Coco Homes Inc v Caleron Properties Ltd, 2017 ABQB 15

Court of Queen’s Bench of Alberta Citation: Coco Homes Inc v Caleron Properties Ltd, 2017 ABQB 15 Date: 20170111 Docket: 1001 11347 Registry: Calgary Between: Coco Homes Inc. Plaintiff - and - Caleron Properties Ltd. Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice G.H. Poelman _______________________________________________________ Appeal from the Judgment by J. Farrington, Master in Chambers Filed on the 15 th day of January, 2016 Dated the 15 th day of January, 2016 ( 2017 ABQB 30 , Docket: 1001 11347) I. Introduction

[ 1 ] Caleron appeals a decision made by the learned Master on January 15, 2016, granting

summary judgment to Coco. The

summary judgment enforced a settlement agreement made on the evening before a trial was scheduled to commence. [ 2 ] The settlement offer was made by Caleron, to convey a small interest it held in a land development project at Chestermere. The Chestermere project was unrelated to the subject matter of the litigation. Thus, the relevant facts to be considered involve both the Chestermere project and the communications regarding settlement of this action which concerned unrelated matters. [ 3 ] My decision involves basic principles applying to appeals from masters’ decisions,

summary judgment applications, contracts and in particular, when mistake enables a party to avoid a contract. II. Factual Overview A. Chestermere Joint Venture [ 4 ] Coco (together with other corporations, comprising “the builders group”) and Caleron were joint venture participants in a land development project in Chestermere, Alberta (“the Chestermere Joint Venture”), pursuant to a “Joint Venture Agreement” dated May 30, 2006. [ 5 ] Edgewater Communities Ltd. held the joint venture lands as a bare trustee.

It had no other function: no entitlement to revenues or management obligations. [ 6 ] The only business of the joint venture was to develop the lands for eventual residential subdivision and sale. [ 7 ] Initially, the interests in the Chestermere Joint Venture were Caleron as to 50% and the builders’ group (including Coco) as to 50%. Shareholdings in Edgewater were likewise evenly divided. The lands were purchased in 2010 for $5,490,000. [ 8 ] Disputes between Caleron and the builders’ group (led by Coco) led to an arbitration in 2011.

The arbitration decision resulted in Caleron’s Chestermere Joint Venture interest being reduced in accordance with its capital contributions, and later issues led to further reductions in Caleron’s interest. Ultimately, Caleron’s interest was reduced to 5.78%.

However, the arbitration did not determine changes to Edgewater’s shareholdings, so that Caleron remained a 50% shareholder. [ 9 ] Thus, between 2011 and May 5, 2014 (the eve of trial of an action on an unrelated matter), Caleron held a minor interest in the Chestermere Joint Venture, although the decision did not change the shareholding of the trustee company holding the lands. During this period, it received no notices or other information from these entities or Coco. [ 10 ] The property held by the Chestermere Joint Venture was acquired in 2010 for $5,490,000.

Effective January 1, 2014, it was appraised at $10,000,000 once developed. In cross-examination of Caleron’s president, Ronald Slater, it was revealed that in November 2010, Mr. Slater reported that the lands had an appraised value in excess of $10,000,000 on an “as is” basis, based on appraisal obtained around that time. B. This Action [ 11 ] This action arose from another arrangement between Coco and Caleron, for development of lands in the Montreaux area of Calgary.

Coco sought damages from Caleron for breach of that agreement, and Caleron counterclaimed for wrongful registration of a caveat and certificate of lis pendens. [ 12 ] In the statement of claim, Coco sought damages for breach of contract in the amount of $2,550,000, and a declaration that Coco was entitled to a return of deposits in the amount of $510,000 paid to Caleron. Caleron sought damages of $400,000 and special damages of $252,000. C.

Settlement [ 13 ] On the evening before trial, Caleron’s counsel made a settlement offer by telephone to Coco’s counsel, which involved transferring Caleron’s interest in the Chestermere Joint Venture to Coco.

The idea for this proposal, involving interests unrelated to the subject of litigation, originated with Caleron through its president, Ronald Slater. [ 14 ] After initial telephone conversations and email correspondence, the following emails were exchanged: May 5, 2014 – 7:55 pm (From Caleron’s settlement counsel to Coco counsel): This will confirm that your client has accepted Caleron’s offer to transfer its shares in the Chestermere Joint Venture in full satisfaction of the claim and counterclaim. I also confirm that you and Mr.

