Neher v. Marathon Homes Inc., 2011 ABQB 92

Court of Queen ’ s Bench of Alberta Citation: Neher v. Marathon Homes Inc., 2011 ABQB 92 Date: 20110217 Docket: 0703 06882 Registry: Edmonton Between: Sharon Neher and Jade Neher Plaintiffs (Defendants by Counterclaim) - and - Marathon Homes Inc. Defendant (Plaintiff by Counterclaim) _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Don J. Manderscheid _______________________________________________________ I.

Introduction [ 1 ] In 2006, the Plaintiffs, Jade and Sharon Neher (the “Nehers”) and the Defendant, Marathon Homes Inc. (“Marathon”) entered into an agreement for the construction and sale of a single family residence on lands located in a rural subdivision west of the City of Edmonton near Spruce Grove. While a house was constructed, it was not the exact house specified in the agreement. The Nehers sued for either specific performance or damages.

[ 2 ] The Nehers submit that the Defendant breached the agreement to take advantage of an increase in market value. They allege the Defendant intended to sell the house it built to an alternative customer for a higher price than what Marathon would have received under the construction and sale agreement. [ 3 ] Marathon alleges that it was entitled to terminate the purchase contract as an instalment payment was not made on time.

It counterclaims for damages arising from its inability to freely deal with the property as a result of the Caveat and Certificate of Lis Pendens that the Plaintiffs registered against Marathon’s title to the property to preserve the Plaintiffs’ interest under the purchase contract. II. Background [ 4 ] The parties have filed an agreed statement of facts. In addition to those agreed facts are other facts that emerged during the trial. The facts are as follows: 1. The Nehers are a married couple who formerly resided in Edmonton and who now live in Halifax, Nova Scotia.

Marathon is an Alberta residential home contractor corporation. Its president and sole shareholder is Joedy Barber (“Barber”). 2. On September 13, 2006, the Nehers and Marathon entered into a written agreement (the “Purchase Agreement”) whereby the Nehers would pay Marathon $499,528.30 plus GST, or $529,500 (the “Purchase Price”), to construct a single family residence (the “Residence”), according to the Nehers’ specifications on land (the “Land”) Marathon owned in the Century Estates subdivision near Spruce Grove.

Upon completion, title to the Land including the Residence (the “Property”) was to be transferred to the Nehers. 3. The Purchase Agreement included a draw

schedule under which the Neher’s would make payments to Marathon. This

schedule (the “Original Draw Schedule”) was proposed by Barber and included four payments: a. $20,000 deposit, b. $100,000 “on completion and inspection of foundation”, c. $100,000 “on completion and inspection of framing (lock up)”, and d. $309,500 “on completion and possession” of the Residence. 4. The parties were aware of the Nehers’ plan to build a shop (the “Shop”) on the Land. However, because discussions on the Shop were still at a preliminary stage, the Purchase Agreement did not include construction of the Shop. 5.

The Nehers paid a $20,000 deposit toward the Purchase Price on September 13, 2006 as required by the Purchase Agreement. 6. Shortly thereafter, the Nehers approved plans for the Residence drawn up by Marathon and, on September 25, 2006, removed all conditions on the purchase, including a financing condition. 7. Within a few days of conditions being lifted, the Nehers met again with Barber. They advised Barber that their bank, TD Canada

Trust (“TD Bank”), had indicated it would only approve financing with a different draw schedule, which the bank called a “conventional draw schedule”. That

schedule (the “Revised Draw Schedule”) included three payments in addition to the deposit that had already been provided: a. 35% upon lock-up and electrical and plumbing complete, b. an additional 30% upon taping and sanding of drywall, with basement floor and heating complete, and c. the remainder of the Purchase Price upon substantial completion and possession. 8. The parties did not document any revisions to the Purchase Agreement in writing. Both sides agreed that a revised Purchase Agreement would be prepared in writing when the Shop’s construction and cost details were finalized.

The parties agree their intention was to re-write the Purchase Agreement to include the Shop and any other changes. 9. Marathon then began construction of the Residence in October of 2006. 10. Marathon prepared plans for the Shop through the fall and winter of 2006, and presented the plans and a price estimate to the Nehers on December 19, 2006. The price estimate was more than had been originally discussed and was not acceptable to the Nehers. The Nehers responded to the proposal by fax and indicated they now only wanted Marathon to complete some parts of the Shop project.

Ultimately, the parties were unable to reach any final agreement with respect to the Shop, however, Marathon did do some preliminary work on the Shop, such as staking it out. 11. Over the course of construction, the parties met several times at the building site or a nearby building site to discuss various matters which related to the Residence. Jade Neher estimates there was a total of about 10 meetings from the time the Purchase Agreement was signed until the Purchase Agreement was purportedly terminated on February 27, 2007. Barber does not dispute this number.

Some meetings were scheduled for specific reasons; others were casual meetings. It is clear that the parties met a number of times, however, nothing turns on the exact number of meetings. 12. On November 3, 2006, the concrete walls of the basement of the Residence had been completed, weeping tile and damp proofing was installed, and footings for teleposts on the basement floor were poured.

