Swan Group Inc. v. Bishop, 2012 ABQB 146

Court of Queen ’ s Bench of Alberta Citation: Swan Group Inc. v. Bishop, 2012 ABQB 146 Date: 20120302 Docket: 1001 10127 Registry: Calgary Between: The Swan Group Inc. Respondent/Plaintiff Defendant By Counterclaim - and - Mark D. Bishop Appellant/Defendant Plaintiff By Counterclaim _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C.A. Kent _______________________________________________________ [ 1 ] The Swan Group (Swan) develops single family and multi-family projects.

One of those projects was a condominium development at Stewart Creek in the Three Sisters Village at Canmore. Mark Bishop (Bishop) entered into an agreement to purchase a unit for a total of $922,094. The agreement was dated April 19, 2007. Bishop paid a deposit of $130,485. The agreement did not have a fixed completion date and at the time of the agreement, the project had not been started. The agreement provided that construction of each phase would not begin until Swan's sales test had been met and that the anticipated date for completion would be determined solely by Swan.

Swan was required to give Bishop 45 days notice of the actual possession date but the possession date could be extended if

Swan was unable to actually give possession on that date. The agreement provided that it was possible to grant Bishop possession of theunit prior to the registration of the condominium plan, but he would be in possession as a tenant at will. The agreement also containedthe following clause: This Offer is made subject to the following Developer’s Condition: (

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

Schedule 1 on or before September 20,2008 The developer may unilaterally extend the date referred to above for a period of up to three (3) months after the date set out above bynotice in writing to the Purchaser given at any time on or before the said date. [2] A condominium plan cannot be registered until the exterior walls of the building and interior walls between the units havebeen completed. The plan must be approved by the municipal planning authority and registered at the Land Titles Office. In this case thecondominium plan was registered on May 6, 2009.

On August 18, 2009, Swan provided Bishop with notice of possession which statedthat the possession date would be October 22, 2009. On October 5, 2009, Bishop wrote asking for an extension on the October 22possession date. He said he did not receive the original notice of possession because it had been sent to the wrong address. He also saidthat he was not happy with the state of the property. He said that he preferred to defer possession until the trades had finished their work.At the end of the letter he said: “What I am saying is a different possession date makes much more sense. The project looks great.

Theshow suites are awesome and I look forward with anticipation to moving in but not under partially complete circumstances.” Swanagreed to change the possession date to November 23, 2009. [3] There are two documents that were signed by Swan and Bishop after the original agreement was signed. The first was anamending agreement to deal with the New Home Warranty program signed in October, 2007. There is a place where Mr. Bishopacknowledged that all conditions had been complied with. In my view, nothing turns on this since it was signed well before thecondominium plan was to be registered.

The second agreement dealt with a golf membership. It is dated in April, 2007. It allowed Mr.Bishop membership in the Stewart Creek Golf Course for a reduced fee because he had purchased a condo. Mr. Bishop golfed eachseason from 2007 until 2011. [4] On November 23, 2009, Swan’s lawyer received a letter from Bishop’s lawyer advising that Bishop no longer intended oncompleting the purchase. Swan’s lawyer advised Bishop’s lawyer that Bishop was required to complete the purchase. Bishop’s lawyersent a letter advising that Bishop would not complete because of a material change in his financial circumstances.

Swan’s lawyer advisedBishop’s lawyer that since Bishop did not complete the purchase, Swan was terminating the agreement, retaining the deposit money andreserving its rights to claim any expenses caused by Bishop’s failure to complete. [5] This is an appeal from the Master. Both Swan and Bishop applied for

summary judgment. The Master granted judgment infavour of Swan on the basis that the clause in question was not a true condition precedent. Both sides agree that this is an appeal on aquestion of law so that the standard is correctness. However, Swan argues that there still ought to be some deference paid to the Master’sdecision. On that point, I find it difficult to reconcile the notion that I should be deferential to the Master with the standard of correctness.The Master was correct or he was not. [6] This case is about the effect of the clause requiring registration of the condominium plan.

Is it a true condition precedent thatrelieves the parties from their obligations under the contract? If it is, was the condition precedent waived or does the doctrine of estoppeloperate in favour of Swan? Dealing first with the nature of the clause, the starting point for this analysis is Zhilka v. Turney (SCC), [1959] SCR 578. That case dealt with the requirement to obtain annexation and subdivision of the property inquestion. The court found that the clause regarding annexation and subdivision was dependent entirely on the will of a third party, themunicipality. That made the clause a true condition precedent.

The court said at para 11: The obligations under the contract, on both sides, depend upon a future uncertain event, the happening of which depends entirely on thewill of a third party - the Village council. This is a true condition precedent - an external condition upon which the existence of theobligation depends. Until the event occurs there is no right to performance on either side. The parties have not promised that it willoccur.

In the absence of such a promise there can be no breach of contract until the event does occur. [7] Bringing that analysis to Alberta and to the registration of condominium plans, there are two relevant cases. The first is

Kempling v. Hearthstone Manor Corp.1996 ABCA 254 , [1996] 8 WWR 735. The developer vendor and the purchasersentered into a contract that required the vendor to register the condominium plan. The contract provided that if the condominium planwas not registered by a specified date, the agreement “shall be null and void” and the vendor was required to return the deposit to thepurchasers. The condominium plan was registered late. Subsequent to the late registration of the plan, there were further dealingsbetween the parties with respect to possession of the condominium.

The delays had an effect on the purchasers such that they decided tomove to British Columbia. There are three judgments all concurring in the result, but for different reasons. Picard, J.A. found that therewas no condition precedent. She asked the question: did the parties intend that there be no contract for the purchase of the unit if the planwas not registered by the date specified in the contract? (para 37). She goes on to say: The answer must be no. Certain action by the [vendor] is by itself very telling.

