Swan Group Inc. v. Bishop, 2011 ABQB 533

Court of Queen ’ s Bench of Alberta Citation: Swan Group Inc. v. Bishop, 2011 ABQB 533 Date: 20010831 Docket: 1001 10127 Registry: Calgary Between: The Swan Group Inc. Plaintiff Defendant by Counterclaim - and - Mark D. Bishop Defendant Plaintiff by Counterclaim _______________________________________________________ Reasons for Judgment of J.T. Prowse Q.C., Master in Chambers _______________________________________________________ Sale of Canmore condominium fails to close [ 1 ] The plaintiff Swan Group Inc. (“Swan”) entered into a written contract to construct and sell a condominium in Canmore, Alberta to the defendant Mark D. Bishop (“Bishop”). The sale did not close. Swan seeks a

summary judgment declaring that it can keep Bishop’s deposit and that Bishop is responsible for any further damages. Bishop counters with a

summary judgment application for the return of his deposit.

Onus of proof where

summary judgment is based on the

interpretation of a contract [2] The nature of the onus to be met in a situation of

summary judgment involving contractual

interpretation is dealt with by theAlberta Court of Appeal in Tottrup v. Clearwater [2006]A.J. No. 1532, 2006 ABCA 380; 68 Alta. L.R. (4th) 237; 401 A.R. 88; 2006CarswellAlta 1627, where the court first dealt with the usual onus of "plain and obvious" or "beyond real doubt" before continuing: There are however, other types of

summary judgment applications. In some cases the facts are clear and undisputed. The ultimateoutcome of the case may depend on the

interpretation of some statute or document, or on some other issue of law that arises fromundisputed facts. In such cases the test for

summary judgment is not whether the issue of law is ‘beyond doubt’, but whether the issue oflaw can fairly be decided on the record before the court. If the legal issue is unsettled or complex or intertwined with the facts, it issometimes necessary to have a full trial to provide a proper foundation for the decision. In other cases it is possible to decide the questionof law summarily ... [3] While Tottrup was decided under prior rule 159, I believe it is applicable to the present

summary judgment rule 7.3. [4] The relevant facts are clear and undisputed and adequately set out in the affidavits before this court. There is no need for a trial. I believe this dispute can be fairly decided on the record before the court. Is the requirement for registration of a condominium plan by September 30, 2008 a true condition precedent? [5] When the parties entered into the sale contract, a condominium plan had not yet been registered. The contract called forSwan to register a condominium plan on or before September 30, 2008.

Swan failed to do so. [6] Bishop says Swan’s registration of a condominium plan by September 30, 2008 was a true condition precedent. If so, thenthe purchase contract became null and void upon Swan’s failure to fulfill this obligation: see Zhilka v. Turney (SCC),[1959] S.C.R.578, 18 D.L.R. (2d) 447, 1959 CarswellOnt 81, and Kempling v. Hearthstone Manor Corp., 1996 ABCA 254 , 41 Alta. L.R. (3d) 169, 137 D.L.R. (4th) 12, 184 A.R. 321, 1996 CarswellAlta 611 (Alta.C.A.).

Hence, says Bishop, he is entitled to thereturn of his deposit. [7] Swan says that the registration of the condominium plan was not a true condition precedent, or, even if it was, then it waswaived by the parties. If Swan is correct then it is entitled to retain Bishop’s deposit, and Bishop is liable for any additional damagessuffered by Swan. The wording of the clause dealing with Swan’s registration of a condominium plan [8] The following clause is contained in the purchase contract, under the heading “Developer’s Condition”: This offer is subject to the following Developer’s Condition: (

a) the Developer shall register the Phased Condominium Plan creating theunits shown on

Schedule 1 on or before Sept. 30, 2008. Contrasting the clause in question with a standard condition precedent clause [9] The sparseness of the clause in question can be appreciated by comparing it to a standard clause contained in the “ResidentialReal Estate Purchase Contract”approved by the Alberta Real Estate Association. The form approved by AREA begins by leaving blankswhere one can insert “Buyer’s Conditions” and “Seller’s Conditions” followed by the following provisions:

- Unless otherwise agreed in writing, the Buyer’s Conditions are for the full sole benefit of the Buyer and the Seller’s Conditions are for the sole benefit of the Seller. The Buyer and Seller must use reasonable efforts to satisfy their respective Conditions. - The Buyer and the Seller may unilaterally waive or acknowledge satisfaction of their Conditions by giving written notice to the other party on or before the stated Condition Day. If that notice is not given, then this Contract is ended immediately following that Condition Day.

Contrasting the clause in question with a clause in the recent Leasing Group decision [ 10 ] A recent decision of the Alberta Court of Appeal, Leasing Group Inc. v.

