Dacha Property Management Ltd v Jaswal, 2017 ABQB 250

Court of Queen’s Bench of Alberta Citation: Dacha Property Management Ltd v Jaswal, 2017 ABQB 250 Date: 20170405 Docket: 1301 14257 Registry: Calgary Between: Dacha Property Management Ltd. Plaintiff - and - Mohinder Jaswal and Amandeep Jaswal Defendants _______________________________________________________ Reasons for Judgement of the Honourable Madam Justice K.M.

Eidsvik _______________________________________________________ [ 1 ] The Plaintiff Dacha Property Management Ltd. (“Dacha”) brought an action for the specific performance enforcement of an option to purchase a piece of land in Calgary or alternatively breach of contract and damages. At trial, the Plaintiff elected to seek damages and was no longer seeking specific performance. Background and Factual Findings [ 2 ] The president and sole operator of Dacha, Mr. Alexander Tomes testified that he was in the business of buying and selling properties on a “rent to own” basis.

He saw a listing for the rent of the property in question, at 39 Ranchridge Crescent NW, Calgary and was in touch with the owner, Mr. Mohinder Jaswal in early January 2010. He offered to find a tenant for him and then to dispose of the property at a favourable price.

[ 3 ] Mr. Jaswal had purchased the property in September 2009 for $340,000. When Mr. Tomes went to inspect the property he found that it was in very bad shape and it was unlikely that anybody would rent it since it was not in a livable condition. Nonetheless, Mr. Tomes (always on behalf of Dacha) offered to lease the property for three years at a rent of $1600/month with an option to purchase it for $380,000 at the end of the lease term, or on October 31, 2013. This represented years of rental income and a $40,000 profit for Mr.

Jaswal. [ 4 ] On January 15, 2010 a lease (“the Lease) and an option to purchase agreement (the “Option Agreement”) were signed by the parties. I will come to some specific terms later, but included was the right to sublease the property and caveat the title in the meantime. [ 5 ] Mr. Tomes spent almost two months cleaning and fixing up the place. He removed garbage, replaced the stove, painted the house, cleaned out the basement from soot damage, cleaned the furnace and ducts and repaired plumbing and windows and landscaped the yard. [ 6 ] Mr. Jaswal denied that the place was in such bad shape.

He inferred indeed that it was in great shape and he had pictures to prove it. He did not produce the pictures and he never saw the property himself, relying instead on a real estate agent. Further, I note in the Option Agreement that there is a mention of replacing carpets in clause 2.5 which likely would not have been there if the carpets didn’t need some work. [ 7 ] I accept that the place was in bad repair as described by Mr. Tomes. [ 8 ] On February 22, 2010, as planned, Mr. Tomes found a tenant for the property, Oliver and Heidi Machl.

He entered into a lease with them for 3 years, ending at the same time as the Lease, October 31, 2013. He also granted them an option to purchase at the price of $425,000 at the end of their term. [ 9 ] In February 2010 Mr. Tomes, as per the Option Agreement, put a caveat on title. [ 10 ] On June 10, 2010, Mr. Jaswal’s lawyer contacted Dacha’s lawyer and asked if Dacha would postpone his caveat in favour of a new mortgage that “his client” would be placing. His client was noted on the letter as “Mohinder and Gurdeep Jaswal”. Mr.

Tomes had been aware that this re-financing may occur and clause 3.8 of the Option Agreement contemplated such a postponement. Dacha’s lawyer agreed the next day to postpone the caveat without any issue. [ 11 ] As it turned out however, Mr. Jaswal was upset with having a caveat on a title with his name on it. Behind Dacha’s back, and in breach of the Option Agreement, he took advantage of the postponement of the caveat and transferred the title for no consideration to his daughter, the Co-Defendant, Amandeep Jaswal on June 11, 2010. [ 12 ] Dacha paid all of the rent as it was due with no problems.

It complied with all of the conditions in the Option Agreement and Lease. Dacha continued to improve the property by adding a hardwood floor, putting tile floor in the foyer, insulating the garage, improving the doors and deck etc. [ 13 ] In the fall of 2013, and more specifically on September 12, 2013, Mr. Tomes called Mr. Jaswal to tell him that he wanted to exercise the right to purchase the property. Mr. Jaswal returned his call a few weeks later, on September 29, 2013, and bizarrely answered that he would not agree to sign a purchase agreement unless Dacha removed the caveat on the land.

