trustee are to preserve the property and to convey it as required.The basis for this trust flows from the maxim that equity treats as done that which ought to be done. As there is a promise to convey the land, equity treats the purchaser as already enjoying the status of owner. However, that treatment is contingent on whether equity will order specific performance of the contract. In other words, if and only if equity would compel the transfer of title, will it conceive of the purchaser as being an owner in the interim.

 

Treating the availability of specific performance as the sine qua nonof an equitable interest creates a paradox. The purchaser’s equity (and the creation of this special constructive trust) is treated as arising the moment the contract is made. However, whether equity will compel this transfer to be completed is

never certain at that point. Before equity will order performance it must be shown that damages provide an inadequate remedy. The position for a very long time was that land was regarded as unique so that an order for damages was not normally an acceptable response to a breach.

 

 Even so, an order for performance was not inevitable. There may be conditions and undertakings contained in the agreement that first must  be  satisfied.  Moreover,  all  equitable  remedies  are  discretionary; they cannot be demanded as of right. A purchaser guilty of delay, or who otherwise engages in inappropriate action prior to closing, may be denied specific performance.

 

II.Semelhago and its aftermath The decision

The facts in Semelhago are unremarkable. In 1986, S agreed to purchase a house under construction from P. When the closing date arrived, P reneged on the deal. Several weeks later, he transferred the house to his wife. S sued, seeking damages in lieu of specific performance. Throughout the period, S remained in his original house. It  was  conceded  by  counsel  for  the  defendant  (P)  that  specific performance was an available remedy under the circumstances. But S did not seek performance. He wanted equitable damages instead. The dispute concerned the quantum of damages to be awarded to the disappointed purchaser in lieu of performance. Five years had passed between the time of breach and the trial, and during that time the purchaser’s existing home had itself appreciated in value. Given that, it was arguable that the purchaser had suffered no real loss, and that any award of damages would constitute a windfall. The Supreme Court held that S was entitled to recover the difference between the agreed sale price of the second home and that home’s value at the time of trial. Justice Sopinka, writing for the majority, stated that the calculation of damages need not take into account the increase in value of the plaintiff’s retained home. Moreover, damages were to be measured as at the date of trial, for only then could the award be a true equivalent of an order for specific performance. In the course of this analysis, Sopinka J. reflected on the significance of the uniqueness of the subject property when performance is being sought. Those comments now form the foundation ofthe law governing specific performance for real estate contracts in Canada. Here they are in full:While at one time the common law regarded every piece of real estate to be unique, with the progress of modern real estate development this is no longer the case. Both residential, business and industrial properties are mass produced much in the same way as other consumer products. If a deal falls through for one property, another is frequently, though not always, readily available.It is no longer appropriate, therefore, to maintain a distinction in the approach to specific performance as between realty and personalty. It cannot be assumed that damages for breach of contract for the purchase and sale of real estate will be an inadequate remedy in all cases. The common law recognized that the distinction might not be valid when the land had no peculiar or special value. In Adderley v. Dixon (1824)…Sir John Leach, V.C., stated (at p. 240):Courts of Equity decree the specific performance of contracts, not upon any distinction between realty and personalty, but because damages at law may not, in the particular case, afford a complete remedy. Thus a Court of Equity decrees performance of a contract for land, not because of the real nature of the land, but because damages at law, which must be calculated upon the general money value of the land, may not be a complete remedy to the purchaser, to whom the land may have a peculiar and special value. Courts have tended, however, to simply treat all real estate as being unique and to decree specific performance unless there was some other reason  for  refusing  equitable  relief.  …Some  courts,  however,  have begun to question the assumption that damages will afford an inadequate remedy for breach of contract for the purchase of land. In Chaulk v. Fairview Construction Ltd….the Newfoundland Court of Appeal[,]…after quoting the above passage from Adderley v. Dixon, stated…:The question here is whether damages would have afforded Chaulk an adequate remedy, and I have no doubt that they could, and would, have. There was nothing whatever unique or irreplaceable about the houses and lots bargained for. They were merely subdivision lots with houses, all of the same general design, built on them, which the respondent was purchasing for investment or re-sale purposes only. He had sold the first two almost immediately at a profit, and intended to do the same with the remainder. It would be quite different if we were dealing with a house or houses which were of a particular architectural design, or were situated in a particularly desirable location, but this was certainly not the case. Specific performance should, therefore, not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available. The guideline proposed by Estey J. in Baud Corp., N.V. v. Brook…with  respect  to  contracts involving chattels is equally applicable to real property. …:Before a plaintiff can rely on a claim to specific performance