1098872 Alberta Ltd. Plaintiff - v. -, 2011 ABQB 606

Court of Queen ’ s Bench of Alberta Citation: 1098872 Alberta Ltd. v. Phoenix Land Ventures Ltd., 2011 ABQB 606 Date: 20111003 Docket: 0903 03339 Registry: Edmonton Between: 1098872 Alberta Ltd. Plaintiff - and - Phoenix Land Ventures Ltd. and FIC Investments USA Corp. Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Brian R. Burrows _______________________________________________________ [ 1 ] FIC Investments USA Corp. appeals from the dismissal by Master Smart of its application to open up the noting in default filed against it in this action.

The issue is whether FIC has satisfied the requirement that it show that it has a meritorious defence to the action. Master Smart held that it had not. [ 2 ] The action concerns the purchase and sale of a parcel of land in Devon, Alberta. On March 23, 2007, 1098872 agreed to sell the land to Phoenix Land Ventures Ltd. On the same day, Phoenix Land Ventures Ltd. agreed to sell the land to FIC.

The closing of both transactions was September 1, 2007. [ 3 ] The agreement between 1098872 and Phoenix contemplated that a significant portion of the consideration would not become payable until after the closing date. 1098872 therefore registered a caveat against the title protecting its vendor ’ s lien for the unpaid

portion of the sale price. [ 4 ] The Transfer of Land which 1098872 provided prior to the closing date was blank as to the transferee. 1098872 permitted Phoenix, as intervening purchaser, to fill in the transferee as it saw fit. It filled in FIC. The land was conveyed from 1098872 to FIC subject to 1098872's caveat. [ 5 ] In March 2009, not having received the delayed portion of the sale price in accordance with the terms of the agreement, 1098872 commenced this action to enforce its vendor ’ s lien.

Though served, FIC did not defend within the period permitted for defence. 1098872 noted FIC in default. [ 6 ] On February 7, 2011, 1098872 filed an application for a order for sale of the land to recover the unpaid vendor ’ s lien. On March 7, 2011, FIC filed an application for an order permitting it to defend the action despite its default. [ 7 ] Both applications were heard by Master Smart on April 19, 2011. He dismissed FIC ’ s application for leave to defend the action and granted 1098872's application for a judicial sale of the land to enforce the unpaid vendor ’ s lien.

The order has been stayed pending this appeal. [ 8 ] Master Smart was satisfied with FIC ’ s explanation as to why it had not filed a defence during the period allowed to it for doing so. He was also satisfied that FIC had not inordinately delayed its application to set aside the noting in default.

However, he was not satisfied that the materials disclosed a meritorious defence, that is, a triable issue of fact or law. [ 9 ] FIC submitted that 1098872 had misrepresented the condition of the land and that it was therefore liable in tort to FIC and that this provided FIC with a meritorious defence to 1098872's claim. [ 10 ] In making that submission FIC relied on a provision in the contract between 1098872 and Phoenix in which 1098872 represented to Phoenix that, “ to the best of its knowledge, the Vendor is not aware of any environmental issues affecting the lands ” .

A representation in exactly the same form was made by Phoenix to FIC in the contract between those two parties. [ 11 ] The materials indicate that prior to entering the agreement to purchase the land from 1098872, Phoenix retained an engineering firm to perform an environmental assessment on the land. The resulting report, addressed to Phoenix, is dated March 15, 2007, 8 days before the date of the two land sale contracts.

The report indicated that there had once been an underground gas storage tank on the land, that there could be contamination, and that further investigation should be done to determine whether or not there was contamination. [ 12 ] Phoenix retained the engineering firm to do the follow-up investigation it had recommended. On July 26, 2007, the engineering firm reported to Phoenix that the land had been adversely impacted by hydrocarbons.

The firm recommended that the site be remediated. [ 13 ] The same engineering firm performed remediation work and on October 23, 2007 reported to Phoenix that no further remediation would be required “ until the site undergoes redevelopment at which time we recommend that the building and the remaining contaminated soil under should be removed ” . [ 14 ] Master Smart held that there could be no duty owed by 1098872 to FIC. The representation it made in the contract between it and Phoenix was made to Phoenix not FIC. There was no privity of contract between 1098872 and FIC.

