1092369 Alberta Ltd. v. Joben Investments Ltd. et al., 2013 ABQB 310

• Judge: Brown, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: April 15, 2013
• Citations: 2013 ABQB 310;(2013), 565 A.R. 17 (QB)

1092369 Alta. Ltd. v. Joben Inv. Ltd. (2013), 565 A.R. 17 (QB)

MLB headnote and full text

Temp. Cite: [2013] A.R. TBEd. MY.163

1092369 Alberta Ltd. (plaintiff) v. Joben Investments Ltd. and Kenyon Estates Development Ltd. (defendants)

(0603 13311)

Japinder Singh Grewal, Surinder Singh Mahal and Amarjit Mahal (plaintiff) v. Joben Investments Ltd. (defendants)

(0703 10988; 2013 ABQB 310)

Indexed As: 1092369 Alberta Ltd. v. Joben Investments Ltd. et al.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Brown, J.

May 23, 2013.

Summary:

This case arose out of the trial of two actions arising from contracts for the sale of building lots in a residential neighbourhood in Edmonton. The landowner, Joben Investments Ltd., agreed to sell 14 lots to the corporate plaintiff and one lot each to the individual plaintiffs (Mr. and Mrs. Mahal and Mr. Grewal). All the purchase and sale agreements contained a seller's condition that a subdivision plan would be registered and building permits obtainable by August 15, 2006 (condition day), and so long as Joben used "reasonable efforts" to satisfy that condition, failure to satisfy it would end the contract. Either on or just before the condition day, the plaintiff purchasers were advised that Joben would not be completing the contracts and the deposits were refunded. The corporate plaintiff, with its returned deposit, secured 12 lots the next day. The corporate plaintiff commenced one action against Joben seeking damages and the individual plaintiffs together commenced another action, seeking specific performance. The plaintiffs claimed that Joben did not use "reasonable efforts" to satisfy the condition in the purchase and sale agreements, and had it done so, it would have satisfied the condition by the condition day.

The Alberta Court of Queen's Bench allowed the actions. The court held that the individual plaintiffs were not entitled to specific performance. Each plaintiff was, however, entitled to damages. The court calculated damages accordingly.

Contracts - Topic 2255

Terms - Conditions and warranties - Condition dependent on third party - [See second Sale of Land - Topic 6029 ].

Contracts - Topic 2267

Contracts - Terms - Conditions and warranties - Condition precedent - [See both Sale of Land - Topic 6029 ].

Contracts - Topic 2281

Terms - Conditions precedent - Defined - [See both Sale of Land - Topic 6029 ].

Contracts - Topic 4106

Remedies for breach - Specific performance - When available - General - [See second Damages - Topic 1043 ].

Contracts - Topic 4110

Remedies for breach - Specific performance - Sale of land - [See second Damages - Topic 1043 ].

Damages - Topic 1043

Mitigation - In contract - Where specific performance claimed - The Alberta Court of Queen's Bench discussed the duty to mitigate in the context of the remedy of specific performance in the case of a sale of land - See paragraphs 136 to 144.

Damages - Topic 1043

Mitigation - In contract - Where specific performance claimed - Two purchase and sale agreements contained a seller's condition that a subdivision plan would be registered and building permits obtainable by a certain date (condition day), and so long as the vendor used "reasonable efforts" to satisfy that condition, failure to satisfy it would end the contracts - The vendor refused to close, because the subdivision was not registered by condition day - The two individual purchasers sued the vendor for specific performance, alleging that the properties were irreplaceable - The Alberta Court of Queen's Bench held that since the seller's condition was not a true condition precedent, the remedy of specific performance was potentially available - However, the evidence in this case fell well short of satisfying the purchasers' burdens of demonstrating irreplaceability such as to justify an award of specific performance - Further, the individual purchasers failed to mitigate by finding a substitute property - See paragraphs 130 to 139.

Damages - Topic 1065

Mitigation - In particular matters - Sale of land - [See both Damages - Topic 1043 ].

Damages - Topic 6100

Contracts - Sale of land - Breach by seller - Measure of damages - [See both Sale of Land - Topic 8774 ].

Damages - Topic 6102

Contracts - Sale of land - Breach by seller - Time for assessment - [See both Sale of Land - Topic 8774 ].

Sale of Land - Topic 957

The contract - Conditions and warranties - Reasonable efforts clause - A vendor obtained conditional subdivision approval from a municipality - The vendor executed purchase and sale agreements containing a seller's condition that a subdivision plan would be registered and building permits obtainable by a certain date (condition day), and so long as the vendor used "reasonable efforts" to satisfy that condition, failure to satisfy it would end the contract - The Alberta Court of Queen's Bench discussed the meaning and content of "reasonable efforts" in this context - The court held that by agreeing to include a "reasonable efforts" clause the parties intended that something less than "best efforts" was required - A "reasonable efforts" obligation "... denotes a prudent and moderate measure of sustained diligence necessary to give business efficacy to the object of the parties' underlying agreement (being, in this case, to effect the purchase and sale of subdivided lots). Alternatively put, it describes the effort that a reasonable person, committed to achieving the objective, would have undertaken" - See paragraphs 68 to 75.

