Novia Development Ltd v Caleron Properties Ltd, 2016 ABQB 406

Court of Queen’s Bench of Alberta Citation: Novia Development Ltd v Caleron Properties Ltd, 2016 ABQB 406 Date: 20160718 Docket: 1301 04044 Registry: Calgary Between: Novia Development Ltd. Plaintiff - and - Caleron Properties Ltd., Perry McCormack, Karen McCormack and 1467535 Alberta Ltd. Defendants - and - Nassr Ali Awada and Sanaa Awada Third Parties

- and - Nassr Ali Awada and Sanaa Awada Plaintiffs by Counterclaim - and - Novia Development Ltd. and 1467535 Alberta Ltd. Defendants by Counterclaim _______________________________________________________ Reasons forJudgment of the Honourable Madam Justice S.L. Hunt McDonald _______________________________________________________ Introduction [ 1 ] This litigation arises out of multiple sales of a parcel of land that had been divided into two unconnected parts, one

part large enough on which to build a home and another, smaller strip of land.

Following several transactions, there is a dispute among the parties as to who is the rightful owner of the smaller strip of land. [ 2 ] The parcel of land legally described as Lot 5, Block 14, Plan 1210870 (“Lot 5”) was created in March 2012 as a result of the registration of a plan of subdivision by Caleron Properties Ltd. (“Caleron”) of lands located in southwest Calgary in an area known as “Montreux in Springbank Hill”. [ 3 ] As a result of registering its Plan of Subdivision on March 29, 2012, Caleron became the registered owner of Lot 5.

Significantly, Lot 5 is shown on Caleron’s Plan of Subdivision as being separated into

Part 1 and

Part 2. As noted on the Plan of Subdivision

Part 1 of Lot 5 is located on the south side of a cul-de-sac, and is of sufficient size to accommodate the building of a single family residential home.

Part 2 of Lot 5 is a sliver of land on the north side of the same cul-de-sac (referred to as “Part 2” or “the sliver of land”). It is not large enough to build a home on in accordance with the City of Calgary’s Direct Control By-Law 86D2009, which specifies a minimum size requirement for each building parcel and limits construction on a lot to one residence. [ 4 ] The Plaintiff, Novia Development Ltd. (“Novia”), owned lands contiguous to and located immediately to the east of

Part 2 of Lot 5. Novia intended to amalgamate and subdivide

Part 2 of Lot 5 with the other lands that it owned to build two homes and, from the remaining land, subdivide off three lots. The principal of Novia, Nader Bank, also has a residence located on the land owned by Novia.

[ 5 ] In accordance with its plans, Novia purchased

Part 2 of Lot 5 from Caleron in July 2012 for $201,840.00. Novia was not able to register the Transfer of Title into its name because its subdivision had not been approved at the time Caleron executed the Transfer of Title. Caleron subsequently sold

Part 1 of Lot 5 to the Defendants, Karen McCormack and Perry McCormack (collectively referred to as the “McCormacks”), who ultimately assigned their Agreement of Purchase and Sale to their numbered company, 1467535 Alberta Ltd. (“146 Alberta”). Through 146 Alberta, the McCormacks only purchased

Part 1, but the documents reflected a purchase of Parts 1 and 2 with an option for Caleron to purchase

Part 2 for $10.00. Caleron exercised its option and as part of the closing, the McCormacks and 146 Alberta executed Transfers Back of Land in favour of Novia for

Part 2. [ 6 ] The McCormacks planned to build a home on

Part 1, but changed their minds. Following their closing, they listed for sale Lot 5, and sold it to the Third Party Defendants, Nassr Ali Awada and Sanaa Awada (the “Awadas”). After Lot 5 was sold to the Awadas, Novia attempted to register the Transfer of Land for

Part 2 without success as the transferor (146 Alberta) was no longer the registered owner of Lot 5. Novia asked the Awadas to sign a new Transfer of Land for

Part 2 to remedy the problem. The Awadas refused, arguing that they intended to purchase, and did purchase, both Parts 1 and 2 of Lot 5. [ 7 ] In the meantime, Novia began building a house on its lot adjacent to

Part 2 and on

Part 2. The construction has since been removed and Lot 2 remediated. 146 registered a caveat and two certificates of Lis Pendens against Lot 5. Novia also registered a caveat against Lot 5. The caveats and certificates of lis pendens were not registered before Lot 5 was purchased by the Awadas. During the litigation, Novia filed a revised Plan of Subdivision which did not include the

Part 2 lands and informed the parties it would only be seeking damages and not specific performance. [ 8 ] The dispute centres around who bears the responsibility for the sale by 146 Alberta of

Part 2 to the Awadas after it had already executed a Transfer of Land in favour of Novia in what was described by Caleron’s real estate lawyer as an “unorthodox process”. At issue is the

interpretation of the agreements entered into among the parties and the impact of registration (or not) of a Transfer of Land at the Land Titles Office. The parties suggest this situation has arisen out of opportunism, carelessness and recklessness by multiple parties. No resolution can completely undo what has transpired. Facts [ 9 ] There were various agreements entered into by the parties that are fundamental to this litigation.

These include an agreement between Caleron and Novia, an agreement between Caleron and the McCormacks that was subsequently assigned to 146 Alberta, and an agreement between 146 Alberta and the Awadas. Caleron/Novia Agreement [ 10 ] Novia and Caleron executed an Agreement for Purchase and Sale dated June 8, 2012 for the sale by Caleron of

Part 2 of Lot 5 to Novia (the “Caleron/Novia Agreement”). Novia paid the sum of $201,840.00 to purchase the sliver of land. [ 11 ] Initially, Novia’s dealings with Caleron were carried out by Nader Bank on behalf of Novia. He and Caleron entered into a Subdivision and Servicing Agreement dated August 15, 2011, which included the joint creation, ownership and sale of a shared residential lot through an exchange of lands (the “Subdivision and Servicing Agreement”). He later assigned his interest in the purchase of Caleron lands to Novia with notice to Caleron. [ 12 ] Novia owned the lot adjacent to

Part 2, and intended to register a Plan of Subdivision to amalgamate

Part 2 into its Lot 10 and combine

Part 2 with some of Novia’s land to create Lot 10 in Novia’s Subdivision. Novia was still in the process of obtaining the requisite approvals from the City of Calgary Planning authorities for its Plan of Subdivision at the time the Caleron/Novia Agreement was entered into.

In order to complete the purchase of the sliver of land from Caleron, Novia would only be able to register the Transfer of Land it received from Caleron with the Plan of Subdivision once it was approved. [ 13 ] Accordingly, clause 6 of the Caleron/Novia Agreement required Caleron to provide Novia with a registrable Transfer of Land relating to the sliver of land which, upon registration, would provide the Certificate of Title to the sliver of land to issue in the name of Novia, free of all encumbrances, liens or interests except the “Permitted Encumbrances” as defined in the Agreement.

In other words, it was contemplated that the actual transfer of

Part 2 may not be completed until sometime after the closing. [ 14 ] Clause 13 of the Caleron/Novia Agreement specified that the Agreement was not to merge on the delivery or registration of the transfer of land. Clause 16 set out that there were “no representations and warranties other than the agreement”, and clause 20 mandated that “[t]ime shall be of the essence”. [ 15 ] In addition, clause 14 of the Agreement stipulated that Caleron would bear the cost of preparing the Transfer of Land to convey

Part 2 to Novia, and that Novia would be responsible for and pay all costs associated with registration of any such Transfer of Land. [ 16 ] The closing date was stipulated to be July 25, 2012. The purchase and sale actually closed sometime in late July or early August of 2012, and Novia paid the sum of $201,840.00 to Caleron to purchase the land.

After adjustments, $95,000.00 was to be released to Caleron with the balance to be held in trust pending completion of certain unrelated matters in the Subdivision and Servicing Agreement entered into between Novia and Caleron. [ 17 ] At closing, Novia was not yet in a position to register the Transfer of Land received from Caleron, as its Plan of Subdivision was not yet finalized. Caleron/McCormack Agreement

[ 18 ] The McCormacks and Caleron entered into an Agreement for Purchase and Sale dated October 5, 2011 for the sale of

Part 1 of Lot 5 from Caleron to the McCormacks for $480,150.00 (the “Caleron/McCormack Agreement”).

