B & R Development Corporation Ltd. v. Trail South Development Inc., 2011 ABQB 470

Court of Queen ’ s Bench of Alberta Citation: B & R Development Corporation Ltd. v. Trail South Development Inc., 2011 ABQB 470 Date: 20110721 Docket: 0203 07239, 0003 10282 Registry: Edmonton Between: 0203 07239 B & R Development Corporation Ltd., operating under the trade name of Abbey Lane Homes Plaintiff - and - Trail South Developments Inc. Defendant And Between: 0003 10282 410675 Alberta Ltd. Plaintiff - and - Trail South Development Inc. Defendant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice L.J. Smith

_______________________________________________________ 1. Introduction.............................................................................................................. Page: 3 2. Facts and Operation of the Contract.................................................................... Page: 3 A. Abbey Lane Homes Group....................................................................... Page: 6 B. Trail South Group....................................................................................... Page: 7 C.

The Land Transaction................................................................................ Page: 8 D. The Agreement .......................................................................................... Page: 9 i. Vendor’s Deferred Reserve Condition........................................ Page: 9 ii. Purchaser’s First Condition.......................................................... Page: 9 iii. Purchaser’s Second Condition.................................................. Page: 10 E. Progress of the Purchase through the Paragraph 4 Caveats............. Page: 10 F.

IBI’s Involvement and the Planned Re-zoning and Subdivision.......... Page: 13 i. Arrangements to Pay IBI and Re-zoning and Subdivision Costs Page: 14 ii. IBI Advances the Re-zoning and Subdivision Application....... Page: 14 iii. Unsuccessful Amendment of the Paragraph 4(

f) Deadline..... Page: 15 iv. The Re-zoning and Subdivision Proceeds; Easement Issues Page: 16 F. The Second Attempt at a Paragraph 4(

f) Extension............................ Page: 16 G. Post-February 13 Developments........................................................... Page: 19 i. Re-zoning and Subdivision Continues...................................... Page: 20 ii. Discussions on An Amended or New Agreement................... Page: 21 iii. Continued Preparations for the Transfer................................... Page: 22 iv. Mastroprimiano’s Construction and Venture Structure Plans. Page: 23 H. The Deal Collapses................................................................................. Page: 23 3.

Contract Terms and Adjustment......................................................................... Page: 24 4. Preliminary Adverse Inference Issue - Mr. Kolbuc............................................ Page: 25 A. The Adverse Inferences.......................................................................... Page: 26 B. Legal Principles....................................................................................... Page: 26 C. Mr. Kolbuc’s Status and Authority.......................................................... Page: 28 D.

The Available Documentary Evidence.................................................. Page: 28 5. Issues.................................................................................................................... Page: 29 6. Analysis................................................................................................................. Page: 30

A. Binding Agreement.................................................................................. Page: 30 i. Certainty of Parties...................................................................... Page: 30 ii. Essential Terms........................................................................... Page: 33 B. Can B & R Recover for Breach of the Agreement?............................. Page: 33 i. Trust relationship between B & R and 410675......................... Page: 34 ii. Collateral Contract....................................................................... Page: 36 a.

Abbey Lane as a Party.................................................... Page: 36 b. Statute of Frauds and Part Performance...................... Page: 37 C. Waiver of the Time is of the Essence Provision................................... Page: 38 i. The Relevant Factual Context..................................................... Page: 38 ii. Legal Principles that Govern Waiver......................................... Page: 39 iii. Analysis......................................................................................... Page: 40 D.

New Agreement....................................................................................... Page: 41 E. Good Faith................................................................................................ Page: 43 7. Damages.............................................................................................................. Page: 43 8. Conclusion............................................................................................................ Page: 44 1. Introduction [ 1 ] Two actions tried together seek damages related to failure of a land sale contract via various avenues.

A trust relationship between the plaintiffs is alleged giving rise to a claim for damages by a non-signatory to the land contract. [ 2 ] Liability is denied in part on the basis that the contract for the sale of land became null and void on its own terms, and secondly as no trust relationship between the plaintiffs has been established. 2. Facts and Operation of the Contract [ 3 ] This dispute revolves on the characterization of certain steps in a complex real-estate transaction, the steps’ relationship to contract caveats, and when and whether those caveats took effect.

Here, one of the plaintiffs sought to purchase from the defendant certain property (the Land) by contract (the Agreement) with the intent to develop a multi-family condominium complex. [ 4 ] The review of the facts of this case is also a convenient point at which to comment on the status and operation of the Agreement between October 1999 and April 2000. Chief Justice Fraser in ATCO Electric Ltd. v. Alberta (Energy and Utilities Board) , 2004 ABCA 215 at para. 77 , 361 A.R. 1 succinctly summarized the basis on which any contract, including the alleged collateral contract, must be interpreted:

It must be understood therefore that the search for the parties' intentions is conducted on an objective basis, meaning that the focus is on what a reasonable person would infer from the words used. This interpretive exercise must be undertaken with due regard to the entire contract. One cannot simply pick and choose clauses - or parts of clauses - without considering the contract as a whole. It also means being alive to the relevant background against which the contract was concluded, the purpose of the exercise being to ascribe to the written text the most appropriate meaning which the words can properly bear .

Or to put it the way that Lord Hoffman did in Jumbo King Ltd. v. Faithful Properties Ltd. [1999] H.K.C.F.A.R. 279: The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean .

And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objectives which it was intended to achieve . (Footnotes omitted, emphasis added.) [ 5 ] As will become apparent in the subsequent review of how the Agreement progressed and ultimately collapsed, the practical objective of the parties was never in serious doubt; this was an attempt to buy and sell land.

The complexity and difficulty arose from the various developments that required the parties adjust their roles and the Agreement’s timetable. It is also clear that the persons involved in this transaction came to different conclusions as to what parts of the Agreement were in operation as the deal progressed. The commentary in the review of facts on the status of the Agreement in certain instances anticipate the subsequent analysis, and should be read in the context of those specific issues evaluated in the latter part of this judgment. [ 6 ] First provided is a

summary of the parties, their interrelationships, and how these persons became involved in this matter.

Name Description Relationship to the Plaintiffs Relationship to the Defendants Abbey Lane Homes Group B & R Developments Ltd. a property development company; B & R operates under the trade name of Abbey Lane Homes plaintiff #1 410675 Alberta Ltd. a shell corporation that was intended to buy the Land, then transfer the Land to a final owner, possibly B & R plaintiff #2 Bruno Mastroprimiano principal of B & R and 410675 Alberta directing mind of both plaintiffs Don Lupul lawyer for the Plaintiffs directed by Bruno Mastroprimiano David Hamilton architect hired by the plaintiffs to design the planned condominium complex, he also participated in discussions to re-zone and subdivide the Land

Trail South Group Trail South Development Inc. a corporation selling the Land defendant CentreCorp. Management / CentreCorp.

Real Estate a corporation with the same owners and directing minds as the defendant CentreCorp represented the defendant during the transaction and provided management services to the defendant; interactions between the plaintiffs and the defendant were generally conducted by CentreCorp Rob Green president and co-owner of Trail South and CentreCorp a directing mind of Trail South and CentreCorp Henry Bereznicki co-owner of Trail South and CentreCorp a directing mind of Trail South and CentreCorp Jeff Kolbuc employee of CentreCorp CentreCorp employee responsible for communications and allegedly decision making on the Land purchase John Little lawyer for the defendant and CentreCorp directed by CenterCorp personnel Gilbert Weiss in-house counsel for CenterCorp from Toronto IBI land use / zoning consulting firm plaintiff consented to hiring; fee shared proposed by the defendant to carry the City of Edmonton application for re- zoning and subdivision of the Land; fee shared Marshall Hundert employee of IBI received from the plaintiffs early re- zoning, subdivision, and project planning information received instructions from the defendant on the re-zoning and subdivision application CRI realtor realtor for the buyer and seller realtor for the buyer and seller Ray Jacobson realty agent, employee of CRI realty agent for the buyer and seller; ‘agent’ on behalf of the plaintiffs during contract amendment discussions realty agent for the buyer and seller

A. Abbey Lane Homes Group [ 7 ] Mr. Mastroprimiano is the substantial owner and controlling mind of the corporate plaintiffs in both actions. His business, generally, is the building of multi-family condominiums on acquired land. His work is known under the name Abbey Lane Homes (Abbey Lane). Where ‘Abbey Lane’ is used in this judgment that assumes: 1. signing was done by Mr. Mastroprimiano, 2. the Abbey Lane letterhead was used, 3. correspondence was sent to Abbey Lane, or 4. reference is being made to Mr. Mastroprimiano’s business generally. [ 8 ] 410675 Alberta Ltd. (410675) is a shell corporation used by Mr.

