Relief from Forfeitures - Examples. Fisher v. Soroka
In Fisher v. Soroka (Ont CA, 2022) the Court of Appeal considered delay as it feeds in the tests for both setting aside default judgment, and relief from forfeiture:
 The appellant’s first submission is that the motion judge applied the wrong legal analysis to the extent he used the test for setting aside a default judgment, rather than the analysis for granting relief against forfeiture. We disagree. The motion judge considered the legal analyses applicable to both setting aside a default judgment and granting relief against forfeiture. He cited leading authorities of this court regarding both issues. Both tests were relevant in the circumstances.. Ching v. Pier 27 Toronto Inc.
 In any event, a significant factor in both tests is whether the motion was brought promptly and the moving party’s explanation for the delay: Winters v. Hunking, 2017 ONCA 909, at paras. 12-14; Intact Insurance Co. v. Kisel, 2015 ONCA 205, 125 O.R. (3d) 365, at paras. 12-14; and Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at paras. 47-50. We see no palpable and overriding error in the findings of the motion judge on the record before him that the motions to set aside were not made with reasonable promptness, and that the appellant’s explanation for the delay was neither plausible nor credible.
In Ching v. Pier 27 Toronto Inc. (Ont CA, 2021) the Court of Appeal considered an issue of relief from forfeiture:
 Under s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43, a court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.. 2324702 Ontario Inc. v. 1305 Dundas W Inc.
 In his reasons, the trial judge described the factors to be considered for the purposes of relief from forfeiture as: whether the conduct of the party seeking relief from forfeiture was reasonable, whether the object of the right of forfeiture was to secure the payment of money, and whether there was a substantial disparity between the value of the property forfeited and the damage caused by the breach. The property forfeited in this case is of course the deposit.
 In describing the factors, the trial judge relied on Scicluna v. Solstice Two Limited, 2018 ONCA 176, 421 D.L.R. (4th) 675, which drew on Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC),  2 S.C.R. 490, an insurance case.
 Other authorities that have examined relief from forfeiture in the context of real estate deposits have applied an arguably different test. See for example: Varajao v. Azish, 2015 ONCA 218; Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374; and Azzarello. This test for relief from forfeiture, which is based on the English Court of Appeal decision of Stockloser v. Johnson,  1 Q.B. 476 (C.A. (Eng.)), poses two questions: (i) is the forfeited deposit out of all proportion to the damages suffered; and (ii) would it be unconscionable for the vendor to retain the deposit?
 In Redstone, this court examined both questions. Lauwers J.A., writing for himself, Sharpe and Hourigan JJ.A., referred with approval to the five-person panel in Tang v. Zhang, 2013 BCCA 52, 359 D.L.R. (4th) 104. In Tang, the vendor had been able to resell a $2 million property for more than the original purchase price and had suffered no loss. Citing the principles that underlie a deposit, the British Columbia Court of Appeal overturned the relief from forfeiture of the $100,000 deposit granted by the trial judge. One such principle identified in Tang, and approved by Lauwers J.A., was that:
A true deposit is an ancient invention of the law designed to motivate contracting parties to carry through with their bargains. Consistent with its purpose, a deposit is generally forfeited by a buyer who repudiates the contract, and is not dependant on proof of damages by the other party. If the contract is performed, the deposit is applied to the purchase price. Following upon that decision, and mindful of the recognition of the advantages of allowing parties to define for themselves the consequences of breach and the need for contractual certainty, in Redstone, Lauwers J.A. reasoned that the fact that the vendor suffered no damages did not in itself render the forfeiture of the entire deposit of $750,000 unconscionable. He stated at para. 25 that the finding of unconscionability must be an exceptional one, strongly compelled by the facts of the case and noted, at para. 30, that the list of the indicia of unconscionability is never closed. Ultimately, this court concluded that the vendor was entitled to retain the full deposit paid by the purchaser in the face of no evidence of any damages.
 As the Supreme Court stated in Saskatchewan River, relief from forfeiture is an equitable and discretionary remedy. Absent a legal or palpable and overriding error, it is not for this court to substitute its discretion for that of the trial judge. Based on the record before him, he reasonably concluded that the respondent incurred expenses of approximately $227,544.24 consequent on the appellants’ breach. The trial judge considered these expenses, the quantum of the deposit, and the increased proceeds of disposition received by the respondent on the resale of the property but chose not to exercise his discretion in favour of the appellants. Relief from forfeiture is not simply a mathematical formula; it is an exercise of discretion. Although the respondent ultimately may have gained approximately $100,000 from the transaction, I am unable to conclude that the trial judge’s refusal to grant relief from forfeiture of the appellants’ deposit was infected with error.