Part 1 was described as a “single family residential Lot”, and the Agreement indicated that the lot being purchased was part of an unregistered subdivision plan at the time of execution. The closing date was initially stipulated to be nine months from the date of the Caleron/McCormack Agreement, as Caleron was still in the process of registering its Plan of Subdivision which would create Lot 5. The Closing Date was subsequently set for July 5, 2012 by email between the parties. [ 19 ] Caleron only intended to sell

Part 1 of Lot 5 to the McCormacks, who intended to build a home on

Part 1. In the Caleron/McCormack Agreement, “Lot” was defined as “Lot 5,

Part 1, Block 14, Plan unregistered...” Further, in clause 2, the Lot being sold and purchased pursuant to this Agreement was set out as

Part 1. [ 20 ] In clause 20 of the McCormack/Caleron Agreement, Caleron was granted an option to repurchase

Part 2 from the McCormacks for $10.00 “upon the Vendor [Caleron] obtaining necessary approvals for the subdivision of

Part 2 from [Lot 5]” (the “Option”). The transfer back of

Part 2 was intended by Caleron to be registered concurrent with Novia’s Plan of Subdivision once Novia obtained the necessary approvals from the City. [ 21 ] Clause 21 of the McCormack/Caleron Agreement provided Caleron with the right to file a caveat on Lot 5 referencing the Agreement and its rights regarding the Option to repurchase

Part 2, and such caveat would be a permitted encumbrance. The McCormacks and Caleron acknowledged and agreed that the Option would run with the land and be binding on their transferees, assignees, successors and heirs. [ 22 ] Pursuant to clause 15 of the McCormack/Caleron Agreement, the McCormacks paid Caleron $10,000.00 as security for the due performance of the purchaser’s obligations, including landscaping and repair of any damage to infrastructure facilities (the “Grading/Damage Deposit”). [ 23 ] The McCormacks originally intended to build a home on

Part 1. By email dated June 29, 2012, they advised Ronald Slater of Caleron that they no longer wished to build on the lot. They inquired whether Caleron would agree to accept a return of the lot or alternatively give the McCormacks the right to sell the property themselves. By email dated July 5, 2012, Mr. Slater advised them that they would have to close on the lot purchase and then re-sell the land themselves. On July 15, 2012, the McCormacks inquired about the return of the $10,000.00 Grading/Damage Deposit. By email dated July 17, 2012, Mr.

Slater replied: Once you have assigned or sold your interest in the lot to a third party, and the third party has paid its Damage Deposit, Caleron will refund your deposit to you. You will be required to return the grade slip issued to you at that time. [ 24 ] The McCormacks assigned their interest to their corporation, 146 Alberta, to take advantage of tax requirements relating to payment of GST.

They provided written notice to Caleron and received written permission to assign their interest to 146 Alberta, and executed an assignment of the Caleron/McCormack Agreement on August 10, 2012. [ 25 ] There was some delay by Caleron in providing the registrable transfer documents to the McCormacks. The closing date was extended to July 25, 2012, and the purchase and sale actually closed in early August when funds were released to Caleron after registration of the transfer for Lot 5 occurred at the Land Titles Office. [ 26 ] To protect Novia’s unregistered interest in

Part 2 of Lot 5, Caleron exercised its Option to repurchase

Part 2 in August 2012 at around the time of closing. Although the Option was required to be exercised in writing, there was no written notice given. In any event, there is no dispute between Caleron, the McCormacks and 146 Alberta that the Option was exercised. [ 27 ] As a result of the exercise of the Option, the McCormacks and 146 were required to execute two Transfers of Land for

Part 2 in a form prepared by Caleron for each of Caleron and Novia. Before registering the Transfer of Land from Caleron to 146, they executed the two Transfers of Land on August 2, 2012: one personally in favour of Caleron, and one on behalf of 146 in favour of Novia (the “Transfers Back”). At the time 146 Alberta’s lawyer forwarded the executed Transfers of Land to the lawyer acting for Caleron on the sale, no trust conditions were imposed by 146 Alberta’s lawyer stipulating any deadline for registration of either of them at the Land Titles Office. The Option provision allowing Caleron to repurchase

Part 2 was never registered by Caleron by caveat on title to Lot 5, presumably because they exercised the Option almost immediately. [ 28 ] Lot 5 was transferred to 146 Alberta, who became the registered owners of the entirety of Lot 5, including both Parts 1 and 2, on August 9, 2012, completing the purchase and sale transaction. [ 29 ] Novia subsequently received the Transfer Back from Caleron that had been executed by 146 Alberta after the completion of the Caleron/McCormack Agreement. Novia’s lawyer attempted to register it at the Land Titles Office, but the request was rejected on August 20, 2012.

Novia was advised by the Land Titles Office that the Transfer Back had to be provided concurrently with Novia’s Plan of Subdivision in order for it to be registered. [ 30 ] 146 Alberta listed the property for sale the day before it became the registered owner of Lot 5. No mention was made in the Listing Agreement or Residential Real Estate Purchase Contract alerting any third party that the sliver of land was excluded from the sale, as

Part 2 was subject to the Option set out in clause 20 of the Caleron/McCormack Agreement. 146 Alberta/Awada Agreement [ 31 ] Pursuant to a Residential Real Estate Purchase Contract dated November 8, 2012, 146 Alberta agreed to sell “Lot 5, Block 14, Plan 1210870” to Nassr Ali Awada and Sanaa Awada (the “Awadas”) for $508,000.00 (the “146 Alberta/Awada Agreement”). This price was $28,850.00 more than what they paid to Caleron for

Part 1. [ 32 ] There was no mention in the 146 Alberta/Awada Agreement that only

Part 1 was intended to be sold to the Awadas, or that

the sliver of land across the street,

Part 2, was excluded as part of the sale. The municipal address for the property was listed as 152 Fortress Bay SW, which included both Parts 1 and 2. [ 33 ] The 146 Alberta/Awada Agreement did not mention Caleron’s Option to re-purchase

Part 2 of Lot 5. Nor were there any trust conditions imposed or notice given by 146 Alberta’s lawyer to the Awadas’ lawyer in respect of the Option provisions created by clause 20 of the Caleron/McCormack Agreement, even though it was agreed that the Option be binding upon the McCormacks’ successors and would run with the land. [ 34 ] The Awadas’ evidence at trial was that they knew they were purchasing Parts 1 and 2 of Lot 5. They intended to build a residence on

Part 1 and hold

Part 2 as an investment. Their evidence was that they had researched the property and were aware in advance that it was comprised of Parts 1 and 2. They did not print out their research at the time, but recreated their research once this litigation commenced so Mrs. Awada could refer to it in her testimony. [ 35 ] While this may seem to be convenient after the fact, there is corroborating evidence that the Awadas knew at least before the transaction closed on November 30, 2012 that Lot 5 was comprised of both a lot suitable for residential construction (Part 1) and a sliver of land across the street (Part 2).

On November 9, 2012, Caleron provided the Awadas’ realtor with an email copy of a Tentative Plan of Subdivision showing both Parts 1 and 2 of Lot 5, together with architectural guidelines for the area. The email also contained a copy of the cul-de-sac with reference to “10”, but no explanation as to what that meant. On November 10, 2012, the Awadas received a plot plan for

Part 1, again by email. The Awadas waived conditions on the 146 Alberta/Awada Agreement on November 16, 2012. [ 36 ] The Awadas’ evidence was that at no time before closing did anyone advise them that only

Part 1 was for sale. Further, they were not aware of the parties’ contracts relating to Lot 5 prior to the closing. [ 37 ] The purchase and sale transaction had a closing date of November 30, 2012. Once registration of the Transfer of Land was registered at the Land Titles Office, the Awadas released the sale proceeds to 146 Alberta on December 3, 2012. The Registrar of Land Titles issued a new Certificate of Title in the names of the Awadas that included both

Part 1 and

Part 2 of Lot 5. Novia’s Subdivision Approval [ 38 ] Novia’s Plan of Subdivision reflected Novia’s intention to amalgamate

Part 2 of Lot 5 with lands it owned and then to subdivide portions of the land into new lots. The sliver of land was intended by Novia to form part of its new Lot 10 shown on its Plan of Subdivision submitted for registration to Land Titles in January, 2013. [ 39 ] Subsequent to the Awadas completing their purchase from 146 Alberta, Novia finally received all its subdivision approvals from the City of Calgary. Novia attempted again to register 146 Alberta’s Transfer Back in its favour concurrently with registration of its Plan of Subdivision in January, 2013 at the Land Titles Office.

The documents were rejected, and the Land Titles Office advised Novia in its rejection notice that the Transfer Back needed to be signed by the current owners. [ 40 ]

Part 2 of Lot 5 is currently registered in the Awadas’ name. It has no development potential on its own, as the sliver is not of sufficient size for a single family residential home in the DC (Direct Control) zoned area to be built in accordance with the conditions imposed for building in the area. It cannot be subdivided or sold in its present form.

Part 2 is not large enough to meet minimum lot size requirements specified by the Development Plan for the Springbank Hill area. Novia Commences Construction on

Part 2 of Lot 5 [ 41 ] Novia received building permits for its lots from the City of Calgary on January 2, 2013, and a building permit for construction of a new home on what was to be Lot 10 (which would include

Part 2) on January 4, 2013. This was prior to when Novia obtained final approvals for its Plan of Subdivision. On January 17, 2013, Novia’s Plan of Subdivision was approved that would amalgamate

Part 2 with another lot to form Lot 10. On January 21, 2013, Novia attempted to register its Plan of Subdivision and the Transfer Back from 146 Alberta. These documents were rejected by the Land Titles Office on January 28, 2013. [ 42 ] At the end of January 2013, Novia commenced construction of a foundation on its proposed new Lot 10 of its as-of-yet unregistered Plan of Subdivision. The foundation encroached on the sliver of land which was registered in the name of the Awadas, as it remained

Part 2 of Lot 5. [ 43 ] When the Awadas realized that construction had commenced on the sliver of land registered in their name, they reported the development to the City of Calgary. A stop work order was issued by the City of Calgary.