Mastroprimiano for the purpose of acquiring land. His land acquisition pattern was to complete all the steps to purchase land, but for the transfer of the land, within the corporate entity of 410675, and then to transfer the land to a different corporate entity for development. That different corporate entity charged with development could be a joint venture corporation, a new corporation, or Mr. Mastroprimiano’s main operating company, B & R Development Corporation Ltd. (B & R). [ 9 ] B & R is the corporation where Mr.

Mastroprimiano’s business profits from various sources are reported for the Canada Revenue Agency. In the action by 410675, the damages claimed are claimed on behalf of B & R, not 410675. 410675 did not claim a loss since it was never the intention to have 410675 act as an owner of land or developer. 410675 was used to provide limited liability during the process of acquiring the land. [ 10 ] Abbey Lane Homes is the registered trade name for B & R. [ 11 ] Mr. Mastroprimiano is an astute businessman. Abbey Lane’s work is well respected. His evidence held together for the most part. B.

Trail South Group [ 12 ] Formally, the Land was owned by Trail South Developments Inc. (Trail South) [ 13 ] Trail South’s parcel of land was a 7.09 acre parcel (3.86 acres to be subdivided out of Plan 7620205, Block 1, Lot 4, Area 7.09 acres more or less, excepting out mines and minerals). The Agreement dealt with the 3.86 acres. It was vacant land. The rest of the 7.09 acres was developed commercially.

Therefore the Agreement contemplated re-zoning to permit residential housing on the vacant land and subdivision of the whole parcel into two parcels to permit the sale of the vacant land. [ 14 ] Generally, communications and instructions for Trail South came from persons who worked at CenterCorp Management Services Ltd. and/or CenterCorp Real Estate Services Ltd. (CenterCorp), a pair of corporations with the same president (Rob Green) and owners (Rob Green and Henry Bereznicki) as Trail South.

There is no issue that CentreCorp and its employees acted on behalf of Trail South, and during this transactions they are best legally characterized as agents for Trail South. [ 15 ] One employee of CentreCorp, Jeff Kolbuc, was usually the ‘point of contact’ for the purchase Agreement and planned Land

sale. His role and authority in this transaction is a point of some dispute, and that will be the subject of further commentary. Mr. Kolbuc did not testify. [ 16 ] Mr. Bereznicki testified on behalf of Trail South. In contrast to Mr. Mastroprimiano, Mr. Bereznicki’s evidence on behalf of Trail South was general, vague and not supported by his file which he had not kept. C.

The Land Transaction [ 17 ] The events material to this matter took place between early September of 1999 and mid April of 2000. [ 18 ] 410675 or its nominee, the Purchaser, entered into an offer for the purchase of land from Trail South on September 1, 1999. Trail South accepted the offer on September 2 nd . For the duration of the dealings between the parties no nominee was named; nor was there a written trust agreement between the plaintiffs or disclosed to Trail South. [ 19 ] The use of the words “or nominee” was common practice.

The usage of ‘or nominee’ came with very limited reservations on the part of any party or person involved. The Agreement, para. 10(

f) required only written notice prior to assignment and that Trail South must accept any reasonable transfer. I conclude that all parties understood that 410675 was a shell company and that a different entity was expected to be chosen to take ownership of the land once the deal matured. Both parties understood that land-owning entity would be directed by and at least partially owned by Mr. Mastroprimiano. [ 20 ] The Land which was the subject of the offer was brought to the attention of Mr. Mastroprimiano by a commercial realtor, Mr. Jacobson of CRI Realty Group Inc (CRI).

Trail South for about a decade had been seeking an ‘anchor’ retail tenant for the Land before Mr. Jacobson brought 410675 to its attention. This alternative development approach and others caused Trail South to realize that a residential development would be a good fit to the Trail South land. [ 21 ] The Land was an in-fill site fulfilling the business requirements of Mr. Mastroprimiano for one of his California style developments.

His requirements were for the community surrounding this style of development to provide proximity to a senior population, to older and established neighbourhoods, to shopping, medical clinics, coffee houses and such, as well as easy road access to the airport and city. Absence of competition was also a criterion. [ 22 ] In-fill sites were not plentiful. Mr. Mastroprimiano’s objective in the material time was to acquire suitable sites for development. He avoided land in the city’s newly developed areas. [ 23 ] Bank financing to acquire land was not an issue for Abbey Lane.

Abbey Lane was never refused financing for development purposes. [ 24 ] Mr. Mastroprimiano was introduced to the Land by CRI in early summer of 1999. He, through 410675, made a first offer. It was withdrawn. Mr. Bereznicki of Trail South attended at one of Abbey Lane’s developments to investigate and confirm the quality of the proposed development, and assure himself it would be suitable to the Land. Mr.

Bereznicki concluded the proposed development met the appropriate standard, and the second offer made on September 1 was accepted. [ 25 ] The purchase price was $1,513,120.00, which meant a per acre price of $392,000.00. Three staged deposits were involved in the purchase: 1. an immediate non-refundable deposit of $10,000.00,

2. a second and contingent deposit of $65,000.00 payable when the Purchaser’s first condition was waived, and 3. a third and contingent deposit of $50,000.00 payable when the Purchaser’s second condition was waived. [ 26 ] The first deposit of $10,000.00 was paid by Abbey Lane Homes, a division of B & R, to Mr. Little, Edmonton counsel for Trail South. This was the manner in which payments were made by the plaintiffs during their dealings with Trail South. All the funds paid on the transaction were paid by Abbey Lane Homes, a division of B & R.

B & R was not a party to the agreement and the funds paid by B & R were recorded for accounting purposes as receivables. D. The Agreement [ 27 ] The purchase Agreement anticipated that the transaction would pass through a number of checkpoints as the parties moved closer to closing the Land’s sale and transfer. These checkpoints involved a number of Vendor and Purchaser requirements, embodied in a set of caveats. Paragraph 4 of the Agreement sets out these Vendor’s and Purchaser’s conditions. This part of the Agreement is crucial for this judgment, and so Paragraph 4 is reproduced in full in

Schedule A to these reasons. Succinctly, a critical aspect of the present dispute involves which of these conditions were met or waived. Put another way, the parties dispute how far this transaction advanced through the various caveat checkpoints. i. Vendor’s Deferred Reserve Condition [ 28 ] Paragraph 4(

a) provides that from the date of acceptance, Trail South had 30 days to discharge a Deferred Reserve Caveat (Vendor’s condition). This is the sole condition in favour of the Vendor. Waiver of this condition does not have any effect on the other caveats and their operating periods. ii. Purchaser’s First Condition [ 29 ] 410675 had 60 days (the Feasibility Period) to ensure the property was suitable for its development: Paragraph 4(b-d). Waiver of the Purchaser’s First Condition required payment of the $65,000.00 deposit.

Expiry of the 60 day period or waiver of the Purchaser’s First Condition marks the end of the Feasibility Period. iii. Purchaser’s Second Condition [ 30 ] The Purchaser’s Second Condition came into play at the end of the Feasibility Period: Paragraph 4(f). From that point 410675 had 90 days to re-zone and subdivide the Land (Paragraph 4(e)), failing which the Agreement became null and void: Paragraph 4(f). [ 31 ] Within the 90 day period, 410675 was entitled to request one 30 day extension to run from the end of the 90 day period: Paragraph 4(g).

That extension was only available where the buyer had been diligent in its attempts to re-zone and subdivide the Land: Paragraph 4(g). [ 32 ] In the event 410675 had not satisfied or waived the re-zoning/subdivision requirement within the 90 days (or the further 30 day extension if granted) then Trail South had the election to take over the subdivision/re-zoning process: Paragraph 4(h).

However, if Trail South so elected, the Agreement would become null and void 180 days after the end of the Feasibility Period if the planning process was not satisfied by either party or waived by 410675 by that time: Paragraph 4(i). [ 33 ] Paragraphs 4(

f) and 4(

i) therefore each provide an alternative mechanism by which the Purchase Contract may automatically end unless the Land is re-zoned and subdivided.

E. Progress of the Purchase through the Paragraph 4 Caveats [ 34 ] Paragraph 4 of the Purchase Agreement created an ambitious timeline for the land transfer. Notably, the re-zoning and subdivision would be dependant on the City of Edmonton and its approval of those steps. Nevertheless, Mr. Mastroprimiano felt that the 90 day deadline for re-zoning and subdivision was tight but achievable. That deadline was subject to certain contractual extensions. [ 35 ] Mr. Mastroprimiano moved quickly to hire his architect, Mr. Hamilton. On September 29 Mr. Mastroprimiano and Mr.