This was bizarre since Mr. Jaswal had already transferred title to his daughter on June 11, 2010 so it is unclear why he was concerned about this still. Further, it was an unreasonable condition. [ 14 ] Mr. Dacha attended a few days later at a furniture store Mr. Jaswal was working at. He brought in an AREA (Alberta Real Estate Association) standard residential real estate purchase contract with him so that he could get it signed by Mr. Jaswal. This form of real estate contract was an attachment to the Option Agreement and Mr.

Jaswal was familiar with it. (I note that it was not actually attached to the Agreement but both parties knew what the form was). Instead of agreeing to sign this purchase agreement which could have easily been done that day since the terms were already agreed to, Mr. Jaswal refused to deal with Mr. Tomes and asked him to leave. [ 15 ] Undeterred, Mr. Tomes called Mr. Jaswal on October 7 to discuss this matter again. Mr. Jaswal wanted Mr. Tomes to deal with his lawyer and said that he was getting a new one and would get back to him. [ 16 ] The new lawyer’s name was texted to Mr. Tomes on October 9, 2013. Mr.

Tomes tried on many occasions to get a hold of this new lawyer, and with Mr. Jaswal again, with no success. He finally got his own lawyer to try and reach Mr. Jaswal or his lawyer. Clearly, in my view, Mr. Jaswal was stonewalling Mr. Tomes. [ 17 ] Mr. Tomes finally spoke with Mr. Jaswal on October 21 and asked why he was refusing to cooperate. Mr. Jaswal suggested that he was “waiting for the documents”. Mr. Tomes therefore got an AREA offer to purchase filled out using Mr.

Jaswal’s daughter’s name (since he had learned that the title had been transferred, albeit improperly, to her) and the Machl’s as purchasers since they were the assignee’s to the agreement (and which was expressly allowed under the Option Agreement). [ 18 ] Mr. Tomes dropped off the purchase agreement at Mr. Jaswel’s new lawyer’s offices on October 23, 2013. [ 19 ] Mr. Tomes again heard nothing. He got his own lawyer involved again and he understood that the lawyers were playing “telephone tag”. On October 29, 2013, Mr.

Tomes’ lawyer told him that there was a problem with the offer acceptance date in the purchase agreement and that they wanted a new one. [ 20 ] Mr. Jaswal testified that he would have brought the offer to his daughter to sign had the right date been put in. He disagreed that he (or she) could have simply signed the Offer as is and returned the offer so that a small date change could be initialed by the Mechl’s. He testified that this was his only problem with the Offer and that he knew that Mr. Tomes was trying to exercise his rights to have the title transferred to Dacha as per the Option Agreement.

[ 21 ] On October 31, Mr. Jaswal’s lawyer called to say that the documents were ready for pick up. However upon Mr. Tomes’ arrival at Mr. Jaswal’s lawyer’s office, the lawyer said that “he had no right to talk to him” and he rudely showed him the door. [ 22 ] The next day, November 1 st , 2013, Mr. Jaswal called to get Mr. Tomes to remove the caveat. Mr. Jaswal refused to make any further efforts to close the deal. Amandeep called and emailed over the next couple of days to the same effect. Mr.

Tomes referred the matter to his lawyer and further efforts to close were continuously rebuffed on the basis that the Option was not exercised in time. [ 23 ] Ultimately Dacha was sued because it could not close with the Machl’s. It settled with them and returned their deposit. Issues 1. Was there a breach of contract? 2. If so, what are the damages? 1. Breach of Contract? .Clause 2.4 of the Option Agreement reads as follows: 2.4 Exercise of Option The Grantee may exercise the Option at any time during the Option Period by delivering to the Grantor, written notice of the exercise of the Option.

