1238117 Alberta Ltd. Plaintiff - v. -, 2011 ABQB 527

Court of Queen ’ s Bench of Alberta Citation: 1238117 Alberta Ltd. v. Farm Air Properties Inc., 2011 ABQB 527 Date: 20110824 Docket: 0703 03149 Registry: Edmonton Between: 1238117 Alberta Ltd. Plaintiff - and - Farm Air Properties Inc. Defendant _______________________________________________________ Memorandum of Decision of L. A. Smart, Master in Chambers _______________________________________________________ The Application [ 1 ] The Defendant has applied for

summary dismissal of the action and an order discharging the caveat and Lis Pendens registered by the Plaintiff on the subject lands. Facts

[ 2 ] On April 28, 2006 the parties entered into an Agreement whereby the Plaintiff offered to purchase land located in Leduc Business Park from the Defendant.. A purchase price of $519,750 was agreed upon and a deposit of $51,975 was tendered. The Agreement was subject to Purchaser ’ s and Vendor ’ s conditions attached as schedules. [ 3 ] The substance of the Purchaser ’ s conditions are as follows: 1. Where terms are used in this

Schedule which have been defined in the Agreement, they shall have the same meaning as set forth in the Agreement. 2. The Agreement is conditional upon the following:

a) Subject to land-use approval by the City of Leduc.

b) Subject to the Purchaser securing financing acceptable to the Purchaser.

c) Due diligence to be completed by the Purchaser. to be completed by the Purchaser before 4:00 P.M. on June 30, 2006. 3. The Purchaser shall use commercially reasonable efforts to satisfy each of the Purchaser ’ s Conditions by the respective date specified for each, and the Purchaser shall notify the Vendor immediately upon the satisfaction of each of the Purchaser ’ s Conditions.

The Purchaser ’ s Conditions have been inserted for the sole benefit of the Purchaser and may be waived by the Purchaser upon the delivery of a notice to the Vendor or its solicitor to that effect on or before the respective date specified for each. 4.

If, after fulfilling its obligations set forth in paragraph 3 above, the Purchaser fails to provide the Vendor with notice of each of the Purchaser ’ s Conditions and other waived or satisfied by 5:00 PM (Alberta time) on the respective date specified for each, then this Agreement shall be deemed to have been canceled and to be at an end and the Deposit paid by the Purchaser shall work forthwith be returned to the Purchaser without any deduction, and each party shall be discharged from any further liability or obligation under the Agreement. [ 4 ] The substance of the Vendor ’ s Conditions are as follows: 1. (Same as Purchaser ’ s Conditions) 2.

The Vendor ’ s obligation to complete the transaction contemplated by this Agreement is subject to it providing its approval and writing of the intended use and design of the project, on or before 10 days after Vendor ’ s receipt of a reasonable description of such use and design. Such description shall include renderings, streetscape and proposed landscaping on any street frontages. In the event that the Vendor does not provide such approval by such date, this Agreement shall be null and void and of no further force or effect and the Deposit shall be returned to the Purchaser.

The Vendor shall be entitled to register a charging agreement against the title to the Property, on closing, to assure that construction of the improvements is carried out in accordance with the plans approved. Such charging agreement to be removed from title upon the completion of construction in accordance with the plans. 3.

If the Vendor fails to provide the Purchaser with notice that each of the Vendor ’ s Conditions have been satisfied by 5:00 p.m. (Alberta time) on the respective date specified for each, then this Agreement shall be deemed to have been canceled and to be at an end and the Deposit paid by the Purchaser shall forthwith be returned to the Purchaser without any deduction, and each party shall be discharged from any further liability or obligation under the Agreement. 4.

If the Vendors Conditions are not satisfied on the respective date specified for each and an Agreement is not made to extend that day, this Agreement will be at an end and the Deposit shall be returned to the Purchaser.

[5] Under the second condition, plans were submitted by the Purchaser to the Vendor but were not accepted by the Vendor.There does not appear to be a dispute over the timing of delivery of the plans or the communication of the nonacceptance. Furthermore,satisfaction of the Purchaser’s conditions are not in issue. The explanation given by the Vendor’s representative was a concern that thetype of development set out in the plans would adversely affect the marketability of adjoining lands also owned by the Vendor, inparticular, for its proposed use as a hotel site.

The plans submitted are both entitled Industrial Warehouse Facility. The floor plan isfurther entitled Warehouse Type Units. Each unit is rectangular labeled with an office/reception area at the front and warehouse in theback. The Building Elevations contemplate retail signage on the front.

The building is to have a metal roof, metal siding and a garagetype insulated metal door in the rear. [6] The Purchaser believes that the true motivation for the Vendor for nonacceptance of its plans was the increase in value.There is no evidence before the court of the value of the subject lands at the time of the offer or when the plans were presented tosupport the Purchaser’s belief.