At that point elements of the foundation and basement remained incomplete, including: a. piles for the garage, deck and porch; b. the floor joist for the first floor; c. backfilling of basement walls; d. plumbing rough-ins on the basement floor; e. concrete slabs for either the basement or the garage; f. installation of the furnace and hot water tank; and

g. stairs to the basement. 13. The Nehers were not informed by Marathon or Barber that the foundation was complete. They were not asked for, nor did they provide, any further instalment payments other than the initial $20,000 deposit. 14. On or about January 5, 2007, the Nehers met with Barber at the Property. According to Sharon Neher, this was a routine visit to discuss the windows going into the house. At some point in the conversation, the Nehers raised some financing issues that had been brought up by the TD Bank.

The Nehers described the issue as a “glitch” related to TD Bank’s realization that the house in which the Plaintiffs lived was not currently on the market. According to the Nehers, TD Bank suggested some alternatives, including their builder guarantee the sale of the Plaintiffs’ existing home. The Nehers passed these alternatives on to Barber. The Nehers say that at no time did they understand from TD Bank that their financing was in trouble and they were surprised when Barber expressed some interest in TD Bank’s suggestion of a builder guarantee. 15. Barber’s testimony was different.

He says he took this discussion to mean that the Nehers’ financing was in trouble. This concerned him. However, it does not appear that he shared his concern with the Nehers. 16. The Nehers testified that they did not ask for any action on Barber’s part during the January 5, 2007 meeting. Barber does not dispute that. Specifically, he testified that the conversation was left with the Nehers saying they had another option. There were no further discussions in relation to financing as TD Bank resolved the issue internally a week later, and the Nehers notified Barber of that fact.

That said, at trial Barber testified that such news did not resolve his concerns. 17. Barber and Sharon Neher met again on January 21, 2007. Barber testified that payment timing was discussed, and he expressed his concern with the TD Bank definition of “lock-up”. He was concerned that would change when the first payment under the Revised Draw

Schedule was due. Sharon Neher testified that she had no particular memory of the meeting, but does not dispute that it happened. She testified that she was not aware that Barber had any concerns regarding the draw schedule. At trial, Barber admitted that he did not ask for any payment at this meeting. He says this was because he was “frustrated” over the prospect of a delay in his expected payments. 18. On February 27, 2007, the parties met at the Property.

During that meeting, Barber handed the Nehers documents purporting to terminate the Purchase Agreement on the basis that the Plaintiffs had not met the payment schedule. Barber demanding payment of the whole Purchase Price. At this meeting Sharon Neher asked if they would get their deposit back. Barber’s reply was yes. She then asked if they would get interest on their deposit; Barber said he would think about it. 19. The Nehers testified that at the meeting Barber said he could not afford to complete construction of the Residence at the contracted price, but was willing to complete at a higher price.

The Neher’s rejected that proposition and said they felt they could not work with Barber again. 20. According to the Nehers, when they drove by the Property several days later, they noticed a “For Sale” sign on the Property. 21. Following the February 27, 2007 meeting, Barber returned the Nehers’ deposit by cheque. The Nehers did not cash the cheque because it was accompanied by a letter which stated that cashing the cheque would constitute acceptance of the termination of the Purchase Agreement. As at the date of trial, the deposit remains in Marathon’s possession. 22.

The Nehers consulted a lawyer after these events. On or about March 6, 2007, the Nehers filed a Caveat (the “Caveat”), forbidding registration against title to the Land, and a Certificate of Lis Pendens (the “Certificate of Lis Pendens”) against title to the Land at the Land Titles Office. 23. In a letter dated March 6, 2007, the Plaintiffs offered to complete the Purchase Agreement, even under the Original Draw Schedule. The Defendant rejected that proposal by letter dated March 12, 2007, saying that the Plaintiffs were in breach of the Purchase Agreement.

24. In a letter dated November 26, 2008, the Plaintiffs proposed to remove the Caveat to facilitate a sale of the Property, provided the proceeds of that sale were paid into trust. The Defendant also rejected this proposal. III. Issues [ 5 ] This matter has three principle issues: a. Was Marathon’s termination of the Purchase Agreement illegal? b. If Marathon illegally terminated the Purchase Agreement, what is the Nehers’ remedy, and how should that remedy be assessed? c. Is Marathon entitled to damages as the Nehers wrongfully registered the Caveat and Certificate of Lis Pendens against the title to the Land?

If so, what are Marathon’s damages? IV. Analysis [ 6 ] The burden of proof in a civil case is proof on a balance of probabilities: F.H. v. McDougall , 2008 SCC 53 , [2008] 3 S.C.R. 41 at para. 49 . a. Was Marathon’s termination of the Purchase Agreement illegal? [ 7 ] The Plaintiffs argue that Marathon did not have grounds to terminate the Purchase Agreement. Further, they argue that termination was without warning or prior notice, and that the Defendant’s motive to terminate was to exploit a dramatic rise in house prices. [ 8 ] The Plaintiffs argue three alternative basis for wrongful termination: 1.

