ABS Trucking Ltd v Gainers Properties Inc, 2017 ABQB 625

Court of Queen’s Bench of Alberta Citation: ABS Trucking Ltd v Gainers Properties Inc, 2017 ABQB 625 Date: 20171016 Docket: 1603 07350 Registry: Edmonton Between: A B S Trucking Ltd Applicant - and - Gainers Properties Inc Respondent _______________________________________________________ Reasons for Decision of L.A. Smart , Master, Court of Queen's Bench of Alberta _______________________________________________________ Background [ 1 ] The Applicant, A.B.S.

Trucking Ltd. (ABS) applies for an order to remove from title of certain land (the Property) 3 caveats (Caveats) filed by the Respondent, Gainers Properties Inc. (GPI) protecting a Repurchase Agreement. [ 2 ] On August 1, 1999, GPI and Fletcher’s Fine Foods Ltd (Fletcher’

s) entered into a land sale agreement to transfer title to lands briefly legally described as Lot 2A, Block 5, Plan 9921389 (Original Lands). Fletcher’s assigned that agreement to its wholly- owned subsidiary Grimm’s Find Foods Ltd (Grimm’s). GPI was granted the right to repurchase the Original Lands as set out in

Schedule A (Repurchase Agreement) to the land sale agreement. The repurchase right at a price of $847,600 would come to an end upon the earlier of the completion of a Development and October 1, 2019.

The term Development is defined as the completion of “a bacon processing plant or a food processing plant, or some other development upon the lands, which in the sole discretion of GPI is similar to a bacon processing plant or food processing plant, and which has a market value, excluding the fair market value of the bare Lands and the Remaining Buildings, of at least $5 million (including the building or buildings to be constructed on the Lands, fixtures and equipment).” On October 27, 1999, GPI registered a caveat against title to the Original Lands with respect to the Repurchase Agreement. [ 3 ] On March 5, 2002 GPI and Grimm’s entered into an Agreement to Amend the Repurchase contract.

The Original Lands would be subdivided into two parcels so that Grimm’s could sell one parcel to another party. The repurchase price would be amended from $847,600 to $1. On March 14, 2002, the Original Lands were subdivided into two parcels briefly legally described as Lot 4 and 5, Block 5, Plan 0221247. On the same day GPI registered a caveat against title to Lot 5 (the Property) with respect to the Agreement

Amending Repurchase Agreement. [4] On March 11, 2002 Grimm’s and TCS Alberta Inc. (TCS) entered into an Assumption Agreement with respect to the Lot 4Lands. Under the Agreement Grimm’s agreed to sell Lot 4 to TCS.

Schedule A forming a part of the Assumption Agreement, to whichTCS agreed to be bound, provided for GPI’s right to repurchase Lot 4 at $847,600. It also provided that the repurchase right would endupon the earlier of the completion of a “Development” (as defined in in the Schedule) on those lands or June 30, 2004. TCS constructeda cold storage facility satisfying the requirement for completion of the Development and the repurchase right of GPI came to an end.

Theassessed value of the cold storage facility is now $29,518,500. [5] In July 2005, Grimm’s entered into an agreement with Premium Brands Inc. (PBI) and Premium Brands Operating LimitedPartnership (PBLP). GPI consented on the basis that PBI and PBLP agreed in the Lot 5 Assumption Agreement to perform the covenantsto be performed by Grimm’s and they would be binding on the respective successors and assigns of PBI and PBLP including PremiumBrands Operating GP Inc.

It was agreed that the Lot 5 Assumption Agreement would be registered against title to Lot 5 and a caveat wasregistered August 22, 2005. [6] By way of transfer ABS obtained title to Lot 5 (the Property) from “Premium” on August 8, 2013 without obtaining theconsent of GPI. Premium and ABS agreed that ABS would be bound by all of the terms and conditions of the Repurchase Agreementand the Agreement Amending Repurchase Agreement and observe and perform all covenants, terms and conditions set forth in thoseagreements. ABS had the opportunity to see all of the GPI Caveats and the documents supporting those caveats.

The purchase price paidby ABS was $2,500,000 and the Property is currently assessed at a value of $4,194,500. Discussion Land Titles Registration\Caveats [7] ABS contends that the filing of the Caveats offends s 143(1) of the Land Titles Act, RSA 2000, c L-4 as only one caveatshould be filed in respect of the same matter. In addition, it cites Ruptash v Zawick, (SCC), [1956] SCR 347 that heldthat a caveat must describe with a fair degree of particularity, the interest being claimed.

Furthermore, there are defects in the executionof many of the underlying documents contrary to the requirements of the Land Titles Act for registration. [8] In my view, the respective caveats reflect material variations notably changes in parties to agreements and consequently aresufficiently different from one another so as not to offend the limitation of one caveat for a matter. The Caveats in this case set out thatthere is a repurchase agreement which description succinctly and completely describes the interest claimed.

The detail must be soughtout which is part of the inherent nature of caveats but clearly a prospective purchaser is alerted to the substance of the claim. In this case,ABS was able to secure copies of the various agreements and, if it wished, review and assess their import.

