3434273 Manitoba Ltd. v. Nowak, (2013) 297 Man.R.(2d) 35 (QB)

• Judge: Mainella, J.
• Court: Court of Queen's Bench of Manitoba (Canada)
• Case Date: September 04, 2013
• Jurisdiction: Manitoba
• Citations: (2013), 297 Man.R.(2d) 35 (QB);2013 MBQB 214

3434273 Man. v. Nowak (2013), 297 Man.R.(2d) 35 (QB)

MLB headnote and full text

Temp. Cite: [2013] Man.R.(2d) TBEd. OC.007

3434273 Manitoba Ltd. (plaintiff) v. Halina Nowak (defendant)

(CI 06-01-46943; 2013 MBQB 214)

Indexed As: 3434273 Manitoba Ltd. v. Nowak

Manitoba Court of Queen's Bench

Winnipeg Centre

Mainella, J.

September 4, 2013.

Summary:

The defendant (Nowak) decided to sell her duplex privately. She listed it for $209,000. The plaintiff corporation owned rental properties. Mr. and Mrs. Clark were the corporation's shareholders and officers. After negotiating with Mr. Clark, Nowak verbally agreed to sell the duplex for $195,000. Mrs. Clark prepared an offer to purchase. On March 25, 2006, the Clarks met with Nowak and reviewed the offer to purchase. The parties agreed on a possession date of May 1, 2006. Nowak accepted and signed the offer. The Clarks signed the offer on behalf of the corporation and gave Nowak a $1,000 deposit. Shortly after the corporation had obtained financing, Nowak advised the Clarks that she was cancelling the deal. She sold the duplex to a third party in August 2007 for $225,000. The corporation sued Nowak, claiming equitable damages for its loss of interest in an appreciating property, loss of future rents and expenses related to the failed deal.

The Manitoba Court of Queen's Bench held that Nowak was in fundamental breach of the contract. The corporation was awarded damages of $30,000 in substitution for a decree of specific performance, and $3,300 for out-of-pocket expenses related to the failed deal.

Contracts - Topic 2051

Terms - Implied terms - General - [See Sale of Land - Topic 6029 ].

Contracts - Topic 2281

Formation of contract - Conditions precedent - Defined - [See Sale of Land - Topic 6029 ].

Contracts - Topic 3555

Performance or breach - Performance of conditions precedent - General - The plaintiff purchaser sued the defendant vendor for damages arising from a failed real estate transaction - The defendant argued that the contract was null and void after April 12, 2006, because the plaintiff failed to fulfill a condition precedent in the offer to purchase that required it to arrange a mortgage by that date - A real estate appraiser testified on behalf of the plaintiffs that he conducted an appraisal of the defendant's property on April 8, 2006, and determined that it was appropriate for a mortgage - He prepared a report for a Bank of Nova Scotia employee (Hamm) on April 10, 2006 - Hamm testified that appraisals were always done before the bank provided a mortgage, and an appraisal was only requested after the bank had already determined that the borrower had the necessary funds to cover the balance of the transaction - The plaintiff testified that it was advised by Hamm on either April 10 or 11, 2006, that its mortgage was approved - The Manitoba Court of Queen's Bench accepted the plaintiff's testimony and that of its witnesses and found that the plaintiff had fulfilled the financing condition - The mortgage had been arranged by April 12 - There was no requirement that the actual paperwork relating to the mortgage be completed by April 12 - Based on the terms of the offer to purchase, there was no obligation on the plaintiff to provide notice to the defendant by any set date that it had fulfilled the financing condition - In any event, the court accepted that the plaintiff advised the defendant by telephone on either April 10 or 11 that it had fulfilled the financing condition - The defendant also received written notice from the plaintiff's solicitor before the closing date - See paragraphs 101 to 110.

Contracts - Topic 3730

Performance or breach - Fundamental breach - What constitutes a fundamental breach - [See Sale of Land - Topic 8755 ].

