Blue Hill Capital Corporation v Daon Property Corporation, 2013 ABQB 28

Court of Queen ’ s Bench of Alberta Citation: Blue Hill Capital Corporation v Daon Property Corporation, 2013 ABQB 28 Date: 20130111 Docket: 1203 08683 Registry: Edmonton Between: Blue Hill Capital Corporation and Kenneth J. Rusnak Plaintiffs/Respondents - and - Daon Property Corporation Defendant/Applicant _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.M.

Ross _______________________________________________________ Introduction [ 1 ] In this application, the Defendant, Daon Property Corporation [Daon], sought an Order discharging the Caveat and Certificate of Lis Pendens [CLP] filed by the Plaintiff, Blue Hill Capital Corporation [Blue Hill]; and an Order summarily dismissing Blue Hill ’ s Statement of Claim, filed in relation to lands in the Fort McMurray area in Alberta, legally described as SE 1/4 7-89-9-W4 [the Lands] which were the subject of an accepted offer to purchase dated September 24, 2010 [the Agreement]. [ 2 ] On November 20, 2012, I delivered an oral decision discharging the Caveat and CLP, primarily on the ground that Blue

Hill was not entitled to specific performance of the Agreement as damages would be an adequate remedy. Additionally, I found that Blue Hill was not ready, willing or able to pay the purchase price for the Lands by the closing date of November 28, 2011 or by the extended closing date that it sought of December 31, 2011. [ 3 ] I reserved decision regarding Daon ’ s application to summarily dismiss Blue Hill ’ s claim for damages. This memorandum deals with that application.

Background facts [ 4 ] Under the Agreement, Blue Hill agreed to purchase the Lands from Daon for a purchase price of $17 million, payable by two deposits in the amounts of $25,000 and $175,000, with the balance of $16.8 million payable on closing. [ 5 ] The Agreement provided that it was subject to Blue Hill ’ s receipt of a financing commitment by December 15, 2010. Prior to the Agreement, Daon had applied to local authorities for an Area Structure Plan [ASP]. The Agreement provided that Daon would obtain approval of the ASP by January 30, 2011. In fact, there were delays in obtaining the ASP.

The parties entered into a series of written extension agreements, under which the deadline dates for both Blue Hill ’ s obligation to obtain a financing commitment and Daon ’ s obligation to obtain approval of the ASP were extended. Finally, on August 29, 2011, the parties entered into a written addendum to the Agreement [the Addendum] under which both conditions - Blue Hill ’ s receipt of a financing commitment and Daon ’ s receipt of approval of the ASP - were waived.

All other conditions to the agreement had previously been satisfied or waived. [ 6 ] The Addendum provided that the closing date for the transaction was 90 days following the waiver or satisfaction of all conditions precedent to the Agreement. As that occurred on August 29, 2011, the closing date was November 28, 2011.

The Addendum also provided that “ If the Buyer requires additional time to close the transaction, upon the mutual agreement of the seller and the buyer, the seller will provide a written extension for an additional 30 day period. ” Such an extension would bring the closing date to December 28, 2011. [ 7 ] The Agreement provided that the first deposit of $25,000 was to be paid within10 business days after written acceptance; and the second deposit of $175,000 was to be paid within 10 business days after waiver or satisfaction of Condition #1 in the Agreement.

Condition #1 was satisfied by letter dated November 26, 2010 from Blue Hill, so the second deposit should have been paid by December 10, 2010. [ 8 ] Neither deposit was ever paid. It is clear that Daon was aware that at least the second deposit had not been paid, and had verbally extended the time for payment. The affidavit of Mr. St. Lawrence, sole director of Daon, states that, in mid-December 2010, he learned from Mr. Mahan, who acted as a facilitator between Blue Hill and Daon, that Blue Hill had not yet paid the second deposit. He advised Mr.

Mahan that Daon was prepared to provide Blue Hill an additional four months to pay the second deposit. After the expiry of this four month extension, Mr. St. Lawrence deposes that Mr. Mahan informed Mr. Rusnak, majority shareholder of Blue Hill, on numerous occasions in the spring and summer of 2011, that the second deposit was due and must be paid. [ 9 ] Mr. Rusnak deposes that, prior to execution of the Agreement, he advised Mr. Mahan that Blue Hill did not have the first deposit of $25,000, “ much less ” the additional deposit of $175,000. Mr.

Mahan told him not to worry as Daon would defer the deposits at least until the ASP was approved so that both deposits could be paid from the mortgage proceeds expected to be forthcoming soon after that approval to fund the transfer of the property. Mr. Rusnak also states that neither Daon nor Mr. Mahan ever requested that the deposits be paid or specified a date by which they should be paid. [ 10 ] Mr. Rusnak argues that at the time of the Addendum, Daon waived payment of the deposits.