If the Option is exercised in the manner set forth in this subsection 2.4, then this Agreement shall become a binding agreement for the purchase and sale of the Option Lands which shall be completed upon the terms and conditions contained in the Purchase and Sale Agreement attached hereto as

Schedule “B” (“the Purchase Agreement”) and the closing date shall be the 31 st day of October, 2013 (the “Closing Date”) provided that in the event of conflict the terms and conditions of this Agreement shall be paramount to those contained in the Purchase Agreement.

For clarity, in the event of the exercise of the Option within the Option Period the parties hereby expressly agree to forthwith execute a Purchase Agreement if requested by either party. [ 24 ] Later, clause 3.2 indicates: 3.2 Additional Documentation The parties hereto covenant to execute promptly such further documents or instruments and to provide such assurances as may be necessary to give effect to this Agreement and to conclude the transactions set out herein in accordance with the provisions of this Agreement. [ 25 ] The Defence argued that although Mr. Jaswal testified that he knew Mr.

Tomes wanted to exercise the option and that he had delivered a written purchase contract to that effect, since there were some parts of the Offer that were defective and there was a financing condition that made it conditional, the Option was not enforceable. [ 26 ] The Defence relies on many cases, to point out that whether Mr. Jaswal was aware or not was irrelevant since this is parole evidence and cannot change the terms of the contract. Further, that the exercise of the option “must be clear, explicit and unequivocal” and in this case it was not: see a good

summary of the cases on this point in 441 Main Inc v Silver Pawn Pictures Inc. 2012 MBQB 47 at para 21 . [ 27 ] The Defence points out that the acceptance date on the Offer was the 22 nd of October when the offer was made on the 23 rd , and that a ticky box that referred to a “financing schedule” was ticked off even though there was no

schedule attached, meant that the offer was conditional on financing, a condition that was not removed before October 31, 2013. [ 28 ] I agree with the Defence that resort should not be made to parole evidence to interpret the contract however, it is also trite law that resort can be had to the circumstances surrounding the contract creation and performance in order to understand the context of the commercial transaction. [ 29 ] Here it was obvious from the beginning of this arrangement between the parties that Dacha would want to exercise its option once the lease agreement was over.

It had fulfilled all of the terms of the agreements over a period of over three years and had relied on the Option Agreement to improve the property over the period of the lease. The deal was good for everyone: Mr. Jaswal was making a healthy profit on a property that he had only held for a few months before this deal came along. Dacha Property was also going to make some profit net of its expenses that it incurred fixing the place up. [ 30 ] Mr. Jaswal had obligations under the Option Agreement that he did not fulfill. Once a written notice of the exercise of the Option was delivered to Mr.

Jaswal, he needed to execute a Purchase Agreement as requested. This was to be done “forthwith” or “promptly”. Written notice that Dacha wanted to exercise its option rights was attempted on October 3, and was formally made on October 23, 2013. Written notice does not mean a perfect Offer to Purchase, it means only a notice. Here it was obvious from the Offer to Purchase that Dacha wanted to exercise its rights, defects or not. As such Mr. Jaswal had an obligation to sign a Purchase Agreement but failed to do so. Instead, I find that he stonewalled Mr.

Dacha’s attempts to exercise his option rights. [ 31 ] The Supreme Court has condemned the behaviour that Mr. Jaswal exemplified in this case. In Bhasin v Hrynew 2014 SCC 71 , the court said at para 65:

65 The organising principle of good faith exemplifies the notion that, in carrying out his or her performance of the contract, a contractingparty should have appropriate regard to the legitimate interests of the contracting partner. While “appropriate regard” for the otherparty’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in allcases. It merely requires that a party not seek to undermine those interests in bad faith. [32] Here I find that Mr.

Jaswal was doing just that – he was “undermining” the interests of Dacha on several occasions. First hefailed to return calls for two weeks in September. Then he refused to meet with Mr. Tomes who could have easily filled out the simpleterms of the Offer he brought so that Mr. Jaswal could sign it then and there out on October 3 – this would have been a simple thing: theprice and closing date were fixed.

Merely the parties’ names had to be filled in. ( I note that the one complication of course was that Mr.Jaswal no longer owned the property, but he (and his daughter who testified) both indicated that this was not a problem – in any event,this breach of contract cannot possibly relieve Mr. Jaswal of his obligations). [33] In any event, on October 23 when a completed Offer to Purchase was personally delivered to Mr. Jaswal’s lawyer, Mr. Jaswalagain refused to execute it. The minor corrections that needed to be made could easily have been accommodated.