In addition, the Awadas’ lawyer issued a written notice to Novia to cease all activities on the Awadas’ land. [ 44 ] After receiving the stop work order, Novia finished the subfloor over the foundation, fenced in the construction site and then stopped its construction project. [ 45 ] Relying on the Option clause in the Caleron/McCormack Agreement, Novia filed a caveat dated March 8, 2013 claiming an interest as beneficial owner of Lot 5, which by then was registered in the Awadas’ name.

It was discharged on October 21, 2014. [ 46 ] 146 Alberta filed a caveat dated February 22, 2013, claiming to be the beneficial owner of Lot 5. On April 9, 2013, 146 Alberta registered a certificate of lis pendens against Lot 5 as well. There is a second certificate of lis pendens that was registered against Lot 5 relating to the caveat filed by 146 Alberta on May 7, 2013. [ 47 ] No caveat or certificate of lis pendens had previously been filed on the title to Lot 5.

These were the first documents registered on title that gave notice of the Option contained in the Caleron/McCormack Agreement (which was later assigned to 146 Alberta) and of the interest claimed in

Part 2 of Lot 5.

[ 48 ] On September 29, 2014, Novia’s counsel advised the parties that Novia had prepared a revised plan of subdivision that did not include

Part 2. Novia then demolished the basement foundation and remediated the land at a cost of $10,605.00. The Problem Comes to Light [ 49 ] Ms. McCormack continued to follow up with Caleron for the return of the $10,000.00 Grading/Damage Deposit. By email dated December 11, 2012, she advised Mr. Slater that “152 Fortress Bay SW Springbank Hill Lot 5, Block 14, Plan 1210870” had been sold to the Awadas effective November 30, 2012, and requested a return of the Grading/Damage Deposit. She followed up again by email on January 9, 2013. On January 23, 2013, after receiving no response, she emailed Mr.

Slater advising that she would attend at Caleron’s office on the following Monday to pick up a cheque. In response on January 25, 2013, Mr. Slater asked her to bring a copy of the 146 Alberta /Awada Agreement including the Awadas’ agreement to be bound by the terms of the Caleron/McCormack Agreement, and that they agree Caleron is permitted to file a caveat to enforce the terms and conditions of that agreement. [ 50 ] In early February 2013, the problem relating to

Part 2 became evident. [ 51 ] Negotiations commenced between Novia, Caleron, the McCormacks and 146 Alberta to try to resolve the problem with the Awadas, who were by that time the registered owners of

Part 2. [ 52 ] Initially in this action, Novia sought specific performance of its agreement with Caleron for the purchase of

Part 2. Novia had a new transfer back prepared which they requested the Awadas execute. [ 53 ] The Awadas refused all requests to transfer title to

Part 2 to Novia. [ 54 ] Significant time passed. There was no resolution achieved by the parties. [ 55 ] Subsequently, Novia decided not to seek a transfer of

Part 2 from the Awadas. As noted, in the fall of 2014, Novia removed its caveat from the Awadas’ title and proceeded instead with a new Plan of Subdivision wherein the original layout of its lots would be reassigned so that a building lot could be configured next to the sliver of lands, but not incorporating

Part 2 of Lot 5. Novia advised the parties it would be seeking damages, rather than specific performance in this action. Claims Novia [ 56 ] Novia commenced this action against Caleron, the McCormacks and 146 Alberta. [ 57 ] Novia claims it suffered losses caused by Caleron who breached the June 8, 2012 contract between the parties when Caleron sold the un registrable piece of land (Part 2 Lot 5) to Novia.

Despite Novia paying the purchase price of $201,840.00, Novia claims Caleron has never provided it with a registrable Transfer of Land capable of passing legal title to Novia. [ 58 ] In addition, Novia claims its losses were also caused by the McCormacks and 146 Alberta who created an equitable interest in the land in favour of Novia (by signing the Transfers Back), and then subsequently defeating that very same interest by selling Novia’s sliver of land (Part 2 of Lot 5) to a bona fide third party purchaser for value (the Awadas), which meant Novia could not register the Transfer Back provided by 146 Alberta when it attempted to register it concurrently with its Plan of Subdivision in January 2013. [ 59 ] Novia also claims against the McCormacks and 146 Alberta for breach of an implied contract, breach of trust and Land Titles fraud. [ 60 ] Novia seeks damages against Caleron, the McCormacks and 146 Alberta, jointly and severally, in the amount of $580,110.56 which it claims was caused to Novia by those parties’ actions.

The amounts claimed by Novia include: a) $201,840.00 for the return of the purchase price paid for the land; b) $70,500.00 for the wasted costs of constructing a foundation on

Part 2; c) $2,293.20 for the cost of renting a fence to secure the construction site on

Part 2 of Lot 5 and Lot 10 once the City of Calgary issued a stop work order; d) $10,605.00 for the cost to demolish the foundation and remediate the land; e) $45,322.36 for wasted work in seeking approval of its initial Plan of Subdivision including

Part 2, which includes (i) $6,825.00 paid to a survey company, (ii) $29,557.36 paid to a consultant for work that could not be reused, (iii) $2,100.00 paid to the City of Calgary pursuant to an indemnification agreement, and (iv) $6,840.00 for loss of investment interest for a letter of credit posted to secure the indemnification agreement; f) $216,000.00 for the loss of developable lands in Novia’s subdivision as a result of the loss of

Part 2; and

g) $33,550.00 in increased costs for approval of a new Plan of Subdivision due to new requirements for a swale, at a cost of $11,550.00, and the removal and replanting of trees, at a cost of $22,000.00. [ 61 ] Novia also seeks damages for designing a home and obtaining building permits, although this was not quantified in their evidence or submissions [ 62 ] In addition to damages, Novia requests a declaration from the Court that it has paid all boundary costs to Caleron. Caleron objects to this relief, noting that it was not plead in the Amended Statement of Claim. The issue of boundary costs was not plead.

It was mentioned in opening argument at trial as a request for a declaration that Caleron comply with its obligations in the Subdivision and Servicing Agreement between it and Novia, and was raised in Novia’s written argument following trial. Caleron argues that there was no evidence at trial that it did not fulfill any such obligations. Caleron [ 63 ] Caleron filed a Statement of Defence denying any liability to Novia. It states it protected Novia’s purchase of

Part 2 of Lot 5 and protected Novia by the Option provision in the Caleron/McCormack Agreement. Further, Caleron submits it provided Transfers Back to effect the transfer of

Part 2 to Novia on its closing with the McCormacks (which, by the time of closing, was with 146 Alberta). [ 64 ] Accordingly, Caleron requests the claim against it be dismissed with costs. The McCormacks and 146 Alberta [ 65 ] The McCormacks and 146 Alberta say they are caught in a litigation nightmare between the carelessness of Novia in failing to protect its interest in

Part 2, and opportunism of the Awadas who only acquired

Part 2 as a result of a mistake. [ 66 ] In their Statement of Defence, the McCormacks and 146 Alberta state that Novia failed to promptly register the Transfer Back it received once the Caleron/McCormack Agreement closed. Further, they allege that Novia failed to register a caveat to protect its interest under the Option granted to Novia by clause 20 in the Caleron/McCormack Agreement. [ 67 ] 146 Alberta alleges that its Transfer of Land to the Awadas inadvertently included

Part 2 of Lot 5 due to a mistake. The McCormacks and 146 Alberta assert they performed all obligations required of them relating to the Option. [ 68 ] They further state that they reasonably believed that any interest they may have had in

Part 2 had been transferred to Novia, and that any pending subdivision had been completed. They submit that the fact that Novia commenced construction of a house before it had properly secured title to

Part 2 is not the result of any default or breach of 146 Alberta or the McCormacks. Accordingly, they deny that Novia has suffered damages as a result of their actions. [ 69 ] In any event, if Novia’s interest in

Part 2 has been defeated, it is as a result of its failure to caveat its interest in

Part 2 or to register the Transfer Back, or as a result of Caleron’s failure to caveat Novia’s interest pursuant to the Caleron/McCormack Agreement. It is not the fault of 146 Alberta or the McCormacks. [ 70 ] 146 Alberta filed a Third Party Claim against the Awadas on the basis that the Transfer 146 Alberta provided to the Awadas erroneously contained the sliver of land known as

Part 2 of Lot 5. 146 Alberta alleges that, as a result, their contract with the Awadas contains a mutual or common mistake. 146 Alberta alleges that the Awadas hold the sliver of land by express, constructive or implied trust in favour of 146 Alberta. [ 71 ] Alternatively, 146 Alberta seeks to have the 146 Alberta/Awada Agreement of November 8, 2012 rectified to replace and limit the legal description of the lands transferred to the Awadas to

Part 1 of Lot 5. [ 72 ] Additionally, 146 Alberta and the McCormacks filed a Notice of Claim against Co-Defendant claiming contribution and indemnity from Caleron. They also seek reimbursement of their $10,000.00 Grading/Damage Deposit. Although this claim does not appear in the pleadings, the parties fully argued for return of their deposit at trial. It is discussed below. The Awadas [ 73 ] The Awadas deny that they are liable to 146 Alberta. They submit they were aware of and intended to buy both parts of Lot 5.