Moroz will seek to adjourn the trial sine die tomorrow morning pending further arrangements to document the transfer. Thank you counsel for your efforts to resolve this matter. Regards, Chad May 5, 2014 – 7:57 pm (From Coco counsel to Caleron counsel)

Thank you. Will touch base with you tomorrow about the paperwork. Matt [ 15 ] The next morning, Caleron’s trial counsel appeared before the assigned trial judge, where the following exchange occurred in court: Counsel: My Lord, I’m pleased to advise the Court that about 13 and a half hours ago, this matter settled. The Court: Well, good for you. Congratulations. Counsel: The—thank you. So the parties have settled. They are in the process of papering that settlement agreement so we would jointly ask that the trial be adjourned sine die and we will in due course file a consent dismissal order or a discontinuance.

The Court: Very Good. Adjourned sine die. D. Papering the Settlement Agreement [ 16 ] Coco’s counsel prepared draft settlement documents, providing for transfer of Caleron’s interest in the Chestermere Joint Venture and an exchange of mutual releases among Caleron, Coco and other members of the builder’s group.

Caleron proposed revisions, ascribing a value for the shares to be transferred and additional language for a release and indemnity in favour of Caleron. [ 17 ] While the parties were exchanging proposed settlement documents, the realtor who had original introduced Caleron to the builder’s group sent a letter to the various parties interested in the development, confirming that the lands were under review for development application approval and that he was in due course entitled to a commission.

Thereafter, Coco requested an indemnity from Caleron specifically relating to the commission claims, which Caleron refused. E. Development of the Chestermere Lands [ 18 ] The letter from the realtor gave specific information regarding the status of development. It advised, in part, as follows: I confirm that the Lands legally described below are now under review with the Town of Chestermere for final Development application approval. This action by the Town will permit the Joint Venture Group to begin development of the lands or to sell its interest of said lands.

This approval will trigger the payment of my commissions that are due to me as per the commission agreement executed by Mr. Ron Slater. I further confirm that the submitted subdivision application includes the expected number of single family, multi-family and commercial lots and or units to be approved and this approval crystalizes the value of the commission that are payable to me. [ 19 ] Following receipt of the realtor’s letter, Mr.

Slater made inquiries of the City of Chestermere, which verified that an Area Structure Plan had been approved in September 2013 and the builder’s group had sought Outline Plan approval in order to amend the existing land use bylaw and permit full scale development of the lands. (Earlier, before the estrangement of the parties leading to the arbitration, Mr.

Slater had arranged for a draft Area Structure Plan to be prepared, involving a significant amount of work on his part.) Ultimately, the recent requests for approval by Coco and the builders group were denied by the city of Chestermere’s planning department, although it appears this occurred after the period relevant for this action. III. Law on

Summary Judgment Appeals A. Standard of Review [ 20 ] This proceeding is an appeal of a master’s judgment under rule 6.14 of the Alberta Rules of Court . [ 21 ] Appeals from masters’ judgments are de novo and no deference should be given to the decision under appeal: McGowan v Lang , 2015 ABCA 217 , 602 A.R. 168, para 32 ; Bahcheli v Yorkton Securities Inc. , 2012 ABCA 166 , 524 A.R. 382, para 30 . The standard of review is correctness: Bahcheli , para 30 . B.

Summary Judgment [ 22 ] Coco made an application before the learned Master to enforce a settlement agreement, bringing its application under the

summary judgment provisions of rule 7.3. [ 23 ] The courts recently adopted a “modern” approach to

summary judgment applications. In Hyrniak v Mauldin , 2014 SCC 7 , [2014] 1 S.C.R. 87, the Court at para 2 encouraged “moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case”, holding at para 5 that “summary judgment rules must be interpreted broadly, favoring proportionality and fair access to the affordable, timely and just adjudication of claims”. The principle was stated as follows: There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for

summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the

judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [para.49.] [24] The Hyrniak v Mauldin approach is consistent with Alberta’s modern rules, which call “for a more holistic analysis ofwhether the claim has ‘merit’, and is not confined to the test of a ‘genuine issue for trial’ found in the previous rules”: Windsor vCanadian Pacific Railway Ltd, 2014 ABCA 108, 572 A.R. 317 at para 14. On a

summary judgment application, it must be determined“whether there is in fact any issue of ‘merit’ that genuinely requires a trial, or conversely whether the claim or defence is so compellingthat the likelihood it will succeed is very high such that it should be determined summarily”: WP v Alberta, 2014 ABCA 404, 588 AR110 at para 16; Pyrrah Design Inc v Plum and Posey Inc, 2016 ABCA 12 at para 19. [25] Not every factual dispute will prevent

summary judgment. Rather, “there must be a genuine issue of a potentially decisivematerial fact . . . which cannot be summarily found against the non-moving party on the record revealed by the ‘fair and just process’”:776826 Alberta Ltd v Ostrowercha, 2015 ABCA 49, 593 A.R. 391 at para 11. [26] Similarly, it has been held that not all conflicts in affidavit evidence preclude

summary judgment; rather, the matter shouldproceed without oral evidence where the judge can make the necessary findings of fact and apply the law to those facts: Elkow v Sana, 2015 ABQB 803, 29 Alta. L.R. (6th) 246 at para 46, citing and quoting Sandhu v Siri Guru Nanak Sikh Gurdwara of Alberta, 2015ABCA 101, 599 A.R. 267 at para 79. As the Court of Appeal emphasized in Ostrowercha at para 11, the key is whether viva voceevidence is needed to properly resolve the case. IV. Formation of Contract A. General Principles [27] A settlement agreement is a form of contract.

Its existence depends, as with other contracts, on showing a mutual intention tocreate a legally-binding relationship and agreement on all essential terms: Newell Post Developments Ltd v 1402801 Alberta Ltd, 2010ABQB 660, 503 A.R. 334, para 32, citing authority. [28] Whether a contract was made, in this sense, requires consideration of the parties’ words and conduct from an objectiveperspective: Newell Post, para 33. [29] Determining existence of a contract is different from whether it was completed or documented: Fieguth v Acklands Ltd (1989), (BC CA), 59 D.L.R. (4th) 114 (B.C.C.A.), quoted with approval in Newall Post, para 39.

In many casesparties make a simple contract but later disagree on how it should be documented, what it means or how it should be performed.

In thosecases, the terms of the contract must be determined by the court based on the conduct and words by which the contract was made and,where the court concludes that everything agreed by the parties is not contained in the written documents or oral statements of theparties, by implied terms: Fridman, The Law of Contract in Canada, 6th ed (Toronto: Carswell, 2011), 463. [30] Where the essential terms of the contract are clear, it is not proper to inquire into the subjective intentions or state of minds ofthe parties: Lakemount Sportsworld Inc v Cicchi, 2012 ONSC 544, para 26. B.

Application [31] It is clear that the parties intended to make a contract – that is, a legally-binding agreement. Their words and conduct, allthrough counsel, admit of no other

interpretation. [32] On the eve of trial, Caleron’s counsel wrote to Coco’s counsel to “confirm that your client has accepted Caleron’s offer totransfer its shares in the Chestermere Joint Venture in full satisfaction of the claim and counterclaim.” In court the next morning,Caleron’s counsel advised that “the parties have settled. They are in the process of papering that settlement agreement.” [33] Caleron now maintains that the parties failed to reach agreement on all material terms and therefore, despite their intention, acontract was not formed.

The non-agreed essential terms, it argues, were “the value or price to be paid for Caleron’s interest in the JointVenture and shares in Edgewater, the timing of the transfer as well as agreement on release and indemnity.” [34] Caleron does not strongly press the first and second terms, and they are quickly dealt with. “Value or price” to be paid byCoco was abandonment of the claim it made in the action. The evidence shows no need to “price” the interest in the joint venture.

Theevidence also shows no need for a fixed closing date, and would therefore be implied by the court as within a reasonable time. [35] Caleron puts more emphasis on the dispute over whether there should be a release and indemnity, to whom and on whatterms. It seems that this issue took on more significance than it might have because of the realtor’s notice of claim for commission. [36] This dispute arose as the parties jockeyed for the best position possible in the process of documenting the settlement. Neithercould persuade the other to accept its position.

