Alexander v Chandra, 2017 ABQB 203

Court of Queen’s Bench of Alberta Citation: Alexander v Chandra, 2017 ABQB 203 Date: 20170327 Docket: 1603 07189 Registry: Edmonton Between: Carol Alexander Applicant - and - Ashwin Chandra, Jennifer Singh and Udrek Singh Respondents _______________________________________________________ Reasons for Decision of S.L. Schulz , Master, Court of Queen’s Bench of Alberta _______________________________________________________ [ 1 ] The Applicant seeks to exercise her statutory right of rescission of the agreement to purchase a condominium unit pursuant to

section 12 of the Condominium Property Act, RSA 2000, c C-22 (CPA). She also claims reimbursement of certain expenses incurred with respect to the condominium. [ 2 ] For the reasons that follow, the application is dismissed. Facts [ 3 ] The Applicant (“Purchaser”) entered into a written contract with the Respondents (“Vendors”) on February 12, 2014 relating to the purchase of real property located in Edmonton, Alberta. The Alberta Real Estate Association (“AREA”) contract describes the property being purchased as 11436-97 Street Edmonton - Front Unit - with a legal description of RN43 (XLIII), Block 4, Lot 19.

The closing date specified in the AREA contract is March 24, 2014. [ 4 ] The Purchaser’s conditions were removed on February 25, 2014. No separate title for a Front Unit existed on that date. [ 5 ] On March 17, 2014, Condominium Plan 142 1348 (“the Plan”) was registered at the Land Titles Office, creating Unit 1 (the Back Unit) and Unit 2 (the Front Unit) as constituent parts of a condominium corporation. [ 6 ] On March 18, 2014 the Purchaser’s solicitor wrote to the Vendors’ solicitor indicating that the Purchaser was ready to proceed “but for the fact that we don’t have a title”.

The Vendors’ solicitor replied on March 20, 2014, suggesting that the closing date

be moved to April 14, 2014 as the “subdivision plan has not yet been registered at Land Titles”. [ 7 ] On March 24, 2014 the Purchaser’s Solicitor requested that the Vendor grant the Purchaser a right of first refusal on the back unit as a term of extending the closing date. [ 8 ] On March 25, 2014, the Vendors’ solicitor indicated that the Vendor would be willing to grant the right of first refusal if the Purchaser would agree to a closing date of April 14, 2014.

The Purchaser’s solicitor responded that the Purchaser would be amenable to an April 25, 2014 closing date together with the right of first refusal and confirmation that “once the titles are split, the zoning of the unit she is purchasing will be low-level, multi-family”. [ 9 ] On March 26, 2014, the Vendors’ solicitor advised that the Vendors agreed to the new closing date of April 25, 2014 but noted that his clients “cannot control the City’s zoning and makes no representations in that regard”. [ 10 ] On March 31, 2014, the Purchaser’s solicitor sent an email to the Vendors’ solicitor stating “...we were surprised that this was registered as a condo rather than a duplex!

What about a party wall agreement?” At questioning, the Purchaser testified that her lawyer made her aware of the change from duplex to condo via email and phone call, but could not recall the date with certainty. She indicated, however, that is was either on or after March 31, 2014. [ 11 ] A transfer of land for Unit 2 of the newly created condominium was executed on April 28, 2014 and registered at the Land Titles office on May 13, 2014. [ 12 ] The Purchaser’s right of first refusal on Unit 1 was executed on May 5, 2014 and registered on May 27, 2014.

She moved into the unit in July 2014. [ 13 ] The Originating Application was filed on April 25, 2016. Issues: 1. Are the Vendors developers under the CPA ? 2. Is the Purchaser entitled to rescission? 3. What is the Status of the Right of First Refusal? 4. Is the Purchaser entitled to reimbursement for expenses? 5. Is the Purchaser’s claim time barred pursuant to the Limitations Act ? 1. Are the Vendors developers under the Condominium Property Act ? Applicable Law [ 14 ] The Purchaser claims a right of rescission pursuant to

section 12 of the CPA . [ 15 ]