Hamilton met with city planners to start the re-zoning and subdivision process. It was recommended that a single re-zoning application be made for the whole site following which there would be subdivision of the site into two parcels. It was concluded that Trail South needed to be involved. Until this date, re-zoning the entire parcel had not been contemplated. [ 36 ] On September 30 Mr. Kolbuc of CenterCorp, acting for Trail South, requested an extension to November 1, 1999 of the Vendor’s Condition regarding the Deferred Reserve Caveat.

He prepared and sent a Condition Precedent Extension form signed by Rob Green, president of CenterCorp and of Trail South. That same day Mr. Mastroprimiano signed and returned the form. I conclude that agreement amended the Agreement to vary the original Deferred Reserve Caveat deadline date. [ 37 ] As previously noted, Mr. Kolbuc’s status and authority is an issue in this trial. I conclude here that the fact that Mr. Green, not Mr. Kolbuc, signed the Condition Precedent Extension is evidence of Mr. Kolbuc’s limited authority to make certain agreements. [ 38 ] On October 8, Mr. Mastroprimiano wrote Mr.

Kolbuc advising of the City’s requirements regarding re-zoning and saying that re-zoning “must be initiated by the vendors”. He advised Mr. Hamilton was available to begin work immediately. He also wrote “This implies that the current Offer to Purchase must be rectified A.S.A.P. to reflect changes to some of the conditions.” Sent together with his letter were the minutes of the meeting with the City and Mr. Hamilton’s letter interpreting the minutes. The same package was forwarded to Mr. Jacobson on October 13. [ 39 ] On October 13, Mr. Lupul, legal counsel for Mr.

Mastroprimiano’s corporations, wrote his client advising of two easements on the land; one a Utility Easement and the other an Access Easement. One became relevant during the re-zoning and subdivision process. [ 40 ] On October 14, Mr. Hamilton provided a concept drawing to Mr. Jacobson to assist with basic zoning requirements. [ 41 ] The next day, in response to the request of Mr. Bereznicki at CenterCorp, Mr. Hamilton provided a brief resume and references. The purpose of the information was to assist CenterCorp in deciding whether to hire Mr. Hamilton. The fact that CenterCorp chose not to hire Mr.

Hamilton is evidence that CenterCorp agreed to greater involvement in the planning process. [ 42 ] On October 25, a further concept drawing was sent by Mr. Hamilton to Mr. Mastroprimiano. [ 43 ] The letters of October 27 and 29 described following are alleged, together with the rest of the evidence, to form the basis of either a Collateral Contract regarding the re-zoning and subdivision conditions of the Agreement or evidence of waiver of the time of the essence provision or part performance of the extension of the Agreement deadlines. [ 44 ] On October 27, Mr.

Kolbuc requested of Abbey Lane an extension of conditions 4(

a) and 4(

c) to December 1. Abbey Lane (with the assistance of Mr. Lupul) sent to CenterCorp a signed Condition Precedent Extension form to that effect. Mr. Mastroprimiano understood CenterCorp was representing Trial South. The form was forwarded by Mr. Kolbuc to Mr. Green who signed for Trail South two days later but unilaterally changed the date for the extension to November 15. I conclude that this exchange of documents effectively amended the Agreement to change the relevant deadline dates. [ 45 ] The fact that Mr. Kolbuc requested the extension and Mr.

Green, President of CenterCorp and an officer of Trail South, changed the effective date is evidence that Mr. Kolbuc’s handling of this matter for Trail South was subject to oversight - in other words

yet further evidence of Mr. Kolbuc having only limited authority. [ 46 ] The effect of this extension was to push the Vendor’s condition on the Deferred Reserve Caveat back by about 45 days, the Purchasers First Condition (Feasibility) back by about 15 days and the rest of the deadlines back by the same 15 days. Under the Agreement, the October 29 agreement to extend the deadlines on conditions 4(a and

c) also meant that the Purchaser’s Second Condition (re-zoning and subdivision) had to be completed by February 13 or the Agreement became null and void. [ 47 ] Mr. Kolbuc’s letter requesting the extension also states “... we also made the decision that once these conditions [4 a and c] are removed, CenterCorp would take care of the re-zoning (i.e. hiring of architect and costs involved). ... Due to these extensions, if the other conditions require an extension, that can be done in due time.” [ 48 ] On October 29, Mr.

Kolbuc again wrote Abbey Lane enclosing the signed Condition Precedent form extending the two conditions to November 15. He explained why there was need for delay and suggested that Abbey Lane do nothing until Trail South was able to confirm it was proceeding with the deal, which it would do by November 15. He stated “If ... the partners elect to go forward with your deal we will commence the re-zoning process at that time and adjust the conditions accordingly.” Apparently Trail South was entertaining another offer. Abbey Lane took steps to express interest in the whole parcel and had its lawyer, Mr.

Lupul, write to Mr. Little, counsel for Trail South, to point out that failing to remove the Vendor’s condition to entertain another offer was not in the intent of the Agreement. Mr. Lupul also registered a land title caveat to protect 410675’s interest under the Agreement. [ 49 ] Mr. Bereznicki’s evidence is that he had nothing to do with the letters of October 27 and 29. He did not contact Mr. Kolbuc to determine to whom the “we” in the middle paragraph of the October 27 letter referred. He maintained that the only persons with signing authority were himself and Mr. Green.

He did agree however that facts had changed; the whole parcel had to be re-zoned, CenterCorp had to get more involved for Trail South at the City’s request and the fee arrangement changed. [ 50 ] Mr. Bereznicki’s evidence is that matters of contract were handled by the lawyers. Mr. Green was a lawyer in private practice in addition to his roles with CenterCorp and Trail South. Mr. Weiss was a Trail South lawyer situated in Toronto. Mr. Bereznicki’s evidence is corroborated by Trail South’s actions and is further evidence of Mr.

Kolbuc’s restricted authority. [ 51 ] I conclude at this point that the parties agreed that Trail South would be the party to initiate and where necessary conduct the re-zoning and subdivision application before the City of Edmonton. This is not an amendment to Agreement Paragraph 4(e), or a new agreement, but rather conduct by the parties within the initial scope of the written contract. This delegation of roles is consistent with Trail South’s obligations under Purchase Agreement paragraph 5(

b) that Trail South “shall cooperate fully ... with the Purchaser in all [re-zoning and subdivision applications] where the Vendor’s cooperation is necessary ...”. Here, that necessary cooperation was Trail South initiating and conducting when necessary the re-zoning and subdivision application on behalf and under the instructions of 410675 (ie. Mr. Mastroprimiano). [ 52 ] On November 12, Mr. Weiss, Ontario counsel for Trail South, wrote to 410675, c/o Abbey Lane Homes, waiving the Vendor’s condition. On November 15, Abbey Lane wrote Mr.

Bereznicki waiving the Purchaser’s First Condition (feasibility) and sent the Second Deposit of $65,000.00 to Mr. Little. Again, that amount was paid by Abbey Lane Homes, a division of B & R, and not 410675. It is noteworthy that Mr. Kolbuc was not involved in these contractual steps. [ 53 ] Waiver of the feasibility period condition caused certain other dates to crystalize. The 90 day deadline (Paragraph 4(f)) for the buyer to complete re-zoning and subdivision was now set as February 13, 2000, with the option of a 30 day extension by the vendor to March 14, 2000 (Paragraph 4(g)).

Alternatively, if the vendor took control of the re-zoning and subdivision process, then the 180 day period would end on May 13 (Paragraph 4(h-I)). [ 54 ] The testimony and correspondence evidence provides no basis to conclude that the parties had invoked or agreed to proceed under the Paragraph 4(

h) mechanism by which Trail South would be responsible for re-zoning and subdivision. Arguably, that option would not even be available until February 13 to March 14: Paragraph 4(g). Nevertheless, the City’s requirements had forced Trail South to begin to re-zone and subdivide the Land, which is not a circumstance expressly contemplated by the Purchase Agreement. As previously noted, Trail South had a contractual obligation to cooperate with the re-zoning and subdivision applications, and I conclude that obligation included Trail South taking a lead role, on behalf of 410675, under the Paragraph 4(

f) mechanism.

[ 55 ] Operationally, that is exactly what happened. Even if Mr. Kolbuc was not formally authorized to commit Trail South to that path, Mr. Bereznicki’s evidence and the post-October 29 conduct of Trail South confirm that it had accepted that role. F. IBI’s Involvement and the Planned Re-zoning and Subdivision [ 56 ] On November 16, Mr. Kolbuc requested the IBI Group (IBI) provide a fee proposal to conduct the re-zoning and subdivision ASAP. [ 57 ] On November 21 and 26, Mr. Mastroprimiano sent Mr. Hundert of IBI the current zoning material. [ 58 ] IBI provided its proposal on November 23.