The Addendum provided: “ It is further agreed that once the ASP is approved, the Purchaser shall be responsible for all costs going forward on the Neighbourhood Structure Plan and will pay such costs within 60 days of becoming due. ” Mr. Rusnak deposes that Blue Hill “ understood that the assumption of these liabilities ” was in lieu of payment of the deposits. However, on cross-examination, Mr. Rusnak admitted that this was an assumption on his part. He also admitted that the costs of the Neighbourhood Structure Plan were the responsibility of Blue Hill under the original Agreement.

[ 11 ] Shortly after the Addendum, Daon terminated the Agreement, citing non-payment of the deposits. [ 12 ] Mr. St. Lawrence deposes that he met with Mr. Rusnak on or about September 18, 2011 and demanded that Blue Hill provide proof that the second deposit had been paid, failing which the Agreement would be at an end. He also discussed with Mr. Rusnak a letter which Mr. Rusnak had circulated to potential investors. [ 13 ] On September 22, 2011, Mr. St. Lawrence sent an e-mail to Mr.

Rusnak which stated: Please accept this email as confirmation that our Offer to Purchase on the Fort McMurray lands SE 1/4 7-89-9-W4 is now terminated as the deposit is not in place as per the agreement. It has come to our attention that you have been shopping this around which was not agreed to. Please cease all solicitation requests NOW. [ 14 ] Mr. St. Lawrence deposes that it was only in October 2011 that he learned that the first deposit had never been paid. [ 15 ] Mr. Rusnak deposes that at the September 18, 2011 meeting, Mr.

St Lawrence accused him of shopping the project around, and that he responded that he was merely communicating with third parties to obtain financing, as he was entitled to do. At no time did Mr. St. Lawrence or Mr. Mahan demand payment of the deposits. [ 16 ] On September 30, 2011, Blue Hill registered a caveat against the lands claiming an interest under the Agreement (the first caveat). [ 17 ] On October 11, 2011, the ASP was approved. [ 18 ] In December 2011, Blue Hill requested Daon to extend the closing date from November 28, 2011 to December 31, 2011.

Daon did not respond. [ 19 ] Daon served on Blue Hill a Notice to Take Proceedings on the first caveat, and Blue Hill filed a Statement of Claim in Action No. 1203 02395 and Certificate of Lis Pendens (the first action and first CLP). The first CLP was registered against the Lands on February 10, 2012. [ 20 ] Daon brought an application in the first action to summarily dismiss the first action and discharge the first caveat and first CLP. The application was heard by Justice Burrows on June 7, 2012.

Justice Burrows struck the first Statement of Claim and discharged the first caveat and CLP, on the ground that Blue Hill was not represented by counsel but by Mr. Rusnak, who has been disbarred from the Law Society of Alberta and does not have standing before the Court. Justice Burrows ’ Order was dated June 7, 2012. [ 21 ] On the same day, Blue Hill filed a second Statement of Claim, identical to the first Statement of Claim except that it was filed by a lawyer, Steven Fix, who later withdrew as counsel of record.

On the same day, Blue Hill filed a second caveat again claiming an interest in the Lands under the Agreement, and on the following day, June 8, 2012, Blue Hill filed a second CLP. Mr. Rusnak has since filed an affidavit indicating that Blue Hill has assigned its interest under the Agreement to him and has been added as a party to this action. Counsel for Daon did not object to Mr. Rusnak representing himself and Blue Hill for the purpose of the within application. Analysis Test for

summary dismissal

[22] On an application for

summary dismissal, the applicable test is whether it is plain and obvious that the action cannotsucceed. The pleadings and evidence on the

summary judgment application must show that the claim has no reasonable prospect ofsuccess. And while

summary judgment should not be granted if opposing affidavits clash on relevant facts, the Court has an obligation toconduct a careful review of the evidence with an eye to determining whether there are undisputed facts sufficient to resolve the matter:De Shazo v Nations Energy Co Ltd, 2005 ABCA 241 at paras. 17-18, 367 AR 267; cited in 1247532 Alberta Ltd v Valpy Corporation,2007 ABQB 547 at para 19, 427 AR 169 [Valpy].

Waiver and promissory estoppel [23] Blue Hill’s claim is based on the Agreement, and on Daon’s alleged breaches of the agreement by terminating the Agreementand by failing to extend the time for closing of the Agreement.