There could be no duty. [ 15 ] FIC submits on this appeal that 1098872 owed it a duty in tort, not in contract. It submits that as transferor in a conveyance of land to FIC, albeit a skip transfer, 1098872 was in a relationship of sufficient proximity to FIC that it owed FIC a duty of care. Further, it

submits that it was reasonably foreseeable that FIC would rely on 1098872's representation concerning the absence of any environmental issues concerning the land. It submits that 1098872 breached its duty of care by negligently making a false representation that 1098872 knew or should have known FIC would rely on, it particular that 1098872 had no knowledge of any environmental issues concerning the land.

FIC submits that the existence of this cause of action in its favour against 1098872 provides it with a defence to 1098872's claim. [ 16 ] In my view, the materials on this application do not show that 1098872 had knowledge of environmental issues affecting the land or that 1098872 made any false representation to anyone including FIC. Assuming, without deciding, that 1098872 owed a tort duty of care to FIC, FIC has not shown that 1098872 breached that duty.

FIC ’ s theory of a defence to 1098872's claim fails. [ 17 ] The only representation by 1098872 concerning environmental issues was the representation it made to Phoenix in its contract with Phoenix entered on March 23, 2007. That representation was, “ to the best of its knowledge, the Vendor is not aware of any environmental issues affecting the lands ” . It was a representation about the state of 1098872's knowledge.

Clearly, it was not a representation that there were no environmental issues affecting the land [ 18 ] The evidence establishes that by March 23, 2007, the Phase 1 environmental study commissioned by Phoenix had been completed. The report issued to Phoenix on March 15, 2007 indicated there was a possible environmental concern because at one time there was an underground gas storage tank on the property. [ 19 ] There is no evidence that 1098872 knew of this report when it made representation to Phoenix in the March 23, 2007 contract.

There is no evidence that 1098872's representation was false or negligent. [ 20 ] The affidavit of the officer of FIC filed in support of this application contains paragraphs (in particular paragraphs 29 and 32) which are identical to paragraphs (paragraphs 28 and 31) contained in an earlier affidavit of another officer of FIC filed in FIC ’ s application for leave to defend (opening up a noting in default) an action brought against it by Phoenix (Action 0903 10462). In those paragraphs the deponents swear that “ the Plaintiff ” was aware of the engineer ’ s Phase II and Phase III environmental reports.

Both deponents swear that “ the Plaintiff ” attempted to partially remediate the lands. While these statements are supported by documentary evidence in the case of the Plaintiff, Phoenix in Action 0903 10462, there is no support for the statements so far as they relate to the Plaintiff in this action. [ 21 ] It seems very unlikely to me that the statements copied from the earlier affidavit can be accurate as to the knowledge and actions of 1098872. In particular the affidavit suggests that 1098872 carried out the remediation work after it no longer held title to the land.

T he documentary evidence indicates that Phoenix carried out the work. Phoenix had an ongoing relationship with FIC. The evidence of the FIC officer in this application as regards 1098872's knowledge appears to be unreliable. [ 22 ] In any event, there is no evidence, even in that affidavit, that 1098872 had knowledge of an environmental issue when it made the representation it made to Phoenix on March 23, 2007. There is evidence that Phoenix had knowledge of an environmental issue at that point.

Indeed, Phoenix commissioned the environmental assessment of the land pursuant to an agreement with FIC that it would do so at FIC ’ s expense. Clearly FIC was alive to the need to make diligent inquiry in this regard and had set out to do so. If all other elements of the cause of action which FIC seeks to raise as a defence were present, which they are not, there would be significant doubt about the element of reliance. [ 23 ] The materials do not disclose a meritorious defence. I agree with Master Smart ’ s decision. The appeal is dismissed with costs. Heard on the 20 th day of July 2011.

Dated at the City of Edmonton, Alberta this 3 rd day of October 2011.

Brian R. Burrows J.C.Q.B.A. Appearances: John. H. Wilson, Q.C. for the Plaintiff Kenneth W. Fitz for the Defendant FIC Investments USA Corp. The Defendant Phoenix Land Ventures Ltd. did not participate in the application.