 I would also add that the retention of the deposit by the respondent vendor in this case is consistent with the objective of a deposit and the prospect of its forfeiture as described in Benedetto v. 2453912 Ontario Inc., 2019 ONCA 149, 86 B.L.R. (5th) 1, at para. 14: “a forfeited deposit does not constitute damages for breach of contract, but stands as security for the performance of the contract.” See also Benedetto, at paras. 6-7; Tang, at paras. 20-24, 30.
 However, I would add two important caveats to my conclusion on the issue of relief from forfeiture. First, it is of significance that the appellants did not challenge the quantum of the damages that the respondent said arose from the appellants’ failure to close the transaction nor did they challenge any of the constituent elements of the respondents’ damages. In other words, the appellants did not argue that any of these elements should not be considered as proper heads of damage in light of the respondent’s prior breaches.
 Second, because the decision on relief from forfeiture is an inherently discretionary one based on the specific facts of a particular case, developers who act in a manner, such as the respondent did here, by which they do not honour their contractual obligations, should not expect that such a favourable outcome will necessarily be the result in future cases.
In 2324702 Ontario Inc. v. 1305 Dundas W Inc. (Ont CA, 2020) the Court of Appeal reviewed the law of relief from forfeiture in a commercial landlord and tenant case:
 The Commercial Tenancies Act, R.S.O. 1990, c. L.7, allows the court to grant “such relief as […] the court thinks fit”, having regard to all the circumstances, where a landlord seeks to enforce a right of re-entry or forfeiture following a tenant’s breach: ss. 19, 20(1). The Saskatchewan River Bungalows case also established the test for granting relief from forfeiture. In granting the discretionary and equitable remedy of a relief from forfeiture, a court is to consider the conduct of the applicant, the gravity of the applicant’s breaches of the lease, and the disparity between the value of the forfeited property and the damage caused by the breach: Saskatchewan River Bungalows, at p. 504.. Kechnie v. Sun Life Assurance Company of Canada
 Although the failure to renew the lease is not a breach of the lease, the court may grant relief from forfeiture where a party seeks to renew the lease but has not complied with the formal requirements or preconditions for doing so. However, this relief is available only in circumstances more narrowly confined than the three-pronged test from Saskatchewan River Bungalows. As recently restated in McRae Cold Storage Inc. v. Nova Cold Logistics ULC, 2019 ONCA 452, at para. 10:With respect to the renewal of a lease, a precondition for the exercise of any such equitable discretion is that the tenant has made diligent efforts to comply with the terms of the lease which are unavailing through no default of his or her own: 120 Adelaide Leaseholds Inc., at para. 9; Ross v. T. Eaton Co. (1992), 1992 CanLII 7470 (ON CA), 11 O.R. (3d) 115 (C.A.), at pp. 124-125; 1383421 Ontario Inc. v. Ole Miss Place Inc. (2003), 2003 CanLII 57436 (ON CA), 67 O.R. (3d) 161 (C.A.), at para. 80; Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc., 2016 ONCA 93, 344 O.A.C. 363, at paras. 55-56.
In Kechnie v. Sun Life Assurance Company of Canada (Ont CA, 2016) the Court of Appeal considered relief from forfeiture arguments in the context of a commission compensation scheme for terminated salespersons:
Relief from Forfeiture. Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co.
 After examining the provisions of the CORe agreements and arriving at her interpretation of their meaning, beginning at para. 44, the trial judge addressed the question whether the provisions disentitling the appellants to receive the CORe payments were “unenforceable as punitive forfeiture clauses or an unreasonable restraint of trade”. She held they were not.
 The appellants accept that trial judge applied the proper test for granting relief from forfeiture, as set out in Kozel v. Personal Insurance Co., 2014 ONCA 130 (CanLII), 119 O.R. (3d) 55, at para. 31:
In exercising its discretion to grant relief from forfeiture, a court must consider three factors: (i) the conduct of the applicant, (ii) the gravity of the breach, and (iii) the disparity between the value of the property forfeited and the damage caused by the breach. However, they submit that she erred in in applying the test. I disagree.
 Whether to grant or refuse relief from forfeiture, as an equitable remedy, is a purely discretionary decision: the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98; Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC),  2 S.C.R. 490, at para. 32. Here, the trial judge reviewed the record in the context of all three of the foregoing factors. In substance, the appellants simply disagree with the findings she made.
