Verbeek v Stewart, 2012 ABQB 415

Court of Queen ’ s Bench of Alberta Citation: Verbeek v Stewart, 2012 ABQB 415 Date: 20120625 Docket: 0703 16188 Registry: Edmonton Between: Calvin Verbeek Appellant - and - Donald Harvey Stewart Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Robert A. Graesser _______________________________________________________ Appeal from the Order by W.H. Breitkreuz, Master in Chambers Dated the 8 th day of May, 2012 Filed on the 23 rd day of May, 2012 ( Docket: 0703 16188) Introduction

[ 1 ] This is an appeal from the decision of Master Breitkreuz dated May 8, 2012 wherein he approved an offer to purchase 2 quarter sections of land (the "lands") owned jointly by the parties by one of the co-owners, Donald Harvey Stewart. [ 2 ] The offer to purchase had been made on April 18, 2012 and was for a purchase price of $2,000,000.00. Master Breitkreuz's order provided that in the event the conditions in Mr. Stewart's offer were not met by 9:00 p.m. on May 18, 2012, Mr. Verbeek's offer of May 3, 2012 to purchase the property would be accepted. Background [ 3 ] This matter has a lengthy history. Mr.

Verbeek alleged that he and Mr. Stewart had agreed to purchase the lands and operate a gravel operation. The lands were registered in Mr. Stewart's name, and eventually litigation ensued between them as to ownership of the lands and an accounting for expenses and revenues from the lands. [ 4 ] Both parties were represented by counsel throughout the litigation. [ 5 ] On the eve of trial in January, 2012, the parties settled the dispute. The settlement involved the granting of 3 consent orders. The first order gave Mr. Verbeek judgment against Mr.

Stewart for $400,000.00, representing the accounting as between them for expenses and revenues from the lands and the gravel business which had been conducted on the lands. [ 6 ] The second order was to transfer the lands into the joint names of Mr. Stewart and Mr. Verbeek, as tenants in common. [ 7 ] The third order was to order: 1. That the lands be listed for sale with a realtor to be chosen by the Plaintiff; 2. The list price was to be no less than $1,600,000.00; 3. The term of the listing was to be 90 days; 4. That both Mr. Verbeek and Mr. Stewart could make offers to purchase; and 5.

That either party could make an application to the Court for an order directing acceptance of any offer. [ 8 ] The following narrative is taken from the various materials filed in support of the application before Master Breitkreuz, which included an affidavit of Mr. Verbeek sworn April 5, 2012, an affidavit of Mr. Stewart sworn April 24, 2012, an affidavit of Mr. Verbeek sworn May 3, 2012 and the transcript of questioning of Mr. Stewart on his April 24 affidavit (together with exhibits and undertaking responses). [ 9 ] The settlement included a provision whereunder Mr. Stewart had until March 13, 2012 to pay Mr.

Verbeek $1,150,000 to satisfy the judgement and purchase Mr. Verbeek's interest in the lands. The settlement also stipulated that Mr. Stewart was responsible to obtain a discharge of the Farm Credit Canada mortgage registered against title to the lands. The FCC mortgage is in the amount of $108,000.00 and secures a letter of credit provided by FCC to Alberta Environment to secure reclamation obligations under the sand and gravel extraction permit previously approved by Alberta Environment. The letter of credit is set to expire in September, 2012. [ 10 ] Mr.

Stewart did not pay the agreed amount, so the three consent orders were presented Master Schlosser on March 15, 2012.

[ 11 ] Thereafter, instead of listing the lands as provided in the third order, Mr. Verbeek made an offer to purchase the lands on April 4, 2012. The offer was for $1,600,000.00 and required that the FCC mortgage be discharged, and that the sum of $115,000.00 be held back from the sale proceeds to satisfy any demands which might be made on the letter of credit in favour of Alberta Environment. It appears that the intent of the offer was that these funds would be held pending a determination as to the amount necessary to reclaim the lands as at the expiry of the letter of credit.

