Wetaskiwin Stock Car Club v Draeger, 2016 ABQB 144

Court of Queen ’ s Bench of Alberta Citation: Wetaskiwin Stock Car Club v Draeger, 2016 ABQB 144 Date: 20160314 Docket: 1503 15416 Registry: Edmonton Between: The Wetaskiwin Stock Car Club Applicant - and - Theodore Adam Draeger Respondent _______________________________________________________ Reasons for Judgment of W. S. Schlosser , Master in Chambers _______________________________________________________ [ 1 ] This is an originating application pursuant to

section 141 of the Land Titles Act , RSA 2000, c. L-4 to discharge caveat. It was brought in regular chambers and adjourned so that some authorities could be brought to bear on the issue. [ 2 ] The case appears to fit squarely within one of the ‘incongruities’ noted in the dissenting opinion in Walton (below). If it were not for the somewhat unique facts of this case, the court would seem to be faced with the difficult choice of applying dicta from the majority decision in Walton, and a legislative enactment directly on point. List of Authorities

1. Weinblatt v Kitchener (City), (SCC), 1969 SCR 157 2. Canadian Long Island Petroleums Ltd v Irving Industries Ltd, (SCC), [1975] 2 SCR 715 3. Mitsui & Co (Canada) Ltd v Royal Bank of Canada, (SCC), [1995] 2 SCR 187 4. Sprague-Rosser Contracting Co Ltd v 572757 Alberta Ltd, 2013 ABQB 205 (M), aff’d 2013 ABQB 363 (Gill J) 5. Mylonas Enterprises Ltd v Foundation Place Inc, 2013 ABQB 385 (Yamauchi J) 6. Caleron Properties Ltd v North Calgary Community Church, 2004 ABCA 357 1244034 Alberta Ltd v Walton InternationalGroup Inc, 2007 ABCA 372 7. Semelhago v Paramadevan, (SCC), 1996 2 SCR 415 8.

Triska v Wiggins, 2015 ABQB 33 (Graesser J) 9. Oxford Development Group Inc. v. Midland Ltd. [1993] A.J. No. 47 (CA). Facts [3] In 1972, Theodore Draeger sold a quarter

section of his farm to the Wetaskiwin Stock Car Club for $2,200. This agreementwas protected by a caveat. At the time of the sale the parties agreed (in part):

(1) The Purchasers agree that should they no longer require the above described land they will resell it to the Vendor for the sum of$2200.00 and they agree that upon the said sale the land will be returned so far as possible to original state for use as farm lands.

(2) The Purchasers further agree that the Vendor is entitled to register a Caveat to protect his interest under the said agreement. [4] Over the intervening years, the club built a race track and put nearly one million dollars into the facilities. Now they needanother additional $150,000 for their operation but they want to get financing for it. They say that the caveat stands in their way. Theyargue that the caveat does not disclose an interest in land, and therefore must be discharged from title. Analysis Contractual Rights [5] The original parties are involved.

No application has been taken to challenge the validity of the agreement itself. Whether ornot the caveat is valid, the Wetaskiwin Stock Car Club remains under a contractual obligation to leave the caveat in place. The irony ofthe situation is that the Wetaskiwin Stock Car Club wishes to borrow money for the purposes of continuing its operation but in doing somay frustrate the agreement by using the land to secure its obligations under the loan. In a sense, it wants to prefer new obligations overold ones, because the old ones are no longer convenient. [6] This case goes beyond the usual

section 130 of the Land Titles Act situation that permits someone claiming an interest inland to register a caveat. The Stock Car Club agreed to the caveat here. Unless Mr. Draeger consents, the Court is to uphold theagreement, not re-write it because one party no longer wishes to comply. This would seem to end the matter, but the decided casesrequire that we go on. Dicta in the Oxford Development case tells us that: “A contract can give an interest in land only to the extent thatspecific performance is possible” (and see Walton, per Slatter J.A. at para. 36).

The Nature of the Interest [7] The interest in question is a right of first refusal, or a right of re-purchase, not an option to purchase. In Caleron PropertiesLtd. v. North Calgary Community Church, 2004 ABCA 357, the Court held: [12] An option to purchase gives the optionee, at the time the option is granted, “a right, which he may exercise in the future, tocompel the optionor to convey to him the optioned property”: Canadian Long Island Petroleums Ltd. v. Irving Industries Ltd., (SCC), [1975] 2 S.C.R. 715 at 731. It is not merely an “agreement to make an agreement”.