Contracts - Topic 9204

Unconscionable transactions relief - General principles - Requirement of inequality in bargaining position plus improvident transaction - The defendant (Nowak) decided to sell her duplex privately - She listed it for $209,000 in February 2006 - The plaintiff corporation owned rental properties - Mr. and Mrs. Clark were the corporation's shareholders and officers - After negotiating with Mr. Clark, Nowak verbally agreed to sell the duplex for $195,000 - Mrs. Clark prepared an offer to purchase - On March 25, 2006, the Clarks met with Nowak and reviewed the offer to purchase - The parties agreed on a possession date of May 1, 2006 - Nowak accepted and signed the offer - The Clarks signed the offer on behalf of the corporation and gave Nowak a $1,000 deposit - The corporation obtained financing around April 10, 2006 - A few days later, Nowak advised the Clarks that she was cancelling the deal - The corporation sued Nowak for damages - Nowak argued that the contract should be set aside on the basis of unconscionability - The Manitoba Court of Queen's Bench rejected Nowak's argument - The mere fact that the Clarks were more sophisticated than Nowak in real estate matters did not by itself mean that there was an inequality in their relative positions - This appeared to be a classic give and take - The purchase price agreed to was fair market value - The deal could not be said to be foolhardy or improvident, let alone grossly unfair - See paragraphs 66, 67 and 79 to 86.

Contracts - Topic 9353

Unconscionable transactions relief - Conditions for relief - What constitutes unequal bargaining positions - [See Contracts - Topic 9204 ].

Contracts - Topic 9356

Unconscionable transactions relief - Conditions for relief - What constitutes an improvident or unfair agreement - [See Contracts - Topic 9204 ].

Damage Awards - Topic 1150

Contracts - Sale of land - Breach by seller - [See Sale of Land - Topic 8755 ].

Damages - Topic 6151

Contracts - Sale of land - Breach by seller - Measure of damages - [See Sale of Land - Topic 8755 ].

Damages - Topic 6153

Contracts - Sale of land - Breach by seller - Time for assessment - [See Sale of Land - Topic 8755 ].

Fraud and Misrepresentation - Topic 603

Undue influence - General principles - What constitutes undue influence - [See Fraud and Misrepresentation - Topic 766 ].

Fraud and Misrepresentation - Topic 766

Undue influence - Evidence and proof - Onus of proof - The defendant (Nowak) decided to sell her duplex privately - She listed it for $209,000 in February 2006 - The plaintiff corporation owned rental properties - Mr. and Mrs. Clark were the corporation's shareholders and officers - After negotiating with Mr. Clark, Nowak verbally agreed to sell the duplex for $195,000 - Mrs. Clark prepared an offer to purchase - On March 25, 2006, the Clarks met with Nowak for 30 to 45 minutes and reviewed the offer to purchase - The parties agreed on a possession date of May 1, 2006 - Nowak accepted and signed the offer - The Clarks signed the offer on behalf of the corporation and gave Nowak a $1,000 deposit - The corporation obtained financing around April 10, 2006 - A few days later, Nowak advised the Clarks that she was cancelling the deal - The corporation sued Nowak for damages - Nowak argued that the contract should be set aside on the basis of undue influence - The Manitoba Court of Queen's Bench rejected Nowak's argument - Given the nature of the relationship between Nowak and the Clarks (a one-time deal with no prior relationship), the burden was on Nowak to establish that the Clarks had exerted undue influence such that her consent to the deal should be questioned - Nowak did not meet this burden - Mr. Clark's negotiations with Nowak were reasonable - Given Nowak's strong personality, it was unlikely that she was intimidated or fooled by Mr. Clark - Although Nowak signed the offer within an hour of seeing it, the evidence confirmed that she was anxious to finalize the deal in order to get rid of her mortgage obligation - In addition, key terms had been agreed to before March 25, 2006 - See paragraphs 66 to 78.