Any funds not claimed from the letter of credit would be divided equally between the parties. [ 12 ] Presumably, that provision enabled Mr. Verbeek to deal with the County of Parkland (in which the lands are located) and Alberta Environment to determine the reclamation costs for the lands to date, and to enable Mr. Verbeek to make new arrangements with Alberta Environment for future reclamation costs. [ 13 ] There is no evidence that the offer was presented to Mr. Stewart, as the offer was appended to Mr. Verbeek's affidavit of April 5, 2012 in support of his application to have the offer accepted by the Court.

Mr. Verbeek filed an application for approval of the offer on April 10, returnable on April 17. [ 14 ] That application was obviously adjourned. Mr. Stewart swore an affidavit on April 24, 2012 in opposition to Mr. Verbeek's application for approval. The affidavit objects to various terms in the offer, including its provisions relating to stockpiled aggregate, improvements to the residence on the lands, the treatment of the FCC mortgage amongst other matters. His affidavit also appended his offer dated April 18, 2012 to purchase to lands for $2,000,000.00. [ 15 ] Mr.

Stewart filed a notice of application on April 24, seeking an order rejecting Mr. Verbeek's April 4 offer and accepting his April 18 offer. [ 16 ] His offer deals with the FCC mortgage on the basis that the FCC mortgage is to be discharged; the seller (the two co-owners) would be responsible for reclamation costs to the completion date of the offer, and thereafter the buyer (Mr.

Stewart) would be responsible for any future bonds, security, costs, etc. [ 17 ] His offer stipulates a $10,000.00 holdback from the purchase price which is estimated by him to cover the reclamation costs to date, which is to be divided in the event there are no claims on the letter of credit. Stockpiled aggregate is to be divided as at the date of acceptance. [ 18 ] Mr. Stewart was questioned on his affidavit on May 1. The application proceeded before Master Breitkreuz on May 8. [ 19 ] On May 3, Mr. Verbeek made a further offer to Mr. Stewart. It addressed some of Mr.

Stewart ’ s concerns as outlined in his April 24 affidavit and increased the return to Mr. Stewart slightly by assuming responsibility for FCC and the letter of credit issues. [ 20 ] A further notice of application filed by Mr. Verbeek on May 3 and returnable on May 8 sought approval of Mr. Verbeek's May 3 offer and rejection of Mr. Stewart's April 18 offer. [ 21 ] Mr. Verbeek's affidavits of April 5 and May 3 contain correspondence relating to the various offers between their solicitors. The January 13, 2012 letter from Mr. Verbeek's lawyer to Mr.

Stewart's lawyer, which was the foundation for the ultimate settlement, describes the consent order for sale as an "Order for Partition and Sale of the Lands". [ 22 ] A letter from Mr. Verbeek's lawyer to Mr. Stewart's lawyer dated March 29, 2012 says: "...we agreed that, despite the terms of the Consent Judgment...neither party shall be permitted to oppose an Offer to Purchase on the basis that the Listing Prerequisite was not met

However, we agreed that either party shall be permitted to oppose an Offer to Purchase made before the Listing prerequisite is met on the basis that by not complying with the Listing Prerequisite, the value that the Lands might achieve on the open market has not been tested. [ 23 ] I was not provided with the transcript of the proceedings on May 8. The appellant, Mr. Verbeek, had obtained one but had not provided it to Mr. Larocque, counsel for Mr. Stewart. [ 24 ] Mr. Larocque argued that the transcript would not have been properly before me because he had not been provided with it.

He did not say that he had agreed to waive the requirement that it be filed as part of the record. Both parties were in agreement that the result of the decision in Bahcheli v. Yorkton Securities Inc. , 2012 ABCA 166 has clearly set the standard of review of Masters' decisions as correctness, so I was essentially invited to make a fresh determination of the issue on the materials before me. [ 25 ] I observe that while the Master’s decision would no longer be entitled to deference as a result of Bahchelli , that does not mean that it should not be put before the court as part of the record.