Sale of Land - Topic 957

The contract - Conditions and warranties - Reasonable efforts clause - A vendor obtained conditional subdivision approval from a municipality - The vendor executed purchase and sale agreements containing a seller's condition that a subdivision plan would be registered and building permits obtainable by a certain date (condition day), and so long as the vendor used "reasonable efforts" to satisfy that condition, failure to satisfy it would end the contract - Shortly before or on condition day, the vendor announced that it would not be able to complete the sales because the subdivision had not been registered - The purchasers claimed that the vendor did not make "reasonable efforts" to satisfy the condition - The Alberta Court of Queen's Bench agreed - The vendor's agent (engineer), for whom the vendor was responsible, failed to submit the required revised drawings to the municipality on time - His almost non-existent efforts as the condition day approached did not constitute "reasonable efforts" - Nor did the vendor's principal's oversight of the engineer constitute "reasonable efforts" - See paragraphs 76 to 123.

Sale of Land - Topic 6029

Completion - Conditions precedent and subsequent - What constitutes a condition precedent - The Alberta Court of Queen's Bench distinguished between a "true condition precedent" and an "ordinary condition precedent" - See paragraphs 50 to 56 - The court stated that "The essence of a true condition precedent is found in its purpose, which is to allow a party to waive another party's default in performing a condition intended for the benefit of the first party, while preventing a party from waiving its own default or the default of a third party upon whose discretion or effort performance depends ... The two essential qualities of a true condition precedent are, therefore, that (1) it cannot be waived unilaterally (whereas other conditions can be waived by the party for whose benefit the condition had been included in the contract); and (2) it depends on a future, uncertain event, which depends upon the will of a third party" - See paragraph 56.

Sale of Land - Topic 6029

Completion - Conditions precedent and subsequent - What constitutes a condition precedent - A vendor obtained conditional subdivision approval from a municipality - The vendor executed purchase and sale agreements containing a seller's condition that a subdivision plan would be registered and building permits obtainable by a certain date (condition day), and so long as the vendor used "reasonable efforts" to satisfy that condition, failure to satisfy it would end the contract - The Alberta Court of Queen's Bench held that this condition was not a "true" condition precedent because, according to the agreements, the vendor was entitled to unilaterally waive the seller's condition prior to the condition day - The first quality of a "true" condition precedent was that it could not be waived unilaterally - The court opined further that the condition did not meet the second quality of a true condition precedent because it was not dependent upon the exercise of discretion by others such as the municipality - Rather, it was dependent only upon time, and the diligence of the vendor and its agents in completing the subdivision requirements - See paragraphs 57 to 67.

Sale of Land - Topic 7408

Remedies - General - Specific performance - When available - [See both Damages - Topic 1043 ].

Sale of Land - Topic 7414

Remedies - General - Mitigation - Duty of injured party - [See both Damages - Topic 1043 ].

Sale of Land - Topic 8551

Remedies of purchaser - Specific performance - When available - [See second Damages - Topic 1043 ].

Sale of Land - Topic 8568

Remedies of purchaser - Specific performance - Bars - [See second Damages - Topic 1043 ].

Sale of Land - Topic 8763

Remedies of purchaser - Damages - Time for assessment of - [See both Sale of Land - Topic 8774 ].

Sale of Land - Topic 8774

Remedies of purchaser - Damages - Measure of - A vendor agreed to sell building lots in an Edmonton residential neighbourhood (subdivision) to two individual purchasers - The vendor refused to close and returned the deposits - The plaintiffs sought specific performance - The Alberta Court of Queen's Bench found that the plaintiffs were not entitled to specific performance because they failed to establish that the lots were irreplaceable - However, the court awarded the individual plaintiffs damages - The court discussed the method of valuation, especially given the rapidly rising real estate market in Edmonton at the time - Damages were fixed at the difference between the lot value at the time of the breach and the contract price - See paragraphs 140 to 154.

Sale of Land - Topic 8774

Remedies of purchaser - Damages - Measure of - A vendor agreed to sell 14 building lots in an Edmonton residential neighbourhood (subdivision) to the corporate plaintiff/purchaser - The vendor refused to close - With the returned deposit, the corporate plaintiff obtained 12 building lots the next day - The corporate plaintiff sued the vendor for damages - The corporate plaintiff acknowledged that the damages respecting 12 of the lots were the difference between the lot value at the time of the breach and the contract price - However, the corporate plaintiff argued that another date should be used for calculating damages for the other two lots - The Alberta Court of Queen's Bench acknowledged that it was open to the court to compensate the corporate plaintiff for the loss of the two lots by a measure of damages assessed at some point later than the date of the breach, there was no sound basis to do so in this case - The court, therefore, calculated the damages respecting all 14 lots using the difference between the lot value at the time of the breach and the contract price - See paragraphs 155 to 165.

