Arero Corp. v. Erb (G & D) Holdings Ltd. et al., (2010) 262 Man.R.(2d) 52 (CA)

• Judge: Monnin, MacInnes and Beard, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: November 03, 2010
• Jurisdiction: Manitoba
• Citations: (2010), 262 Man.R.(2d) 52 (CA);2010 MBCA 111

Arero Corp. v. Erb Holdings (2010), 262 Man.R.(2d) 52 (CA);

      507 W.A.C. 52

MLB headnote and full text

Temp. Cite: [2011] Man.R.(2d) TBEd. JA.002

Arero Corporation (plaintiff/appellant) v. G & D Erb Holdings Ltd., D & M Erb Holdings Ltd. and F & L Erb Holdings Ltd. (defendants/respondents)

(AI 10-30-07344; 2010 MBCA 111)

Indexed As: Arero Corp. v. Erb (G & D) Holdings Ltd. et al.

Manitoba Court of Appeal

Monnin, MacInnes and Beard, JJ.A.

December 8, 2010.

Summary:

The parties entered into a purchase and sale agreement whereby the plaintiff would purchase land from the defendants. Subdivision approval was not obtained by the closing date set by a second amending agreement. The defendants took the position that the agreement was at an end and they could retain a $10,000 deposit paid by the plaintiff, as well as a $150,000 payment and $14,752.50 in interest paid by the plaintiff pursuant to the second amending agreement. The plaintiff brought an action. The plaintiff's statement of claim alleged that the defendants failed to disclose documentation in their possession or control affecting the property as required by the original agreement, including geotechnical, hydrological, environmental and engineering reports. The plaintiff's amended statement of claim sought the return of all deposits and payments made to the defendants. The amended claim alleged that the agreement was conditional on the plaintiff obtaining necessary subdivision approvals, that it was a true condition precedent, and since the condition was not capable of being satisfied the agreement was void and never came into effect. In the alternative, the plaintiff sought relief from forfeiture of the $150,000 payment. The defendants moved for summary judgment to dismiss the plaintiff's claim.

The Manitoba Court of Queen's Bench, in a decision reported at 252 Man.R.(2d) 25, granted summary judgment dismissing the plaintiff's claim regarding the defendants' failure to provide documentation. With respect to the plaintiff's claim for the return of the funds paid, the court made no specific finding as to whether there existed a true condition precedent. Rather, the court simply concluded that the condition with respect to the obtaining of subdivision approval had been waived by the plaintiff. With respect to the return of the $150,000, the court held that there were real issues with respect to whether the payment was liquidated damages or a penalty which warranted a determination at trial. The court therefore denied the motion for summary judgment to dismiss this part of the plaintiff's claim. The plaintiff appealed. The defendants cross-appealed.

The Manitoba Court of Appeal dismissed the appeal and the cross-appeal. The court agreed that the claim regarding the requirement to provide documentation had little chance of success at trial and should be dismissed, although for different reasons than the motions judge. With respect to the plaintiff's claim for the return of the funds, the court held that the motions judge erred in not finding that the requirement of subdivision approval was a true condition precedent and in finding that the plaintiff could (and did) waive the condition precedent pertaining to subdivision approval. However, the motions judge was not in error in directing that this issue be resolved by way of trial. The defendants had not made out a prima facie case of their entitlement to the funds paid to them under the original agreement and the second amending agreement. Moreover, their argument that the second amending agreement was severable and could stand on its own still had to be addressed because of the court's finding that the motions judge erred in dealing with the validity of the initial agreement. The court directed that the matter proceed to trial in order to decide if the amending agreement was a severable or stand-alone agreement and thus still valid notwithstanding that the initial agreement was void, whether the defendants were entitled to retain all or any of the funds that had been paid to them, and whether the plaintiff was entitled to relief from forfeiture in respect of the payment of $150,000.

Practice - Topic 5708

Judgments and orders - Summary judgments - Bar to application - Existence of issue to be tried - [See Sale of Land - Topic 6029 ].

Practice - Topic 5715

Judgments and orders - Summary judgments - Burden on applicant - [See Sale of Land - Topic 1901 ].

Practice - Topic 5719

Judgments and orders - Summary judgments - To dismiss action - [See Sale of Land - Topic 1901 ].