It is an antecedent contract, theexercise of which must lead to a binding contract of purchase and sale: Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, (SCC), [1995] 2 S.C.R. 187 at paras. 27-28, quoting Sudbrook Trading Estate Ltd. v. Eggleton, [1983] 1 A.C. 444 at 476-77(H.L.). Because it is a contract, an option requires consideration and must contain essential terms such as certainty of parties, subjectmatter and price. But an option to purchase is a specialized instrument and, to be valid, must contain three additional features, set out bythe Supreme Court in Mitsui at para. 26, citing Paul M.

Perell, “Options, Rights of Repurchase and Rights of First Refusal as Contractsand as Interests in Land” (1991) 70 Can. Bar Rev. 1 at 3: 1. exclusivity and irrevocability of the offer to sell within the time period specified in the option; 2. specification of how the contract of sale may be created by the option holder; and

3. obligation of the parties to enter into a contract of sale if the option is exercised. [8] And, in Long Island at page 732, the Court found: In other words, the essence of an option to purchase is that, forthwith upon the granting of the option, the optionee upon the occurrenceof certain events solely within his control can compel a conveyance of the property to him. (emphasis added) [9] In Mitsui, Major, J., writing for the Court says (at 199-200): The difference between an option and a right of pre-emption is that an option gives the optionee the unilateral right to exercise theoption and thereby require the optionor to sell the subject-matter of the option upon pre-arranged terms.

A right of pre-emption, or rightof first refusal, does not give the grantee the unilateral power to compel the grantor to sell the property in question. Instead, the grantorhas the sole power to decide whether to make an offer. It is only at that point that the grantee (or lessee) is given the opportunity ofpurchasing the property. A right of first refusal is a commitment by the grantor to give the grantee the first chance to purchase shouldthe grantor decide to sell. (emphasis added) In this case, the right to require re-conveyance does not depend on events solely within the control of Mr. Draeger.

This right comes intobeing on the occurrence of an event within the control of the Stock Car Club; being their decision that they no longer require the land. [10] The Agreement is not an option to purchase because it depends on the occurrence of a future event that is not ‘solely withinthe control of the optionee’. Instead, the interest is properly characterized as a right of first refusal or right of re-purchase (and seeWalton at para. 38). Both are treated as interests in land though a right of first refusal is sometimes said to be a lesser right. Both willsustain a caveat, at least initially.

When is an interest in land not an interest in land? [11] As noted in Walton, (para. 38), rights of first refusal were not initially considered interests in land: Canada Trustco MortgageCompany v Skoretz (1983), (AB KB), 26 Alta. LR (2d) 60 (and see Canadian Long Island, at 732). In response tothis decision, the Law of Property Act, RSA 2000, c L-7, was specifically amended to provide: 63(1) The following are equitable interests in land: (

a) a right of first refusal to acquire an interest in land; . . . Section 63(2) goes on to provide:

(2) After registration of a caveat under the Land Titles Act protecting an equitable interest referred to in subsection (1), the equitableinterest takes priority in accordance with

section 14 of the Land Titles Act and runs with the land. [12] In Walton, the majority, (following Semelhago), concluded (at para. 16): ... The relevant inquiry is whether it is plain and obvious, mindful of the test in Semelhago, that the Appellant has no interest in landcapable of being enforced by specific performance.

It is axiomatic that if specific performance is not available, there is no interest in theland and the caveat must be struck. (emphasis added) [13] And further: [17] Alberta law is well settled that on an application to discharge a caveat based on an agreement for the purchase and sale of land, afinding that damages would be an adequate remedy is sufficient to discharge the caveat. The determination of the chambers judge wasthus correct in law and is supported by sound policy considerations.

Once it has been determined that damages are an adequate remedy,there is no “interest in land” capable of protection by caveat. (emphasis added) [14] In Walton, a right of first refusal had been exercised. It had become an agreement of purchase and sale. The appellant filed acaveat after the closing date to protect its purchaser’s interest. Walton, and Semelhago before it, were decisions about a purchaser’s rightunder an agreement for sale. [15]

Section 143 of the Land Titles Act deals with caveats protecting agreements for sale. Section 143(1) permits discharge even ifthe agreement is not in default, if it ‘otherwise appears to be a case in which the caveat should be removed’. [16] Section 141(1) of the Land Titles Act requires any caveator to ‘show cause’ why the caveat should not be discharged. Theshort answer to the

section 141 application for this caveat would seem to be that

section 63 of the Law of Property Act makes it aninterest in land,

section 130(

b) of the Land Titles Act permits it to be protected by a caveat. With respect, I am not confident that dicta inWalton (or in Oxford) was intended to apply universally and, in effect, overrule

section 63 of the Land Titles Act.