The Revised Draw

Schedule applied, and the Plaintiffs were not in default under that schedule; 2. The Original Draw

Schedule applied, and the Plaintiffs were not in default under that schedule; and 3. Even if the Original Draw

Schedule applied and the Plaintiffs were in default under that schedule, an implied term in the Purchase Agreement required Marathon to provide notice when a payment was due. [ 9 ] Marathon argues that it was entitled to rely on the Original Draw Schedule. It argues the parties failed to come to a meeting of the minds on the Revised Draw

Schedule and therefore the Purchase Agreement was not amended to incorporate the Revised Draw Schedule.

[10] Alternatively, Marathon suggests that even if the parties agreed to the Revised Draw Schedule, the Statute of Frauds, 1677(29 Car.2) c. 3, makes that amendment to the Purchase Agreement unenforceable. Thus, the Original Draw

Schedule applies. Marathonthen argues that under the Original Draw Schedule, a payment came due when the foundation was completed on November 3, 2006, andthe Plaintiffs failed to make that payment within a reasonable time. Marathon submits that means the Plaintiffs repudiated the PurchaseAgreement before Marathon terminated the Purchase Agreement on February 27, 2007. 1. Which draw

schedule applied? [11] A contract requires that all parties agree to the terms of that contract. This consensus is traditionally described as the partieshaving “a meeting of the minds”. Whether any such meeting occurred is evaluated from the point of view of the “objective reasonablebystander”: Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co., 2003 ABCA 221, 330 A.R. 353 at para. 8. Evaluation ofconsensus is clearly an objective test: Saint John Tugboat Co. v.

Irving Refinery Ltd., (SCC), [1964] S.C.R. 614 at621. [12] There is no dispute the parties initially agreed to a payment scheme that followed the Original Draw Schedule. The writtenand signed Purchase Agreement provides evidence of that. The question is whether they later agreed to replace the Original DrawSchedule with the Revised Draw

Schedule or another payment scheme. [13] The evidence clearly indicates the Nehers and Barber discussed the need to shift the payment arrangement to the RevisedDraw Schedule. Sharon Neher telephoned Barber and asked for a meeting to revise the draw schedule. She outlined the changes requiredby the TD Bank. During or shortly after the phone call, Barber duly noted the details of the Revised Draw

Schedule down as “35Locking 65 Taping 97 Completion” in his notebook. He admitted in cross-examination that he told Sharon Neher on the telephone thatthe changes “should be no problem.” [14] The parties met on September 30, 2006 to discuss the draw schedule. Jade and Sharon Neher both testified as to their memoryof that meeting. They report Barber was receptive to the changes to the Revised Draw Schedule. Barber wrote down the details of thedraw

schedule in his notebook. He also told them that the Revised Draw

Schedule would provide an incentive for him to work faster,because it provided him with more money prior to transfer of title than the Original Draw Schedule. Both Nehers said while there mayhave been discussion about the draw schedule, it was clear to them from the meeting that Barber ultimately accepted the draw schedulewhich was required by the TD Bank. [15] The Nehers testified that the percentages were based on the value of the Residence without the Land. Because the value of theLand was only estimated at that point – at $130,000 – the dollar amounts corresponding to the percentages were also estimated.

SharonNeher testified that the dollar estimates provided by the TD Bank were $135,000 at the first draw of 35%, $119,000 at the second drawof another 30%, and the remainder at completion. The Plaintiffs said these amounts made sense to them because title to the Propertywould not be transferred prior to completion. [16] Barber’s description of the meeting was somewhat different.

He admits that while he was receptive to the Revised DrawSchedule, he also requested an additional instalment of $40,000 upon completion of the foundation and that all parties agreed to thisadditional instalment. [17] According to Barber, his understanding was that the percentages were based on the full Purchase Price of the Property, that is,Residence and Land and GST. [18] There is limited documentary evidence from this meeting. During the meeting, Barber recorded some information in hisnotebook: 35 first draw lockup 135 65 taped 119

40 foundation 135 Lock up 30 Taping Balance at Completion Re/Write - when shop confirmed [ 19 ] Barber testified that the upper figures referred to the draw

schedule requested by the Nehers. That is, 35% would be payable upon the lockup stage, and 65% would be payable upon the taping stage. He explained the “65” was the percentage sum of the first two payments: 35% for the first draw, 30% for the second. The figures of “135” and “119” referred to the dollar amounts in thousands represented by the percentages. That is, 35% of the price payable would be about $135,000 and there would be another $119,000 payable to bring the instalments to 65% upon completing of the taping stage. [ 20 ] Barber testified that the lower figures represented the draw

schedule actually agreed to. That is, he says the parties agreed to $40,000 upon foundation completion, $135,000 upon lock-up, another 30% upon taping, and the balance at completion. In addition, the Purchase Agreement would be rewritten when the plans and pricing for the Shop were approved. [ 21 ] I found the Nehers to be credible and reliable. Their testimony was clear and consistent throughout. [ 22 ] I was not entirely satisfied by Barber’s testimony. At times, he appeared to contradict himself.