It predicted being before City Council on March 14. This end date did not include time for the appeal process or for the subdivision application. If the contract extensions were not utilized, that March 14 estimate fell past the Agreement Paragraph 4(

f) February 13 date for completion of subdivision and re-zoning. [ 59 ] Mr. Bereznicki’s evidence is that although he knew the re-zoning and subdivision could not be completed by the February 13 date, Trail South continued with the planned sale due to ‘deal momentum’ and the fact the Agreement provided discretionary extensions that could further extend the re-zoning and subdivision deadline. [ 60 ] That said, the deadline of February 13 was never changed by written agreement. i. Arrangements to Pay IBI and Re-zoning and Subdivision Costs [ 61 ] On November 25, Mr.

Kolbuc wrote Abbey Lane proposing to give the contract to IBI subject to approval by Mr. Mastroprimiano. A proposal for sharing of fees was made; Purchaser to pay City application fee and the IBI Professional Fee to be equally shared. Abbey Lane agreed the next day. Mr. Kolbuc notified IBI the same day and proposed a meeting with Abbey Lane, himself and IBI for the following Monday. [ 62 ] Mr. Mastroprimiano agreed that the original intent of the agreement was that the Purchaser be responsible for subdivision. He continued to want to be involved in re-zoning because he cared about densities. [ 63 ] Mr.

Mastroprimiano had never previously met Mr. Hundert. Mr. Hundert of IBI is an independent witness with a good memory of his involvement in this matter. He felt that his client was CenterCorp. Meetings took place at CenterCorp or at the IBI offices. He never met alone with Mr. Mastroprimiano but he did meet with CenterCorp alone on a number of projects. He was unaware of the fee-sharing agreement or of any deadlines under the Agreement. [ 64 ] Allegedly, the November 25 and 26 th hiring of IBI and the fee arrangement is further evidence of a collateral agreement or waiver of deadline. I disagree.

The engagement of IBI by Trail South with Mr. Mastroprimiano’s consent is consistent with the responsibility for the planning process remaining with 410675 but that Trail South was obligated to cooperate. That cooperation took the form of Trail South proposing hiring and jointly directing IBI on behalf of or together with 410675. [ 65 ] Neither does the fee agreement support a fundamentally different arrangement than that set out in the Agreement, though Trail South has assumed an obligation to share IBI’s fee.

Trail South’s agreement to cover these costs is consistent with its obligation to cooperate under the Agreement. Trail South agreement to share IBI’s fee however represents a new financial obligation and in that respect is an amendment to the Agreement.

ii. IBI Advances the Re-zoning and Subdivision Application [ 66 ] On November 30, the project start-up meeting was held at the CenterCorp offices with Mr. Kolbuc, Mr. Hundert, Mr. Mastroprimiano and Mr. Jacobson present. [ 67 ] Mr. Hundert recommended that public consultation be deferred until after Christmas. Mr. Kolbuc directed that public consultation be done about one week into the new year. As a result, completion of the planning process was expected to be delayed into the months of May or June. [ 68 ] The delay of the public notices until after Christmas was the sort of direction within Mr.

Kolbuc’s authority. However, this delay emanated from the operation of the legal terms of the Agreement, specifically the original timing included Christmas, the agreed extensions exacerbated the negative impact of the delay over the Christmas season, and Trail South was required to be involved, rather than any authority of Mr.

Kolbuc to change the terms of the Agreement on behalf of Trail South. [ 69 ] In the months that followed both Trail South and Abbey Lane (for 410675) engaged in various interactions and communications with IBI. [ 70 ] In early December, a topographical survey was ordered and completed December 17. The survey disclosed the parcel to be smaller than originally thought. Mr. Mastroprimiano forwarded the survey to Mr.

Hamilton a few days later for design amendments. [ 71 ] From January 6 to 7, notices of the planning process were sent to the surrounding community. [ 72 ] On January 11, IBI provided a draft subdivision plan to CenterCorp and Abbey Lane. Also on January 11, Mr. Mastroprimiano requested an updated re-zoning

schedule from IBI and for confirmation that the notification to the neighbors had been sent out. [ 73 ] Sometime in early January, Mr. Kolbuc wrote to Mr. Green providing the latest re-zoning

schedule from IBI. He advised Mr. Green that the deal was behind

schedule due to Trail South’s delay on the Deferred Reserve Caveat condition, its consideration of the competing Westbank deal and the Christmas season delaying the notices to the public. [ 74 ] On January 17, Abbey Lane paid the City’s application fee of $4,400.00. I conclude that payment was made on behalf of 410675. [ 75 ] On January 20, an IBI invoice was received by CenterCorp ($1490.83). iii. Unsuccessful Amendment of the Paragraph 4(

f) Deadline [ 76 ] At this point the real estate agent, Mr. Jacobson, became involved in the scheduling of the land purchase. Mr. Jacobson saw himself as a dual agent, though his January to February 2000 activities suggest a more active and independent role. On January 20, Mr. Jacobson wrote Trail South regarding his commission agreement as broker on the Trail South/Abbey Lane deal. He was, by this letter, working to formalize his commission agreement on the file. [ 77 ] Mr. Jacobson did not have the letters of October 27 and 29 in his file.

[ 78 ] Mr. Jacobson says that on January 21, Mr. Jacobson wrote to Mr. Kolbuc, and asked for a 90 day extension at the “request of Bruno Mastroprimiano and 410675 ... to complete the re-zoning and subdivision ...”. Attached was a signed Condition Precedent Extension to extend the 90 day re-zoning and subdivision period in Paragraph 4(

f) from 90 to 180 days. That would bring the deadline to May 15, 2000. [ 79 ] I note at this point that the Paragraph 4(

f) extension is not the one that is expressly provided in the Agreement. I therefore conclude that this request was for an amendment of the terms of the Agreement. The request was to alter the contract and to extend the 90 days given from the end of the Feasibility Period for re-zoning and subdivision by a further 90 days. [ 80 ] Mr. Mastroprimiano testified that he did not feel the extension was necessary. He felt the conditions had previously changed or that the parties were operating under

section 4(

i) of the Agreement. Nevertheless, he agreed that Mr. Jacobson could write on his behalf. He did not consult Mr. Lupul. [ 81 ] Mr. Bereznicki testified he felt the request was far beyond the scope of the Agreement, and it was formally rejected on February 7. I conclude the January 21 Agreement amendment advanced by Mr. Jacobson never took effect. iv. The Re-zoning and Subdivision Proceeds; Easement Issues [ 82 ] On January 21, Mr. Hundert notified Mr. Kolbuc, with a copy to Mr.

Mastroprimiano, of the change in parcel size (about .13 of an acre) largely due to an easement of a neighbouring Esso business (the Esso Easement). [ 83 ] On January 24, Mr. Little wrote Mr. Lupul advising that Trail South wanted the Esso Easement land to be part of the purchase. Mr. Lupul forwarded the request to his client on January 28. [ 84 ] On January 25, Mr. Hundert sent a revised

schedule to both parties and Mr. Jacobson with the 3 rd City application reading proposed for April 16. [ 85 ] On January 28, Abbey Lane paid the bill for the topographical survey ($2803.40). [ 86 ] On January 31, Mr. Kolbuc advised IBI to revise the subdivision plan to exclude the Esso Easement. F. The Second Attempt at a Paragraph 4(

f) Extension [ 87 ] As previously indicated, on February 7, Mr. Little wrote to CRI advising that Trail South was unwilling to agree to the 90 day extension requested in Mr. Jacobson’s January 21 correspondence. The letter was copied to Mr. Kolbuc and to Mr. Lupul but Mr. Lupul did not receive it. It was not sent to Mr. Mastroprimiano pursuant to the Notice provision of the Agreement, Paragraph 10(e). Nevertheless, Mr. Mastroprimiano had knowledge of the refusal as is shown by his actions on February 9, so that defective notice is not relevant. [ 88 ] Mr. Little maintained he was acting on instructions from Mr.