Section 12 imposes obligations on a developer who sells or agrees to sell a condominium unit or a proposed unit. Therefore, a preliminary threshold question that must be addressed is whether the Vendors meet the definition of “developer”. [ 16 ] The CPA sets out the following

definitions: 1(1)…(g) “condominium plan” means a plan registered in a land titles office that complies with

section 8 and includes… …(j) “developer” means any person who, alone or in conjunction with other persons, sells or offers for sale to the public units or proposed units that have not previously been sold to the public by means of an arm’s length transaction …(y) “unit” means (

i) in the case of a building, a space that is situated within a building and described as a unit in a condominium plan by reference to floors, walls and ceilings within the building

(2) In this Act a reference to an arm’s length transaction or to a transaction being at arm’s length is a reference to a transaction that is conducted in an open market between willing parties to the transaction negotiating in their own respective self interest where the consideration paid is competitive and not unreasonable having regard to open market conditions. A n alysis [ 17 ] In this instance the parties were transacting at arm’s length and the Purchaser is therefore a member of the public. The question remains as to whether the Vendors sold or offered for sale a “unit” or “proposed unit” as defined in the CPA .

[18] The initial AREA contract was concluded on February 24, 2014. In order for a binding and enforceable contract to be created,there must be a meeting of the minds. In other words, the parties must reach consensus ad idem on essential terms: Ron Ghitter PropertyConsultants Ltd v Beaver Lumber Company Limited, 2003 ABCA 221 at para 9, 17 Alta LR (4th) 243.

As stated by Fraser CJA in RonGhitter, this will be the case where: [9] ...it is clear to the objective reasonable bystander in light of all material facts, that the parties to contract and the essential terms of thatagreement can be determined with a reasonable degree of certainty... [19] On February 24, 2014, the parties came to agree on the property to be sold and the price. However, there was no agreement asto how and in what form the Vendors would convey a legal interest to the Purchaser. [20] The test for whether the parties have reached an agreement must be anchored in the agreement itself.

Where the contract isplain and unambiguous, that will ordinarily end the matter: Ron Ghitter at paragraph 8. The AREA contract is silent as to the nature ofthe legal interest the Purchaser was to receive. At the time of its execution, there was no separate title to the “front unit”. The “front unit”did not legally exist. [21] It appears, at least at the outset that the parties were labouring under mutual mistake, which prevented them from being adidem. The Purchaser reasonably believed that she was purchasing a duplex.

However by March 17, 2014, the Vendors’ solicitor hadregistered a condominium plan at the Land Titles office. The Vendors, or their agents, appear to have undertaken the creation andregistration of the condominium unilaterally, suggesting that they reasonably believed they were selling a condominium. [22] It was not until March 31, 2014, or shortly thereafter, that the parties came to agree that they would be concluding the sale ofa condominium unit.

On March 31, 2014, the Purchaser’s solicitor sent an email to the Vendors’ solicitor indicating he was surprised theunit was registered as a condominium (as opposed to a duplex). On or about that same day, the Purchaser’s solicitor communicated to thePurchaser that a condominium plan had been registered. At some point near this time, she agreed to proceed with the purchase of acondominium unit.

Therefore, it was only on March 31 at the earliest that the parties were in agreement that the property to be sold was acondominium unit. [23] The agreement for the sale of a condominium, however, was not reduced to writing. [24] In Alberta, the Statute of Frauds:

An Act for the prevention of frauds and perjuries, (UK) 29 Charles II c 3 (1677) (“Statute ofFrauds”) requires that a contract for the sale of land be in writing.

Section 4 reads as follows: [N]o action shall be brought…upon any contract for sale of lands…unless the agreement upon which such actions shall be brought, orsome memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person there untoby him lawfully authorized. [25] In Harvie v Gibbons, 1980 ABCA 38 , [1980] AJ No 951, 109 DLR (3d) 559 at paragraphs 16 and 18, the AlbertaCourt of Appeal sets out that the Statute of Frauds does not require a rigid or precise form of memorandum.

What is required is astatement of the essential (material) terms of the contract. While materiality varies with the circumstances, material terms in a landtransaction include the parties, the property, and the price. The Court found that the Statute of Frauds does not deal with the validity ofthe contract but rather deals with evidence of the existence of the agreement: para 17. The agreement (oral contract) and thememorandum (evidence of the agreement) are to be regarded as analytically distinct.