Rule 6.14(4) requires that the record for the appeal include a transcript of the proceedings before the master, and the master’s judgment, unless the parties agree or the judge hearing the appeal rules that it is not necessary. [ 26 ] It was not argued by Mr. Larocque that the materials were deficient by the absence of the proceedings before the master and he was anxious that the appeal proceed. There were apparently no detailed reasons provided by the Master, so that deficiency is not fatal to the hearing of the appeal.

While I would have preferred to have the full proceedings before me, I do not see this procedural deficiency as a bar to hearing or deciding the matter. [ 27 ] Subsequent to the Master's decision, further affidavits were sworn by Mr. Verbeek and his friend Barbara Sutherland deposing to removal of gravel from the lands as well as putting forward details of the FCC mortgage. Mr. Larocque objected to the use of these affidavits as he had not been provided with copies. [ 28 ] It would appear that these affidavits were prepared in contemplation of this appeal (by former counsel) and were not provided to Mr.

Larocque by former counsel for Mr. Verbeek, and current counsel was unaware that the affidavits were not provided. [ 29 ] In any event, nothing on this appeal turns on those affidavits. Analysis [ 30 ] Master Schlosser's order of March 15 with respect to the sale of the lands was a consent order, as part of the settlement between the parties. It does not specifically reference partition and sale, or the Law of Property Act , RSA 2000 c L-8 . However, it is clear from the materials put forward by Mr.

Verbeek that his lawyer considered that the consent order for sale was to be an order for partition and sale. [ 31 ] That agreement gives context to the consent order, and informs the jurisdiction of the Court to deal with the applications before it by both Mr. Verbeek and Mr. Stewart. Both parties sought the approval of the Court of their offers to the other; the main jurisdiction the Court might have for such a process is the partition and sale provisions of the Act . [ 32 ]

Section 15 provides: 15(1) A co-owner may apply to the Court for an order terminating the co-ownership of the interest in land in which the co-owner is a co-owner.

(2) On hearing an application under subsection (1), the Court shall make an order directing (

a) a physical division of all or part of the land between the co-owners, (

b) the sale of all or part of the interest of land and the distribution of the proceeds of the sale between the co-owners, or (

c) the sale of all or part of the interest of one or more of the co-owners' interests in land to one or more of the other co-owners who are willing to purchase the interest.

(3) A sale under subsection (2)(

b) or (

c) and the distribution of the proceeds of the sale shall be under the direction of the Court.

(4) In making an order under subsection (2)(c), the Court shall fix the value of the land sold and the terms of the sale. [ 33 ] It is significant Mr. Verbeek's offer of May 4 expressly contemplates the need for court approval (in paragraph 3) as well as the possibility of appeals from court approval. Mr. Stewart's offer of April 18 contains similar provisions. [ 34 ] The consent order of March 15 directs the sale of the lands, and fixes the terms of sale (listing by the Plaintiff for at least $1,600,000.00).

While the Court did not fix the value of the lands, the affidavit evidence indicates that they had been appraised at $1,600,000.00 in 2007. That seemed sufficient for the parties to agree that the listing price would be "at least" $1,600,000.00. [ 35 ] I am satisfied that the order of March 15 substantially complies with the requirements of s. 15, and that the parties' intention at the time was to have a sale "under the direction of the Court".

It is clear from the history of the matter that finding agreement between these parties would be difficult, as evidenced by the terms of their offers to each other. [ 36 ] I find that the parties contemplated and agreed to a partition and sale process which by necessary implication would be governed by the provisions of The Law of Property Act . [ 37 ] It is also significant that neither party objects to either offer on the basis that it does not reflect the market value of the lands, or that the market value had not been tested by the listing process.

That potential objection to approval of either offer does not appear to have been raised before the Master and was not raised before me. [ 38 ] Mr. Verbeek's main objection to Mr. Stewart's offer is that the offer contains obligations on the part of the vendor (both Mr. Verbeek and Mr. Stewart) that were unacceptable. Mr. Verbeek argues that a number of warranties and condition cannot be imposed on him because he was never in actual occupancy of the lands. [ 39 ] In particular, Mr.