Green or Mr. Bereznicki. [ 89 ] At this point the testimony by the witnesses of their

interpretation of the status of the Agreement diverges. [ 90 ] Mr. Jacobson was clearly concerned that the deal was about to abort. On February 9, Mr. Jacobson wrote to both Mr. Kolbuc

and Mr. Bereznicki requesting a further 30 day extension on behalf of his client 410675. Again, a Condition Precedent Extension was signed by Mr. Mastroprimiano and this time framed as an extension to Paragraph 4(f) “such that the date for the Purchaser to waive their condition is extended to expire on March 14, 2000.” Notably, this Condition Precedent Extension does not invoke the Paragraph 4(

g) option for a 30 day extension to the 90 day post-Feasibility Period deadline. I interpret the February 9 Condition Precedent Extension request to be an attempt to amend the terms of Paragraph 4(

f) to increase the 90 day period to 120 days. [ 91 ] Mr. Jacobson’s letter that accompanied the form is ambiguous on this point. He never mentions Paragraph 4(

g) but does characterize the attached Condition Precedent Extension as “... our enclosed request to extend the contract on the above noted lands for an addition thirty (30) day as per the original agreement .” [Emphasis added.] That is not what the Condition Precedent Extension says. I find such a meaning should not be ‘read in’ in these circumstances. [ 92 ] Mr. Mastroprimiano’s evidence was that Mr. Jacobson made the two extension requests because he was concerned about his commissions. This is a fair characterization. Mr. Mastroprimiano did not feel the extension requests were necessary. One reason was that he believed that the parties were now operating under Paragraph 4(h-

I) and that Trail South had taken charge of the re-zoning and subdivision process. However, he permitted (rather than instructed) Mr. Jacobson to make the requests on 410675’s behalf. [ 93 ] As I have previously explained, Mr. Mastroprimiano was incorrect to conclude that the Paragraph 4(h-

I) mechanism was underway. Further, it was not only not underway, it was unavailable. The Paragraph 4(i) 180 day period emanates from the Vendor’s election in Paragraph 4(h). From my conclusion on the effect of October 29 Agreement amendment, the Paragraph 4(

h) election appears to have only been possible between February 13 and about March 14. [ 94 ] While an argument could be made that an earlier window was possible, based on the Paragraph 4(

c) deadline in the original Agreement, I conclude that is an incorrect

interpretation of the Agreement. Paragraph 4(

h) indicates its period of operation is in relation to the end of the Feasibility Period . That date was expressly amended by agreement of the parties. [ 95 ] In any case, at the material time, when the Vendor could have made its election, the Vendor had made its position clear. It was not willing to extend as the Purchaser requested. There are insufficient facts from which to infer that Trail South had, nevertheless, made its election under Paragraph 4(h-

I) in light of its position on the extensions requested. Certainly, Trail South never expressly invoked those Agreement provisions. [ 96 ] Trail South took a different

interpretation of the February 9 Condition Precedent Extension. Mr. Kolbuc responded on February 11 with: I reviewed your February 9, 2000 letter with my head office. Our opinion is that your letter does not satisfactorily prove that the purchaser has been proceeding diligently and expeditiously with the re-zoning/subdivision of the subject property or that this process could not have been completed within the agreed upon time frame. In short, this reply indicates Trail South interpreted the February 9 proposed amendment as an attempt by 410675 to invoke the Paragraph 4(g) 30 day extension procedure.

Given the text of Mr. Jacobson’s letter that accompanied the Condition Precedent Extension, that conclusion is readily understood. [ 97 ] Mr. Kolbuc’s correspondence makes reference to Paragraph 4(

g) of the Agreement where the Purchaser undertook to provide the Vendor with periodic reports. Then there is a request for materials to justify an extension after review of which the extension would be considered. Mr. Bereznicki maintained Mr. Kolbuc was instructed to write the letter by himself and either Mr. Green or Mr. Weiss, but had no recall of what actually happened. Mr. Jacobson forwarded the letter the same day to Mr. Mastroprimiano, Mr. Hundert and Mr. Lupul. [ 98 ] It is clear that Trail South had no basis to reject a 30 day extension request under the reporting requirement of Paragraph 4(g).

At trial, Mr. Bereznicki was unable to point to anything substantial proving 410675 had not been diligent in its move towards re-zoning and subdivision. Changes in density and size were caused by Trail South’s indecision on the Esso Easement. The time frame was driven by both Trail South’s selection of IBI and IBI’s handling of the process. The denial of extensions were not the fault of Abbey Lane. Mr. Bereznicki agreed that the reporting requirement in Paragraph 4(

g) of the Agreement was meant to apply if Trail South was not involved in the process with the City. He acknowledged that Mr. Hundert met frequently with Mr. Kolbuc and provided information to him. Mr.

Bereznicki relied on Mr. Kolbuc’s reports to be informed. [ 99 ] I therefore conclude that if 410675 had invoked Paragraph 4(

g) and sought the 30 day extension provided by that provision, Trail South had no basis to deny that extension. However, 410675 never took the step to request that extension of the Paragraph 4(f) 90 day deadline. [ 100 ] The deadline of February 13 passed without comment. As 410675 did not seek an extension under Paragraph 4(f), and Trail South did not take control of the re-zoning and subdivision process (Paragraph 4(h-I)), I conclude the Agreement was null and void on that date (Paragraph 4(f)). G.

Post-February 13 Developments [ 101 ] The re-zoning and subdivision process continued though the Agreement no longer had any legal force. The parties testified that they had different perspectives on why that was the case. [ 102 ] Mr. Bereznicki testified the Agreement became null and void on February 13. I have concluded that he was correct. From his perspective, the sale to 410675 would only occur if Trail South and Abbey Lane negotiated a fresh agreement. On that basis, he saw the ongoing interactions between the parties as an attempt by 410675 and Mr. Jacobson to negotiate a new deal.

That said, there is no question that the re-zoning and subdivision process continued seamlessly. Mr. Bereznicki’s explanation for IBI continuing was ‘deal momentum’ and IBI’s ignorance of the terms of the Agreement. [ 103 ] Mr. Mastroprimiano testified that he thought Mr. Jacobson’s concerns were ill-founded, and that the Agreement was already operating under the Paragraph 4(h-

I) procedure. Mr. Mastroprimiano’s own notes show he was aware of the effective deadlines rising from agreed extensions and in particular the completion date of February 13 under the Agreement. While the notes appear to address proceeding under

section 4(

h) and (

i) of the Agreement, the notes presume all requests for extensions available would be agreed. [ 104 ] Mr. Lupul was of the view that the letters of October 25 and 27 invoked Paragraph 4(

h) of the Agreement. His view was that the Agreement required the Purchaser to apply for re-zoning and the Vendor to co-operate while the change was to require the Vendor to apply for re-zoning and the Purchaser to co-operate. I have previously rejected that

interpretation of the October 25-27 agreement, and concluded the Agreement as originally written provided a basis for the transaction to proceed with Trail South’s cooperation taking the form of initiating and participating in, at times directing with consent, the re-zoning and subdivision process. [ 105 ] Abbey Lane and Trail South clearly shared the planning tasks. Abbey Lane obtained surveys, provided concept drawings, consented to hiring IBI, attended the meetings and shared in the professional fees and paid the City’s application fee.

Trail South chose IBI to do the work, shared in IBI’s fee, initiated the application, and through Mr. Kolbuc, attended the meetings. [ 106 ] Under the Agreement, Mr. Mastroprimiano was not prepared to waive the re-zoning and subdivision condition since he could not purchase the land unless and until it was subdivided. However, he maintains the Agreement changed. He does not say that specific deadlines were agreed. Rather, Mr.

Mastroprimiano maintains it was changed to put the planning process squarely in Trail South’s hands with cooperation from Abbey Lane and with the end date being upon completion of the planning process. [ 107 ] That very substantial change to the Agreement’s terms was not however ever formalized. There was never a written request by Mr. Mastroprimiano through his lawyer for agreement ‘rectification’ after the letter of October 8. The substance of that ‘rectification’ remained undefined. i. Re-zoning and Subdivision Continues

[ 108 ] On February 14, IBI submitted the re-zoning and subdivision application to the City with additional documents following on the 16 th . [ 109 ] From Mr. Hundert’s perspective, which I accept, there were no delays from Abbey Lane or Mr. Hamilton. The application was moving at a good speed. Mr. Hundert recalls no complaints for lack of diligence. Mr. Hundert recalls speaking regularly to Mr. Kolbuc. He had recommended leaving the Esso Easement land with CenterCorp, with Mr. Kolbuc instructing otherwise and then changing Trail South’s position. [ 110 ] On February 17, Mr.

Hamilton provided elevation and suite drawings to Abbey Lane. [ 111 ] On February 18, IBI sent the site plan to Mr. Hamilton. [ 112 ] On February 24, Mr. Hundert sent to Mr. Kolbuc a

summary of IBI’s activities on Trail South’s behalf. This

summary was intended by Mr. Mastroprimiano to be the report requested by Trail South on February 11 in relation to whether the re-zoning and subdivision efforts had proceeded diligently (Paragraph 4(g)). [ 113 ] Also on that date, there was a meeting at which Mr. Mastroprimiano, Mr. Jacobson, Mr. Hundert, Mr. Bereznicki and Mr. Kolbuc were present. Mr. Jacobson recalled discussion regarding progress on the re-zoning. Mr. Hundert recalled there was no opposition to his revised

schedule which provided dates, there was no suggestion of delay by the Purchaser, that Mr. Bereznicki asked Mr. Mastroprimiano if he intended to proceed and received an affirmative answer, that Mr. Bereznicki mentioned that if Mr. Mastroprimiano was not interested London Drugs was. [ 114 ] Deposits were discussed. Also discussed was the price adjustment required due to the easement issue. The reduction in density from 192 to 176 units was also due to the easement issue. [ 115 ] As a result of that meeting, Mr. Hundert asked the City planners for a favor, on Mr.