This distinction is further supported by commentaryin John D McCamus, The Law of Contracts, 2nd Edition (Toronto, Irwin law, 2012) at page 176: “[f]ailure to comply with the statutorywriting requirements has the effect that the [oral] agreement is unenforceable. It does not have the further effect, however, ofdetermining that the agreement is void or non-existent”. [26] In this case, the agreement was made on March 31, 2014 or thereabouts.

Although the Purchaser is unsure as to whetherMarch 31 was the precise day on which she agreed to go forward with the purchase of a condominium unit, I can find with certainty thatat some point between March 31 and April 28, 2014 there was an oral agreement between the Purchaser and the Vendor for the sale of acondominium unit. [27] The Transfer of Land registered at the Land Titles office bears the names and signatures of the Vendors as well as the name ofthe Purchaser, the legal description of the property and the price.

It does not contain the signature of the Purchaser but there is sufficientevidence of the agreement in the emails exchanged between the lawyers as authorized representatives of the parties for the Transfer ofLand to qualify as evidence that renders the oral agreement enforceable. The Transfer of Land was executed on April 28, 2014 and theagreement is therefore enforceable as at that date. Accordingly, I am satisfied that there was an enforceable arms-length sale of acondominium unit making the Vendors a “developer” as set out in the CPA. 2. Is the Purchaser entitled to rescind the agreement?

Applicable Law [28] The CPA provides as follows: Sale of units by developers 12(1) A developer shall not sell or agree to sell a unit or a proposed unit unless the developer has delivered to the purchaser a copy of (

a) the purchase agreement,

(

b) the bylaws or proposed bylaws, (

c) any management agreement or proposed management agreement, (

d) any recreational agreement or proposed recreational agreement, (

e) the lease of the parcel, if the parcel on which the unit is located is held under a lease and the certificate of title to the unit or proposed unit has been or will be issued under section 5(1) (b), (

f) any mortgage that affects or proposed mortgage that will affect the title to the unit or proposed unit or, in respect of that mortgage or proposed mortgage, a notice prescribed under subsection (2), and (

g) the condominium plan or proposed condominium plan.

(2) A developer may deliver to the purchaser in respect of a mortgage or proposed mortgage a written notice stating (

a) the maximum principal amount available under the mortgage, (

b) the maximum monthly payment that may be paid under the mortgage, (

c) the amortization period, (

d) the term, (

e) the interest rate or the formula, if any, for determining the interest rate, and (

f) the prepayment privileges, if any.

(3) Subject to subsection (4), a purchaser who purchases a residential unit pursuant to this

section may, by providing written notice to the developer and without incurring any liability for doing so, rescind the purchase agreement within 10 days from the date the purchase agreement was executed by the parties to it.

(4) A purchaser may not rescind the purchase agreement under subsection (3) if all the documents required to be delivered to the purchaser under subsection (1) have been delivered to the purchaser not less than 10 days prior to the execution of the purchase agreement by the parties to it.

(5) If a purchase agreement is rescinded under subsection (3), the developer shall, within 10 days from the developer’s receipt of a written notice by the purchaser of the rescission, return to the purchaser all of the money paid in respect of the purchase of the residential unit.

(6) A developer shall provide to a purchaser of a unit prior to or at the time that the purchaser takes possession of the unit or proposed unit an occupancy permit or permission in writing to occupy the unit or proposed unit that is issued or given pursuant to the regulations under the Safety Codes Act . Rescission of purchase agreement 13 Every developer who enters into a purchase agreement shall include in the purchase agreement the following: (

a) a notification that is at least as prominent as the rest of the contents of the purchase agreement and that is printed on the outside front cover or on the first page of the purchase agreement in bold face, in upper case and in larger print than the rest of the purchase agreement stating as follows: “The purchaser may, without incurring any liability for doing so, rescind this agreement within 10 days after its execution by the parties to it unless all of the documents required to be delivered to the purchaser under

section 12 of the Condominium Property Act have been delivered to the purchaser not less than 10 days prior to the execution of this agreement by the parties to it.”; ... Offences and penalties 79

(1) A person who fails to comply with section 12(1) or (5) , 13 , 14 or 21 is guilty of an offence and liable to a fine (

a) of not less than $200 nor more than $15 000 in the case of a person who is not a company, and (

b) of not less than $500 nor more than $25 000 in the case of a company.