Verbeek objects to the following: 4.4 that "the Seller's lawyer may use the Purchase Price to pay out all mortgages"; 4.6 that "the property will be in substantially the same condition as it was when this Contract was accepted"; 4.8 "if the Seller fails to deliver the closing documents...then payment of the Purchase Price and Interest will be postponed...";

5.1 that "risk of loss or damage to the Property shall be with the Seller"; 6.1(

b) that Goods are in "normal working order"; 6.1(

c) that the current use of the land complies with existing municipal; land use by-law; 6.1(

e) that buildings and improvements do not encroach; and 6.1(

f) that building and improvements comply with municipal bylaws. [ 40 ] He also argues that the provisions of sale relating to the discharge of the FCC mortgage are uncertain, or are otherwise such that approval should be withheld. [ 41 ] Mr. Verbeek also objects to the treatment of stockpiled gravel, which provides that the parties are to "share equally the net sale proceeds of all stockpiled aggregate on the Property at the date of acceptance of the Offer." He maintains that gravel has been removed since the date of the offer. [ 42 ] Mr.

Stewart's lawyer notes that the terms (other than those relating to FCC) are virtually identical to the terms in Mr. Verbeek's offer to him; all he did in making his $2,000,000.00 offer was to change the names of the parties and the price. [ 43 ] Mr. Verbeek replies that since he has no knowledge of the condition of the lands and has had no control over it, warranties expected from him are very different than those which might be expected from Mr. Stewart, who had occupancy and control of the lands. [ 44 ] Mr. Verbeek also argues that there is enough uncertainty with Mr.

Stewart's offer that it cannot simply be accepted to constitute a valid agreement. [ 45 ] Mr. Verbeek does not seek to have his offer of May 3 accepted; instead he proposes that the Court order a sealed offer process between the parties to finalize the matter. Decision [ 46 ] I will first deal with Mr. Verbeek's objections to the form of offer. The conditions he objected to (but for the FCC mortgage and stockpiled gravel) are standard terms and conditions.

Market value of lands takes into account a number of factors which bear on the nature and quality of the lands and the use to which the lands can be put. [ 47 ] The obligations of the Seller under the agreement are joint obligations.

Section 17 of the Act gives the Court a number of powers to fairly adjust matters between co-owners: 17(1) In making an order, the Court may direct that (

a) an accounting, contribution and adjustment, or any one or more of them, take place in respect of the land, and

(

b) compensation, if any, be paid for an unequal division of the land.

(2) In determining if an accounting, contribution or adjustment should take place or compensation be paid for an unequal division of the land, the Court shall, without limiting itself from considering any matter it considers relevant in making its determination, consider whether (

a) one co-owner has excluded another co-owner from the land; (

b) an occupying co-owner was tenant, bailiff or agent of another co-owner; (

c) a co-owner has received from third parties more than the co-owner's just share of the rents from the land or profits from the reasonable removal of its natural resources; (

d) a co-owner has committed waste by an unreasonable use of the land; (

e) a co-owner has made improvements or capital payments that have increased the realizable value of the land; (

f) a co-owner should be compensated for non-capital expenses in respect of the land; (

g) an occupying co-owner claiming non-capital expenses in respect of the land should be required to pay a fair occupation rent; (

h) a co-owner has at the time the application is made under this Part rights in the land for which the co-owner would receive compensation under the Dower Act if an order had been made under that Act dispensing with that co-owner's consent to the disposition of that land. [ 48 ] The "standard" matters Mr. Verbeek objects to may ultimately cause no difficulties. The value of the lands likely relates to its use as a gravel pit, and not the buildings on it. [ 49 ] The mortgage objected to by Mr. Verbeek is a mortgage granted by Mr. Stewart to Richard G. Larocque Professional Corporation. That was for Mr.