They assert they conducted extensive due diligence relating to the purchase prior to executing an offer to purchase with 146 Alberta [ 74 ] The Awadas assert they were never made aware of any dealings between Caleron, the McCormacks and 146 Alberta, and Novia. [ 75 ] At all material times, the Awadas claim that they were bona fide purchasers for value and relied on the register of the Land Titles Office. [ 76 ] Accordingly, they request dismissal of the Third Party Claim with costs on a solicitor-client basis. [ 77 ] They also request an order from the court discharging the caveats filed as Instrument Nos. 131050331 and 131057865 and discharges of certificates of lis pendens registered as Instrument Nos. 131083 604 and 131105 074 from their title.

The caveat filed by 146 Alberta (131050331) and the two certificates of lis pendens remained registered on title as of the time of trial, according to a Historic Land Titles Certificate as of September 4, 2015 filed as an exhibit at trial. [ 78 ] In addition, the Awadas brought a counterclaim against Novia and 146 Alberta seeking:

a) Damages due to the delay they have suffered in building a house, although they say the actual costs will not be known until they construct a house. They expect the costs of building a house in 2016 will be greater than in 2013. They ask either for leave to have damages assessed at a later date once the costs of building are ascertained, or damages at large in an amount of $25,000;

b) Nominal damages against Novia for trespass due to Novia’s trespass in commencing to construct a house on their land;

c) A discharge of the remaining caveat and certificates of lis pendens ; and

d) Solicitor and client costs for the Counterclaim, as those costs were incurred to obtain a discharge of the remaining caveat and certificate of lis pendens , pursuant to sections 144 and 149 of the Land Titles Act , RSA 2000, c L-4 regarding compensation for wrongfully filed caveats and certificates of lis pendens . Issues [ 79 ] The fundamental questions for determination are who has suffered damages and who is responsible for those damages as a result of the sale by 146 Alberta of

Part 2 at a time when

Part 2 had already been sold to Novia. The issues for determination in order to answer those questions are: 1) Issues relating to Caleron and Novia a. Did Caleron breach the Caleron/Novia Agreement? b. Did Caleron have the obligation to file a caveat or take other steps to protect Novia’s interest in

Part 2 of Lot 5? c. Did Novia have the right to file a caveat to protect its interest in

Part 2 of Lot 5 pursuant to the Novia/Caleron Agreement? In failing to do so, is Novia the author of its own misfortune and therefore should its claim be dismissed? 2) Issues relating to the McCormacks and 146 Alberta a. Did the McCormacks or 146 Alberta breach the Caleron/McCormack Agreement? b. Are the McCormacks or 146 Alberta liable to Novia on the basis of breach of an implied contract, breach of trust, or Land Titles fraud? c. Can the McCormacks be held personally liable for their actions on behalf of 146 Alberta?

Should the corporate veil between 146 Alberta and the McCormacks be pierced? 3) Issues relating to the Awadas’ purchase a. Are the Awadas bona fide purchasers for value without notice of Lot 5 (both parts), or was

Part 2 of Lot 5 conveyed to the Awadas by mistake? b. How should the contract between 146 Alberta and the Awadas be interpreted? c. If Lot 5 was conveyed by mistake, is rectification an appropriate remedy? 4) The Awadas’ claim against Novia and 146 Alberta a. Are Novia and 146 Alberta liable to the Awadas for the improper filing of caveats and certificates of lis pendens against Lot 5? b. Is Novia liable in trespass to the Awadas? If so, are the Awadas entitled to any damages? 5) Collateral Issues raised by the Parties a.

Is Novia entitled to a declaration from the Court that Novia has paid all its boundary costs pursuant to the Subdivision and Servicing Agreement between it and Caleron? b. Does Caleron owe the McCormacks a refund of $10,000.00 that the McCormacks and 146 Alberta claim for the return of their Grading/Damage Deposit? 6) Damages Issues a. What is the proper quantum of Novia’s damages? Is Novia entitled to the full amount of $580,110.56 claimed for its costs and estimated losses? b. In the alternative to damages, is Novia entitled to an order for restitution for breach of trust against 146 Alberta? c.

What are the Awadas’ damages in respect of their counterclaim? [ 80 ] These issues are discussed in the following section. Analysis and Decision

Issues relating to Caleron and Novia (

a) Breach of agreement – Did Caleron provide a “Registrable Transfer of Land”? [81] Novia purchased

Part 2 of Lot 5 from Caleron for $201,840.00, and claims it received nothing in return. According to Novia,Caleron breached the Caleron/Novia Agreement by failing to provide Novia with a registrable transfer of land, in effect selling Novia anunregistrable piece of land. Novia alleges that Caleron never provided it with a registrable transfer of land capable of passing legal title toNovia. In addition, Novia complains that while Caleron was aware that 146 Alberta intended to list Lot 5 for sale, it did not informNovia. [82] Novia argues that the commercial purpose of the Caleron/Novia Agreement was for Novia to purchase

Part 2 from Caleron toamalgamate with its adjacent lands to create Lot 10. This would require both that Novia, with Caleron’s consent, apply to the City ofCalgary for approval of its Plan of Subdivision to amalgamate

Part 2 of Lot 5 into Lot 10, and that Caleron provide a “registrableTransfer of Land” to be registered concurrently with Novia’s Plan of Subdivision. [83] While subdivision approval is required before part of a parcel of land can be conveyed, it is not a condition precedent to thevalidity of a contract to sell part of the parcel.

It is implicit that the owners of the full parcel will seek subdivision approval and, onceapproved, convey the new parcel covenanted to be sold: Carruthers v Tioga Holdings Limited, 1999 ABCA 73 (“Carruthers”) at para 4.In this case, it was the purchaser, Novia, who was to seek subdivision approval. [84] There is no dispute that Caleron was aware that Novia intended to amalgamate

Part 2 of Lot 5 into Lot 10, and that thetransfer could not be registered until the City approved Novia’s Plan of Subdivision. There is also no dispute that Caleron consented toNovia’s Plan of Subdivision.

Clause 6 of the Caleron/Novia Agreement stipulates that, upon receipt of the balance of the purchase price(including interest and adjustments): The Vendor shall ... provide the Purchaser with a registrable Transfer of Land which, upon registration, will cause the certificate of titleto the Lot to issue in the name of the Purchaser ... [85] There is no issue that Caleron provided Novia with a duly executed Transfer Back at the time Novia released the funds toCaleron to complete the purchase.

The issue is whether Caleron delivered a “registrable Transfer of Land” as required under clause 6. [86] In determining the key question of whether Caleron provided Novia with a “registrable Transfer of Land”, general principlesof contractual

interpretation provide some guidance to ascertain what Caleron was required to do. Specifically, contracts should beenforced in accordance with the parties’ intentions: Nexxtep Resources Ltd v Talisman Energy Inc, 2013 ABCA 40 at para 20. Further,where an agreement is clear and unambiguous, extrinsic evidence is not admissible: Nexxtep at para 20. At the same time, words are notto be interpreted in a vacuum.

As the Alberta Court of Appeal held in AG Clark Holdings Ltd v HOOPP Realty Inc, 2013 ABCA 101 atpara 15: ...The court must have regard to the contract as a whole, giving the words used their natural and ordinary meaning, and also havingregard to the relevant background context. [87] Novia argues that the Caleron/Novia Agreement mandated that the Transfer of Land provided to it must be capable of passingan interest in land.

The Transfers Back provided could not pass an interest in land in the context of Novia’s pending Plan of Subdivision.The Transfer Back from 146 Alberta would only be “registrable” once the Plan of Subdivision was approved, and Novia argues thatCaleron was aware of this. Novia relies on Bighorn No. 8 (Municipal District ) v Bow Valley Waste Management Commission, 2013ABQB 723 at para 17, aff’d 2015 ABCA 127, where the Court stated: Some guidance is obtained from King v Operating Engineers Training Institute of Manitoba Inc., 2011 CarswellMan 485 (Man.