(2) Subject to subsection (1), a person who fails to comply with this Act is guilty of an offence and liable to a fine of not less than $200 nor more than $5000.

(3) If a corporation fails to comply with this Act, each member of the board who is knowingly a party to that failure is guilty of an offence and liable to a fine of not less than $200 nor more than $5000. Application of Act

80(1) This Act applies notwithstanding any agreement to the contrary and any waiver or release given of the rights, benefits orprotections provided by or under sections 12to 17 is void.

(2) A remedy that a purchaser of a unit has under this Act is in addition to any other rights or remedies that the purchaser has.

(3) A purchase agreement may be enforced by a purchaser notwithstanding that the developer failed to comply with this Act. Emphasis added Analysis [29] The purpose of Sections 12 and 13 is to provide protection to consumers: Qualex- Landmark Investments Inc v Soroya, 2011ABQB 354, 512 AR 356 (“Qualex”) at para 83.

This is underscored by the presence of Section 80(1) which provides that any waiver bythe purchaser of its available rights under sections 12 to 17 is void. [30] When a developer fails to disclose, the Courts have found the purchase agreement to be voidable by the purchaser: Qualex atpara 82; Clyne v Lear Enterprises Ltd, 2009 ABPC 134 at para 114, 473 AR 120 (“Clyne”); Bugar v 928028 Alberta Ltd, 2006 ABPC268 at para 13, AWLD 954 (“Bugar”).

A voidable contract remains in effect unless the party entitled to avoid it opts to do so: ReferenceRe Western Canadian Fire Insurance Co, (AB CA), 1915 CarswellAlta 97 at para 20, 30 WLR 648.

Thisinterpretation is supported by Section 80(3) of the CPA which allows the purchaser to enforce an agreement notwithstanding thedeveloper has not complied with the CPA. [31] Here, the Purchaser relies on Qualex (para 84) and the developer’s failure to disclose in order to argue that her right to rescindcould extend beyond the 10 days contemplated by the legislation and should in fact be extended up until today. [32] Qualex is a different fact scenario than the case at bar. In Qualex, the transaction had not closed.

Here, the Purchaserexercised her right under Section 80(3) to enforce the contract (ie close the transaction) notwithstanding the developers’ breach. [33] The fact that the transaction closed is significant. Upon closing, a contract ceases to be executory: Di Castri, Law of Vendorand Purchaser, 3rd Ed vol 2 (Toronto: Carswell, 2016) at para 728 (“Di Castri”). The Purchaser therefore finds herself in afundamentally different position than the purchasers in Qualex, Bugar and Clyne.

Here, the Purchaser could have exercised her right toavoid the contract until closing, but in closing the transaction, this right was foreclosed. Closing rendered the contract functus in itsexecutory aspect and no longer able to be modified or set aside. The Purchaser, who had the benefit of being advised by a solicitor, couldhave opted to avoid the contract while it was in its executory state but chose not to do so.

By choosing to close, she took steps to enforcethe contract and as a result fundamentally altered her position and consequently, lost her ability to seek rescission. [34] As a result of closing and the Purchaser having received good title, the doctrine of contractual merger applies.

The AlbertaCourt of Appeal has summarized the main principles enunciated by the Supreme Court of Canada as follows: Firstly, the general rule of presumption is that the agreements in the sales contract are merged in the conveyance; Secondly, this general rule does not apply to collateral or independent undertakings in the sales contract and the presumption is they arenot merged in the conveyance; Thirdly, both presumptions are overborne if the intention of the parties was to the contrary.

Moretta v Western Computers Investment Corp (1983), 1983 ABCA 306 , 50 AR 168 (CA) at para 30 and 31 relying on Fraser-Reid v Droumtsekas, (SCC), [1980] 1 SCR 720 at paras 29 and 30 [35] The doctrine of merger provides that the agreement for the sale of land is subsumed into the deed upon closing. Theunderlying premise for its operation is that the purchaser has agreed to accept title to the land in place of the rights it held under thecontract of sale.