For example, at one point in his testimony he insisted that the parties came to an agreement that $40,000 would be payable upon foundation completion. However, on another occasion he stated that the parties did not come to any agreement during the September 30, 2006 meeting, and therefore the original contract was still in force. [ 23 ] In addition, Barber admitted that he never requested a payment of $40,000. He says the foundation was complete around November 3, 2006, and according to his alleged payment scheme he was due $40,000 at that point.

Similarly, he did not request that amount when the Purchase Agreement was (allegedly) terminated on February 27, 2007, or at any other time. [ 24 ] Other entries in his notebook suggest other schemes. One entry, made sometime in the fall of 2006, had $100,000 with a question mark beside it, and referred to an amount due upon completion of the foundation. [ 25 ] Barber’s

interpretation of events also defies common sense. He says the Revised Draw

Schedule percentages are based on the full Purchase Price of the Property ($529,500) and not just the price of the Residence (around $400,000). That does not align with his explanation of the September 30, 2006 notes, as the values there (35%, $135,000; 30%, $119,000) derive from a total purchase amount of about $400,000 and not $529,500. [ 26 ] Barber’s testimony is also contradicted by evidence that the Original Draw

Schedule required two draws of $100,000 and that equated to Marathon receiving 50% of the approximately $400,000 construction price of the Residence prior to completion. Later, in cross-examination, he admitted that he “never did the math” because “it wasn’t really relevant to [him] at that time.” [ 27 ] Bluntly, I find it difficult to understand how any businessman, let alone a residential building contractor, would be so nonchalant when the question of payment quantum and timing is in play. [ 28 ] As stated in St.

John’s Tugboat at 621, the test of the objective reasonable bystander is a question of “the intention which the law will attribute to a man is always that which his conduct bears when reasonably construed, and not that which was present in his own mind.” On a balance of probabilities, I find that the conduct of the parties show that they did come to a meeting of the minds to accept the Revised Draw

Schedule as an amendment to their Purchase Agreement.

[ 29 ] Marathon argued that any amendment to the draw

schedule was unenforceable under the Statute of Frauds and the parol evidence rule. The former states that matters dealing with land must be evidenced in writing, while the parol evidence rule states that evidence which contradicts the terms of the written agreement is inadmissible.

The Defendant later conceded that the parol evidence rule barring admission of extrinsic evidence contrary to a written contract does not apply to subsequent oral amendments to a written contract: Triple ‘R’ Contracting Ltd. v. 384848 Alberta , 2001 ABQB 52 , 282 A.R. 1 at paras. 25-25 . [ 30 ] As a result, I would adopt the reasoning of Phillips J. in Triple ‘R’ Contracting , at para. 21: . . . I appreciate that written contracts must be treated with respect.

However, when, as here, the subsequent conduct of the contracting parties points to the conclusion that they do not consider themselves to be governed by the Contract’s terms and instead developed an alternative arrangement established on clear evidence, it is unreasonable to impose the written Contract on the relationship. . . . [ 31 ] Marathon further argued that the amendment purported to alter an essential term of the Purchase Agreement, being the price. I disagree. The Purchase Price under the Purchase Agreement was $529,500.

That never changed. [ 32 ] In addition, I agree with the Plaintiffs that the amendment in question, which solely addresses dates and quantum of payments, does not deal with land, but merely with timing of payments. In Stochinsky v. Chetner , 2003 ABCA 226 , 330 A.R. 309 at paras. 24-26 , the Alberta Court of Appeal said that the timing of payments may be a non-essential term and fall outside the subject matter of the Statute of Frauds .

In Stochinsky at para. 26 , the Court held that changing the number and timing of payments within a single year was not an essential term, whereas deferring all of the payments for five years was an essential term. I find the facts of this case more closely correlate to the former rather than the latter alternative. I therefore conclude that documentary evidence of the revision to the payment

schedule is not required. [ 33 ] I conclude that following the September 30, 2006 the parties had agreed to make payments following the Revised Draw Schedule, and that no further changes were made to that payment scheme. 2. Did the Nehers breach the Purchase Agreement by missing a payment under the applicable draw schedule? [ 34 ] Under the Revised Draw Schedule, the first payment was due upon “Lock-up.” There was some dispute between the parties as to exactly what “Lock-up” entailed.

However, regardless of the exact definition of “Lock-up,” it is clear that the stage was not reached before Marathon “terminated” the Purchase Agreement. Therefore, the Nehers did not breach any payment requirement under the Revised Draw Schedule. [ 35 ] As a consequence I find that the Nehers neither repudiated nor breached the Purchase Agreement.

When Marathon “terminated” the Purchase Agreement on February 27, 2007 it illegally withdrew from a valid contract. [ 36 ] I note that even if I am incorrect, and the Purchase Agreement had not been amended to require the Nehers make payments following the Revised Draw Schedule, I would still conclude that the Nehers did not miss a payment under the Original Draw Schedule. That scheme required payment “on completion and inspection of foundation”. [ 37 ] As of February 27, 2007, there were still components missing from the foundation work, notably the piles and grade beam for the garage as well as other items.

