Limitation Period Bars Claim For Breach Of Assignment Of Agreement Of Purchase And Sale

• Published date: 10 November 2022
• Subject Matter: Real Estate and Construction, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

In Ontario, there is a general two-year limitation period for claims relating to a breach of contract which starts on the day when a plaintiff discovers that damage from a breach occurred and knows that a legal proceeding would be an appropriate means to seek a remedy. There is a general presumption that the limitation period starts as of the date that "performance was due" meaning the date on which the breach of contract occurred.

For claims involving breach of a residential property Agreement of Purchase and Sale (APS), the scheduled closing date is often when performance was due since title to the property was supposed to have been transferred on that date. There may be circumstances when another date would serve as the starting point for the limitation period, but in most cases it would be prudent for a plaintiff to commence an action within two years of the scheduled completion date, if not earlier.

The consequences of missing the limitation period were demonstrated in the Ontario Superior Court of Justice decisions in 9383859 Canada Ltd. v. Saeed, in which an aborted assignment transaction led to two motions concerning the limitation period: 2020 ONSC 4883 (CanLII) and a second decision released on November 8, 2022 [not yet on CanLII].

In 2016, the buyer under an APS (Saeed) for a property in Markham, Ontario, assigned her rights to a numbered company, 9383859 Canada Ltd. (938 Canada), that was owned by an experienced buyer and seller of real estate. The scheduled completion date in the APS was May 5, 2016. However, the transaction did not close. The property was then resold to other buyers. 938 Canada's owner learned about the resale on May 18, 2016.

The assignor, Saeed, sued the sellers and the new buyers for breach of the APS and sought to obtain title to the property by way of specific performance. 938 Canada's owner provided information to Saeed's counsel to assist in the litigation. On July 27, 2018, the court dismissed Saeed's action for specific performance: Saeed v. Gunarajah, 2018 ONSC 4590 (CanLII). The court noted that the evidence was overwhelming that the sale was a genuine, arm's length transaction.

On September 17, 2019, 938 Canada commenced its own action against several parties, including Saeed, the sellers, and their respective lawyers. Amongst other allegations, 938 Canada claimed that it was denied the opportunity to pay the sellers $5,000 to extend the closing date. 938 Canada claimed that Saeed and the transaction lawyers had...