so as to insulate himself from the consequences of failing to procure alternate property in mitigation of his losses, some fair, real and substantial justification for his claim to performance must be found.20Since the appropriateness of specific performance in this case was not put in issue, Sopinka J.’s comments were obiter dictum. Even so, the principle has been followed consistently by lower courts in Canada.21 2.The current test for specific performanceIn one sense, Semelhago changed little. Equitable remedies are always discretionary; that being so, no particular outcome is available as of right. Equity will demand, among other things, that a party seeking relief must come with clean hands and be prepared to do equity if the circumstances require as much. The old law always treated damages as the default remedy, though for land it was assumed that money would normally not do.22 However, even in the pre-Semelhago era, an order for performance was occasionally denied on the basis that the subject property was not unique and that damages would serve as a suitable remedy.23 Given this background, the change ushered in by Semelhago can be seen as one of degree, not principle. The current law is not described uniformly in the case law. Three kinds of formulations can be found:Statement #1 (from Semelhago): “Specific performance should…not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available.”24Statement #2:  To  be  entitled  to  an  order  for  specific  performance  it must be shown that “(1) the subject property is unique and a substitute is not readily available; (2) the remedy of damages is comparatively inadequate to do justice; and (3) the plaintiff has established a fair, real, and substantial justification for the claim of specific performance.”25Statement #3: “The…fundamental question is whether the plaintiff has shown that the land rather than its monetary equivalent better serves justice between the parties. This will [often] depend on whether money is an adequate substitute for the plaintiff’s loss and this in turn will [often] depend on whether the subject matter of the contract is generic or unique.26These three statements bear strong similarities, though they also contain important differences. In my view, the first two statements are inadequate, and the third formulation reflects a proper statement of the current law. I discount the first two formulations because they both give undue prominence to the element of uniqueness. Both suggest that proof of uniqueness is essential if performance is to be ordered. In fact, uniqueness is not a necessary basis on which to decide whether specific performance should issue. Moreover, in some cases uniqueness will not be sufficient to warrant that order.Under the current law, uniqueness is not a necessary basis for ordering specific performance because even if the property is a purely fungible unit, damages may not serve the ends of justice. That would be so in at least three instances. First, damages may be difficult to compute. If the land in issue is not unique, it would normally be possible to ascertain its value by examining other comparable properties. Still, life is not always as accommodating. Rational disagreements can emerge about current valuations that would require considerable time and effort to resolve. The market may be so volatile that fixing the value of the property may lead to significant over- or under-valuation.28 Secondly, as already noted, specific performance is a discretionary remedy,29 and equity is attentive to the conduct of both parties whenever equitable relief is being sought. Where a defendant is guilty of inappropriate conduct (beyond a mere breach of contract), the scales of justice may tip in favour of an order of specific performance against that party.30 This discretion may be exercized in favour of a defaulting vendor even where no wrongdoing is involved, such as where denying an order for performance would have left the contracting parties as co-owners.31Thirdly, a damages award may not be of practical value if the vendor is unable to satisfy the judgment. It has been questioned whether a vendor’s insolvency is or is not a valid reason for concluding that damages are inadequate.32 The concern is that to order performance in that situation would give the purchaser an unfair preference over unsecured creditors of the insolvent vendor. Even if that is good law, there are other instances in which a monetary award can be a hollow victory.33 The land in issue may be the only exigible asset of an otherwise solvent vendor. Or the vendor’s principal exigible assets may be in another jurisdiction, so that execution against those properties would be difficult and expensive.34By the same token, uniqueness is not necessarily enough to support the granting of an order of specific performance. As already noted, equitable relief may be denied where it is the plaintiff who has engaged in improper conduct, or where the plaintiff is guilty of delay (laches)35 or acquiescence12The Dalhousie Law Journalthat results in appreciable hardship on the defendant.36 Equity will not order performance where to do so would affect certain third parties, most prominently, the bona fide purchaser for value of a legal interest without notice of the prior equitable right of the purchaser.37 Equity will also refuse specific performance where ongoing supervision of the contract might be necessary.38Hence, the third formulation of the three in circulation is superior. The primary question is whether damages will suffice to meet the ends of justice. In that determination, the uniqueness of the property is one consideration among others, albeit often the most important factor.3.Themeaning of uniqueness Like  snowflakes  and  fingerprints,  all  properties  can  be  described  as unique. No two parcels can occupy the same physical space on the globe. However, that kind of uniqueness will not suffice to render a property special in this context, for otherwise the issue would lose all significance. Yet we also know that uniqueness does not mean that that the