The expert evidence presented by both sides is consistent that these form part of a foundation. The Original Draw

Schedule required payment upon “inspection and completion.” “Inspection” may have been satisfied when a foundation inspector from the County of Parkland approved the foundation work in November of 2006, but even so the foundation was not “completed”. 3. Was it an implied term of the Purchase Agreement that Marathon would give notice that a payment was due?

[ 38 ] Given my previous conclusion it is not necessary for me to address whether there was an implied term that Marathon would give notice when a payment was due under the appropriate draw schedule. That said, I have no doubt that Marathon had an obligation to first ask for payment before it declared the Nehers had breached their obligations. [ 39 ] The Plaintiffs argue that even if a building target had been reached that would trigger a payment, the Plaintiffs were entitled to notice of that fact. That never occurred. [ 40 ] Marathon argues that no notice was required when a payment was due.

Alternatively, it argues that the Nehers received constructive notice. [ 41 ] A contract must be interpreted in accordance with sound commercial principles and good business sense, and to avoid commercial absurdity: Ventas, Inc. v. Sunrise Senior Living Real Estate , 2007 ONCA 205 , 85 O.R. (3d) 254 at para. 24 . [ 42 ] Here, Marathon brought out an inspector to examine the foundation. Marathon neither informed the Nehers of the scheduled inspection, nor did it notify the Nehers that the foundation had passed inspection and that a bright green sticker was affixed to the foundation to signify that checkpoint.

Rather, Marathon relies on the existence of the bright green sticker, which was visible above the ground, to say that the Nehers knew that the foundation had passed inspection. It says that on at least one occasion, Jade Neher walked around the foundation and could have seen the sticker. [ 43 ] I reject Marathon’s argument as both absurd and not commercially reasonable. [ 44 ] At the time of construction, the Nehers had no specific construction knowledge above that of an average lay person. They testified they did not notice the green sticker.

Even if they had noticed it, they would not have understood that it meant the foundation had passed inspection, or that successful inspection meant the foundation was complete. Barber admits that he did not draw the Plaintiffs’ attention to the existence of the sticker or discuss it in any way. [ 45 ] A builder dealing with lay purchasers controls the timing of the work, schedules inspections of the work, and possesses all the required specialized knowledge of his or her trade. Often purchasers, as here, are not on site frequently and therefore rely on the builder to update them as to the status of the work.

The Defendant is advancing a scenario which is, bluntly, absurd. In effect it imputes to the purchaser expert understanding of the building process, its stages, and regulatory processes. But Marathon’s position goes further, and appears to even require the contracting parties be clairvoyant, able to know sight-unseen the moment a building construction checkpoint has been met, so they may in a timely manner provide the necessary payment. [ 46 ] Contractual relations often require communication, and here that communication was deficient.

This builder has no right to rely on its silence as a basis on which to allege its contractual partners had failed to adhere to the agreed bargain. The Plaintiffs said that conclusion allowed a builder to “lie in the weeds”. I agree. 4. Did Marathon illegally terminate the Purchase Agreement? [ 47 ] It is undisputed that Marathon purported to terminate the Purchase Agreement on February 27, 2007.

The question is whether Marathon was entitled to do so under the Purchase Agreement, or whether it did so without any legal basis. [ 48 ] Marathon relies on Clause 14 of the Purchase Agreement to say that it was entitled to terminate the Purchase Agreement, specifically that part of Clause 14 that says that the builder can terminate if the purchaser is in “default in payment of the Total Price or interest or any part of the payables.” The Plaintiffs dispute Marathon’s

interpretation of this clause. [ 49 ] Since I have concluded that no payment was ever potentially due under any of the various alleged payment schedules, I also

therefore conclude that the Plaintiffs never missed a payment. As a result, the Plaintiffs were not in default under Clause 14. Marathon was not entitled to terminate the Purchase Agreement. Marathon’s February 27, 2007 “termination” was therefore a unilateral refusal to perform its contractual obligations. Marathon breached the Purchase Agreement. The Nehers are entitled to a legal remedy. b.

If Marathon illegally terminated the Purchase Agreement, what is the Nehers’ remedy, and how should that remedy be assessed? [ 50 ] In the Statement of Claim, filed May 29, 2007, the Plaintiffs sought specific performance of the Purchase Agreement or damages in lieu of specific performance. [ 51 ] At trial, Plaintiffs’ counsel confirmed to the Court that the Plaintiffs have abandoned their claim for specific performance and now seek damages in lieu of specific performance.