Sale of Land - Topic 805

The contract - General - Agreement for sale - What constitutes - The defendant (Nowak) decided to sell her duplex privately - She listed it for $209,000 - The plaintiff corporation owned rental properties - Mr. and Mrs. Clark were the corporation's shareholders and officers - After negotiating with Mr. Clark, Nowak verbally agreed to sell the duplex for $195,000 - Mrs. Clark prepared an offer to purchase - On March 25, 2006, the Clarks met with Nowak and reviewed the offer to purchase - The parties agreed on a possession date of May 1, 2006 - Nowak signed the offer - The Clarks signed the offer on behalf of the corporation and gave Nowak a $1,000 deposit - The corporation obtained financing around April 10, 2006 - A few days later, Nowak advised the Clarks that she was cancelling the deal - The corporation sued Nowak for damages - The Manitoba Court of Queen's Bench found that a binding contract for the purchase and sale of the duplex existed as of March 25, 2006 - Since neither party was represented by a real estate agent and the transaction was entirely private, this finding was governed entirely by the common law requirements as opposed to the Real Estate Brokers Act - The terms of the agreement as set out in the offer to purchase were sufficiently certain respecting the parties, the property, consideration and conditions - The offer was communicated to Nowak personally and she accepted it as evidenced by her signature - The Clarks immediately satisfied the deposit requirement by paying Nowak $1,000 - See paragraphs 54 to 60.

Sale of Land - Topic 907

The contract - Essential terms and conditions precedent - Conditions precedent - [See Contracts - Topic 3555 and Sale of Land - Topic 6029 ].

Sale of Land - Topic 1433

The contract - Form and contents of agreement or memorandum - Parties - Description of parties - Mr. and Mrs. Clark were the shareholders and officers of the plaintiff corporation - They prepared an offer to purchase a duplex that the defendant (Nowak) had listed in a private sale - Mrs. Clark explained to Nowak that the corporation would be the purchaser of the duplex and that she and Mr. Clark were the only two people involved in the corporation - Nowak accepted and signed the offer to purchase - Later, she purported to cancel the deal - The corporation sued Nowak for damages - Nowak claimed that she thought the purchaser was the Clarks, not the corporation, and the contract was void based on this mistake - The Manitoba Court of Queen's Bench found that the offer to purchase was unambiguous as to the identify of the purchaser - It was the corporation - The Clarks made no misrepresentations to cause Nowak to be mistaken about the purchaser's identity, and Nowak's conduct confirmed that she was not operating under such a misunderstanding - The alleged mistake was only raised when Nowak wanted to get out of the deal - See paragraphs 61 to 65.

Sale of Land - Topic 1821

The contract - Implied terms - General - [See Sale of Land - Topic 6029 ].

Sale of Land - Topic 1965

The contract - Breach of contract - What constitutes - [See Sale of Land - Topic 8755 ].

Sale of Land - Topic 6029

Completion - Conditions precedent and subsequent - What constitutes a condition precedent - The defendant decided to sell her duplex privately - In March 2006, the defendant and plaintiff purchaser signed an offer to purchase - The offer contained a clause which read "This offer is subject to the Purchaser arranging a mortgage as outlined by April 12th, 2006 otherwise offer to purchase is null and void." - The offer had been prepared by the plaintiff and was not a standard form - It did not contain a clause that allowed a purchaser to waive the financing condition - The defendant subsequently stated that she was cancelling the deal - The plaintiff sued for damages - The defendant argued that the contract was null and void after April 12 because there was no proof that the plaintiff had fulfilled the financing condition - The plaintiff argued that the financing condition was for its sole benefit, and the deal could go through even if the financing condition was not satisfied by April 12 - The Manitoba Court of Queen's Bench found that the financing condition was a true condition precedent - It could not be waived without the defendant's consent, nor could the plaintiff enforce the contract if it did not fulfill the financing condition - Given the parties' intentions and the fact that the contract was entirely workable without the implication of terms, this was not an appropriate case for the court to imply a term that allowed the plaintiff to waive the financing condition - See paragraphs 87 to 100.