C.A.) asto what evidence or type of evidence is admissible as forming the “factual matrix”, commencing at para 66: The nature of the evidence that constitutes the factual matrix, will, of necessity, vary from case to case and is highly contextual, butgenerally it consists of the “background of relevant facts that the parties must clearly have been taken to have known and to have had inmind when they composed the written text of their agreement” (Glaswegian Enterprises Inc. v BC Tel Mobility Cellular Inc (1997), (BC CA), 101 BCAC 62 (BCCA) at para 18, Lambert J.A.) …such evidence is generally restricted to circumstances known to both parties that illuminate the meaning a reasonable person wouldgive to the words employed: Glaswegian, supra, at paras 18-20. …it is certainly right the court should know the commercial purpose of the contract and this in turn presupposes knowledge of thegenesis of the transaction, the background, the context, the market in which the parties are operating, … So, generally, the factual matrix will include, among other things: • Evidence of the commercial purpose of the contract, its aims and objectives; • Evidence of the nature or custom of the market or industry in which the contract was executed; • Evidence of the objective intention of the parties.

But not, • Evidence of the subjective intention of the parties;

• Evidence of the negotiations; and • Evidence of the subsequent conduct of the parties after the contract was entered into. [ 88 ] Novia submits that in interpreting the Caleron/Novia Agreement, the factual matrix referred to by the Court should include the fact that the parties were aware of the subdivision approval timelines. [ 89 ] Caleron responds that the Transfer Back provided was registrable. It was in a form that included a reference to the Plan of Subdivision to be inserted once it was approved.

At the time of closing, both Caleron and Novia were aware that the Plan of Subdivision would have to be filed concurrently with the Transfer Back. This is not a situation where neither party realized the Transfer Back would have the effect of subdividing Lot 5 and did not realize a plan of subdivision was required.

Caleron and Novia were aware of this, and the obligation to obtain subdivision approval rested with Novia. [ 90 ] In addition to relying on the contextual information regarding the commercial purpose of the Caleron/Novia Agreement and that the parties were aware of the subdivision timelines, Novia refers to sections in the Land Titles Act , to interpret the meaning of “registrable Transfer of Land”. Specifically: -“Registration” is defined in

section 1(

v) as “(

i) the bringing of land under the provisions of this Act, (ii) the entering on the certificate of title of a memorandum authorized by this Act or any other Act of any instrument or caveat, and (iii) the entering in the proper register of any instrument or caveat authorized to be registered, of which a memorandum is not required to be entered on a certificate of title”; -“Transfer” is defined in

section 1(

w) as “the passing of any estate or interest in land under this Act, whether for valuable consideration or otherwise, as well as the instrument of transfer in the prescribed form”; -The Land Titles Act provides that “[w]hen land for which a certificate of title has been granted is intended to be transferred, the owner may execute a transfer in the prescribed form”: s 64(1); and -The Land Titles Act sets out the prescribed form of transfer in section 64(3) requiring (

i) a description of the land that is sufficient to identify it, and (ii) an accurate statement of the estate or interest intended to be transferred or created. [ 91 ] Novia argues that clause 6 of the Caleron/Novia Agreement required that Caleron provide Novia with a transfer of land that: (

i) was capable of passing the legal interest in the land; (ii) was capable of registration at the Land Titles Office; and (iii) would, upon registration, pass legal title to the purchaser. [ 92 ] Caleron required the McCormacks and 146 Alberta to execute Transfers Back for

Part 2, and Novia received a Transfer Back executed by 146 Alberta. The Transfer Back was in the prescribed form and met the requirements set out in section 64(3) of the Land Titles Act .

I accept that it could not be registered until Novia’s Plan of Subdivision was approved, as that would be contrary to section 652(1) of the Municipal Government Act , RSA 2000, c M-26, which provides: A Registrar may not accept for registration an instrument that has the effect or may have the effect of subdividing a parcel of land unless the subdivision has been approved by a subdivision authority. [ 93 ] That the Transfer Back could not immediately be registered does not, in my view, mean the Transfer Back was not registrable in accordance with clause 6 of the Caleron/Novia Agreement; it was registrable subject to Novia completing the process for approval of its Plan of Subdivision, and submitting it together with the Plan of Subdivision for concurrent registration.

Once Novia received the Transfer Back, it released the funds to Caleron and made no objection at the time to the form of transfer. It did not object that Caleron did not fulfill its obligations under the Caleron/Novia Agreement even when the Land Titles Office rejected the registration of the Transfer Back because Novia’s Plan of Subdivision had not yet been approved. [ 94 ] When Novia’s Plan of Subdivision would be approved and its application process were not within Caleron’s control, and Caleron played no role in that application process once it provided its consent.

I agree with Caleron’s submission that Novia was provided with a registrable Transfer of Land that contemplated it being filed concurrently with Novia’s approved Plan of Subdivision. [ 95 ] Even considering the commercial purpose of the Caleron/Novia Agreement and that the parties were aware of the subdivision approval timelines, that does not lead to the conclusion that Caleron did not provide a registrable Transfer of Land.

Whether a Transfer of Land is “registrable” when provided by Caleron cannot depend on whether Novia files it at the Land Titles Office with or without its Plan of Subdivision, where it would be registered or rejected, respectively. [ 96 ] I find Caleron fulfilled its obligations under the Caleron/Novia Agreement. (

b) Caleron’s obligation to file a caveat or otherwise protect Novia’s interest [ 97 ] At the McCormacks’ request, Caleron transferred title directly to 146 Alberta. Novia concedes that Caleron had no control over what 146 Alberta did once it became the registered owner of Lot 5. Caleron could have filed a caveat on Lot 5 pursuant to clause 21 of the Caleron/McCormack Agreement referencing that agreement and its rights as to the Option.

Novia argues that Caleron could have, and should have, filed a caveat to protect Novia’s interests, especially as Caleron had been informed by the McCormacks that they did not want to close on the purchase and Caleron advised them to sell Lot 5 themselves. [ 98 ] There is no dispute that Caleron could have filed a caveat on Lot 5 advising of its Option to obtain a Transfer Back of

Part 2. This would have provided notice of the Option as long as the caveat remained on title. However, once Caleron exercised the Option

(which it did prior to closing, although not in writing), there was no longer a reason to file a caveat to give notice of the Option. The caveat clause was in the Caleron/McCormack Agreement to permit Caleron to provide notice on title to Lot 5 if the Option had not yet been exercised, and the McCormacks and 146 Alberta had not provided the Transfers Back at the time of the transfer of title.

That Caleron was permitted to file a caveat pursuant to the Caleron/McCormack Agreement does not create any legal obligation to Novia. [ 99 ] In addition to having permission to file a caveat, Caleron had some dealings with the Awadas during their purchase process. Initially, the Awadas contacted Caleron indicating they were interested in purchasing a lot. Caleron sent them information regarding Lot 6 and Lot 7 which Caleron had listed for sale.

The materials Caleron provided to the Awadas at their request also showed both parts of Lot 5 which was contiguous to Lot 6. [ 100 ] I find that Caleron fulfilled its obligations under the Caleron/Novia Agreement, and was not in breach of its terms. Further, Caleron was not required to file a caveat to protect Novia’s interest in

Part 2 of Lot 5 once it delivered the duly executed Transfers Back to Novia. (

c) Novia’s obligation to protect its own interest [ 101 ] The McCormacks and 146 Alberta argue that Novia is ultimately most responsible for its own loss. It took no steps to protect its own interest in

Part 2 by registering a caveat, and did not advise Caleron or 146 Alberta when its subdivision was delayed. [ 102 ] Once Novia received the Transfer Back signed by 146 Alberta, Novia then should have taken steps to protect its own interest. Novia notes that the Caleron/Novia Agreement did not grant it the right to file a caveat to protect its interest in

Part 2. Had Novia registered a caveat without contractual authority, it submits that it would have been exposed to potential liability for filing a caveat against land owned by someone other than Caleron. Novia points to the Awadas’ claim against it for doing just that – filing a caveat against Lot 5. [ 103 ] In my view, Novia is exposed to potential liability for registering a caveat against Lot 5 once Lot 5 had been purchased by the Awadas because the Awadas were not aware that

Part 2 had been sold separately. Had Novia registered a caveat against Lot 5 when either Caleron or 146 Alberta was the owner, it is unlikely either of them would have objected, knowing that Novia had purchased

Part 2. [ 104 ] Novia also argues that it was improper for it to file a caveat because it would have had to file a caveat over all of Lot 5, being a greater interest than it held. This is for the reason that the Registrar of Land Titles would not register a partial interest in land as that would have the effect of subdividing it. I accept that Novia could only have filed a caveat on all of Lot 5 until its Plan of Subdivision was registered.