The fact they disagreed on the documentation does not mean there is no contract, and thefact that either or both may have proposed terms inconsistent with whatever contract existed does not mean the contract was repudiated.In Fieguth v Acklands Ltd, the British Columbia Court of Appeal held that when attempting to document a settlement, parties may tenderwhatever documents they wish without rescinding the agreement, and “neither party is released or discharged unless the other party hasdemonstrated an unwillingness to be bound by the agreement by insisting upon terms or conditions which have not been agreed upon orare not reasonably implied in these circumstances” (at 121). [37] These parties had a simple contract.

They agreed to abandon their crossclaims and Caleron agreed to transfer its interest in the

Chestermere Joint Venture to Coco. The express terms of the contract (by email) made no reference to any release, but it is customary to grant releases when settling litigation: Imperial Oil Ltd v 416169 Alberta Inc , 2002 ABQB 386 , 310 A.R. 338, para 10 . [ 38 ] Where the terms of a release are not expressly agreed upon (almost always so in late settlements), the court can determine the terms according to what is commercially reasonable, and issue a binding declaration to that effect: Imperial Oil Ltd , paras 14, 17 and 20 .

With respect, I agree with the learned Master’s determination of the proper terms, thus declaring that: [I]t was the intention of the parties that neither Coco nor Caleron shall have any claims against the other pertaining to the matters raised in this action, or the Chestermere Joint Venture project. Caleron intended to transfer the interest in the Chestermere Joint Venture without further liability for that project, and Coco intended to accept the interest “as is” including any proper claims against the joint venture.

The transfer includes the shares in [Edgewater Communities] Ltd. held by Caleron as requested, or the land, if the transferee(

s) simply wish to receive the land subject to the trust obligations pertaining to the land. [Master’s decision, para 41.] V. Mistake A. Principles [ 39 ] Caleron seeks the equitable remedy of rescission on the basis that in making the contract, there was a unilateral mistake by Caleron. [ 40 ] To establish unilateral mistake, the parties agree that Caleron must show that (

a) it made a mistake, (

b) on a material term, (

c) which Coco actually or constructively knew, and (

d) the result of enforcing the settlement agreement would be unconscionable. (These principles are taken from Bedrock Expiration Ltd v Allen , 2003 ABQB 532 , 347 A.R. 265, para 32 .) [ 41 ] (The authorities are not unanimous on whether unilateral mistake means no contract was made because despite appearances there was no real correspondence of offer and acceptance: Ron Ghitter Property Consultants Ltd v Beaver Lumber Co , 2003 ABCA 221 , 30 A.R. 353, para 13 , quoting from the English text Cheshire On Contract (2001); or whether a contract exists but may not be enforceable in equity: Bedrock , paras 32, 38 and 48; Fridman , 252-253 and cases cited.

The distinction may be important in some cases, but not here.) B. Application [ 42 ] Caleron says it was mistaken because “the nature of [its] interest in the Joint Venture project was not as it understood it to be when it made the proposal.” Elsewhere, it says “Mr. Slater affirmatively states that Caleron would never have proposed settlement premised on a transfer of its interest in the Joint Venture had he been aware of the state of development of the project or significant enhanced value of the Lands.” As counsel stated in argument, Mr.

Slater concluded that the development was going nowhere. [ 43 ] In essence, Caleron’s alleged mistake is that when it offered settlement the project had advanced farther than Mr. Slater thought; and Caleron was hopeful of bargaining away something of less immediate value to Coco. [ 44 ] The evidence shows that from about 2010, Coco and others in the builders group gave no information to Caleron about the Chestermere Joint Venture, even though Caleron retained a very minor financial interest.

Coco can be criticized for not being forthcoming about the information, although the evidence shows that Caleron knew it was at the very least entitled to some information and for four years made no inquiries or requests for information. [ 45 ] Further, Mr. Slater acknowledged in cross-examination that he knew the lands would be developed at some point, as this was the purpose of the joint venture. As an experienced property developer, he knew the steps that would be required. In fact, after receiving the realtor’s commission demand, he ascertained the status of development from public records. [ 46 ] On Mr.