Blue Hill acknowledges that it did not pay the deposits as provided in theAgreement, but argues that Daon waived reliance on the dates for payment of the deposits, or created a promissory estoppel in relation tothose dates, and subsequently could not insist on payment of the deposits except on reasonable notice to Blue Hill. [24] In Saskatchewan River Bungalows Ltd v Maritime Life Assurance Co, (SCC), [1994] 2 SCR 490at para 18 (QL) the Supreme Court of Canada observed that waiver and promissory estoppel are closely related; and that the principleunderlying both doctrines is that a party should not be allowed to go back on a choice when it would be unfair to the other party to do so:citing, WJ Alan & Co v El Nasr Export and Import Co, [1972] 2 QB 189 (CA); Re Tudale Explorations Ltd and Bruce (1978) (ON SC), 20 OR (2d) 593, 88 DLR (3d) 584 at 587 (Ont Div Ct); and SM Waddams, The Law of Contracts, 3rd ed(Toronto, Ont: Canada Law Book, 1993) at para 606. [25] The Supreme Court went on to consider the requirements of waiver, citing with approval the following description of theelements of waiver from Federal Business Development Bank v Steinbock Development Corp (1983), 42 AR 231 at 236 [SteinbockDevelopment]: The essentials of waiver are thus full knowledge of the deficiency which might be relied upon and the unequivocal intention to relinquishthe right to rely on it.

That intention may be expressed in a formal legal document, it may be expressed in some informal fashion or itmay be inferred from conduct. In whatever fashion the intention to relinquish the right is communicated, however, the consciousintention to do so is what must be ascertained. [26] Daon’s evidence is that it was aware that the second deposit had not been paid by the time stipulated in the Agreement, thatthere was an express oral extension for four months (conveyed on behalf of Daon by Mr. Mahan), and subsequent discussions (againthrough Mr.

Mahan) from which it might be inferred that further extensions were granted. Blue Hill’s evidence is that the oral extensionof time to pay the deposits (conveyed by Mr. Mahan) related to both deposits and continued until Daon terminated the Agreement.Daon’s own evidence points to the presence of the essentials of waiver of the deadline for payment, at least with respect to the seconddeposit, that requires assessment at trial. While Daon denies awareness that the first deposit had not been paid, in light of Blue Hill’sevidence to the contrary and the role of Mr.

Mahan as intermediary, I find that there is also a triable issue as to whether the deadline forpayment of the first deposit was waived. [27] Blue Hill also advanced an argument on the application that the requirement to pay the deposits was not only extended, buteliminated when Blue Hill agreed in the Addendum to pay costs of the Neighbourhood Structure Plan. This assertion is not supported byany evidence. Mr. Rusnak admitted that it was only an assumption on his part. He also acknowledged that the costs of theNeighbourhood Structure Plan were the responsibility of Blue Hill under the original Agreement.

There was no basis on which areasonable person would take this provision in the Addendum to amount to a waiver of the requirement to pay the deposits. I concludethat Blue Hill cannot succeed in this claim. [28] In order to establish promissory estoppel, the party relying on the doctrine must prove that the other party has, bywords or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on.

The representee must also establish that he relied on the representation, and acted on itor in some way changed his position: Maracle v Travellers Indemnity Co of Canada, (SCC), [1991] 2 SCR 50, 80 DLR(4th) 652 (QL) at para 13.

[ 29 ] Assuming that Daon’s extension of time to pay one or both deposits might constitute the required representation, there is no evidence that Blue Hill relied on this representation in the sense of acting on it or changing its position in any way. Blue Hill was without funds and seeking financing both before and after the representation, and before and after Daon terminated the Agreement. Blue Hill’s expenditures of time and effort in continuing to search for financing were undertaken for its own purposes and its own benefit, and did not change its position vis- à -vis Daon.

I conclude that Blue Hill cannot succeed in its claim for promissory estoppel.

Lack of written extension agreement [ 30 ] Daon responds to Blue Hill’s waiver argument that there was no written extension agreement relating to the deposits, and that Blue Hill cannot rely on oral representations to modify the Agreement, due to the parol evidence rule: Gainers Inc v Pocklington Financial Corporation , 2000 ABCA 151 at paras 10 , 15; 255 AR 373; Paddon Hughes Development v Pancontinental Oil , 1998 ABCA 333 at para 27 , 67 Alta LR (3d) 104; Ridge Development Corporation v Haji Holdings Inc , 2009 ABQB 664 at paras 28-29 .

The Agreement itself precludes oral amendments and provides that the written Agreement constitutes the entire agreement between the parties in this matter. In addition, Daon relies on the Statute of Frauds . [ 31 ] The parol evidence rule bars reliance on extrinsic evidence to modify a written contract. However, there are exceptions to the parol evidence rule.