Kolbuc’s request, and had the hearing date moved from May 19 to May 1. I accept that the objections from the community were not major. [ 116 ] On February 29, Mr. Hundert provided Mr. Kolbuc a previously requested revised project

schedule showing an estimated completion date of June 2. This projection included the subdivision approval and appeal periods. [ 117 ] Mr. Little requested on March 2 and IBI sent on March 3 the draft DC5 regulations and subdivision plan. ii. Discussions on An Amended or New Agreement [ 118 ] On March 1, Mr. Kolbuc wrote a memo to Rob, inferred to be Rob Green, explaining the reduction in size of the land from 3.86 acres to 3.37 acres.

He noted that Abbey Lane had agreed to pay for some of the land contained in the Esso easement but that Trail South would keep it as their land and maintain it: Therefore, although Abbey is only buying 3.37 acres, he is paying for 3.5 acres. At $392,000 per acre on 3.5 acres, the total price is $1,372,000. This amount is $141,120 less than the amount detailed in the executed offer. Henry [Bereznicki] is in agreement with this. John Little is revising the offer as far as timing and price goes.

We should get a black-lined Amending Agreement to review by tomorrow. [ 119 ] Between March 1 and 15, drafts of a New Agreement were exchanged between counsel. According to Mr. Lupul, the writing was required to clarify the current state of affairs in relation to which party was to control the zoning (the Vendor wanted it put back on the Purchaser), to the City’s zoning time lines, and to change the acreage due to the easement. Mr. Little maintained he was acting on the

instructions of Mr. Green or Mr. Bereznicki. [ 120 ] On March 15, Mr. Little provided Mr. Lupul with an amended draft agreement covered by a letter saying in part “We caution you that our client has not yet read this draft.” [ 121 ] The March 15 th draft contained strict time deadlines, the latest being June 15 for the subdivision approval. Closing was defined as “the earlier of June 30, 2000 and Fifteen (15) days following the approval by the City of Edmonton of the Subdivision Plan and the expiry of the statutory appeal period. In the event an appeal is filed, ...

Fifteen (15) days following the dismissal of the appeal.” Mr. Little’s cover letter also said “Our client requires some certainty as to when the sale will ultimately be concluded or terminated.” The June 15 deadline emanated from Mr. Mastroprimiano’s objection to the original draft requiring subdivision approval by May 15. [ 122 ] Mr. Mastroprimiano did not wish to agree to ignore the ‘side deal’ (October letters) which he saw as regarding control of the re-zoning process.

Nevertheless, he signed the New Agreement making re-zoning the obligation of the Purchaser with the Vendor’s co- operation. [ 123 ] By March 24 to 26, Mr. Lupul recalls that there was a deal and all that was required were execution copies of the agreement. [ 124 ] Mr. Mastroprimiano queried his lawyer during this time as to why the Agreement was not just extended. This supports his testimony that he believed the Agreement was still operating. [ 125 ] On April 3, Mr. Little sent on Mr. Lupul’s request clean copies of the March 15 Offer to Mr. Lupul for execution by Mr. Mastroprimiano.

He said “... please return all four copies to our office so that we may have them executed by the Vendor.” They were executed by Mr. Mastroprimiano for 410675 that same day and returned to Mr. Little on the 4 th and the 5 th . There is no explanation for the delay from March 15 to April 3 rd . I accept Mr. Little’s evidence that it was very unlikely that he would have represented to Mr. Lupul that his clients’ signing of the New Agreement was a foregone conclusion. [ 126 ] Paragraph 10(

h) of the New Agreement states “This offer supercedes any previous agreements between the Vendor and Purchaser including but not limited to a similar agreement dated September 2, 1999.” When cross examined on the reason Mr. Little included Paragraph 10(

h) in the New Agreement, if the Agreement was indeed dead, he stated that he felt it was prudent to clarify. The context for this answer is Mr. Little’s evidence that, although he was aware of the October letters, he was not privy to the planning process and therefore could not make safe conclusions. [ 127 ] Mr. Mastroprimiano characterized the New Agreement as an extension of the Agreement which took the form of a new offer. [ 128 ] The intended effect of the New Agreement, and how it was viewed by the parties is uncertain, but fundamentally irrelevant. It was never accepted by both sides.

I have concluded that the Agreement was, by this point, inoperative. Without a new ‘meeting of minds’ no legal obligations existed between the parties. iii.

Continued Preparations for the Transfer [ 129 ] During these discussions between Trail South and Abbey Land, IBI and the plaintiffs continued their steps to prepare for the re-zoning, subdivision, and sale: · March 9 - Abbey Lane requested an Environmental Assessment; it also requested confirmation of dates from IBI regarding processing the re-zoning and subdivision application with a specific request for confirmation of expiration of appeal periods. · March 13 - Abbey Lane requested a soils test.

· March 17 - IBI sent a revised draft of the DC5 to all parties. · March 27 - IBI provided Mr. Jacobson with sections of the Municipal Government Act dealing with subdivision appeals. · March 28 - IBI requested of Mr. Kolbuc the advertising fee for the City ($791.80). · March 28 - Abbey Lane wrote IBI requesting a proposal for the public information meeting be as soon as possible. · March 31 - Abbey Lane paid $2461.00 to Venture Engineering for the environmental assessment; Mr.

Hamilton sent Abbey Lane concept plans for the common areas as they related to the condominiums. · April 6 - the City wrote IBI confirming that it had managed to arrange for the public hearing to be on May 1; Mr. Kolbuc forwarded the subdivision plan to Mr. Weiss. iv. Mastroprimiano’s Construction and Venture Structure Plans [2] Sometime in March, Mr. Mastroprimiano prepared his budget for the Trail South project. His plan was to build in three stages beginning in February of 2001 and to finish in December of 2003 unless the market was very good.

His budget was based upon recent experience with costing the Terra Losa California Project with 8 percent markups for the future years resulting in conservative estimates. [3] With the three phase protection against risk, Mr. Mastroprimiano testified that he decided that he could build the project through B & R rather than in a joint venture as he had until then intended, had done previously a good majority of the time, and did on One River Park, a project of similar cost. One River Park did not have the risk protection of proceeding in phases. Mr. Mastroprimiano had built through B & R twice previously.

His use of joint ventures was to share the risk, not to raise capital. [4] I accept that Mr. Mastroprimiano is an astute businessman. However, the preponderance of evidence does not support his assertion that in March of 2000 he came to the unequivocal decision to develop the land through B & R. The market at the time was beginning an active upward trend. His evidence was that he would forgo the three phases if the market supported it. However, in an even hotter market he chose to build One River Park in a joint venture corporation (with Mr. Mastroprimiano owning 37%).

On all of the evidence, I find that a similar sharing of the risk would have been undertaken on the Trail South project. H. The Deal Collapses [5] On April 11, the City Land and Buildings Branch notified Abbey Lane that it had lost its hold on a parcel of land. The hold had expired on April 7, 2000. It was immediately placed on hold for another builder. [6] On April 13, Mr. Little wrote Mr. Lupul acknowledging receipt of the New Agreement endorsed by Mr. Mastroprimiano and confirming that ‘Trail South does not accept the offer”.

The same day Trail South wrote to IBI withdrawing its application for re- zoning and subdivision. [7] On April 14, Mr. Little returned the Second Deposit plus interest. [8] On April 17, Mr. Lupul wrote Mr. Little maintaining the parties had a deal.

[9] On May 15, Trail South signed an offer for the purchase of the whole parcel. Mr. Bereznicki admitted that negotiations for this new transaction took place around April 8 to 10. Mr. Bereznicki maintained that the New Agreement was not signed because things just took too long. Trail South had given up. He maintained that the receipt of the City’s letter of April 6 th setting the hearing date for May 1 did not affect the decision. I reject this evidence.

In my view, Trail South chose not to sign the New Agreement because they had another interested party and the letter from the City triggered their action. [10] Another offer was made on the Land in November of 2002. It was sold in the Summer of 2004. A multi-family complex was built on it. The process with the City took 20 months to complete. However, the complex built was higher density than was the proposed Abbey Lane development. 3. Contract Terms and Adjustment [11] The meaning of the Agreement is disputed.

Obviously, the preceding review of interactions between the plaintiffs and defendant indicate that the Purchase Agreement was not followed to its letter. In certain cases adjustments to the contract were expressly made via written agreements between the parties. In other instances the changes to the planned transaction have a more evolutionary flavour, and reflect developments not anticipated by the parties when they signed the original purchase Agreement.