Instead there was morestonewalling and delay – or, as the Supreme Court said an “undermining of interests in bad faith”. [34] In light of Mr. Jaswal’s breaches as described, in face of a valid “written notice” properly personally delivered to Mr. Jaswal,the fact that there were minor issues with the Purchase Offer did not void the whole agreement as suggested by the defence – these issuescould have easily been fixed. Mr.

Jaswal never did execute a purchase agreement as he was required to do under the Option Agreement – he could have done this earlier or even after the 31st, since the delay in my view was caused by Mr. Jaswal’s obstruction in fulfilling hisobligations under the Option Agreement. Dacha substantially complied with the Option Agreement and is allowed damages for Mr.Jaswal’s breaches. [35] I refer to Sail Labrador Limited v Challenge One (SCC), [1999] 1 SCR 265 from the Supreme Court ofCanada.

In that case the lessor had failed to make some lease payments through a banking error so that the option to purchase the vesselin question was rebuffed because of imperfect compliance, like here. The court held that there had been substantial performance of theobligations of the agreement and that the owner had no right in these circumstances to cancel the option to purchase. In the result, thetrue intention of the parties was enforced.

The court said at p. 306: “The concern of the Court in this instance must be with fairness.”(underlining mine) [36] I find that the reasoning in Sail Labrador applies here. [37] In the alternative, if because the date was wrong and the ticky box was ticked, so that technically the option was not“unconditional” and therefore unenforceable (which I do not agree with), I would grant relief from forfeiture. I rely on 120 AdelaideLeaseholds Inc v Oxford Properties Canada Ltd

(1993) OJ No 2801, (Ont CA) at para 3 . In that case the tenant had failed to renewwithin the time limit set in its contract. Although the Court agreed that missing a deadline by three months meant that the condition wasnot fulfilled, the Court also said: We do not, however, agree that the court has no jurisdiction to grant equitable relief. In Ross v T.

Eaton Co. (1992) (ON CA), 11 OR (3d) 115 at 124-25 this court held that the jurisdiction to grant equitable relief in cases such as this is a limited one.One of the conditions necessary for the jurisdiction to be exercised is that the tenant has made diligent efforts to comply with the termsof the lease which are unavailing through no default of his or her own. [38] I find that this situation applied here. Mr. Tomes made diligent efforts starting well before October 31 to comply with theterms of the Option Agreement but was thwarted by Mr. Jaswal. The circumstances here are similar: Mr.

Jaswal knew that Dacha wasattempting to close the sale of the property and he knew that the offer was open for acceptance despite the incorrect date on the contract,and he testified that he was not concerned about the financing clause. These issues were easily fixable had he been acting in good faith.Accordingly, I would relieve the Plaintiff from forfeiture of the deal in these circumstances. 2. Damages [39] As I said at the outset, the Plaintiff sought damages in this case instead of specific performance.

Considering that this is aresidential property, it is questionable that it would be considered “unique” enough for a specific performance remedy in any event. [40] In my view, the Defendants breached their duties under the Option Agreement. The first breach, transferring title behindDacha’s back did not result in any damages. Ms. Jaswal agreed that her father had her authority to act as agent throughout. [41] The failure to properly cooperate and then promptly execute a sale agreement and failure to “conclude the transactions” setout in the Option Agreement attracts damages.

The Plaintiff makes a simple claim – the amount of the profit it would have made had thedeal been closed on March 31, 2013 or $45,000 (the difference between the option price of $380,000 and the Machl’s option price of$425,000). I will award that amount in damages plus pre-judgment interest from March 31, 2013 as set out in the Judgement Interest ActRSA 2000, c. J-5.

Heard on the 3 rd and 4 th days of April, 2017. Dated at the City of Calgary, Alberta this 5 th day of April, 2017. K.M. Eidsvik J.C.Q.B.A. Appearances: Nicholas Ramessar for the Plaintiff Jeffrey Woodruff for the Defendants