The Second Opinion: Can You Get Your Money Back? The B.C. Court OF Appeal Addresses The Forfeiture OF Deposits (Again)

Can a party who has failed to consummate a transaction get back a "deposit"? The British Columbia Court of Appeal considered this issue once again in the recent case of Amiri v. One West Holdings Ltd., 2013 BCCA 155.

The facts of the Amiri decision were as follows. A businessman ("Purchaser") purchased, in 2005, a condominium that was to be built for a total price of almost $3 million. The purchase agreement (the "Agreement") provided for the payment of a total "deposit" in the amount of approximately $750,000. The Agreement specifically stated that "[i]f the Purchaser is in breach of any of the covenants or obligations hereunder, the Vendor may, at its election, retain the Deposit...as liquidated damages." The Agreement went on to state that "[t]he parties...agree that [the Deposit] constitutes a genuine pre-estimate of the minimum damages suffered by the Vendor" and that the "Vendor reserves the right to claim for further damages." Time was of the essence for the Agreement.

The Vendor provided notice to the Purchaser that the closing date was going to be March 15, 2010. The Purchaser was abroad and received the notice in early March. However, he suffered a motor vehicle accident and was hospitalized. Moreover, he had significant business obligations arising from his foreign company's financial year-end. The Vendor agreed to extend the closing date to March 29, 2010 (the "Extension Agreement"). The Extension Agreement provided for the release of the Deposit to the Vendor in the event that the Purchaser failed to complete the purchase.

The Purchaser, who had since return from abroad, encountered further difficulty in obtaining the necessary financing (e.g., the lending institution had insisted that the documentation be signed by his wife — who was still abroad — in person,). The closing date was extended further to April 8, 2010. Again, as a condition of the extension, it was reiterated that time was of the essence and that the deposit would be forfeited if the purchase was not completed on the new closing date.

The Purchaser was ultimately eight days late in securing the necessary funds to close the deal. The Vendor took the position that the Purchaser was in default, and asserted its right to the deposit. The transaction was not consummated.

The Purchaser sought to recover his significant deposit. The trial judge ruled in favour of the Vendor, stating that the Purchaser was in default of his contractual obligations and that the forfeiture...