Stewart's sole benefit and I cannot imagine any circumstances where Mr. Verbeek might reasonably fear being made responsible for any part of it. [ 50 ] The property is being occupied by Mr. Stewart, so if there are any problems with the condition of the property, or loss to the property before closing, such matters are likely within his responsibility and control as occupant, and he would likely be responsible for them. Remedies are available to Mr. Verbeek under s. 17. There are likely no "goods", and if there are, any defects may be Mr. Stewart's responsibility in any event. [ 51 ] It is unlikely that Mr.

Stewart could successfully delay closing and payment through his own default in providing closing documents. [ 52 ] There is no indication that there is any problem with the lands being used for gravel extraction and stockpiling, and the FCC mortgage and letter of credit in favour of Alberta Environment speak to the likely existence of valid permitting. Nevertheless, permitting is again something that was likely in Mr. Stewart's control, and if there are difficulties with that, remedies are available under s. 17.

[ 53 ] Presumably the buildings on the lands were there when they were purchased so encroachment issues (if any) would be a joint responsibility. As for improvements complying, the evidence is that Mr. Stewart made improvements to the residence on the lands, so he would likely be responsible for any deficiencies in compliance. This is another area where s. 17 may ultimately protect Mr. Verbeek. [ 54 ] As for the stockpiled gravel, this is again a matter for adjustment between the parties both on closing as well as under s. 17.

The parties settled their differences to January, 2012 as reflected by the consent orders. As at that time, the parties "officially" became co-owners of the land. The partition and sale provisions of the Act allow for a process for the proceeds of any sale of gravel from that time to be accounted for and divided. That would cover and protect any period before the provisions of the offer and its acceptance take place. [ 55 ] As for the FCC situation, this is more complicated. It is aided by reviewing the manners in which the parties dealt with the issue in their offers to the other. Mr.

Verbeek's offer of April 18 (and his offer of May 3) contemplates that the full amount of the letter of credit of $106,000.00 (secured by the FCC mortgage if the letter of credit is called upon) will be held back on closing, plus a further amount for possible expenses. If the letter of credit is called on in September, any amount remaining after the call would be divided between the parties; if no call is made the full amount would be divided equally. [ 56 ] To be understood fully, the context is necessary.

The letter of credit will only be called on in the event that it is not replaced (which would be an obligation of the buyer in order to continue with gravel operations). In any event, the letter of credit would only be called on to the extent necessary to pay for reclamation costs to the date of the call on it. [ 57 ] Presumably, the buyer would sort out the reclamation costs with the County and Alberta Environment and have only that amount drawn from the letter of credit (or holdback amount). [ 58 ] Mr.

Stewart's offer of April 18 contemplates a $10,000.00 holdback which is his estimate of the reclamation costs to date. Para. 7.5 of his offer leaves something to be desired as to what Mr. Stewart contemplated by that. However, that is explained in his affidavit in support of his application to have the offer approved. [ 59 ] He states in para. 9 of his affidavit of April 24: As seller, I am prepared to accept responsibility with ½ of any reclamation costs up to and including the Completion Date only.

Any reclamation issues or costs that may arise subsequent to the Completion Date are the sole responsibility of the Buyer...I estimate the costs of completion of this reclamation to be between $5,000.00 to $10,000.00. The existing FCC letter of Credit should properly terminate as of Completion Date, the Buyer is solely responsible for arranging any Reclamation Bond and attending to security for the same as may be required by any relevant authority." [ 60 ] It is unclear how closing might occur. Presumably, the Buyer will have to make arrangements to discharge the FCC mortgage.

That can likely only be achieved if the Buyer can get a replacement letter of credit so that FCC has no risk that the existing letter of credit will be drawn. But that is a closing detail and problem for the Buyer. [ 61 ] Mr. Stewart's affidavit in support of his application to approve his offer clearly contemplates that the Buyer will be responsible for any reclamation after the closing date, and use of the letter of credit would only be possible for reclamation costs to the date of closing. That position would be entirely consistent with the responsibility of co-owners. Mr.