Some of this latter category of developments are not formalized, and instead are better identified by the parties’ conduct. [12] Just how the purchase Agreement developed, and the possible existence of a collateral contract, was the subject of much controversy at trial. This

section summarizes the conclusions as to how the Purchase Agreement evolved between September 2, 2000 and May, 2001. In certain cases, these comments anticipate the legal analysis that follows. September 2, 1999: the parties sign the Agreement, the contract begins. September 30, 1999: amendment of the Paragraph 4(

a) deadline to 60 days. October 8-29, 1999: no amendment to the contract, instead operation of Paragraph 4(

e) so that the Vendor would initiate the re-zoning and subdivision application and cover costs. October 29, 1999: amendment of the Paragraph 4(

a) deadline to 74 days, amendment of the Paragraph 4(

c) feasability period deadline to 74 days. November 15, 1999: the Paragraph 4(

f) buyer deadline to complete re-zoning and subdivision crystalizes as February 13, 2000, with the option of a 30 day extension to March 14, 2000 (Paragraph 4(g)). The Vendor controlled re-zoning and subdivision deadline crystalizes on May 13, 2000 (Paragraph 4(h-I)). November 25-26, 1999: amendment of Paragraphs 4(

e) and 5(

b) to have the Vendor pay for half IBI’s professional fee and the Purchaser to cover all other costs. January 27 - February 7 first unsuccessful discussion to amend the Paragraph 4(f) 2000: deadline.

February 9-11, 2000: second unsuccessful discussion to amend the Paragraph 4(

f) deadline. February 13, 2000: the Agreement became null and void. March 1 - April 13: unsuccessful discussions for a new contract to sell the Land. [13] I also conclude that the plaintiffs (specifically 410675) had a legal right to obtain an extension of the Paragraph 4(

f) deadline to March 14, 2000, but it did not exercise that right. If I am wrong and the plaintiffs did make that request, the plaintiffs were unable to complete their obligations under the contract within that time frame. Mr. Mastroprimiano testified he needed the planning completed before the land became available for purchase. I therefore infer he was disinclined to waive the planning condition. 4. Preliminary Adverse Inference Issue - Mr. Kolbuc [14] The defendant did not call Mr. Kolbuc as a witness. Trail South’s counsel provided to the plaintiff’s counsel a witness list which did not include Mr.

Kolbuc five days before the plaintiff closed its case. With the witness list was the note that the defendant would advise if Mr. Kolbuc was to testify. The day prior to the close of the plaintiff’s case the defendant’s counsel told plaintiffs’ counsel that they should not presume that Mr. Kolbuc would be called. [15] The preceding review of relevant facts makes clear the Mr. Kolbuc had a significant role in how the attempt to execute the Agreement ultimately unfolded. There are two points that are of particular significance for the plaintiffs: 1. did the October and November written communications from Mr.

Kolbuc create a collateral contract between Abbey Lane and Trail South, and 2. did the November 30 statements of Mr. Kolbuc waive or extend the deadline requirements in Paragraph 4(f-g)? [16] Mr. Kolbuc was contacted by defendant’s counsel and is living in this City. Mr. Kolbuc left the employment of CenterCorp between 2001 and 2003 due to a slow down in the economy. [17] Mr. Kolbuc was examined in 2000 on an Affidavit sworn in relation to an application on a caveat. The plaintiffs have not otherwise contacted or attempted to contact Mr. Kolbuc. [18] Mr. Bereznicki undertook in 2002 to inquire of Mr.

Kolbuc what he meant in his letter of October 27 when he referred to “we”. Mr. Bereznicki did not answer that undertaking. He maintained Mr. Weiss asked but, if an answer was given, it was not entered in evidence. A. The Adverse Inferences [19] The plaintiffs seek a ruling that: 1. the letters of October and November evidence an agreement between Trail South and Abbey Lane that Trail South would undertake re-zoning and subdivision with cooperation from Abbey Lane; the agreement to hire IBI and to share fees was a Collateral Agreement with Abbey Lane; or

2. the letters provide evidence of waiver of those portions of the Agreement that regulate deadlines for re-zoning and subdivision. [20] The plaintiffs say the Mr. Kolbuc’s instruction to send out public consultation after Christmas is evidence of bothagreements. At the November 30 meeting, Mr. Kolbuc was the only representative from Trail South present. He agreed to extend the enddate of the Agreement to a time at which IBI could complete the re-zoning and subdivision. The undated memo from Mr.

Kolbuc to Mr.Green in early January explains the reasons for the needed changes. [21] The letter of February 11 denying the request for extensions based upon a failure to report cries out for Mr. Kolbuc’s explanation. The effect of the February 24th meeting must be to confirm the details of the extension agreement to the completion of thework by IBI. These are the inferences sought by the plaintiffs. If accepted, those inferences would be relevant as a basis for me to makea finding of fact. [22] The defendant maintains that the plaintiffs cannot ask for an adverse inference to make a prima facie case, that Mr.

Kolbuc’snumerous documents speak for themselves, that any adverse inference in relation to the two meetings would be contrary to evidencebefore the court. B. Legal Principles [23] Mr. Kolbuc had substantial involvement on Trail South’s behalf. He was its only representative at the two meetings abovereferenced. The plaintiffs allege that there opens a natural inclination that the defendant in failing to call Mr. Kolbuc feared what he hadto say: Murray v. Saskatoon, (SK CA), [1952] 2 D.L.R. 499, 4 W.W.R. (N.S.) 234 (Sask.

C.A.); Lynch & Co. v.United States Fidelity & Guaranty Co., (ON SC), [1971] 1 O.R. 28, 14 D.L.R. (3d) 294 (Ont. H.C.J.); Keelan et. al. v.Norray Distributing Ltd. et. al., [1967] 62 D.L.R. (2) 466, 60 W.W.R. 129 (Man. Q.B.), Mallet v. Administrator of the Motor VehicleAccident Claims Act, 2002 ABCA 297 at para 80, 330 A.R. 1. [24] However, such inferences should not be made unless a prima facie case against the defendant is otherwise made out: Koor v.Metropolitan Trust Co. of Canada (1993), 48 C.C.E.L. 216 at para. 28, 41 A.C.W.S. (3d) 332 (Ont. Ct. (Gen. Div.)); Allied Signal Inc.v.

Dome Petroleum Ltd. (1996), (AB KB), 195 A.R. 1, 8 C.P.C. (4th) 328 (Alta. Q.B.), affirmed (1993), 1997ABCA 71 , 144 D.L.R. (4th) 30, 193 A.R. 273 (Alta. C.A.), leave denied [1997] S.C.C.A. No. 162; Weedon v. Sherritt Inc.,2004 ABCA 160 at para. 9,130 A.C.W.S. (3d) 1132. The question of whether the plaintiffs have made out a case is dealt with infollowing sections. However, for the purposes of this adverse inference analysis I will initially presume that threshold has been met. [25] No inference should be made where the reason for not calling the witness is explained and is reasonable: R. v.

Jolivet, 2000SCC 29 at para. 25, [2000] 1 S.C.R. 751. That explanation ought to be precise and logical: R. v. Jolivet, at paras. 25, 28. The inferenceought not to be speculative or unsupported by other evidence: Decoine v. Firstrider (1993), 1993 ABCA 100 , 141 A.R. 74, 9Alta. L.R. (3d) 113 (Alta. C.A.); McNamara (Next friend of) v. Porteus, 2003 ABQB 35 at para. 50, 13 Alta. L.R. (4th) 253. Here, thedefendant has put no explanation before the court. [26] The availability of discovery evidence mitigates against making an adverse inference: Hibberd v.

Hurricane HydrocarbonsLtd., 2006 ABQB 707 at paras. 40-41, 407 A.R. 1, affirmed on other grounds 2007 ABCA 408, 422 A.R. 18; Anderson v. CanadaSafeway Ltd., 2004 ABCA 239 at para. 9, 357 A.R. 6. That rule does not apply here. While Mr. Kolbuc was cross examined in relationto an affidavit sworn by him for an application related to the caveat filed, in my view, the narrow evidence relevant to such an applicationis not near to the equivalent of an Examination for Discovery on the matter before the court. No reference was made to the Examinationon Affidavit. I find, Mr.

Kolbuc has not previously given evidence of the sort which would prevent an adverse inference. [27] There is no property in a witness: Smith v. Jones, (SCC), [1999] 1 SCR 455 at para. 15, 169 D.L.R. (4th)385, citing Harmony Shipping Co. S.A. v. Davis, [1979] 3 All E.R. 177 (C.A.), per Lord Denning, M.R., at pp. 180-81. The plaintiffscould have called Mr. Kolbuc as a witness. However this is not a case where the plaintiffs interviewed Mr. Kolbuc prior to the trial orhad full discovery evidence from him. It is not reasonable given Mr.

