The court clarified the application of the principle that 'no one can give what they do not have'
The Court of Appeal for British Columbia upheld the enforceability of a $25.5 million real estate contract despite the seller's lack of ownership at the time of the agreement.
The dispute centred on the enforceability of a contract for the sale of property and the application of the legal principle nemo dat quod non habet ("no one can give what they do not have.")
The case arose from a 2018 agreement in which the appellants, NV Highway Properties Ltd. and Catalina Facilities Rental Properties Ltd., agreed to sell three residential properties. The contract allowed the buyer, 1155204 BC Ltd., to purchase the properties outright or acquire them by buying shares in the companies holding them. The buyer paid a $1.25 million deposit but later chose not to complete the transaction, claiming the contract was unenforceable because the seller did not own the shares.
At trial, the judge sided with the buyer, ruling the contract was invalid under the nemo dat rule, which prohibits the sale of property by someone who does not own it. The judge ordered the return of the deposit and additional fees, finding that the seller's lack of ownership of the shares rendered the agreement unenforceable.
On appeal, the sellers argued that nemo dat applies to property transfers, not contracts. They maintained that the rule does not invalidate contracts where the seller has yet acquired ownership but must fulfill the agreement. The Court of Appeal agreed, emphasizing that the nemo dat rule addresses ownership, not the validity of a contract.
The appellate court found that the lower court misapplied the principle, noting that a seller's failure to own property at the time of the agreement does not render the contract unenforceable. If the seller cannot fulfill the terms, the buyer's remedy lies in seeking damages for breach of contract.
The Court of Appeal also rejected the buyer's argument that the sellers were not ready, willing, and able to complete the transaction. The evidence showed the sellers had taken all necessary steps to transfer the shares, while the buyer had failed to prepare closing documents or pay the purchase price balance.
The court concluded that the buyer's refusal to complete the transaction constituted repudiation of the contract. The appellate court reinstated the sellers' right to retain the $1.25 million deposit as liquidated damages.