Novia would also have been exposed to an action for damages for over-registering its interest by way of caveat: Taylor v 1103919 Alberta Ltd , 2015 ABCA 201 at para 32 ; Land Titles Act , ss 144, 149. Notwithstanding this concern, Novia subsequently registered a caveat over all of Lot 5 specifying its claim for a beneficial interest once it learned that it had been transferred to the Awadas. [ 105 ] Had Novia registered a caveat when the Transfer Back was initially rejected by the Land Titles Office, this dispute could have been prevented. The Awadas would have had notice of Novia’s interest in

Part 2 and would have taken title to Lot 5 subject to the caveat and Novia’s interest. Nevertheless, Novia’s failure to do so did not give rise to this dispute. This dispute arose because ownership of

Part 2 was transferred to two different parties without any steps taken to specify in the sale transaction to the Awadas that they were purchasing Lot 5 subject to Novia’s prior purchase of

Part 2. 2. Issues relating to the McCormacks and 146 Alberta [ 106 ] The McCormacks and 146 Alberta state that their dealings with Novia were limited to the execution and delivery of a single document: the Transfers Back. The Transfers Back were executed in accordance with the Caleron/McCormack Agreement. It may be that the McCormacks and 146 Alberta had little to do with Novia directly, but their actions in selling all of Lot 5 to the Awadas impacted upon Novia’s interest in

Part 2. [ 107 ] Novia claims that the McCormacks and 146 Alberta have improperly defeated Novia’s interest in

Part 2. Specifically, Novia says they created an equitable interest in the land, and subsequently defeated that interest by selling

Part 2 to a third party bona fide purchaser for value. Novia claims this was a breach of an implied contract, breach of trust and land titles fraud. Novia complains that despite executing the Transfers Back, 146 Alberta and the McCormacks did not notify Novia that they had listed Lot 5 for sale. [ 108 ] Caleron also advances a claim against the McCormacks and 146 Alberta for contribution and indemnity, and payment of its costs for defending this action. Caleron’s claim is based on breach of contract. (

a) Breach of the Caleron/McCormack Agreement [ 109 ] The Caleron/McCormack Agreement contained terms that are binding on any successor in interest. Specifically, clause 21 states that the Option to purchase

Part 2 runs with the land and is “binding on the transferees, assignees, successors and heirs” of the parties.

It further permits the filing of a caveat referencing the Caleron/McCormack Agreement. [ 110 ] The Caleron/McCormack Agreement provides at clause 18: The Purchaser covenants and agrees with the Vendor not to sell, transfer, assign or otherwise dispose of its interest in this Agreement or the Lot, without the Vendor’s prior written consent and which if consented to may, as a condition thereof, include a requirement by any purchaser, transferee, assignee or other party to enter into an agreement with the Vendor to be bound to the Vendor to observe and perform all of the terms and conditions set out in this Agreement to be observed and performed by the Purchaser, in the same manner as if such purchaser, transferee, assignee or other party had been the original purchaser under this Agreement.

[111] While the McCormacks advised Caleron that they would be selling the property, and in fact did so at Caleron’s direction oncethey decided they no longer wanted to build on

Part 1, they failed to ensure that 146 Alberta required the Awadas to be bound by theterms of the Caleron/McCormack Agreement as required by clause 18. The McCormacks are in breach of the Caleron/McCormackAgreement. [112] As I have found Caleron not liable to Novia, there is no basis to award contribution and indemnity as a result of this breach.However, the breach may be relevant in a determination of costs. (

b) Breach of Implied Contract with Novia, Breach of Trust and Land Titles Fraud [113] The Transfers Back establish that the McCormacks and 146 Alberta knew that Novia was the owner of

Part 2. Notwithstandingthat knowledge, 146 Alberta sold Lot 5, including Parts 1 and 2, to the Awadas. Novia argues that the improper transfer of

Part 2amounts to a breach of an implied contract, breach of trust or fraud pursuant to the Land Titles Act. [114] These arguments are premised on the conclusion that Novia has an equitable interest in

Part 2 created by the McCormackswhen they executed the Transfers Back. The executed Transfer Back from 146 Alberta created a beneficial interest in land in favour ofNovia: Canadian Superior Oil Ltd v Jacobson, (1991), 1991 ABCA 173 , 115 AR 391 (CA) at paras 20 and 26. Further, thisunregistered interest existed independently of the register at the Land Titles Office: Bezuko v Supruniuk, 2007 ABQB 204 at para 30.The parties do not dispute that Novia was the beneficial owner of

Part 2 once the Transfer Back was executed. The dispute arises as tothe impact that a sale to a bona fide purchaser for value without notice has on this beneficial interest. There is also a dispute over whowas responsible to protect the beneficial interest. [115] Novia argues that until such time as it registered the Transfer Back, the McCormacks, as the creators of the beneficial interest,were obliged to take any necessary steps to ensure that Novia could become the registered owner at any time by registering the TransferBack.

Novia argues that its right to register the Transfer Back may be of a contractual nature, or arise through a trust relationship. [116] The Transfer Back relied upon by Novia was the one executed by 146 Alberta. Subject to a determination that the corporate veilshould be pierced, the beneficial interest arose as a result of Novia’s agreement with Caleron and 146 Alberta’s execution of the TransferBack. Any contractual obligation or trust relationship would therefore arise with 146 Alberta, and not directly with the McCormacks. (

c) Breach of Implied Contract [117] Novia relies on Eldridge v Royal Trust Co (1922), (AB CA), 66 DLR 674 (Alta CA) (“Eldridge”), aff’d (SCC), [1923] 2 DLR 689 (SCC), a 1922 decision of the Court of Appeal of Alberta, for the principle that upon receiving theexecuted Transfer Back, Novia gained a contractual right to demand registration of

Part 2 in its name.

In Eldridge, the Court of Appealheld, at para 41: While it is true that an unregistered transfer does not pass any estate or interest in land nevertheless an equitable interest of a contractualnature under the instrument arises consisting of a right to be registered as the owner of the interest purporting to be conveyed by theinstrument. [118] As a result of this contractual right, Novia argues that there was an implied contractual obligation for the McCormacks toensure the Awadas assumed this contractual obligation. [119] Similarly, Novia relies on Isfeld v Petersen Pontiac Buick GMC (Alta) Inc, 2013 ABCA 251 at para 29, where the Court ofAppeal of Alberta found that the failure to ensure that a subsequent purchaser comply with terms of an unregistered easement resulted inliability to the plaintiff. [120] In this case, Novia argues that the McCormacks and 146 Alberta defeated Novia’s equitable interest and right to registrationwhen they entered into the 146 Alberta/Awada Agreement with the Awadas without ensuring the Awadas were bound to respect Novia’sequitable interest and right to registration. [121] I find that 146 Alberta was aware of Novia’s interest in

Part 2, as it executed the Transfer Back creating Novia’s equitableinterest, in accordance with the Option exercised by Caleron. As assignee of the McCormacks’ obligaions under the Caleron/McCormackAgreement, 146 Alberta was required to ensure that any subsequent purchaser was aware of Novia’s interest, whether or not Novia hadalready registered it. 146 Alberta or its counsel failed to check whether the Transfer Back had been registered. It also failed to ensure thatNovia’s interest was set out in the listing for the sale of Lot 5 or in the 146 Alberta/Awada Agreement, and otherwise failed to draw tothe Awadas’ attention the status of

Part 2. As a result, I find it is liable to Novia for its subsequent sale of

Part 2 to the Awadas. Iconsider whether the McCormacks are personally liable in the discussion below on piercing the corporate veil. (

d) Breach of Trust [122] Novia also argues that the McCormacks and 146 Alberta have breached a trust in favour of Novia, as they held legal title to Part2 as trustees for Novia until such a time as Novia could register the Transfer Back. [123] The McCormacks and 146 Alberta argue that the breach of trust claim must be plead with full particulars: Alberta Rules ofCourt, Alta Reg 124/2010 (the “Rules”), r 13.6(3). No claim for breach of trust was plead, and no particulars provided.

Novia concedesthat Rule 13.6(3) applies, and responds that the fact its Statement of Claim does not specifically reference a trust is a curable irregularitybecause the underlying facts for its breach of trust claim were plead. [124] I find it is too late to fully raise and argue a claim for breach of trust in closing submissions. In any event, there was no trustrelationship in this case, as the three certainties required to establish a trust are not present. To establish a trust, there must be certainty ofsubject-matter, intent and object. Here, there is no certainty of intention or object.

