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Case Study: "Duty of Good Faith" wins again...

The case:
A solicitor acted on the purchase of a house. He forgot to note encroachments on side yard setbacks of two inches and five inches. When the purchasers resold their house some years later, the prospective purchaser used these encroachments as a pretext for refusing to close. The clients sued their solicitor and the prospective purchaser for extensive damages.

The judgment:
At trial, the solicitor was held liable for $393.01, which was the cost of obtaining and registering a variance, which the judge accepted was readily available. The purchaser was held liable for $5,042.99. The judge held that the vendor was able to convey substantially what the purchaser had contracted to purchase, as contemplated by LeMesurier v. Andrus (1986) 54 O.R. (2d) 1 (C.A.).

The Court of Appeal dismissed the purchaser's appeal on liability, agreeing that he acted arbitrarily, capriciously or in bad faith. The Court did reduce the damage award slightly.

Djurickovic v. Lo; Djurickovic v. Lyons [1992] O.J. No. 2190 (Ont. Ct. Gen. Div.); affirmed [1997] O.J. No. 1284 (C.A.)

And again . . . .
The case:
A purchaser agreed to purchase the vendor's house for $1.25 million. One the day of closing, the purchaser repudiated the agreement on the basis of a $2,000 construction lien registered against title. The purchaser knew that the lien could be removed pursuant to a statutory right of payment into the court. The purchaser refused the undertaking of the vendor's solicitor to remove the lien, and also refused to extend the closing for one day.

The judgment:
The trial judge held that the purchaser's decision to repudiate the contract was made arbitrarily and not in good faith, and held the purchaser liable for damages. The Court of Appeal upheld the trial judgment. The Court stated that the courts should be reluctant to allow parties to escape honestly-made contracts in situations where very small amounts of money are involved, since the final result is that the purchaser gets everything he contracted for, rather than something less with an abatement, as was the case in LeMesurier v. Andrus. Green v. Kaufman, (1997) 6. R.P.R. (3d) 141 (C.A.)

Pay monies for settlements for persons under disability into Court, not to plaintiff's solicitor
The case:
The insurers of two defendants involved in a motor vehicle accident settled the claims of the adult plaintiff and the two infant plaintiffs, both of whom received extremely minor injuries. The settlement proceeds for all of the plaintiffs were made payable to the plaintiff's solicitor in trust. The solicitor absconded with the settlement money. The adult plaintiff sought and received compensation from the Lawyers' Fund.

The judgment:
On June 6, 1997, the Division Court held that Rule 7.09 requires that any money payable to a person under a disability pursuant to a settlement was to be paid into Court, unless a judge ordered otherwise. If a defendant chooses to simply pay monies to that person's solicitor, the defendant does so at his own peril. The defendants were therefore required to "repay" the settlement money into Court.

Grande (Litigation Guardian of) v. Grande, (1997) 34 O.R. (3d) 645 (Ont. Ct. Gen. Div. - Div. Ct.)

A "full and final" release is not always full and final
The case:
A husband and wife were injured in a car accident, the wife less so than the husband. She settled her personal injury claim through her solicitor with the adjuster of the defendant's insurer. She executed the usual "full and final" release, which was prepared by her solicitor. Later, she asserted a claim under s.61 of the Family Law Act (FLA). The defendant raised her release as a defence to the action.

The judgment:
Matlow, J. agreed that the wife was entitled to advance her FLA claim. He accepted that no one turned their minds to the potential FLA claim at the time of the original settlement. The only claim in the contemplation of the parties was her own personal injury claim. Matlow, J. followed the judgment of the Alberta Court of Appeal in Athabasca Realty Co. Ltd. v. Foster 25 C.P. C. at 238 as follows: "It is well established that a release operates to cover what the parties had in contemplation. Even wide general words of release are limited by that factor . . ." The defendant's appeal to the Divisional Court was dismissed.

Lloyd v. Deltatto, [1990] O.J. No. 336 (Ont. Dist. Ct.); appeal dismissed [1991] O.J. No. 2721 (Ont. Div. Ct.)


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