Case information

Contracts — Lawful excuse for non performance — Illegal contracts — Does establishing an “unlawful intention” remain a ground sufficient to invalidate an otherwise lawful contract, in light of the modern approach to ex turpi causa established by this Court in Hall v. Hebert, [1993] 2 S.C.R. 159 — If so, what is the scope of the unlawful intentions branch of the doctrine as a basis to refuse performance of an otherwise lawful contract.

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The applicant purchasers entered into two linked purchase and sale agreements with the respondent vendors for the purchase and sale of two commercial properties. Two weeks before the completion date the respondents gave notice to the applicants that they would not be proceeding with the sale on the ground that the agreements had been repudiated or were unenforceable due to alleged wrongdoings by the applicants and the parties’ common real estate agent. The applicants rejected what they claimed was a wrongful repudiation and commenced an action for specific performance or, alternatively, damages.

The Supreme Court of British Columbia dismissed the applicants’ action, accepting the respondents’ defence that the purchase agreements “were part of a transaction intended to be used for unlawful purposes or otherwise tainted by illegality”. For reasons of public policy, the Court declined to enforce them against the respondents as to do so “would be harmful to the integrity of the legal system”. The Court dismissed the respondents’ counterclaims except a claim for breach of contract and fiduciary duty against their real estate agents. The Court of Appeal for British Columbia dismissed the applicants’ appeal and the respondents’ cross-appeal.