 For example, the appellants contend that the disparity between their loss of the CORe payments and any damage Sun Life suffered from the breach was entirely disproportionate. They submit that they lost over $1.8 million in CORe payments, while recovering only about $600,000 from the transferred business and that Sun Life benefitted additionally by receiving almost $675,000 from other Sun Life advisors who purchased portions of the Kechnies’ book of business. They say that Mr. Kechnie’s conduct was reasonable and did not constitute a blatant or intentional breach of the terms of the agreement, and that Sun Life treated the Kechnies badly.
 The trial judge did not see it that way, however. She accepted Sun Life’s evidence and held that its reconstructed data was “more reliable than the figures offered by the Plaintiffs” (para. 57). She found that: Mr. Kechnie had transferred over 600 Sun Life clients and 60 life insurance policies to his son’s firm; roughly $20 million of Mutual Funds assets were moved from Sun Life to the new business; the market value of the mutual funds and segregated funds in the book of business formerly serviced by Mr. Kechnie at Sun Life decreased by 84% between 2008 and 2014; and Mr. Kechnie could earn between $2-3 million in revenue from the transferred business with the result that he would earn from those clients revenue that was at least equal to or greater than the CORe payments he would otherwise have received (paras. 33-40). She also found that Mr. Kechnie “knew very well the nature of the provisions he had contracted to and their implications for conduct following termination” and, indeed, had been “directly involved in the various internal discussions which occurred surrounding the rollout of the new system” (paras. 49 and 52).
 On the basis of this evidence the trial judge characterized Mr. Kechnie’s activities as “a systematic attack on the goodwill in the former block of business” (para. 33) and (on his premise that he would be entitled to receive the CORe payments) as “a flagrant breach of contractual obligations” (para. 53).
 In the end, the trial judge determined that the CORe payment termination provisions were not punitive in nature or a penalty, nor were they contrary to public policy. Having so found, she correctly concluded that the principles of relief from forfeiture were not engaged. Nonetheless, she went on to address the appellants’ claim that the operation of the provisions was unconscionable, harsh and inequitable. Her findings led her to reject these claims as well.
 These conclusions were amply supported by the record and completely justify the trial judge’s conclusion that the appellants were not entitled to relief from forfeiture in the circumstances.
 Nonetheless, the trial judge’s decision is consistent with other authorities supporting the enforceability of forfeiture provisions in contracts of a similar nature to the CORe payment termination clause.
 For example, Inglis v. The Great-West Life Assurance Co., 1941 CanLII 85 (ON CA),  1 D.L.R. 99 (Ont. C.A.), involved a forfeiture clause respecting payments by an insurer to an insurance agent following termination of employment. The clause provided that the company would continue to pay the agent “the commissions on business written during the continuance of this agreement to which the Agent would have been entitled if this agreement had remained in force”; however, if the agent became “connected with or [did] business directly or indirectly for any other life insurance company” the commissions were forfeited. The agent subsequently began to work for another life insurance company. His claim to recover the commissions was unsuccessful. The Court of Appeal held that the forfeiture clause did not constitute a penalty. Its reasoning is instructive for the present appeal. At p. 102, Masten J.A. said:
We are of the opinion that the provisions of [the forfeiture clause] are not in the nature of a penalty. Whether it is to be considered as part of the remuneration provided by the agreement when read as a whole, or as a separate provision entered into in consideration of the right of either party to cancel on notice, appears to the Court to be immaterial. In either case it is the agreement of the parties, not a penalty. The plaintiff agreed that if he chose to join another life insurance company these payments would cease. He did so choose, and their cessation is not in the nature of a penalty but is in pursuance of the agreement by which the plaintiff voluntarily bound himself in the beginning. The Court also agreed that the clause was not in restraint of trade. Other authorities holding that similar forfeiture provisions are valid and enforceable against the defaulting party, either because they do not constitute a penalty or because they do not operate in restraint of trade, or both, include: Webster v. Excelsior Life Insurance Co. (1984), 1984 CanLII 682 (BC SC), 50 B.C.L.R. 381 (S.C.), at p. 382; Roy v. Assumption Mutual Life Insurance Co. (2000), 222 N.B.R. (2d) 316 (Q.B.), at paras. 56-61; Burgess v. Industrial Frictions & Supply Co. (1987), 1987 CanLII 2722 (BC CA), 12 B.C.L.R. (2d) 85 (C.A.), at pp. 89-90. These decisions support the trial judge’s conclusions.
In Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co. (SCC, 1994) the Supreme Court of Canada examined the Alberta version of the (non-insurance) statutory relief from forfeiture provision [the Ontario counterpart is at Courts of Justice Act s.98]:
B.Relief Against Forfeiture. Scicluna v. Solstice Two Limited
The second issue on appeal is the Court's equitable jurisdiction to relieve against forfeiture. The respondents submit that the general power to grant relief, contained in s. 10 of the Judicature Act, should be exercised in this case. The appellant contends that the Judicature Act does not apply since the field is occupied by a statutory scheme (the Insurance Act). It further submits that the respondents' loss was not a forfeiture and argues that, in any event, this is not an appropriate case for granting relief.
Section 10 of the Judicature Act reads:
10 Subject to appeal as in other cases, the Court has power to relieve against all penalties and forfeitures and, in granting relief, to impose any terms as to costs, expenses, damages, compensation and all other matters that the Court sees fit. The power to grant relief against forfeiture is an equitable remedy and is purely discretionary. The factors to be considered by the Court in the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value of the property forfeited and the damage caused by the breach: Shiloh Spinners Ltd. v. Harding,  A.C. 691 (H.L.); Snell's Equity (29th ed. 1990), at pp. 541-42.
The Ontario High Court in Liscumb v. Provenzano (1985), 1985 CanLII 2051 (ON SC), 51 O.R. (2d) 129, aff'd 1986 CanLII 2595 (ON CA), 55 O.R. (2d) 404 (C.A.), relying on the Shiloh decision, summarized the governing principles as follows (at p. 137, per McKinlay J.):
I consider that the following are the appropriate questions to consider in determining whether there should be relief from forfeiture in this case: first, was the conduct of the plaintiff reasonable in the circumstances; second, was the object of the right of forfeiture essentially to secure the payment of money, and third, was there a substantial disparity between the value of the property forfeited and the damage caused the vendor by the breach?The first element of the test set out in Liscumb -- the reasonable conduct requirement -- is not met in this case. The respondents knew, at all relevant times, that Fikowski Sr. was terminally ill and uninsurable. Nonetheless, they chose to have their correspondence from Maritime sent to Lake Louise over the winter, and to collect their mail only intermittently. When the respondents learned that payment of the premium was nine months overdue in April 1985, they did not tender a replacement cheque, but rather waited three months, until July 1985. The trial judge, who was in a position to assess the respondents' conduct, concluded that it was not reasonable. He wrote:
The corporation chose to have a mail box at the Post Office at Lake Louise to receive its corporate mail on a 12 month basis and having made that decision I think they must live with the results. If you only pick-up your mail every two weeks then you are going to be late in getting notices that may be of some importance. Ultimately when the advice that the policy had lapsed was received in late April or early May of 1985 Mr. Michael Fikowski and Mr. J. D. Thomas started a search for a cancelled cheque. Under the circumstances in this day and age of long distance telephones and all the communications that are available I think that they had an obligation to their company to take additional procedures in regard to this matter. They were advised that payment had not been made. There were procedures to have the policy reinstated. If they were going to do anything about it, it had to be done quickly. It wasn't until July 25th, if memory serves me correctly, met [sic] the replacement cheque was sent out, that is three months after they ultimately received the notice.As the failure to satisfy the first test in Liscumb determines the outcome of this appeal, it is unnecessary to comment on the second and third tests outlined in the case.
I therefore find that the plaintiff's case fails and that they are not entitled to relieve against forfeiture.
As the respondents are barred by their conduct from recovering, it is not necessary to determine whether our general power to relieve against forfeiture under s. 10 of the Judicature Act applies to contracts regulated by the Insurance Act. However, I would note that the existence of a statutory power to grant relief where other types of insurance are forfeited (Insurance Act, ss. 201, 205 and 211) does not preclude application of the Judicature Act to contracts of life insurance. The Insurance Act does not "codify" the whole law of insurance; it merely imposes minimum standards on the industry. The appellant's argument that the "field" of equitable relief is occupied by the Insurance Act must therefore be rejected.
Several of the authorities cited by the appellant involved forfeitures made under statutory insurance conditions, which is not the case here: Stenhouse v. General Casualty Insurance Co. of Paris, 1934 CanLII 221 (AB CA),  3 W.W.R. 564 (Alta. S.C.A.D.); Swan Hills Emporium & Lumber Co. v. Royal General Insurance Co. of Canada (1977), 1977 ALTASCAD 13 (CanLII), 2 A.R. 63 (S.C.A.D.). The case of Johnston v. Dominion of Canada Guarantee and Accident Insurance Co. (1908), 17 O.L.R. 462 (C.A.) treated the insurance legislation at issue as a statutory code, and for this reason is no longer good law.