Sale of Land - Topic 1901

The contract - Duties of seller - General - The parties entered into a purchase and sale agreement whereby the plaintiff would purchase land from the defendants - Subdivision approval was not obtained by the closing date set by a second amending agreement - The defendants took the position that the agreement was at an end and they could retain certain funds paid by the plaintiff - The plaintiff's statement of claim alleged that the defendants failed to disclose documentation in their possession or control affecting the property as required by the original agreement, including geotechnical, hydrological, environmental and engineering reports - The allegation had to do with whether the defendants were aware that the proposed subdivision would encounter approval difficulties because of the capacity of the municipal sewage lagoon - A motions judge granted the defendant's motion for summary judgment to dismiss this part of the plaintiff's claim - He stated, inter alia, that "while plaintiff is technically correct in its assertion that defendants have adduced no evidence specifically in relation to this matter, the offer to purchase provides that ultimate responsibility for inspection of the property rested with the plaintiff" - The plaintiff appealed - The Manitoba Court of Appeal dismissed the appeal - The court agreed with the plaintiff's argument that the defendants failed to provide the required evidence to shift the burden of proof onto the plaintiff and that inappropriately shifting the burden onto the plaintiff was an error in law - The court also held that the motions judge misinterpreted the agreement when he concluded that certain clauses provided an answer to the plaintiff's claim - However, the court agreed with the motions judge's conclusion that the claim should be dismissed, but for different reasons - The plaintiff chose to rely on representations made not by the defendants, but by the municipal authority that the sewage lagoon had the capacity to accommodate the proposed subdivision - The allegation against the defendants had little chance of success at trial - See paragraphs 27 to 29.

Sale of Land - Topic 6029

Completion - Conditions precedent and subsequent - What constitutes a condition precedent - The parties entered into a purchase and sale agreement whereby the plaintiff would purchase land from the defendants - Subdivision approval was not obtained by the closing date set by a second amending agreement - The defendants took the position that the agreement was at an end and they could retain a $10,000 deposit paid by the plaintiff, as well as a $150,000 payment and $14,752.50 in interest paid by the plaintiff pursuant to the second amending agreement - The plaintiff's amended statement of claim sought the return of all deposits and payments made to the defendants - The claim alleged that the agreement was conditional on the plaintiff obtaining necessary subdivision approvals, that it was a true condition precedent, and since the condition was not satisfied the agreement was void and never came into effect - In the alternative, the plaintiff sought relief from forfeiture of the $150,000 payment - The defendants moved for summary judgment - The motions judge made no specific finding as to whether there existed a true condition precedent - Rather, the judge simply concluded that the condition with respect to the obtaining of subdivision approval had been waived by the plaintiff - With respect to the return of the $150,000, the judge held that there were real issues with respect to whether the payment was liquidated damages or a penalty which warranted a determination at trial - The judge therefore denied the motion for summary judgment to dismiss this part of the plaintiff's claim - The Manitoba Court of Appeal dismissed an appeal - The motions judge erred in not finding that the requirement of subdivision approval was a true condition precedent and in finding that the plaintiff could (and did) waive the condition precedent pertaining to subdivision approval - However, the motions judge was not in error when he directed that this issue be resolved by way of trial - The defendants had not made out a prima facie case of their entitlement to the funds paid to them - Moreover, their argument that the amending agreement was severable and could stand on its own still had to be addressed because of the court's finding that the motions judge erred in dealing with the validity of the initial agreement itself - The court therefore directed that the matter proceed to trial in order to decide if the amending agreement was a severable or stand-alone agreement and thus still valid notwithstanding that the initial agreement was void, whether the defendants were entitled to retain all or any of the funds that had been paid to them, and whether the plaintiff was entitled to relief from forfeiture in respect of the $150,000 payment - See paragraphs 30 to 38.

Sale of Land - Topic 6033

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

Cases Noticed:

Towers Ltd. v. Quinton's Cleaners Ltd. et al. (2009), 245 Man.R.(2d) 70; 466 W.A.C. 70; 2009 MBCA 81, refd to. [para. 25].

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. 35].

Counsel:

P. Halamandaris, for the appellant;

D.G. Hill and M.E. Low, for the respondents.

This appeal and cross-appeal were heard on November 3, 2010, before Monnin, MacInnes and Beard, JJ.A., of the Manitoba Court of Appeal. The following judgment of the Court of Appeal was delivered by Monnin, J.A., on December 8, 2010.