Slater’s evidence, he sat on his hands for four years and because he received no information from a party with whom he had an acrimonious relationship, he was entitled to assume nothing was happening. His counsel says to question this is to make a credibility finding on a central issue, which cannot be done on a

summary judgment application. [ 47 ] The court is not bound to accept patently unreasonable statements of subjective understandings. Mr. Slater did not make a “mistake.” He decided to sell a minor interest about which he had no current information in order to settle a lawsuit. He made no inquiries about its status or current value. For whatever reason, he later repented of his bargain.

Now, effectively he says when I made my offer, I had no responsibility for my ignorance – Coco was required to give me all the information it had accumulated over 4 years while I waited, before accepting my offer. [ 48 ] Further, he made no mistake about value, which after all is the real issue. He testified that he believed his offer was worth about $560,000, close to what Coco was claiming in the action for deposits ($510,000). When Caleron made its settlement offer, its interest in the Chestermere Joint Venture was 5.78 per cent. The most recent appraisal obtained by Coco and the builders group, which Mr.

Slater critically notes he was not aware of, showed the lands valued at $9.7 million. Without making any deductions for development costs, 5.78 per cent of that value is $560,660 – almost exactly what Mr. Slater testified he believed his offer was worth when he made it. [ 49 ] I conclude that Mr. Slater (and thus Caleron) did not make a mistake on a material term. He made an offer without checking facts available to him, inquiring of Coco, or including conditions to protect his position. That is not effective to put the onus on Coco to protect him.

Anyway, in value he got what he expected, even taking his evidence at face value and ignoring the fact that already in 2010 he obtained an appraisal showing a $10,000,000 value.

[ 50 ] There also is no basis to conclude that Coco constructively or actually knew that Mr. Slater thought there had been no work on the project or misunderstood its value. Caleron’s counsel did not convey what his client knew, assumed or understood about the project, or what value it put on the settled claims and the offered interest in the joint venture.

Nor am I persuaded that Coco should have known that Caleron, a sophisticated party, knew nothing about what happened over 4 years just because Coco failed to provide the information, particularly when it was publically available. [ 51 ] For the same reasons, even if Caleron made a mistake on a material term known to Coco, it would not be unconscionable to enforce the settlement because Caleron transferred its interest at a value close to what it had put on the bargain. VI.

Duty of Good Faith [ 52 ] In some of its submissions, it appears that Caleron relies also on duties of good faith and honesty set out in Bhasin v Hrynew , 2014 SCC 71 . [ 53 ] I do not condone Coco’s failure to provide information to Caleron and allow it to participate in the Chestermere Joint Venture, to the extent required under the agreements. It seems there were breaches of reporting and notice requirements. [ 54 ] However, I have found that these breaches really were not the cause of a mistake on a material term.

In addition, in the context of a 5 per cent interest owner in a mutually-acrimonious relationship, at some point Caleron had to assert its rights. [ 55 ] I am not persuaded that duties of good faith and honest afford a remedy for Caleron. VII.

Summary Judgment [ 56 ] I conclude that there is no genuine issue requiring a trial, as the process has enabled me to make the necessary findings of fact, apply the law to those facts and give judgment by a means proportionate to achieve a just result. [ 57 ] There are very few factual issues here. Those that exist are about what to make of Mr. Slater’s testimony of his subjective intentions and belief, which are relevant only to whether there was a unilateral mistake. As I said earlier, not every factual dispute prevents

summary judgment, and the record here permits me to make the necessary findings in a fair and just process. In any event, none of Mr. Slater’s testimony affects findings I made on Coco’s knowledge, actual or constructive. [ 58 ] I therefore conclude that Coco was entitled to

summary judgment, and therefore Caleron’s appeal of the learned Master’s decision is dismissed. Heard on the 13 th day of September, 2016. Dated at the City of Calgary, Alberta this 11 th day of January, 2017 . G.H. Poelman J.C.Q.B.A. Appearances: Chad Babiuk of Code Hunter LLP for the Appellant/Defendant/Plaintiff by Counterclaim Matthew X. James of Machida James McGurk for the Respondent/Plaintiff/Defendant by Counterclaim