Prospect Developments , 2011 ABCA 83 , 2 R.P.R. (5 th ) 6, 2011 CarswellAlta 379, found that a condition precedent had been created by the following words: The Purchaser hereby acknowledges and agrees that the Unit is contained within the title to Units 3 and 4 ... and that registration of the Re-division Plan at the Land Titles Office (“Condominium Approval”) must be obtained to create a title to the Unit from the title to the said Bare Land Condominium Plan.

Accordingly, the developer and the Purchaser hereby agree that their respective obligations to sell and purchase the Unit is conditional upon Condominium Approval being obtained on or before January 31, 2009 (The “Condominium Condition Date”), failing which this agreement shall be null and void and the deposits shall be returned to the Purchaser... Does the wording of the clause in question indicate a true condition precedent? [ 11 ] Here are some observations regarding the clause contained in the Swan-Bishop contract which tend to support the view that the clause is not a true condition precedent: (

a) the clause does not indicate the consequence of Swan failing to register a condominium plan on or before September 30, 2008. It does not say that failure to register the plan by that date results in the contract being “null and void” or “ended”. (

b) the clause is worded as an obligation of Swan, not as a result flowing from a decision by a third party. The clause does not say that the contract is conditional on registration of the condominium plan by the Registrar of Land Titles. It merely states that Swan will register a plan by September 30, 2008. (

c) other provisions in the contract do not indicate that there is a critical time

schedule which must be adhered to. For instance, the contract has no fixed or even estimated date for completion of construction, granting of possession or conveying title. [ 12 ] Advocating the opposite (that the clause is a true condition precedent) Bishop argues: (

d) the wording of offer as being “subject to” registration of the condominium plan indicates that it is a true condition precedent. (

e) the reference to the clause being a “developer’s”condition (in this case Swan’s condition) infers that it is a true condition precedent, which must be waived by Swan prior to September 30, 2008 (which waiver did not occur). Labelling a condition as either a vendor’s condition or a purchaser’s condition is common when dealing with a true condition precedent. (

f) it is commercially logical to interpret the clause as a true condition precedent because that would protect Swan from the (albeit unlikely) eventuality that it might not be able to satisfy the registration requirements at Land Titles. Indeed, for what it is worth, the affidavit of Swan’s officer, Vincent Liu, confirms that Swan viewed the clause as allowing Swan to walk away from the purchase contract “in the event that Swan was unable to proceed to construct [the building containing the unit], or was unable to register the

Condominium Plan by the specified date”. (

g) if the clause is simply confirmatory of Swan’s obligation to convey title on closing, why would the clause call for Swan to have registered a condominium plan on or before September 30, 2008, rather than on or before the closing date? [ 13 ] In my view, the arguments set out as (a), (

b) and (

c) above are more persuasive than arguments (

d) through (g). My conclusion is that the clause in question was not intended to be a true condition precedent. Consequently, Swan’s failure to register a condominium plan on or before September 30, 2008 did not void the contract. Viewing the clause as a simple condition or warranty [ 14 ] I conclude that the clause in question was at best a condition, rather than a warranty.

The difference between the two has been described as follows: Traditionally, in English law, the terms of a contract have been classified as being either conditions or warranties , the difference between them being that any breach of a condition entitles the innocent party, if he so chooses, to treat himself as discharged from further performance under the contract, and in any event to claim damages for loss sustained by the breach.

A breach of warranty, on the other hand, does not entitle him to treat himself as discharged, but to claim damages only. ( Chitty on Contracts , 23 rd ed., para 787). [ 15 ] Bishop became aware, prior to closing, that Swan had not registered the condominium plan by September 30, 2008, but Bishop did not elect to treat himself as discharged from the contract. Instead, when ultimately notified by Swan of the proposed closing date, Bishop replied by seeking and obtaining an extension of the proposed closing date.

Therefore, even if the clause in question is a simple condition, rather than a true condition precedent, Bishop is not discharged from his obligation to close the purchase. Conclusion [ 16 ] In my view, the purchase contract was valid and subsisting when Bishop refused to close the purchase in late November of 2009. Swan is entitled to retain Bishop’s deposit and to recoup any additional damages suffered as a result of Bishop’s failure to close.

The parties can approach the court for directions on how to have those additional damages assessed. [ 17 ] If the parties cannot agree on costs, they can approach me for a ruling in that regard. Heard on the 8 th day of August, 2011 and the 29 th day of August, 2011. Dated at the City of Calgary, Alberta this 31 st day of August, 2011.

J.T. Prowse, Q.C. M.C.C.Q.B.A. Appearances: Trevor R. McDonald Burnet, Duckworth & Palmer LLP for the Plaintiff (Defendant by Counterclaim) James Early Parlee McLaws LLP for the Defendant (Plaintiff by Counterclaim)