Kolbuc’s central role for the defendant that the plaintiff forgo itsright to cross examine him, particularly given:

1. the late notification and manner by which the plaintiffs became aware that the defendant would not call Mr. Kolbuc as a witness, 2. that Mr. Bereznicki was not well informed on the progression and status of the Agreement in part because Trail South delegated matters to Mr. Kolbuc, 3. that no one called by Trail South was able to give the evidence which one would expect Mr. Kolbuc to give, particularly on matters which are not well documented, such as the meetings of November 30 and February 24. [28] Nevertheless, there are two bases on which to reject an adverse inference.

Evidence allows me to conclude that: 1. Mr. Kolbuc’s authority was limited, which is relevant to a prima facie case, and 2. the words in the documents he wrote are an adequate basis to evaluate his intentions. C. Mr. Kolbuc’s Status and Authority [29] Mr. Kolbuc was characterized by Mr. Bereznicki as a junior employee. Mr. Little characterized Mr. Kolbuc as an employee who could enter into some agreements but he was not a decision maker. The latter was done by Mr. Bereznicki and Mr. Green. Mr. Little said it was unusual for him to accept instructions from Mr. Kolbuc without checking with Mr. Bereznicki or Mr.

Green. I accept Mr. Little’s evidence. [30] In the facts foregoing are set out the references to Mr. Kolbuc’s position and level of authority for Trail South. His work was clearly subject to oversight. Extension of the Vendor’s Condition was signed by Mr. Green. Mr. Kolbuc’s suggestion to extend the Conditions to December 1 was not accepted by Mr. Green. Nor was the modified form signed by Mr. Kolbuc. The waiver of the Vendor’s Condition was signed by Mr. Weiss. These are in my view important pieces of evidence on the limits of Mr.

Kolbuc’s authority which corroborate the testimony of others as to the type of position and authority he held. That evidence is inconsistent with the kind of authority required to make an agreement with a new party or to amend the time of the essence provisions in the Agreement. D. The Available Documentary Evidence [31] The letter of October 27 must be read in its entirety. The decision to “take care of rezoning” is defined by “(i.e. hiring of architect and costs involved)”.

Further the last words in the letter are telling: “... if the other conditions require an extension, that can be done in due time.” [32] On October 29, Mr. Kolbuc stated “If, by November 15, the partners elect to go forward with your deal we will commence the re-zoning process at that time and adjust the conditions accordingly.” [33] While the writing appears to promise an adjustment to the conditions, it does nothing to indicate that future adjustment to those conditions is not necessary.

The latter meaning is preferred when the words are considered in the context of his authority. [34] The extent of the agreement in the November letters is not disputed by Trail South in so far as it required Trail South to initiate the planning process and to share fees. The plaintiffs seek an adverse inference that the deal was made with Abbey Lane , and brought that entity into the contract. I find such an inference is inconsistent with the trial evidence of Mr. Kolbuc’s authority to make

contracts. Further, the ordinary meaning of the words of the letters in the November letters cannot be extended to mean Trail South was to take over the planning process. Lastly, making Abbey Lane (B &

R) a party to a collateral contract would defeat Mr. Mastroprimiano’s clear intent to compartmentalize the land transaction process in 410675. [35] While it would be gratifying to hear what Mr. Kolbuc has to say about the letter of February 11, in my view, the evidence shows that letter lacked some sincerity. In my view, Trail South is fixed with the knowledge of IBI and CenterCorp. It cannot be ignored, however, that in addition to the reference to the failure to provide periodic reports, the letter references that the process could not be completed within the agreed upon time. This latter statement is true.

There is no need to hear from Mr. Kolbuc to reinforce what is obvious on the written evidence. [36] The findings on Mr. Kolbuc’s authority circumscribes any inference that could be made from the two meetings he attended. In all of the circumstances, it cannot be inferred that he agreed on November 30 on Trail South’s behalf to extend the Agreement to a future undisclosed date. Further, on February 24, Mr. Bereznicki was present. Mr. Hundert’s recollection could be consistent with both negotiations on an extension or on a New Agreement.

The effect of the February 24 th meeting, however, turns first on the finer issue of whether during the term of the Agreement it became null and void on its terms or whether it was otherwise extended. [37] For all of these reasons, I decline to make an adverse inference for the failure to call Mr. Kolbuc. The relevant facts are therefore only those previously reviewed. 5. Issues [38]

Part 2 of this judgment outlines the basis for the conclusion that the Agreement ended on its own terms on February 13, 2000. The parties advanced a number of legal arguments that relate to issues relevant to the contract and parties, which are specifically addressed below. In certain instances, these discussions expand on the commentary in

Part 2. In other instances, these issues go to more fundamental questions, such as who are the parties who may enforce a right under the Agreement, or whether a valid contract ever existed. [39] The relevant issues are: 1. Was the Agreement binding? Yes 2. Has a trust been established between the plaintiffs? No 3. Was a collateral contract made? No 4. Was there waiver of the time of the essence provision? No 5. Was a New Agreement or Extension Agreement made? No 6. Did the defendant act in bad faith? No 7. What damages would be proven if liability is found to be in error? See below.

6. Analysis A. Binding Agreement [40] The defendant raises a number of arguments under this head and as a basis for its position that the Agreement was never acontract that could be enforced under law. I will deal with two: 1. was there certainty of parties, and 2. whether there was agreement on the essential terms of the contract? i. Certainty of Parties [41] The defendant argues that the use of the words “or nominee” as Purchaser with 410675 renders the parties uncertain and that,as a consequence the entire contract is a nullity.

In Canada, different legal implications result from use in a contract of the phrase“[identified party] or nominee”. The central issue with that language is the phrase may be interpreted in one of two ways: 1. the buyer will be:

a) the identified party, or

b) an alternative selected by the identified party to replace the identified party; or 2. the buyer is either the identified party or some other unknown individual. [42] In the former case, the buyer is always known; it is either the initial party or a replacement. In the latter alternative, the buyercould be anyone and that means the contract is invalid for lack of certainty. The defendant has cited Westward Farms Ltd. v. Cadieux;Barnabe v. Cadieux (1982), (MB CA), 138 D.L.R. (3d) 137, 16 Man.R. (2d) 219 (Man. C.A.), leave refused [1982]S.C.C.A.

No. 81, where Sullivan J.A. concludes that a contract which includes the “[identified party] or nominee” language is notenforceable as the parties could be anyone: ... it appears to me that there is no certainty of parties where one party is described as a named person or nominee. It is essential to thevalidity of a contract that, in the event of breach, both parties can know with reasonable certainty who can be sued.

In the case before usit would have been impossible for [the seller] to sue anyone on the basis of the written agreement in question in these proceedings. [43] Justice Sullivan therefore concluded that use of “[identified party] or nominee” is always fatal to a contract: “[u]nder thecircumstances, I have no hesitation in saying that the agreement in writing was void for uncertainty.” While he acknowledges that theparties may have meant ‘the buyer will be the identified party or an alternative selected to replace the identified party’, his conclusion isthat contracting parties should make that right to substitute clear via express contract language to that effect. [44] Subsequent Manitoba jurisprudence has followed this strict approach to the “[identified party] or nominee” language:Chomichuk v.

Merrifield (1982), (MB KB), 20 Man.R. (2d) 256, 16 A.C.W.S. (2d) 356 (Man. Q.B.), affirmed (MB CA), 20 Man.R. (2d) 251, 18 A.C.W.S. (2d) 432 (Man. C.A.), Fung v. 3714994 Manitoba Ltd., 2003 MBQB 249,179 Man.R. (2d) 47. In Chomichuk v. Merrifield, at paras. 10-12 Deniset J. concluded that even where the “or nominee” could bereduced to a finite and defined list of alternatives there still was no certainty of party and the “[identified party] or nominee” phrase

nullified the contract. [45] The Manitoba cases indicate they apply a rule from Causeway Shopping Centre Ltd. v. Muise, (SCC),[1969] S.C.R. 274, 70 D.L.R. (2d) 720, a very brief oral judgment of Cartwright C.J.C. which in its entirety reads: Mr. Nunn, we do not find it necessary to call upon you. We are satisfied that the document ex. M-1 referred to during the argument as alease is not a lease because the lessee is named as "Muise or his nominee". Under this document Muise was not liable as a lessee. He subsequently named Olympic as his nominee and this company went intopossession and paid rent for a time.

No assignment of the purported lease was necessary or attempted to bring about this result. The letterex. M-2 in referring to an

interpretation permitting Muise to assign the lease to his nominee does not transform Muise into a lessee underthe original document. [46] Arguably, the first paragraph and its comment on “Muise or his nominee” provides the rule applied by the Manitoba courts.However, the second paragraph indicates that the “or nominee” language operated to replace the defendant/respondent with a differentparty, the defe

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