It is also unnecessary to determine whether relief from forfeiture can operate generally as a before-loss remedy in the insurance context. Clearly, the holder of a term life policy has no vested right to benefits until the loss insured against -- death of the insured -- has occurred. However, a modern understanding of the doctrine of relief would likely expand the notion of forfeiture to include less tangible losses, such as the loss of an option to convert a term policy into one under which benefits would be certain, or the loss of one's insurability. This question remains open.
In Scicluna v. Solstice Two Limited (Ont CA, 2018) the Court of Appeal upheld an application judge's ruling to grant CJA s.98 relief from forfeiture:
 In my view, even though the deposit was forfeited, the application judge was entitled to grant relief from forfeiture, notwithstanding that s. 98 of the Courts of Justice Act, R.S.O. 1990. c. C.43 was not formally advanced by Ms. Scicluna. It was implicit in the application below that Ms. Scicluna was seeking relief from forfeiture. Ms. Scicluna was suing for the return of the deposit that Solstice claimed was forfeited. A judge has a broad discretion under s. 98 to grant such relief.
 Moreover, relief from forfeiture was the obvious outcome on these facts, even though relief from forfeiture is an equitable and purely discretionary remedy: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Company, 1994 CanLII 100 (SCC),  2 S.C.R. 490, at p. 504; and Kechnie v. Sun Life Assurance Co. of Canada, 2016 ONCA 434, 401 D.L.R. (4th) 620, at paras. 26-28. The “appropriate questions to consider” in deciding whether to award relief from forfeiture were identified in Liscumb v. Provenzano (1985), 1985 CanLII 2051 (ON SC), 51 O.R. (2d) 129 at p. 137 (S.C.), affirmed (1985), 1986 CanLII 2595 (ON CA), 55 O.R. (2d) 404 (C.A.), by McKinlay J. (as she then was):
first, was the conduct of the plaintiff reasonable in the circumstances; second, was the object of the right of forfeiture essentially to secure the payment of money; and third, was there a substantial disparity between the value of the property forfeited and the damage caused the vendor by the breach? I do not accept Solstice’s position that Saskatchewan Rivers holds this to be a three part test, requiring satisfaction of each and every part. The Supreme Court described these questions as “factors”, at p. 504 of that decision. See also Kozel v. Personal Insurance Co., 2014 ONCA 130, 119 O.R. (3d) 55, at para. 31. The Supreme Court’s readiness to accept the trial judge’s decision to refuse relief based on the unreasonableness of the conduct of the plaintiff alone does not intimate that each factor is a condition precedent to relief from forfeiture. It signals no more than that a trial judge, exercising this equitable and purely discretionary remedy, is entitled to refuse relief based on unreasonable conduct alone.
 The failure of the application judge to refer overtly to Ms. Scicluna’s conduct is not, therefore, fatal to her decision. Indeed, the application judge was well aware that Ms. Scicluna failed to close the AAPS, and that she refused to sign the release agreement. The application judge was also aware that Ms. Scicluna did not close the transaction because she lost her job, and that her refusal to sign the release agreement was based on a misunderstanding of the meaning of the release agreement. This is not a case where Ms. Sciculina’s conduct was so unreasonable that this court should interfere in the trial judge’s exercise of discretion.
 Indeed, in this case the “substantial disparity between the value of the property forfeited and the damage caused [to Solstice] by the breach” is so manifest and so grossly disproportionate that relief from forfeiture is patently a correct result. This can be said with confidence even without evidence particularizing the actual cost to Solstice of Ms. Scicluna’s failure to close. This is not a case of an ordinary deposit. In the unusual circumstances of this case, Ms. Scicluna had advanced close to 80% of the total purchase price, $293,685 on a purchase price of $372,000. To compound this, Solstice was able to sell the same property that Ms. Scicluna had almost entirely paid for to another purchaser for $435,000. Even before the $263,685 that Solstice claims as forfeited money, it has, in pocket, $93,000 more than it would have had if Ms. Scicluna had closed on the AAPS. This is because of the $30,000 forfeited deposit that Solstice retains under the application judge’s order, and the $63,000 net difference between the condominium’s original sale price and subsequent resale price. Whatever expenses Solstice may have incurred because of Ms. Scicluna’s failure to close, it is obvious that Solstice is not in a net loss position. If Solstice’s forfeiture claim is accepted, it would have a grossly disproportionate windfall. I would not disturb the application judge’s finding on this issue.