The deposit was disproportionate to the damages suffered by the seller
The Ontario Court of Appeal dismissed an appeal by a commercial property seller, upholding the return of the deposit to the buyer's trustee after the buyer failed to close the deal due to bankruptcy.
In Pleterski (Re), 2024 ONCA 711, the seller challenged a decision to return a $500,000 deposit to Grant Thornton Limited, the trustee in bankruptcy for a buyer who had failed to close the deal. The dispute arose after Aiden Pleterski, known as the "Crypto King," and Colin Murphy agreed to purchase a $5.5 million property in Ajax but could not complete the transaction due to Pleterski's bankruptcy.
Pleterski, who paid the $500,000 deposit using investor funds intended for cryptocurrency investments, was declared bankrupt before the closing date in September 2022. Grant Thornton, acting as trustee, notified the seller that the transaction would not proceed, leading the seller to treat this as an anticipatory breach of contract. The property was later sold to another buyer for $300,000 more than the original agreement.
Grant Thornton moved for relief from forfeiture under s. 98 of the Courts of Justice Act, seeking the return of the deposit for the benefit of Pleterski’s creditors. The motion judge ruled in favour of Grant Thornton, determining that the deposit was disproportionate to the damages suffered by the seller and that retaining the deposit would be unconscionable.
The seller appealed, arguing that the motion judge erred by considering the interests of Pleterski’s creditors, who were not parties to the purchase agreement. The Court of Appeal rejected this argument, noting that the analysis of unconscionability requires consideration of the full commercial context, including the fact that Pleterski had misappropriated investor funds to pay the deposit.
The appeal court also found no error in the motion judge’s rejection of the seller’s claim that they had sold the property at a discounted price based on a “gentleman’s agreement” allowing continued use of part of the property. The agreement was not in the contract, and no evidence supported any additional loss to the seller.
Ultimately, the Court of Appeal upheld the motion judge’s decision to return the full deposit to Grant Thornton, for the benefit of Pleterski’s creditors.