Sale of Land - Topic 6033

Completion - Conditions precedent and subsequent - Conditions precedent which cannot be waived - [See Sale of Land - Topic 6029 ].

Sale of Land - Topic 6038

Completion - Conditions precedent and subsequent - Conditions respecting financing to be arranged - [See Contracts - Topic 3555 and Sale of Land - Topic 6029 ].

Sale of Land - Topic 8755

Remedies of purchaser - Damages - In lieu of specific performance - The defendant (Nowak) decided to sell her duplex privately - She listed it for $209,000 - The plaintiff corporation owned rental properties - Mr. and Mrs. Clark were the corporation's shareholders and officers - After negotiating with Mr. Clark, Nowak verbally agreed to sell the duplex for $195,000 - Mrs. Clark prepared an offer to purchase - On March 25, 2006, the Clarks met with Nowak and reviewed the offer to purchase - The parties agreed on a possession date of May 1, 2006 - Nowak accepted and signed the offer - The Clarks signed the offer on behalf of the corporation and gave Nowak a $1,000 deposit - The corporation obtained financing by April 12, 2006, as required by the contract - A few days later, Nowak advised the Clarks that she was cancelling the deal - She sold the duplex to a third party in August 2007 for $225,000 - The corporation sued Nowak, claiming equitable damages for its loss of interest in an appreciating property, loss of future rents and expenses related to the failed deal - The Manitoba Court of Queen's Bench held that Nowak was in fundamental breach of the contract - The corporation was entitled to damages in substitution for a decree of specific performance - The appropriate date for assessing damages was August 2007 - The court awarded damages of $30,000, being the difference between the ultimate sale price of the duplex in August 2007 and the price the corporation contracted to buy it for in March 2006 - Damages in substitution for a decree of specific performance were limited to loss of the bargain - They could not also compensate for loss of profit for not having the use of the land as the rationale for such damages was that the purchaser did not have the land - Accordingly, the corporation's request for damages for loss of future rents was denied - The corporation was also awarded damages of $3,300 for out-of-pocket expenses related to the failed deal - See paragraphs 111 to 128.

Sale of Land - Topic 8763

Remedies of purchaser - Damages - Time for assessment of - [See Sale of Land - Topic 8755 ].

Sale of Land - Topic 8774

Remedies of purchaser - Damages - Measure of - [See Sale of Land - Topic 8755 ].

Cases Noticed:

Krasniuk v. Gabbs et al. (2002), 161 Man.R.(2d) 274; 2002 MBQB 14, refd to. [para. 54].

Noble v. Edwardes (1877), 5 Ch. D. 378 (C.A.), refd to. [para. 56].

Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072; 20 N.R. 500; 9 A.R. 308, refd to. [para. 57].

Kelly et al. v. Enderton et al., [1912] 2 W.W.R. 453 (Man. C.A.), affd. [1913] A.C. 191 (P.C.), refd to. [para. 62].

Natuk v. Kawula (1979), 1 Man.R.(2d) 25 (C.A.), leave to appeal refused (1979), 30 N.R. 267 (S.C.C.), refd to. [para. 67].

Goodman Estate v. Geffen, [1991] 2 S.C.R. 353; 127 N.R. 241; 125 A.R. 81; 14 W.A.C. 81, refd to. [para. 68].

Allcard v. Skinner (1887), 36 Ch. D. 145 (C.A.), refd to. [para. 69].

Stewart v. Nash (1988), 65 O.R.(2d) 218 (H.C.), refd to. [para. 77].

Permaform Plastics Ltd. et al. v. London & Midland General Insurance Co. et al. (1996), 110 Man.R.(2d) 260; 118 W.A.C. 260 (C.A.), refd to. [para. 80].