Specific Performance - Topic 5

General - Specific performance v. mitigation - [See both Damages - Topic 1043 ].

Cases Noticed:

Castledowns Law Office Management Ltd. v. 1131102 Alberta Ltd. et al. (2009), 454 A.R. 328; 455 W.A.C. 328; 2009 ABCA 148, refd to. [para. 53].

Leasing Group Inc. v. Prospect Developments (2003) Inc., [2011] A.R. Uned. 36; 2011 ABCA 83, refd to. [para. 54].

Turney v. Zhilka, [1959] S.C.R. 578, refd to. [para. 54].

F.T. Developments Ltd. v. Sherman, [1969] S.C.R. 203, refd to. [para. 54].

O'Reilly v. Marketers Diversified Inc., [1969] S.C.R. 741, refd to. [para. 54].

Barnet v. Harrison et al., [1976] 2 S.C.R. 531; 5 N.R. 131, refd to. [para. 54].

Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 107; 20 N.R. 500; 9 A.R. 308, refd to. [para. 54].

McCauley v. McVey and MacFarlane, [1980] 1 S.C.R. 165; 27 N.R. 604, refd to. [para. 54].

Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada et al., [1995] 2 S.C.R. 187; 180 N.R. 161; 142 N.S.R.(2d) 1; 407 A.P.R. 1, refd to. [para. 54].

Triple Five Corp. v. Crown Zellerbach Stores Ltd. (1981), 33 A.R. 513; 17 Alta. L.R.(2d) 178 (Q.B.), refd to. [para. 55].

Swan Group Inc. v. Bishop (2013), 542 A.R. 134; 566 W.A.C. 134; 2013 ABCA 29, refd to. [para. 59].

Fossum v. Visual Developments Ltd., 1997 CarswellAlta 1257 (Q.B.), refd to. [para. 73].

Atmospheric Diving Systems Inc. v. International Hard Suits Inc. (1994), 89 B.C.L.R.(2d) 356 (S.C.), refd to. [para. 73].

Bhasin v. Hrynew et al. (2013), 544 A.R. 28; 567 W.A.C. 28; 2013 ABCA 98, refd to. [para. 74].

Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1990), 72 O.R.(2d) 661 (H.C.), revd. (1993), 62 O.A.C. 20; 12 O.R.(3d) 675 (C.A.), refd to. [para. 79].

Hadley v. Baxendale (1854), 9 Ex. Ch. 341 (Ex. Div.), refd to. [para. 125].

Semelhago v. Paramadevan, [1996] 2 S.C.R. 415; 197 N.R. 379; 91 O.A.C. 379, refd to. [para. 133].

1244034 Alberta Ltd. v. Walton International Group Inc. et al. (2007), 422 A.R. 189; 415 W.A.C. 189; 2007 ABCA 372, refd to. [para. 134].

Baud Corp., N.V. v. Brook, [1979] 1 S.C.R. 633; 23 N.R. 181; 12 A.R. 271, refd to. [para. 134].

Asamera Oil Corp. v. Seal Oil & General Corp - see Baud Corp., N.V. v. Brook.

Southcott Estates Inc. v. Toronto Catholic District School Board (2012), 435 N.R. 41; 296 O.A.C. 41; 2012 SCC 51, refd to. [para. 136].

Shulist et al. v. Hunt and Hunt Real Estate Corp. (1987), 78 A.R. 188; 51 Alta. L.R.(2d) 69 (Q.B.), refd to. [para. 139].

Neher v. Marathon Homes Inc. (2011), 509 A.R. 295; 2011 ABQB 92, refd to. [para. 157].

Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943; 277 N.R. 1; 153 O.A.C. 341; 2001 SCC 58, refd to. [para. 162].

306793 Ontario Ltd. in Trust v. Rimes (1979), 100 D.L.R.(3d) 350 (Ont. C.A.), refd to. [para. 162].

Wroth v. Tyler, [1974] Ch. 30, refd to. [para. 162].

Johnson v. Agnew, [1980] A.C. 367 (H.L.), refd to. [para. 162].

Authors and Works Noticed:

Davies, G.J., Conditional Contracts for the Sale of Land (1977), 55 Can. Bar Rev. 289, generally [para. 53].

Fridman, Gerald H.L., The Law of Contract in Canada (6th Ed. 2011), pp. 713 [para. 162]; 731 [para. 139].

McInnes, Mitchell, Specific Performance and Mitigation in the Supreme Court of Canada (2013), 129 L.Q.R. 165, p. 168 [para. 138].

Swan, Angela and Adamski, Jakub, Canadian Contract Law (3rd Ed. 2012), pp. 456, 457 [para. 165].

Counsel:

Ian L. Wachowicz (Parlee McLaws LLP), for the plaintiffs;

R.D. (Dan) Galbraith, for the defendant.

This case was heard on March 4 to 8 and April 15, 2013, before Brown, J., of the Alberta Court of Queen's Bench, Edmonton Registry, who delivered the following decision on May 23, 2013.