plaintiff must show that the property is one of a kind. The property need not be shown to be “incomparable.”39 Instead, the property must be unique “to the extent that its substitute would not be readily available.”40 In essence, the cases have asked whether the property possesses such qualities that finding a suitable substitute is rendered difficult (though not necessarily impossible). Uniqueness, then, is a matter of degree, about which rational disagreements can arise.The purchaser might truly believe that the property is her or his “dream home.”41 But that is not enough. Uniqueness is regarded ashaving subjective and objective facets.42 The subjective element means that the purchaser actually viewed the property as unique at the time of contracting,43 and presumably also at trial. Of course we know intuitively that the property is special to that party because they have not only entered into a contract to acquire that very parcel, but they have also responded to a breach of contract by suing for performance. That being so, the subjective feature seems superfluous and unhelpful. Nevertheless, subjectivity serves to frame the inquiry as to objective uniqueness. External circumstances must demonstrate objectively that another property is not readily available to serve that purpose.44 Here the questions become (i) what features of the property mattered to the purchaser, making it particularly suitable for the purpose for which it was purchased? and (ii) can those features be found elsewhere?45 So, a house with a ravine lot is often viewed as especially desirable. However, should the purchaser concede that it is the home’s Tudor-style architecture that provides the special ingredient, the focus of objective uniqueness must relate solely to that feature.The inquiry into whether a property meets the uniqueness criterion is very fact dependent.46 However, it does not take a real estate agent to know that three of the most important factors leading to a finding of uniqueness are—location, location, location.47 Turning to the case law offers some guidance.48 For example, the criterion has been satisfied where the subject property is situated near lands that the purchaser already owns, at least when there is a use-nexus between those parcels and the property inissue.49 Uniqueness may be found when the property is close to amenities that are of considerable importance to the purchaser50 (such as a school51or a mosque52). A house on a ravine lot, especially where it was custom built, would qualify.53 In the right circumstances, even a vacant lot can be unique.54A property may have unique features even if its locale is quite ordinary. Such was the case where the property was a former school building,55 or was a beautiful rural parcel that was suitable for pasturing horses.56 Other circumstances have also been found to be germane, such as where a buyer lawfully enters into possession prior to the closing and undertakes work on the property,57 or where a purchaser acquires a house next door for the express purpose of getting rid of the neighbour who is living there.58One would think that where the contract deems the property to be unique and where they have stipulated that performance may be sought, such a term should be controlling, at least if it is not unreasonable or otherwise unenforceable.59A distinction is sometimes drawn between residential and commercial properties. Hence, it has been suggested that the subjective aspect is more salient when the home—often a family’s most important purchase60—is involved.61 At the same time, it is appreciated that some homes may lack  sufficient  distinctiveness.  Condo  unit  #203  may  not  differ  in  any material way from condo units #202 and #204. The same might be true of two cookie-cutter homes in a new residential development. Likewise, some commercial properties may possess highly distinctive attributes.62Accordingly, there is no bright-line distinction between residential and commercial properties. Another dichotomy focuses on whether or not the land—residential or commercial—is being acquired for use and occupation or as an investment. Hence, a property acquired for quarrying,63 or lumber64 is a candidate for unique status, whereas a house bought with a view to a prompt re-sale is not. However, this dividing line is also imperfect. Some investments are complex and involve a long-term plan. In such instances, a court may find it very difficult to pinpoint the proper measure of damages.65 This might be seen as a problem of the adequacy of damages. Although little turns on this distinction, it may equally be seen as a matter of uniqueness. One asks whether another property can be found that can be plugged into the plan, as one component among many, to yield the same profit later on.4.The onus of proof General principles governing proof in civil matters mandate that in a contract dispute a disappointed party must demonstrate the breach of a valid agreement. If specific performance is sought, the plaintiff must also be ready, willing, and able to close the deal, and show that damages are inadequate to meet the ends of justice. As we have just seen, under Semelhago that latter issue often imposes an onus on the purchaser to prove that the property is unique, such that a replacement is not readily available.66 In short, the burden of proving uniqueness rests with the plaintiff. The time for that determination is at breach. At that point, the plaintiff must decide whether to terminate the contract and sue for damages, or to keep the contract alive and seek performance.67It is sometimes said that the post-Semelhago law has not gone so far as to replace the presumption of uniqueness with the presumption of replaceability.68 It has also been offered that Canadian law now treats the issue as a matter to be determined by taking account of all of the circumstances.69 I find such statements to be unhelpful. Prior to Semelhago there was a strong presumption that real property was unique and therefore a proper subject for specific performance. However, it was a rebuttable presumption, and, as already