Prairie Petroleum Products Ltd. v. Husky Oil Ltd. et al. (2008), 231 Man.R.(2d) 1; 437 W.A.C. 1; 2008 MBCA 87, leave to appeal refused (2008), 393 N.R. 399 (S.C.C.), refd to. [para. 80].

Williams v. Downey-Waterbury (1994), 97 Man.R.(2d) 307; 79 W.A.C. 307 (C.A.), refd to. [para. 81].

Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; 77 N.R. 161; 21 O.A.C. 321, refd to. [para. 94].

M.J.B. Enterprises Ltd. v. Defence Construction (1951) Co. et al., [1999] 1 S.C.R. 619; 237 N.R. 334; 232 A.R. 360; 195 W.A.C. 360, refd to. [para. 96].

Minoru Park Tower I Limited Partnership v. Martens et al. (1997), 118 Man.R.(2d) 5; 149 W.A.C. 5 (C.A.), refd to. [para. 97].

Turney v. Zhilka, [1959] S.C.R. 578, refd to. [para. 98].

Barnet v. Harrison et al., [1976] 2 S.C.R. 531; 5 N.R. 131, refd to. [para. 100].

Westward Farms Ltd. and Deniau v. Cadieux et al. (1982), 16 Man.R.(2d) 219 (C.A.), leave to appeal refused (1982), 18 Man.R.(2d) 269 (S.C.C.), refd to. [para. 100].

Ryder and Wizenberg v. Medic and Medic (1976), 2 A.R. 284 (C.A.), refd to. [para. 103].

Oilwell Pressure Surveys Ltd. v. Jede and Jede (1978), 11 A.R. 85 (T.D.), refd to. [para. 107].

Chaulk v. Fairview Construction Ltd. (1977), 14 Nfld. & P.E.I.R. 13; 33 A.P.R. 13 (Nfld. C.A.), refd to. [para. 107].

Lysaght v. Edwards (1876), 2 Ch. D. 499 (M.R.), refd to. [para. 112].

Wroth v. Tyler, [1974] Ch. 30 [para. 116].

Stewart v. Ambrosina et al. (1975), O.R.(2d) 483 (H.C.J.), affd. (1977), 16 O.R.(2d) 221 (C.A.), refd to. [para. 117].

Hechter v. Thurston (1977), 34 N.R. 189; 6 Man.R.(2d) 99 (Q.B.), affd. (1979), 34 N.R. 183; 6 Man.R.(2d) 93 (C.A.), revsd. [1980] 2 S.C.R. 254; 34 N.R. 181; 6 Man.R.(2d) 91, refd to. [para. 117].

Johnson v. Agnew, [1979] 1 All E.R. 883 (H.L.), refd to. [para. 118].

306793 Ontario Ltd. in Trust v. Rimes (1979), 25 O.R.(2d) 79 (C.A.), refd to. [para. 118].

Asamera Oil Corp. v. Sea Oil and General Corporation et al. - see Baud Corp., N.V. v. Brook.

Baud Corp., N.V. v. Brook, [1979] 1 S.C.R. 633; 23 N.R. 181; 12 A.R. 271, refd to. [para. 119].

Semelhago v. Paramadevan, [1996] 2 S.C.R. 415; 197 N.R. 379; 91 O.A.C. 379, refd to. [para. 120].

McDonald v. McDonald (2011), 271 Man.R.(2d) 134; 2011 MBQB 241, refd to. [para. 121].

Kopec v. Pyret and Borys (1987), 55 Sask.R. 172; 36 D.L.R.(4th) 1 (C.A.), refd to. [para. 125].

Authors and Works Noticed:

Fridman, Gerald Henry Louis, The Law of Contract in Canada (6th Ed. 2011), p. 262 [para. 61].

Counsel:

Victor E. Bargen, for the plaintiff;

H. Nowak, appeared in person.

This matter was heard before Mainella, J., of the Manitoba Court of Queen's Bench, Winnipeg Centre, who delivered the following judgment on September 4, 2013.