The cases relied on by Novia in support of its trust

argument can be distinguished. Novia cites Lemoine v Smashnuk , 2008 ABQB 193 at para 42 and Ironside v Smith , 1998 ABCA 366 at para 71 , where a trustee held property as a bare trustee without any duty to perform except to convey it to the beneficiary. Novia argues that this case is similar, where the McCormacks and 146 Alberta are bare trustees with the sole obligation to convey

Part 2 to Novia on demand. However, the McCormacks and 146 Alberta have already fulfilled their obligations in order to convey

Part 2 to Novia in executing the Transfers Back; rather than having a positive obligation, 146 Alberta’s obligation is not to transfer

Part 2 a second time. There is therefore no intention of the parties to create a trust. (

e) Land Titles Fraud [ 125 ] Finally, Novia argues that the McCormacks and 146 Alberta have committed land titles fraud by creating Novia’s interest in

Part 2 and then carelessly, recklessly and fraudulently selling all of Lot 5 to the Awadas for a higher purchase price than they paid, improperly defeating Novia’s interest in

Part 2. The McCormacks and 146 Alberta argue that the sale of

Part 2 to the Awadas was an honest mistake; there is no evidence of fraud, dishonesty or deceit. Further, they note that any claim invoking land titles fraud must join the Registrar of Titles as a defendant, in accordance with

section 171 of the Land Titles Act . [ 126 ] Novia acknowledges that while fraud includes deceit and dishonesty, it does not include mere knowledge of an unregistered interest, even when combined with the knowledge that registration will defeat that interest; fraud requires “something more” than mere notice, amounting to injustice, dishonesty, or inequity: Darnley v Tennant , 2006 ABQB 575 (“ Darnley ”) at para 31 . [ 127 ] In Darnley , Mr. and Mrs. Darnley subdivided a parcel of land, agreeing to sell one subdivided part to Mr. Tennant. Mrs. Darnley received sole title to the second subdivided

part in a divorce settlement. Mrs. Darnley’s part had road access along the side of Mr. Tennant’s part. Mr. and Mrs. Darnley agreed by Letter of Intent to sell the access road to Mr. Tennant for $1.00 if it was no longer required. Mr. Tennant filed a caveat on Mrs. Darnley’s

part claiming an interest under the Letter of Intent. Mrs. Darnley applied to have the caveat removed on the basis that it does not protect a registrable interest in the land as she was a bona fide purchaser for value of Mr. Darnley’s interest. In considering whether Mrs. Darnley could rely on the Land Titles Act , or whether her claim is defeated by fraud, the Court considered whether there was “something more” that could amount to fraud within the meaning of the Land Titles Act . Specifically, although there was no actual deceit or dishonesty by Mrs.

Darnley, the Court found she was one of the actual covenantors who created the interest in land that would now potentially be defeated, and her interest in the land is still subject to Mr. Tennant’s rights even though the extent of her interest had increased. [ 128 ] Novia argues that is similar to the situation here, where 146 Alberta created its equitable interest by executing the Transfer Back. However, I find Darnley is distinguishable on the facts. There, Mrs. Darnley sought to discharge the caveat filed to protect Mr. Tennant’s interest that she and Mr.

Darnley created on the basis that she was a bona fide purchaser for value. In this case, 146 Alberta does not argue that it is a bona fide purchaser for value to try to defeat the Transfer Back it executed. [ 129 ] I find the issue of land titles fraud is not properly before this Court, as the Registrar of Titles has not been joined as a defendant. In any event, there was no evidence at trial of deceit or dishonesty; the sale of

Part 2 by 146 Alberta to the Awadas was as a result of careless and reckless conduct. While 146 Alberta had notice of Novia’s interest in

Part 2, I do not find the circumstances of this case amounted to “something more” than mere notice sufficient to establish fraud. (

f) Liability of the McCormacks – Piercing the Corporate Veil [ 130 ]

Part 2 of Lot 5 was transferred to the Awadas by 146 Alberta. Novia asks that this Court pierce the corporate veil between 146 Alberta and the McCormacks so that the McCormacks may be held personally responsible for the transfer. [ 131 ] The circumstances when Canadian courts will pierce the corporate veil are “only when a corporation has been completely dominated and controlled and used as a shield for fraudulent or improper conduct”: Elbow River Marketing Limited Partnership v Canada Clean Fuels Inc , 2012 ABCA 328 at para 16 .

Novia argues that the McCormacks are the sole shareholders, officers and directors of 146 Alberta, and are its directing minds. Novia submits that the corporate veil should be pierced because the sole reason 146 Alberta took title to Lot 5 was to minimize tax liability, and as such, 146 Alberta was a sham corporation. [ 132 ] The evidence before me was that the McCormacks sought to have title to Lot 5 transferred to their corporation, 146 Alberta, to take the benefit of GST provisions. I am not satisfied on the evidence that this amounted to improper conduct.

There is a distinction between tax evasion, which is improper, and tax planning, which is permitted under our law. As I cannot conclude there was fraudulent or improper conduct by the McCormacks in requesting that title be transferred to 146 Alberta, this is not an appropriate circumstance in which to pierce the corporate veil. 3. Issues relating to the Awadas’ purchase [ 133 ] In the event liability is found against them, the McCormacks and 146 Alberta argue they are entitled to recover any losses from the Awadas.

I have found that 146 Alberta is liable to Novia so now consider those arguments. [ 134 ] The McCormacks and 146 Alberta argue that

Part 2 was sold to the Awadas by mistake. As a result, they say that the 146 Alberta/Awada Agreement should be interpreted to include only

Part 1 of Lot 5, and should be rectified to correct the mistake. The Awadas say they were bona fide purchasers for value without notice, and the problem arose as a result of the McCormacks’ negligence, lack of due diligence and failure to disclose information. They argue there was no mistake on their part, as they intended to purchase Parts 1 and 2, and the 146 Alberta/Awada Agreement was clear and concise in describing what was purchased. (

a) Mistake [ 135 ] If the Awadas purchased Lot 5 on notice that

Part 2 had already been sold to Novia, it would have been liable in equity to perform the sale contract and convey the land: Carruthers at para 10 . However, in this case, there was no caveat filed on Lot 5 at the

time of the Awadas’ purchase, and no evidence that they had been informed that only

Part 1 was for sale. I am satisfied that the Awadas were bona fide purchasers for value without notice of Parts 1 and 2 of Lot 5. [ 136 ] As bona fide purchasers for value without notice, the Awadas were entitled to rely on the Land Titles register. The certificate of title is conclusive evidence of title, except in the case of fraud in which the owner has participated or colluded: Land Titles Act , s 62. A bona fide purchaser for value who relies on the register and acquires title from the registered owner cannot be challenged unless the purchaser is engaged in fraud: Land Titles Act , ss 60, 62, 170, 183, 203. [ 137 ] There is no dispute that 146 Alberta conveyed

Part 2 to the Awadas by mistake. The McCormacks and 146 Alberta thought that

Part 2 had been transferred to Novia, and that 146 Alberta owned only

Part 1. They took no steps to verify this or to confirm what the title to Lot 5 was, mistakenly assuming 146 Alberta owned only

Part 1. [ 138 ] The MLS listing referred to a “vacant lot” with the municipal address of “152 Fortress BA SW”. This address was referenced in the MLS Listing Agreement as well, with a reference to “Lot 5”. There was no mention of Parts 1 and 2. In the 146 Alberta/Awada Agreement, it also referenced “152 Fortress Bay SW” with a legal description of “Plan 1210870, Block 14, Lot 5”. There was no indication that only

Part 1 was included, or that

Part 2 was excluded. [ 139 ] It is a question of fact as to what the Awadas intended to purchase. The Awadas’ evidence was that they knew they were purchasing both parts of Lot 5, and that they intended to build a residence on

Part 1 and hold

Part 2 as an investment. Their evidence was that they reviewed the City of Calgary website for tax assessment information, where they first learned that Lot 5 was comprised of Parts 1 and 2. They also say they reviewed the Certificate of Title from the Province of Alberta’s Spin 2 System that showed that Lot 5 was comprised of Parts 1 and 2. [ 140 ] During negotiations, there is evidence that the Awadas were provided with a Tentative Plan of Subdivision showing both Parts 1 and 2 of Lot 5 prior to the date they waived conditions for the purchase.

I am satisfied they knew, at least by that time, that Lot 5 included Parts 1 and 2. On closing, the transfer of land provided to the Awadas (prepared by 146 Alberta’s lawyer) was for the entirety of Lot 5. As Caleron points out, it is difficult to understand why the McCormacks (or their lawyer) did not simply provide a copy of the Caleron/McCormack Agreement to the Awadas or their lawyer in the course of the Lot 5 purchase.