Stewart could not use any part of the letter of credit proceeds as security for future reclamation costs. [ 62 ] Ultimately, one of the closing details will be the valuation of reclamation costs. That may well involve the County and Alberta Environment, but this is a problem that the parties will encounter on any sale of the lands, whether as between themselves or to third parties. [ 63 ] Closing difficulties and adjustments should not stand in the way of an otherwise appropriate sale.

Conclusion [ 64 ] There are in my view no technical reasons why Mr. Stewart's offer of April 18, 2012 should not be accepted by the Court. [ 65 ] The parties agreed on a partition and sale process. They put a court order in place to that effect. They agreed that the property did not need to be listed. Mr. Verbeek made an offer to Mr. Stewart and immediately sought court approval of his offer. Mr. Stewart responded with an offer on similar terms and conditions but with a significantly higher purchase price. Mr. Verbeek responded with a lower offer than Mr.

Stewart ’ s. [ 66 ] There is no evidence before me as to the market value of the lands, other than that there was a 2007 appraisal of $1,600,000.00. Mr. Verbeek's lawyer used that number in his negotiations on settlement with Mr. Stewart's lawyer. That was the price the parties were content to put in the consent order for sale as the listing price.

Parties rarely list property at less than what they consider to be the highest likely sale price, so I can take comfort from the fact that the parties themselves viewed market value at that amount (or less). [ 67 ] No issue is taken with either offer on the basis that the market has not been tested, or that the offers do not reflect market value. [ 68 ] Mr. Stewart's offer was fully responsive to Mr. Verbeek's initial proposal. It provides (according to the parties' advice to me during the hearing) $200,000 more to Mr. Verbeek than a sale at $1,600,000.00 would. [ 69 ] Mr.

Verbeek will receive $1,400,000.00 less half of any costs to pay out and discharge the FCC mortgage (which at its worst case would be something like $53,000.00 depending on the actual reclamation costs to closing). [ 70 ] This would appear to be a better result for him than initially contemplated in the settlement, where Mr. Stewart would have only had to pay him $1,150,000.00 and retain title to the lands. [ 71 ] Faced with the competing offer from Mr. Stewart, Mr. Verbeek presented his May 3 offer, which repeated the $1,600,000.00 purchase price, although it was sweetened by Mr.

Verbeek assuming responsibility for the payout of FCC (and inferentially the reclamation costs to date). The only evidence of the value of that comes from Mr. Stewart's affidavit, which places that at between $5,000.00 and $10,000.00. I cannot draw much from his valuation, but it was not contested by Mr. Verbeek in his affidavit of May 3 supporting approval of his May 3 offer. [ 72 ] As a result, I am satisfied that the Master was correct in accepting Mr. Stewart's April 18 offer. It is the order I would have made on the same materials.

It is the order I would make myself having heard the submissions of counsel on this appeal, reviewing the materials before the Master, and reading the filed affidavits of Mr. Verbeek and Ms. Sutherland which were filed after the Master ’ s decision. I recognize that Mr.

Larocque did not have an opportunity to make submissions with respect to those materials, but my decision obviates any concerns to that effect. [ 73 ] It is implicit in the Master ’ s order that the Court retains jurisdiction to deal with closing issues, adjustments and any other matters that may arise under sections 15 and 17 of the Law of Property Act . [ 74 ] It should be noted that counsel for Mr. Verbeek on this appeal was a different law firm than the firm which represented Mr. Verbeek at the time of settlement and the application before Master Breitkreuz. It appears from the record that Mr.

Verbeek was be effectively represented by previous counsel, and he was certainly effectively and skilfully represented by Mr. Livingstone on this appeal, despite Mr. Verbeek ’ s lack of success.

Heard on the 21st day of June, 2012. Dated at the City of Edmonton, Alberta this 22 nd day of June, 2012. Robert A. Graesser J.C.Q.B.A. Appearances: Stephen J. Livingstone McLennan Ross LLP for the Appellant Richard G. Larocque Gledhill Larocque for the Respondent