The Plaintiffs suggest damages can be assessed at a number of points: 1. the date of the breach, on February 27, 2007, or 2. the date that specific performance was no longer available, either:

a) August 2007, when the home was substantially completed but not according to their specifications; or

b) September 2007, when the Nehers moved to Halifax, Nova Scotia for reasons unrelated to the their dispute with Marathon or the Property. [ 52 ] The Plaintiffs also seek $100,000 in punitive damages. The Nehers allege that the Defendant acted in a high-handed manner in an attempt to profit from a rising real estate market, and that misconduct is the basis for their punitive damage claim. [ 53 ] The Defendant does not dispute that damages rather than specific performance are the applicable remedy.

However, it argues that damages should be assessed based on “what the real loss is.” It says that the real loss in this case is minimal because the Plaintiffs had an existing home, which they were able to sell for considerable gains before they moved to Halifax in September 2007. It argues that had the Purchase Agreement been performed, the Plaintiffs would have had to sell their existing home before they could take possession of the Property. At most, their damages should reflect the increased value of only one home.

Marathon thus says that the Nehers would receive a windfall if they were awarded, in effect, the increased value of two different houses. [ 54 ] The Defendant also notes that the Nehers entered into the Purchase Agreement with the intention of making the house under construction their residence. They had no intention of re-selling that property for profit.

Counsel for the Defendant suggests that means there “weren’t any damages contemplated.” [ 55 ] Finally, the Defendant argues that if damages are assessed according to “the difference between the sale price and the appraised value of the land at the time of trial”, as stated in Royal West Homes v. Webster , 2010 ABQB 446 , 30 Alta L.R. (5 th ) 1 at para 154 , this Court should include GST in the sale price, but not in the appraised value of the Land because GST would not be charged on a re-sale home. 1.

What is the proper remedy, damages or specific performance? [ 56 ] Where breach of contract is proven, damages are usually awarded. As the Privy Council stated in Wertheim v. Chicoutimi Pulp Co. , [1911] A.C. 301 (H.L.) at p. 307, adopted in Fidler v. Sun Life Assurance Co. of Canada , 2006 SCC 30 , [2006] 2 S.C.R. 3 at para. 44 : “the party complaining should, so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed.”

[57] However, specific performance is also an available remedy for breach of contract, particularly where a contract involves thepurchase of land. This approach was explained by LaForest J. in Semelhago v. Paramadevan, (SCC), [1996] 2 S.C.R.415, 136 D.L.R. (4th) 1 at para. 14, . . . every piece of real estate was generally considered to be unique. Blackacre had no readily available equivalent.

Accordingly,damages were an inadequate remedy and the innocent purchaser was generally entitled to specific performance. [58] Semelhago relaxed the rule that the default remedy for a breach of contract pertaining to land was specific performance. Itrecognized that in the era of, . . . modern real estate development ... Residential, business and industrial properties are all mass produced much in the same way asother consumer products.

If a deal falls through for one property, another is frequently, though not always, readily available. [59] Following Semelhago, specific performance is no longer the usual remedy for breach of contracts dealing with land. Rather,specific performance is available only if a property is “unique”: para. 22. The test of whether a property is “unique” is not a question ofwhether a property is one of a kind, but rather whether “its substitute would not be readily available”: Semelhago, para. 22. Analternative restatement of that criterion is provided in John E.

Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003), (ON CA), 63 O.R. (3d) 304, 223 D.L.R. (4th) 541 (Ont. C.A.) at para. 39, leave to appeal denied [2003] S.C.C.A. No. 145, whether: ... the property in question has a quality that cannot be readily duplicated elsewhere. This quality should relate to the proposed use of theproperty and be a quality that makes it particularly suitable for the purpose for which it was intended. The appropriate point to evaluate ‘uniqueness’ is the time the innocent party is faced with the defaulting party’s repudiation of thecontract: Alberta New Home Warranty Program v.

Glenwood Homes Inc., 2009 ABQB 363, 467 A.R. 330, at paras. 13-14. [60] The party seeking specific performance has the onus to establish whether a property is unique: John E. Dodge Holdings atpara. 57. [61] The test of uniqueness is primarily subjective, from the point of view of the plaintiff: Electrohome Ltd. v. Gregg Properties, 2002 ABQB 1001, 11 R.P.R. (4th) 270 at para. 9. This is especially so for residential purchases, where profit is not the main motive:John E. Dodge, para. 59. [62] Here, the Plaintiffs contracted for a custom home on a lot they found after two years of searching.

After Marathon’stermination, the Plaintiffs searched for similar properties, but were unable to find anything that suited them. I would have no problemfinding that specific performance was appropriate except for one fact.

Jade Neher testified that almost immediately after the February 27,2007 termination, the Nehers drove by the Property and observed that construction was continuing, but not in a manner that they hadcontemplated in the Purchase Agreement. [63] As a result, I find that shortly after the February 27, 2007 termination, and before the Nehers had filed their Statement ofClaim, specific performance was not available because the Property was no longer “unique” in that it was no longer “particularlysuitable” for the Nehers’ needs. I find that the appropriate remedy is damages. 2.