[17] If the Walton principle is universal, every interest that was once an interest in land would cease to have the quality if it weredetermined that there is no right to specific performance. In other words, the type of remedy has the power to convert an in rem right intoan in personam one. [18] Given the explicit wording of

section 63 of the Law of Property Act and the fact that the ratio of Walton concerns apurchaser’s interest, instead of the type of interest in question here, I consider myself bound, without more (and with respect), to applysection 63 the Law of Property Act. It may be that the Walton principle will be explicitly extended to other interests in land (it wasapplied to a lis pendens in Triska). But the case is presently only authority for what it actually decides.

There is no doubt a universalprinciple would be useful and easy to apply; though with some violence to theory in property law and the principle of indefeasibility, butI am not confident that the decision goes that far. [19] I will add that even if we are in the realm of the enforceability of unregistered interests, it may well be that a lender would bebound by the agreement anyway: Canadian Long Island, Mylonas at para 25, Weinblatt, para. 16.

To allow the Stock Car Club to resilefrom their agreement and let encumbrancers with notice take free, would in effect, be to endorse the kind of land titles fraud barred byHenry Singer v. Holt Renfrew (1982), 1982 ABCA 135 , 20 Alta LR (2d) 97 (CA). [20] Perhaps, I am being too cautious or too resistant to change when it comes to applying the law to the interest specified bysection 63 of the Law of Property Act. However, even if we apply the Walton analysis to this interest, there remains and open questionabout the adequacy of damages. The Special Problem of Damages in this Case [21] It may well be that Mr.

Draeger is able to demonstrate that the land is unique, being (apparently) contiguous with his otherfarmland holdings. Failing that, there are significant questions about the measure of damages such that it is doubtful that damages wouldbe an adequate or appropriate remedy. On the one hand, it is easy to envision damages being measured by taking the value of the land,remediated to farmland, less $2,200.00 or, alternately, taking the land ‘as is’ and adjusting for the costs of remediation less $2,200.00.Although that might be what it would take to put Mr.

Draeger in the position of the contract having been performed, there is a significantrisk in doing so. [22] The agreement between the Stock Car Club and Mr. Draeger is not expressed to bind Mr. Draeger’s heirs, or successors. Assuch, it describes a life interest. If we were to imagine, for the sake of argument, that the Caveat were to be discharged so that financingcould be obtained but that the lands continued to be used as a Stock Car Club over the course of Mr. Draeger lifetime, the damageswould be entirely mitigated. It is the use, not the Caveat that goes to the root of the contract.

And the mitigation issue does not fallentirely into the realm of speculation. Mr. Draeger was sitting in the courtroom. I take notice of the fact that he is not a young man. [23] To put it in technical terms, it is not clear whether Mr. Draeger would be bound to accept the repudiation represented by thedischarge of the caveat and seek damages or specific performance now, and, if he does, whether his duty to mitigate requires waiting forthe time the Stock Car Club no longer requires the land; something that may never occur during Mr. Draeger’s lifetime. (On this point see Waddams.

The Law of Contract, 6th edition, at para 623 at seq). [24] The issue of damages becomes a question of measuring the loss protection suffered by Mr. Draeger, (tempered by the HoltRenfrew principle) against an event that may never occur. This strikes me as a task that better suited to insurance underwriters oractuaries. In the Walton and Semelhago scenarios, the damages are easily measured in lost profits. I do not want to equate difficulty ofassessment with inadequacy. But this one is not so clear. [25] For all of these reasons I am not willing to discharge the Caveat.

The application is dismissed with costs to the Respondent. Dated at the City of Edmonton, Alberta this 14th day of March, 2016. W.S. Schlosser M.C.C.Q.B.A. Appearances: Juliana A. Masiuk

Bishop & McKenzie LLP for the Applicant Michael D. Klause, Q.C. McDonald Street Law Office for the Respondent