It contained many conditions related to the development that expressly survived a transfer. [ 141 ] Their understanding was confirmed in a letter dated March 4, 2013 filed as an exhibit at trial, where the Awadas’ lawyer wrote to 146 Alberta’s lawyer in response to a request that they transfer

Part 2. He explained: When our clients purchased the property, they knew that they were getting both parts of the lot. They are engineers and had been carefully looking for a lot in this neighborhood for some time. They were willing to purchase this lot for the price they paid because it included both parts. [ 142 ] I find on a balance of probabilities that the Awadas did not mistakenly purchase

Part 2, but rather, they were aware it was included as part of Lot 5. (

b) Agreement of Purchase and Sale of Lot 5 [ 143 ] The McCormacks and 146 Alberta argue that, on a proper

interpretation, the 146 Alberta/Awada Agreement only conveys

Part 1. The basis for this position is that the municipal address of

Part 2 is either “152 Fortress Bay,

Part 2” or “132 Fortress Bay”. As the municipal address conflicts with the legal description, which included

Part 2, they argue it is necessary to interpret what was meant by referring to the words used to describe the property. [ 144 ] I find this is not necessary. There was no confusion about the municipal address, as 132 Fortress Bay would have been the municipal address for

Part 2 once Novia’s Plan of Subdivision was registered and it was amalgamated into Lot 10. This did not happen so the municipal address remained 152 Fortress Bay. Further, the form of agreement used was a standard type of Residential Real Estate Purchase Contract with space to fill in any qualifications or clarifications about Parts 1 and 2 if necessary. The wording of the 146 Alberta/Awada Agreement is clear and it is not necessary to interpret it using external evidence. (

c) Rectification [ 145 ] Where there is a mutual mistake by parties to an agreement, the Court may rectify it to correct the mistake so that the agreement conforms with what the parties intended: Nature Conservacy of Canada v Waterton Land Trust, 2014 ABQB 303 at para 333 . In this case, I have found no mutual mistake. I have also found that the 146 Alberta/Awada Agreement is clear. As a result, this is not an appropriate situation to rectify the agreement so that only

Part 1 is sold to the Awadas. 4. The Awadas’ claims against Novia and 146 Alberta [ 146 ] The Awadas seek damages against 146 Alberta and Novia for wrongfully filing caveats and improperly maintaining certificates of lis pendens . The Awadas also seek damages from Novia in trespass for construction it commenced at the end of January 2013 that encroached on

Part 2. (

a) Liability for filing of Caveats and Certificates of Lis Pendens [ 147 ] After the issue of the transfer of

Part 2 to the Awadas came to light, 146 Alberta filed a caveat dated February 22, 2013, claiming to be the beneficial owner of Lot 5. Novia also filed a caveat claiming an interest as beneficial owner of Lot 5, relying on the Option clause in the Caleron/McCormack Agreement. On April 9, 2013, 146 Alberta registered a Certificate of Lis Pendens against Lot 5 as well. There is a second Certificate of Lis Pendens that was registered against Lot 5 relating to the caveat filed by 146 Alberta on May

7, 2013. Novia’s caveat was discharged on October 21, 2014 in exchange for the Awadas’ permission to enter onto

Part 2 and remediate the land. [ 148 ] As a result of the caveats and certificates of lis pendens, the Awadas counter claim for damages on the basis of sections 144 and 149 of the Land Titles Act , which provide: Compensation in case of caveat filed wrongfully 144 Any person, other than the Registrar, filing or continuing a caveat without reasonable cause is liable to make compensation to any person who may have sustained damage by that filing or continuation, and the compensation may be recovered by action if the caveator has withdrawn the caveat and no proceedings have been taken by the caveator or caveatee as provided in this Act, but if the proceedings have been taken then the compensation is to be decided by the court in the proceedings whether the caveat has been withdrawn or not. … Compensation re certificate of lis pendens 149 A person filing or continuing a certificate of lis pendens without reasonable cause is liable to make compensation to any person who may have sustained damage by that filing or continuation. [ 149 ] The Awadas maintain that Novia had no basis to file and maintain a caveat on Lot 5.

There was no agreement between Novia and the Awadas, and Novia did not name the Awadas as defendants in its lawsuit. Novia itself takes the position that it had no right to file a caveat against all of Lot 5 when it was registered in the name of 146 Alberta, and provides no explanation as to why it later had such a right when Lot 5 had been transferred to the Awadas. Novia’s concern is that the caveat applies to all of Lot 5, not just

Part 2. It is clear that Novia has advanced a claim of ownership of

Part 2 based on the unregistered Transfer Back and the Caleron/Novia Agreement, and it is also clear that Novia has no claim against

Part 1. [ 150 ] The Awadas also argue that 146 Alberta had no reasonable basis to file its caveat and certificates of lis pendens . While 146 Alberta appears to rely on the 146 Alberta/Awada Agreement in support of its caveat, the Awadas argue it does not give any interest in land to 146 Alberta [ 151 ] The Awadas submit that as a result of the caveats that were improperly filed and the certificates of lis pendens that were filed without reasonable cause, they were unable to construct their home.

They say their construction has been delayed by three years, and expect the cost of building will be higher now than if they had built their home when they first purchased Lot 5. They seek leave of the Court to have damages ascertained later once the higher building costs are determined, or alternatively damages at large of $25,000.00. They also seek a discharge of the remaining caveat and the certificates of lis pendens , as well as their costs. [ 152 ] In response, 146 Alberta and the McCormacks argue that the caveats claim an interest only in

Part 2, and do not purport to encumber the title to

Part 1. Therefore, they argue the caveats are properly filed. Further, the Awadas suffered no injury as a result of having the caveats and the certificates of lis pendens filed against their title. They offered no evidence that they were unable to build a house on

Part 1, or that they had problems obtaining financing. In fact, 146 Alberta and the McCormacks argue that the Awadas did not make any arrangements to construct a house. They did not provide any records or documents establishing damages, and their assertion that the cost of construction has increased is entirely hypothetical. Novia also asserts that the Awadas have suffered no damages. [ 153 ] The caveats were filed as exhibits at trial. Novia’s caveat attaches the Caleron/Novia Agreement for the purchase and sale of

Part 2, although the caveat itself is filed against all of Lot 5. 146 Alberta’s caveat is similarly filed against all of Lot 5 and references the 146 Alberta/Awada Agreement dated November 8, 2012. 146 Alberta is claiming an interest in the land, as it argues

Part 2 was transferred to the Awadas by mistake and is seeking rectification. I find the caveats would be properly filed if they could be limited to

Part 2, but neither Novia nor 146 Alberta has an interest in

Part 1. As a result, Novia and 146 Alberta are exposed to a claim for damages for over registration. The issue then becomes whether the Awadas sustained any damages as a result of Novia’s caveat filed all of Lot 5. [ 154 ] The Awadas’ only evidence that they have incurred damages as a result of the caveats is their testimony that they believe it will be more expensive to build a house three years after purchasing Lot 5. They provided no evidence to support their argument that construction costs have increased.

They also provided no evidence that the caveats caused the delay in construction or that they could not obtain construction financing. Given that Novia’s caveat included its agreement for the purchase of

Part 2, there is no evidence that potential lenders would even be concerned by the caveat on

Part 1. I am not satisfied that the Awadas suffered any injury as a result of the caveats and dismiss the Awadas’ request for damages. [ 155 ] The certificates of lis pendens were filed in conjunction with this action, where ownership of

Part 2 is squarely in issue. Novia indicated prior to trial that it would not pursue specific performance, and it would have been an option for the Awadas to apply to the Court to have the certificates discharged if they were impeding development. I find 146 Alberta had reasonable cause to file the certificates of lis pendens . [ 156 ] Although I have found the Awadas suffered no damages from the filing of the caveats and certificates of lis pendens , a s a result of these Reasons for Decision, the remaining caveat and certificates of lis pendens are ordered to be discharged. (

b) Trespass [ 157 ] The Awadas counterclaim against Novia in trespass for the events of January and February 2013, when Novia began construction of a foundation on its proposed new Lot 10 (which would include

Part 2). Its Plan of Subdivision had not yet been registered, and

Part 2 had been transferred to the Awadas. The foundation encroached on

Part 2. [ 158 ] The Awadas reported the development to the City of Calgary, who issued a stop work order. Their lawyer also issued a written

notice to Novia to cease all activities on

Part 2. Novia finished the subfloor over the foundation, fenced in the construction site andstopped work on the construction project.

In the fall 2014, Novia demolished the basement foundation and remediated the land at a costof $10,605. [159] Trespass is committed: ...by entry upon, remaining upon or placing or projecting any object upon land in possession of the plaintiff without lawful justification.To be actionable, the defendant’s act must be voluntary, but it need not be intentional: Langille v Schwisberg, 2010 CarswellOnt 10561(SCJ) (“Langille”) at para 97. [160] A person may commit the tort of trespass where he hires a contractor to enter upon a property without the consent of the ownersof the property: Levy v Stoller, 2009 CarswellOnt 3524 (SCJ) at paras 46-47. [161] In constructing a foundation that encroached on

Part 2 without the Awadas’ permission, Novia committed a trespass. [162] The Awadas acknowledge they have no out of pocket expenses, other than the costs of this litigation, related to the trespass. Asa result, they seek nominal damages. The availability of damages is discussed in Langille at para 158: The general principles applicable to the calculation of damages for trespass are summarized in Rainaldi, Remedies in Tort, Vol. 3(Carswell: Toronto, 1987), p. 23-30: Trespass is actionable without proof of damages. However where there has been slight injury or none at all, only nominal damages willbe awarded.

This is particularly so where the trespass was technical, unintentional, where the defendant acted under a colour of right, ortrespassed in order to avert the possibility of danger to person or property... Where a trespasser commits an injury to the land trespassedupon, the proper measure of damages is the amount by which the value of the land had been depreciated by th

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