At what point in time should damages be assessed? [64] As a general rule, the time for assessing damages is at the date of the breach: Semelhago, para. 13. As the Court stated:

The rationale for assessing the damages at the date of breach in the case of breach of contract for the sale of goods is that if the innocentpurchaser is compensated on the basis of the value of the goods as of the date of breach, the purchaser can turn around and purchaseidentical or equivalent goods. The purchaser is therefore placed in the same financial situation as if the contract had been kept. [65] However, courts are empowered to fix a date for assessing damages that is appropriate in the circumstances: Ansdell v. Crowther, (BC CA), [1984] 11 D.L.R. (4th) 614, 55 B.C.L.R. 216 (B.C.C.A.) at para. 21.

Damages in lieu of a claimfor specific performance can be assessed at a time when the claim for specific performance has been abandoned or is no longer practical:Pepper v. Lecoure (1990), 11 R.P.R. (2d) 235, 20 A.C.W.S. (3d) 1015 (Ont. Dist. Ct.) at 237. [66] In this case, I see no reason to depart from the general rule. Whether damages or specific performance was available at thedate of the breach, very shortly thereafter only damages were available.

As a result, I find damages should be assessed as of the date ofthe breach. [67] In so finding, I realize I am not following the judgment of Greckol J. in Royal West at para. 157 when she awarded damagesas of the date of the trial in a case involving a land purchase gone awry. In my opinion, the cases are distinguished on the facts. Bothcases involve damages for a plaintiff purchaser where the market had fallen between the time of the breach and the date of trial.

Unlikethe Nehers, however, the Royal West plaintiff was a for-profit property developer who, as Greckol J. found, would have found itselfdeveloping properties for sale into a falling market had the contract been performed. She reasoned that granting damages fixed at anearlier date would be giving the plaintiff a windfall: Royal West, para. 157. [68] In the case at bar, the Plaintiffs’ initial intention was to purchase the Property as their residence and not for the purpose ofimmediate resale.

The fundamental principle of law is that the innocent party is to be placed in as good a position, financially speaking,as it would have been had the contract been performed: Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2S.C.R. 943. at para. 73. Here, the more reasonable and fair approach when applying that principle is to assess damages not as at the dateof trial but as of the date of the breach. To do otherwise would reward the Defendant for its wrong doing, at the expense of the Plaintiffswho are the innocent parties. 3.

What is the measure of damages? [69] As stated previously, the purpose of an award of damages for breach of contract is to place the innocent and injured party in asgood a position, financially speaking, as it would have been had the contract been performed: Naylor Group Inc. v. Ellis -DonConstruction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943. at para. 73. Where a contract deals with the sale of land, the damages are“measured by the difference between the sale price and the appraised value of the land at the time of trial”: Royal West, para. 154.

Iwould agree, with the exception that I have found for reasons already stated that the appropriate time of assessment is the date thecontract was breached. [70] Here, the sale price is easily determined. The parties agreed on a Purchase Price of $499,528.30 plus GST, or $529,500.Calculation of value of the Land at the time of the breach is somewhat more complex. My problem is that the expert reports provided byboth the Plaintiffs and the Defendant focussed on the value of similar properties at only two points in time: August 2007 and September2010.

The latter date was used to represent the appraised value at the date of trial. [71] The Plaintiffs argue that the August 2007 appraisal value applies equally to February 2007. In written materials filed withtheir closing arguments, the Plaintiffs submit that “Glen Doll confirmed that the comparables used by Robert Jeffery in his analysis ofthe August 30, 2007 Value would be “even more applicable” in evaluating the value of the home on or about February 27, 2007 due to: (

a) the closer proximity of the comparables to February, 2007 versus August, 2007; and

(

b) the fact that no time adjustments were made in assessing the August 30, 2007 Value. Mr. Doll's evidence in this regard was not contradicted or challenged at trial.” [ 72 ] From my review of Doll’s testimony, he testified as follows: Q Now, I note that the appraisal is as of August 30, 2007, a comparison for sales in March and May you mentioned. Would those comparisons be as applicable to sales in March, April, May as they would be to sales in August? A They would be more applicable to the sales in March, April and May. Q So the valuation would be more applicable for March, April, May?

A Correct, yes. [ 73 ] Doll further testified he believed the price continued to rise until August, 2007 and suggested that without allowing for a time adjustment due to an increase in the market, an appropriate price was between $625,000 to $630,000. [ 74 ] The Defendant argues that to calculate damages GST should be included with the Purchase Price, but stripped out from the appraised value at the time of breach.

It argues that had the Plaintiffs decided to re-sell the Property after completing the purchase, they would not have charged GST, since GST is only payable on new homes. [ 75 ] I disagree with this argument. The rule is that damages are assessed on the basis of replacement value for “identical or equivalent goods”: Semelhago , para. 13 . The identical or equivalent goods here would not have been a replacement used home, but a new custom home.

Therefore, GST should be included as a part of the appraised value at February 27, 2007. [ 76 ] The Defendant argues that to allow the Plaintiffs to benefit from the gains on two homes would constitute a windfall. It points to the fact that the Nehers admitted that they planned to sell their current home before taking possession of the Property. [ 77 ] I disagree with this argument. The issue was addressed by the Supreme Court in Semelhago at para. 19 when it said: The difference between the contract price and the value “given close to trial” as found by the trial judge is $120,000.