noted, one can find cases in which specific performance was denied by reason of lack of uniqueness.70After Semelhago, there is a presumption of replaceability, though it too is rebuttable. We know this is so because if no evidence is tendered on the issue of uniqueness, specific performance should be denied.71 The same result should obtain if no search is made for a suitable substitute.72Requiring the plaintiff to show uniqueness casts upon that party the need to prove a negative, i.e., that there is no substitute property.73 If we were to take the requirement of proving this negative to an extreme, we would ask the plaintiff to locate and consider all relevant properties on the market, and then to discount each and every one as a viable alternative. All the while the defendant would be required to do nothing. That party need not provide a list of properties that could serve as an adequate substitute. It might point to certain locations, alleging only that the properties within that area have not been proven by the plaintiff to be unsuitable. There is, however, a built-in limiting element to the plaintiff’s seemingly impossible task. It must be shown that a substitute was not readily available. That implies an element of practicality to the plaintiff’s burden. It has been observed that the law does not require the purchaser to look high and low for all listed and unlisted properties.74 Rather, there is, Death to Semelhago!17it would seem, some notional requirement of due diligence. Moreover, in appropriate cases, proof of an extensive search for properties prior to the purchase in question will satisfy this requirement.75The issue of uniqueness can arise in interlocutory proceedings, that is, before a full-blown trial of the dispute. For instance, the viability of a claim for specific performance can be challenged by a defendant in an application for summary judgment. In this setting, it is the defendant who bears the persuasive burden. Where summary judgment is sought, the defendant (as moving party) must prove that there is no genuine issue for trial.76 If there is a realistic chance that the plaintiff will succeed (in this case in obtaining an order for specific performance), summary judgment should be refused.77Summary proceedings may also be invoked in another way to bring the issue of specific performance to the fore prior to trial. Proceedings may be brought to discharge a caveat or certificate of pending litigation. For example, as already noted,78 in Alberta a caveat may be lodged claiming, inter alia, an equitable interest under an agreement for sale.79 The Registrar cannot lawfully refuse to record the caveat on the ground that the interest claimed is not recognized as such in law, or that the caveator does not in fact hold the interest being claimed. By the same token, the filing of a caveat in no way validates the interest claimed. It serves as notice only. Alternatively, a litigant may submit a lis pendens, commonly called a certificate of pending litigation, which is designed to provide notice that a claim to an interest in land in being asserted in legal proceedings.80Given that there is little filtering of caveats or lis pendens claims at the moment of registration, there needs to be some process to contestthe validity of recorded caveats. Under statute, a motion can be brought requiring the filing party to prove the interest claimed. In such proceedings the onus rests with the caveating/filing party. Summary judgment may then be sought by the contesting party. To succeed at this stage, whether there is a challenge to a caveat or a lis pendens, the purchaser must make out only a prima facie case supporting an interest in land. Put another way, the motion to discharge will be dismissed unless it is plain and obvious that a claim to specific performance will ultimately fail were the matter to proceed to trial. 5.Specific performance sought by vendorsIn some instances, it is the vendor who will seek specific performance, even though what is being sought by that party is a money payment (the agreed purchase price). The advantage for a vendor in asking for performance is that, if ordered, the entire purchase price can thereby be recovered (plus incidental losses). In contrast, when the claim is for damages for breach, recovery is based on a real or presumed sale of the property by the vendor, so that damages are limited to the difference between the price agreed to in the original contract, and the real or projected proceeds of a later sale. Even though in these cases the vendor is seeking money, the ultimate fungible, the courts continue to premise the availability of specific performance on the basis of uniqueness.82It has been offered that the uniqueness qua vendor does not relate to the property as such, but to the transaction as a whole.83 It might be the case, for example, that the vendor acquired and renovated the land to meet the specifications of the purchaser, under circumstances in which the  vendor  had  no  personal  use  for  the  premises  as  modified,  and  the specialized nature of the building would be of value to few other buyers. If these predicates are in place, it is reasoned, the transaction is unique and an order for specific performance is warranted.846.Summary of the current lawThe decision in Semelhago realigned the law governing the availability of specific performance. In the wake of the decision, the basic rules are as follows:

At trial, a plaintiff, whether purchaser or vendor, seeking specific performance must prove that:

1.There has been a breach of a valid contract, and that the plaintiff is ready, willing, and able to complete the transaction.

2.Damages would not be an adequate remedy. That can be shown by demonstrating any one of the following:

(i)The property is unique to the extent that a substitute is not readily available;

(ii)The  proper  measure  of  damages  is  too  difficult  to calculate;

(iii)There is a reasonable prospect that an award of damages would not be satisfied; or

(iv)Any other consideration that might motivate a court of equity to grant the order.