The purpose of the doctrine is to create finality where the sale of land is concerned: Fournier v Schinnour, 2003 ABQB41 at para 10, 337 AR 174. [36] Therefore, pertinent questions are whether the obligation under 12(1) was a collateral or independent undertaking and if so,did the parties display an overriding intent that it survive the closing of the transaction. [37] The rights and duties found in

section 12 are terms imposed by statute. The broad range of alternative remedies listed undersection 67 as well as the penalties listed in

section 79 for non-compliance with

section 12 suggests that rescission is not the exclusiveremedy available to the purchaser. Moreover, the presence of alternative remedies indicates the legislature’s intent that rescission doesnot survive closing. [38] Based on the foregoing analysis, I find that the right to rescission does not survive the closing of the transaction and is notnow available to the Purchaser. 3. What is the Status of the Right of First Refusal? [39] A document entitled Right of First Refusal dated May 5, 2014 was entered into by the parties and protected by way of theregistration of a caveat against title on May 27, 2014. It is part of the consideration given for the purchase of the condominium. Since the

condominium purchase has not been rescinded, the Right of First Refusal remains in full force and effect. 4. Is the Purchaser Entitled to Reimbursement for Expenses? Reimbursement of Taxes, Utilities, Repairs and Maintenance Expenses [ 40 ] These expenses flow from ownership and are therefore expenses to be borne by the Purchaser. There has been no evidence adduced to the contrary.

Expenses for Deck, Fence and Stairs [ 41 ] The Purchaser seeks an order that the Developer pay the money held in trust for the completion of the decks, fence and stairs to be paid out to the Purchaser as compensation for her cost of constructing common property incidental to the use of Unit 2 (still owned by the Vendor). No evidence has been adduced in support of this claim and it is therefore denied. 5. Is the Purchaser’s Claim Time Barred Pursuant to the Limitations Act ? [ 42 ]

Section 3 of Limitations Act, RSA 2000, c L-12 (“ Limitations Act ”) provides that a claimant must bring an action within a two-year period that commences when the claimant knew or ought to have known there was an injury, the injury was attributable to the defendant and the injury warranted bringing an action. The onus is on the claimant, in this case the Purchaser, to prove that the action was commenced within the time limited by section 3(5) of the Limitations Act . [ 43 ] I have found the Vendors to be developers within the meaning of the CPA .

The agreement was oral until such time as the Transfer of Land was signed on April 28, 2014 at which time it became an enforceable agreement. According to Qualex and the case law on contracts, the time for disclosure can be extended until closing at which time the right to rescind merges and is lost. [ 44 ] Although it is arguable that the agreed upon closing date was April 25, 2014, the actual closing did not happen until May 13, 2014. The actual date of closing should be used to determine the limitation period.

The documents could have been disclosed by the developer at any time up until closing on May 13, 2014. On May 13, 2014, the Developers completed a transaction prohibited by the CPA thereby breaching the CPA , and the Purchaser lost her right of rescission. The Plaintiff suffered the injury complained of on May 13, 2014. The Originating Application was filed on April 25, 2016. It is therefore within the time limited by the Limitations Act .

Even if I am wrong and the date originally agreed upon as the closing date is the correct date to use, the Originating Applications was still filed within 2 years of April 25, 2014. Conclusion [ 45 ] In

summary, this action was brought within the time period specified by the Limitations Act . [ 46 ] The Vendors are Developers within the meaning of the Condominium Property Act . Disclosure was not given before the transaction closed and the right to rescission for failure to disclose merged with closing and does not survive.

The Plaintiff Purchaser’s application for rescission is denied. [ 47 ] The Right of First Refusal remains in full force and effect. [ 48 ] The application for reimbursement of taxes, utilities, repairs and maintenance is dismissed. [ 49 ] The application for the expenses related to the deck, fence and stairs is dismissed for lack of evidence with leave to the Applicant to renew the application upon filing evidence to support the claim. [ 50 ] The Developers/Respondents are entitled to the taxable costs of this action. Dated at the City of Edmonton, Alberta this 27 th day of March, 2017. S.L. Schulz M.C.C.Q.B.A.

Appearances: Kevin Haldane Ogilvie LLP for the Plaintiff Michael Gibson Sharek Logan & van Leenen LLP for the Defendants