I would not deduct from this amount the increase in value of the respondent's residence which he retained when the deal did not close. If the respondent had received a decree of specific performance, he would have had the property contracted for and retained the amount of the rise in value of his own property.... I see no basis for deductions that are not related to the value of the property which was the subject of the contract.

To make such deductions would depart from the principle that damages are to be a true equivalent of specific performance. [ 78 ] Although in Semelhago the damages awarded in lieu of specific performance were calculated as at the date of trial, the underlying reasoning is the same. The Plaintiffs are to be put in the same place had the contract not been breached. If the contract had been performed, the Plaintiffs would have sold their existing home, which had doubled in value, at the peak of the market.

They then would have taken possession of the Property, which they had contracted for in September 2006, and which would have risen in value by February 27, 2007. Had the Purchase Agreement been performed, the Plaintiffs would have received capital gains for both homes. [ 79 ] The Plaintiffs are also entitled to the return of their $20,000 deposit.

[ 80 ] In my opinion, I do not have sufficient evidence to determine with confidence what the valuation of the Property would have been on February 27, 2007. That said, I am confident that is the appropriate date on which the damages should be calculated: Plaintiffs’ damages = [February 27, 2007 Property value + GST] - Purchase Price of Property (including GST) + $20,000 [ 81 ] If the parties cannot agree on a February 27, 2007 valuation for the Property, they can return for a determination by this Court of this point. [ 82 ] In the circumstances, I do not find this to be an appropriate case for punitive damages.

Punitive damages may be awarded only for “advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own”: Honda v. Keays , 2008 SCC 39 , [2008] 2 S.C.R. 362 at para. 62 . Although Marathon’s conduct has not been business-like, I would not characterize it as malicious and outrageous. [ 83 ] The Defendant did not plead the Plaintiffs had a duty to mitigate. Had the Defendant raised it, I would have found that the Plaintiffs fulfilled this duty. Here, the housing market peaked in mid-2007.

Plaintiff Jade Neher recognized that fact, and correctly deduced it was illogical to mitigate by purchasing a home that subsequently fell in value. c. Is Marathon entitled to damages as the Nehers wrongfully registered the Caveat and Certificate of Lis Pendens against title to the Land? If so, what are Marathon’s damages? [ 84 ] Under s. 144 of the Land Titles Act , R.S.A. 2000, c.

L-4 (the “ LTA ”), any person who has filed or continued a caveat without reasonable cause is liable to compensate another person who has sustained damage from that wrongful filing or continuation. [ 85 ] Jurisprudence establishes that damage are recoverable only if the filing party did not have reasonable cause to file or continue the caveat and there is evidence of damage as a result of the registration of the Caveat: Sherstenko v.

Sherstenko , 2006 ABQB 481 , 25 E.T.R. (3d) 233 at para. 63 . [ 86 ] Here, the Nehers had a bona fide claim that the Purchase Agreement was valid; their successful lawsuit illustrates that fact. The Plaintiffs filed the Caveat and Certificate of Lis Pendens in an attempt to protect an interest they had in the Property. As such, the Nehers did not file unreasonably.

Marathon is not entitled to damages under s. 144 of the LTA . [ 87 ] Furthermore, it is to be specifically noted the Defendant did not choose to exercise its rights under LTA , s. 141 to require that the Plaintiffs, “show cause why the Caveat should not be discharged”. In addition, under the Plaintiffs’ letter of November 26, 2008, the Defendant was provided with an opportunity to have the Caveat removed in order to facilitate a sale of the Property, subject to the proceeds being paid into trust.

As previously noted, the Defendant rejected such proposal. [ 88 ] Accordingly, the Defendant is not entitled to an award of damages by reason of the Plaintiffs’ filing of the Caveat and Certificate of Lis Pendens. The Defendant’s counterclaim is dismissed. V. Conclusion

[ 89 ] I find the Defendant had no legal basis to terminate the Purchase Agreement. [ 90 ] As a result, the Plaintiffs are entitled to: 1. Damages, the difference between the Purchase Price of the Property (including GST) and the value of the Property at February 27, 2007 plus GST; 2. Return of their $20,000 deposit; and 3. Interest pursuant to the Judgment Interest Act , R.S.A. 2000, c. J-1. [ 91 ] The Defendant’s counterclaim for damages for wrongful filing of the Caveat and Certificate of Lis Pendens is dismissed. [ 92 ] The Plaintiffs are entitled to costs, as they have been largely successful in this action.

If the parties cannot agree on costs, they may be spoken to within 30 days of this judgment. Heard on the 6 th day of December, 2010. Dated at the City of Edmonton, Alberta this 17 th day of February, 2011. Don J. Manderscheid J.C.Q.B.A. Appearances: Scott Hammel and Paul Ryzuk Miller Thomson LLP for the Plaintiffs Vance Siakaluk Oshry & Company for the Defendant