SM Waddams, The Law of Contracts , 6th ed (Toronto, Ont: Canada Law Book, 2010) at para 329 [SM Waddams, 2010], refers to exceptions in relation to extrinsic evidence of events subsequent to execution of the contract, including that “ [o]ral statements may operate as a waiver of rights evidenced by an earlier written document, or they may set up an estoppel. ” The Supreme Court in Steinbock Development held that waiver requires proof of intention to relinquish a right, but did not limit the form in which that intention was expressed, whether in a formal legal document, or in some informal fashion or even inferred from conduct. [ 32 ] Blue Hill need only establish an arguable case on this application.

Facing a similar argument regarding the admissibility of parol evidence, Charbonneau J concluded that it was not the role of the court on a

summary judgment application to make a definitive ruling on admissibility of the evidence or decide the effect that the evidence would have if ruled admissible: Paul ’ s Aircraft Services Ltd v Kenn Borek Air Ltd , 2012 NWTSC 69 at para 20 . She found that it was not beyond doubt that a defence based on waiver could prevail, as an exception to the parol evidence rule. [ 33 ] I conclude, likewise, that Daon ’ s argument relating to the effect of the parol evidence rule is an issue for trial. [ 34 ] I come to the same conclusion regarding Daon ’ s argument based on the provisions of the Agreement.

It may be that these provisions of the Agreement are also subject to waiver. [ 35 ] As to Daon ’ s argument regarding the Statute of Frauds , this does not improve their position. The Statute of Frauds does not require that the entire agreement between the parties be evidenced in writing, only the essential terms of parties, price and property need be: SM Waddams, 2010 at paras 232, 233.

Can Blue Hill ’ s action succeed? [ 36 ] I conclude that there is a triable issue that Daon waived reliance on the dates for payment of the deposits, notwithstanding the lack of a written extension agreement, and that Daon therefore could not insist on payment of the deposits except on reasonable notice to Blue Hill. Given the very short time frame between the meeting of September 18, 2010 and Daon ’ s termination of the Agreement on September 22, 2010, there is also a triable issue that reasonable notice was not provided prior to Daon ’ s purported termination of the Agreement.

These issues, however, are not sufficient to establish a reasonable chance that Blue Hill ’ s action could succeed. [ 37 ] Blue Hill ’ s action is based on the Agreement. The damages that Blue Hill seeks do not arise from Daon ’ s early termination of the Agreement, but from Daon ’ s failure to perform the Agreement at all. Blue Hill ’ s claim is that it was entitled under the Agreement to purchase the Lands for $17,000,000, and that it could resell them for a profit of $100,000,000.

Blue Hill seeks damages in the amount of that alleged loss of profit, as well as exemplary and punitive damages. [ 38 ] In order to make out its claim for damages for lost profit, Blue Hill must be able to prove that, had it not been for Daon ’ s wrongful termination, it would have purchased the Lands and made the profit. To prove this, Blue Hill must be able to establish that it would have been ready, willing and able to comply with its obligation to pay the Purchase Price on the Closing Date.

[ 39 ] As I concluded in my earlier reasons dismissing Blue Hill’s claim for specific performance, the evidence is perfectly clear that Blue Hill did not and could not tender the purchase price by the Closing Date of November 28, 2011 or even by the extended Closing Date that it sought of December 31, 2011. Blue Hill did not have its own resources and did not have even potential financing until later in 2012.

Blue Hill’s evidence is that it obtained financing that would have permitted it to pay the Purchase Price in June 2012. [ 40 ] There is no allegation in the Statement of Claim and no evidence to support any waiver of the Closing Date as provided in the August Addendum. If any claim could be made for entitlement to an extension of the Closing Date, it would be under the terms of the Addendum, which refer to a possible extension of 30 days.

Blue Hill’s claim for damages for lost profit is based on an asserted entitlement to purchase the Lands at the Purchase Price set out in the Agreement but on a date more than six months after the Closing Date set out in the Agreement. This claim has no reasonable prospect of success. [ 41 ] The parties did not address the claims for exemplary or punitive damages in the application. There is nothing in the pleadings or evidence that would support a judgment for such damages which are not usually awarded in the context of a breach of contract claim.

Conclusion [ 42 ] For the foregoing reasons, I am satisfied that Blue Hill ’ s claim for damages has no reasonable prospect of success and is doomed to fail. In the result, I am satisfied that Daon has met the test for

summary judgment and hereby grant the application for

summary dismissal of Blue Hill ’ s action. [ 43 ] The parties may arrange to speak to me if they are unable to agree on costs. Heard on the 16 th day of November, 2012. Dated at the City of Edmonton, Alberta this 10 th day of January, 2013. J.M. Ross J.C.Q.B.A. Appearances: Kenneth J. Rusnak, Self-Represented for the Plaintiff/Respondent, Blue Hill Capital Corporation

Douglas H. Shell, Q.C. Davis LLP for the Defendant/Applicant, Daon Property Corporation