Nov 30, 2014

1. Facts

P enters into agreement to purchase property from D.
Clause in K of sale holds that all equipment and real property remains at the risk of the vendor until closing, that the vendor would hold all insurance policies and that, in the event of damage, the purchaser could demand the proceeds of the insurance and continue with the sale.
On the day before closing the building was destroyed by fire.D has adequate insurance.
There is a question as to whether the insurance will pay as the fire may have been deliberately set.P wants the closing date to be delayed until after the dispute between the D and the insurance is settled.D refuses to delay.
Before closing date, purchaser registers a statutory declaration which says he will continue to purchase if the buildings are restored or the insurance is determined as being sufficient to cover the costs of the restoration.
After original closing date passes D informs P that he considers the K null and void.
Long after the closing date D receives proceeds of insurance.P attempts to force sale.

2. Issues

Can the P purchaser force the sale?

3. Holding

No.

4. Ratio

La Forest, J. “…the common law is harsh on a purchaser of real property that is damaged by fire or otherwise between the date of the agreement of sake and the date of closing. Unless otherwise provided by the agreement, the purchaser must go through with the purchase and pay the full purchase price. And he is not at common law entitled to the proceeds of any insurance on the property in the absence of express or implied arrangements for the purpose.”

He goes on to examine the clause in the agreement of sale and finds that: “…the clause does not set forth any specific amount of insurance. Indeed, the vendor is under no duty to take out any insurance. All the clause provides for is that if the purchaser elects to go through with the purchase he is entitled to whatever insurance proceeds may be owing. It does not give the purchaser any guarantee that the insurance is necessarily collectible.”

“…the purchaser is entitled to be granted time to sort out what he is to do, and he is also entitled to obtain the details of the insurance coverage from the vendor.” He goes on to find that this was not what the purchaser was doing but that he was rather trying to find out if the insurance would pay and as such the agreement did not entitle the purchaser to wait until he knew what the insurer would do.