The [vendor] began and continued to construct acustomized condominium for the [purchaser] and went on with that even after January 15, 1990. The provision for the change in thecontract, drafted by the [vendor], anticipated difficulties and safeguarded the performance of the contract in spite of them. All of theactions of the [purchasers] anticipated performance of this contract ... ...

The rights and obligations of the parties were not contingent upon the registration of a condominium plan; that was the final step inperformance of the contract by the [vendor], not the first step before performance could take place. [8] Harradence, J.A. found that the clause was a true condition precedent because registration depended ultimately upon a thirdparty. The clause provided that the agreement would be null and void if registration was not effected by the specified date.

He found,however, that by their conduct, the parties had agreed to waive reliance on the condition precedent. [9] Cote, J.A. agreed with the result and wrote only on the issue of damages. [10] The second case is Leasing Group Inc. v. Prospect Developments

(2003) Inc., 2010 ABQB 234, aff'd [2011] ABCA 83. Theclause at issue provided that if the plan was not registered by the date specified, the agreement was null and void and the deposit wouldbe returned to the purchaser. Justice Strekaf found that the language selected was "clear and unambiguous", referring to the portionwhich provides that the agreement would be null and void and the deposit would be returned.

She found that the clause was a truecondition precedent. (para 26). [11] On appeal, the court said the following at para 9: We find it unnecessary to further embroider the law as to conditions precedent in contracts in this case. In our view, this is a simplematter of interpreting the agreement as it was settled by the parties. In her declaration, the chambers judge used the wording “null andvoid” because that happened to be the language that the parties chose.

But her declaration and judgment amount in reality to saying thatthe agreement should be concluded according to its own terms. [12] Bishop argues that this is a true condition precedent because it is dependent upon a third party, the Land Titles Office. Swanargues that the possibility that the Land Titles Office could actually affect the registration of the plan was remote. Registration of theplan was not entirely dependent on the third party and therefore, it was not uncertain.

Second, Swan says that if you look at the contractas a whole, there is no intention to terminate the contract if registration of the plan was not completed. He notes that there are significantfactual differences between this case and Turney. Most significantly, in Turney, noone had to take any steps until the two requirements,annexation and subdivision, had been completed. Moreover, there was uncertainty about whether those matters could ever by completed,unlike here where the possibility of rejection of the plan was remote.

As well, here there was no fixed closing date attached to theregistration of the plan. [13] The Master found that the clause was not a true condition precedent for three reasons. The clause did not indicate what wouldhappen if the plan was not registered by September 30, 2008, the clause did not say that the contract was conditional on registration ofthe plan by the Registrar and other provisions did not indicate a critical time

schedule which needed to be followed.

[ 14 ] Whether the clause is a true condition precedent depends upon whether I apply a strict reading of Turney or whether I also consider the policy implications in a case like this where both sides acknowledge that there was only a remote chance that the Land Titles Office would reject the plan. Swan argues that a party to a contract should not be permitted to rely on the failure to comply with a condition when that failure had no effect in the real substance of the contract and performance of the contract. As compelling as that argument is, the decision in Turney is clear and I must follow it.

When the Supreme Court has ruled on the effect of wording in a contract, then not to apply the ruling creates uncertainty. If parties wish to avoid the effect of a Supreme Court ruling, they can do so by adjusting the provisions of their contract as was done in Leasing Group. [ 15 ] Although the possibility that the Land Titles Office would have rejected the plan was remote, the possibility existed. Registration of a condominium plan is a critical event. It is that act which creates the separate units. Without registration purchasers cannot obtain title to their units.

Although Swan did not make any commitment about when the project would be started or when possession would be available, it did choose not only to specify a date for registration of the plan, but also contemplated some risk of delay by providing for a possible three month extension of the date for registration.

Because of the wording of the contract which specified a date, the necessity that registration occur for purchasers to take title to their units and the fact that registration was at the will of the Land Titles Office, the clause is a true condition precedent. [ 16 ] Swan argues that if there is a true condition precedent, then either Bishop waived the condition or he ought to be estopped from relying on the condition.

Dealing with waiver, Swan does acknowledge that there needs to be mutual agreement to waive by words or conduct that occurred prior to the date set for fulfilment of the condition: Leasing Group (Q.B.) at para. 29. He says, however, that the acts which support affirmation of the contract by Bishop after the date set for registration of the plan can be considered in determining if there was waiver. However, counsel for Bishop points out that there were no acts prior to the date that show that Bishop agreed to waive the condition. I agree with Bishop.

I find no waiver of the condition. [ 17 ] On the issue of estoppel, Swan says that if there is affirmation of the contract as the conduct of Bishop shows, it would be unjust, unfair and inequitable to permit him to resile from the contract. I will assume that there were acts by Bishop that affirmed the contract, for example the comments in the October’s letter, and that Swan can prove that Bishop’s motivation for relying on the failure to register the plan by the date specified was because the value of the condo had diminished as a result of the economic downturn.

Swan says that either Bishop is estopped from relying on the clause, or that the facts are sufficiently in dispute so that a trial is required. I am not certain that Bishop’s strict reliance on the contract is sufficient to create circumstances that are unjust, unfair and inequitable to Swan. However, I am also unsure whether the facts are all clear and uncontroverted. As a result, the appeal of the decision in favour of Swan is allowed for the reasons given above. A trial on the issue of estoppel will be necessary. Heard on the 22 nd day of February, 2012.

Dated at the City of Calgary, Alberta this 2 nd day of March, 2012. C.A. Kent J.C.Q.B.A. Appearances: Trevor R. McDonald

Burnett, Duckworth & Palmer LLP for the Swan Group Inc. James Early Parlee McLaws LLP for Mark Bishop