At no time did the Vendor indicate its reason for termination was due to the increase in value of the lands. [7] The principal of the Purchaser through a separate numbered company owns some lots in the immediate vicinity of thesubject lands. It is also clear that both those and the subject lands were to be held for purposes of sale or as revenue property. The Arguments [8] The Defendant Vendor’s position is quite simple. It did not approve the intended use and design of the project provided bythe Plaintiff.

The Agreement by its terms (Vendor Conditions 2 & 4) came to an end. [9] The Plaintiff Purchaser’s position is that it fully complied with the terms of the Agreement and that the rejection of the planswas arbitrary and done so without good faith. Furthermore the Vendor’s conditions should be read in conjunction with the DevelopmentGuidelines for the Leduc Business Park which had been attached to the Agreement.

The Plaintiff’s officer says that he doesn’t believethat the Defendant took reasonable steps to determine if the plans conformed with the Development Guidelines and the refusal of theDefendant to disclose the nature of correspondence exchanged regarding its application for sub-division and approval by the City ofLeduc supports its bad faith argument. Also, in support of its argument it is noted that the Purchaser’s conditions state that they areexpressly for its sole benefit but no similar provision is included in the Vendor’s conditions.

Discussion [10] The Vendor’s condition 3 provides that should the Vendor fail to provide approval, without more, the Agreement comes to anend. The requirement for the Vendor to take a positive step to keep the Agreement alive and communication of its satisfaction is vestedsolely in its hands. Despite the lack of express wording, it is plainly by operation of the Agreement, a condition for the sole benefit of theVendor. [11] The Development Guidelines are attached as page 18 of the Agreement following

Schedule “E” Agency Disclosure. Noreference is made to these Guidelines elsewhere in the Agreement. Compliance with these Guidelines would be necessary for thePurchaser to proceed with any development but to say that their attachment implies a restriction on the Vendor’s condition is too far areach. If the condition was merely compliance with those Guidelines it would have been very simple for it to be expressed specifically. [12] The final consideration is whether or not there is a requirement of good faith on the part of the Vendor.

The Agreement doesnot contain an express provision of good faith although the exercise of a good faith requirement within a contractual relationship by bothsides must be assumed. This is not a circumstance where the Vendor had an obligation to complete, for example, a subdivision like thecircumstances in Dynamic Transport Ltd. v. O.K. Detailing Ltd. (SCC), [1978] 2 S.C.R. 1072. The Agreement calledfor plans to be submitted by the Purchaser but required the Vendor to do nothing unless it wished to proceed with the transaction. Thereare no parameters or restrictions as to what basis it could decide not to respond.

On a plain reading the Vendor could be arbitrary as noexplanation or reasons were contemplated. The best position for the Purchaser would be for there to be an implied requirement to reviewthe plans submitted and only decline on the basis that there was something about the plans that was unsatisfactory to the Vendor. In myview this does not assist the Plaintiff in its case. The Vendor did respond and gave cogent reasons expressly referable to the proposeddevelopment. On questioning of the Defendant’s officer stated that the plans were reviewed and reasons for not proceeding restated.

ThePlaintiff speculates that the true motivation was the increase in value of the lands but provides no evidence of value from any point in

time. It also has a suspicion that the plans were only perfunctorily examined and the decision based on ulterior motives. Again, there is no evidence. It asks that the Court draw an adverse inference from the refusal to give an undertaking to provide information on the nature of correspondence exchanged by the Vendor or its agent with the City of Leduc with respect to a subdivision. A refusal is not evidence. If the nature of the correspondence would raise an issue then the Plaintiff ought to have applied to compel an answer. Decision [ 13 ] Rule 7.3(1)(

b) of the Alberta Rules of Court applies to this application. 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: . . . (

b) there is no merit to a claim or part of it; . . . [ 14 ] The Rule operates in the same manner and follows the same legal principles as Rule 159 of the immediately previous version of the Rules: Kwan v. Superfly Inc ., 2011 ABQB 343 . In general the test for

summary judgment is expressed in many ways, for example, the “ action is bound to fail ” or has “ no prospect for success ” . Giving the Agreement a plain and ordinary

interpretation in light of the material presented by the Defendant, I am satisfied its onus to show that there is no merit to the claim has been met. The materials filed and the argument made by the Plaintiff fails to adequately refute the Defendant ’ s evidence. Speculation and supposition as to what might be proved in the future are not sufficient to resist the application. [ 15 ] Accordingly the application of the Defendant is granted and the action is dismissed. Land Titles is directed to discharge the caveat and any attendant Lis Pendens . The Defendant shall have its costs of the action.

Heard on the 8 th day of November, 2010. Dated at the City of Edmonton, Alberta this 23 rd day of August, 2011. L. A. Smart M.C.C.Q.B.A. Appearances:

Appearances: Thomas Plupek Plupek Law Office for the Respondent/Plaintiff Brent Mielke Shtabsky & Tussman LLP for the Applicant/Defendant