Parenthetically, I observe thatat least part the multiple caveats provide some additional particulars of the underlying Repurchase Agreement(s) [9] As for the lack of formality of execution which would prevent registration of an agreement per se at Land Titles theregistration of caveats to protect such agreements is permitted in Alberta and commonly used for that purpose. The inability to registerthe actual agreement at the Land Titles Office does not vitiate an otherwise valid agreement between the parties.

Noting the variousagreements and assignments containing affirmation of the Repurchase Agreement (as amended from time to time) leaves no doubt of thevarious parties’ intention with respect to enforceability. Relief from Forfeiture [10] ABS argues that the character of the repurchase right changed to a penalty in 2002 when the price was reduced to one dollarfrom the original price of $847,600 as that was essentially the price that Fletcher’s initially agreed to pay.

Repurchase rights similar tothis one are often requirements of municipalities and land developers obtained for collateral reasons, for example, to ensure constructionoccurs in an orderly and timely fashion. GPI is not a municipality, developer or the Crown. It carries on no business or other activity andwould suffer no apparent loss or damage if the Property remained undeveloped.

Arguably, the construction of the TCS cold storagefacility on Lot 4 satisfied the ostensible objective of the original repurchase right being new development on the Original Lands. [11] Although the right to repurchase land often involves municipalities and land developers, there is no restriction on privateparties holding such interests. There is no evidence as to the motivation or objective of GPI when it sold the lands with the right ofrepurchase.

It is simply not possible to conclude GPI in substance obtained the initially intended consequence through the sale anddevelopment of Lot 4 by TCS, nor in my view is it relevant. ABS notes that the Property is worth at least $2,500,000 being the price itpaid in 2013 and to require it to sell to GPI for one dollar would result in a substantial loss with GPI receiving a corresponding windfall.Although it is plain that ABS would suffer a substantial loss and giving relief seems attractive, ABS purchased the lands from and paidthe purchase price to Premium.

If relief from forfeiture were to be available it would be as against Premium not GPI. Meaning of “Development” and Certainty [12] The meaning of Development in the Repurchase Agreement appears in the agreement as follows: 1.(

a) For the purposes of this Agreement, the term “Development” shall mean the completion by Fletcher’s (which includes subsidiariesand affiliates of Fletcher’s as such terms are used and defined in the Business Corporations Act (Alberta)) or by Fletcher’s successorsand assigns, of a bacon processing plant or a food processing plant, or some other development upon the lands, which in the solediscretion of GPI is similar to a bacon processing plant or food processing plant, and which has a market value, excluding the fair marketvalue of the bare Lands, and the Remaining Buildings, of at least $5,000,000 (including the building or buildings to be constructed onthe Lands, fixtures and equipment).

[ 13 ] Both ABS and GPI made argument regarding the meaning of Development pointing to grammatical rules and placement of commas. In support of their arguments they also present reformatted versions of the paragraph including alteration of punctuation to support their respective position as to its meaning. Although perhaps interesting to some, I find these arguments unhelpful. and reformatted paragraphs an unnecessary and inappropriate distraction. [ 14 ] The law on uncertainty of terms was thoroughly reviewed in Ko v Hillview Homes Ltd ( 2012 ABQB 245 ).

It recognizes that certainty of terms is not self-contained and overlaps with other aspects of contract law notably formation. Ko cautions against introduction of parol evidence notably in the face of whole or entire agreement clauses, or creating unwritten collateral obligations and imposing terms to achieve enforceability. [ 15 ] Regardless the starting point is to examine and interpret the contract and its terms. In Sattva Capital Corp v Creston Molly Corp ( 2014 SCC 53 at para 47 ) the modern approach to contractual

interpretation in Canada is outlined briefly as follows: “. . . The

interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding”. To do so, a decision-maker must read the contract as a whole, giving the words use their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.

Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult looking at words on their own, because words alone do not have an immutable or absolute meaning [citations omitted].” [ 16 ] ABS argues that based on its construction and

interpretation that the descriptions of the types of plants or developments cause the repurchase right to be void for uncertainty. Specifically, it argues that the requirement that the plant or development on the lands have a market value of at least $5 million relates only to “some other developments upon lands” and is not referable to a bacon or food processing plant. Based on that construction ABS argues that an inexpensive sandwich stand could satisfy the requirement. In my view, this illustration using the ABS construction demonstrates its absurdity. Examining the surrounding circumstances at the time strongly supports the

interpretation that the $5 million is referable to any plant or development on the lands to give it a commercially reasonable and rational meaning. [ 17 ] Reaching the foregoing conclusion assists in creating certainty, however, there remain two other issues to be considered in that regard. Firstly, there is the question of what type of plant will satisfy the requirement and is its description sufficient enough for ABS to know what is required to be done to satisfy the condition. A “bacon plant” is relatively straightforward and easy to comprehend.

The alternative of “some other development ... similar to a bacon processing plant or food processing plant” is at the sole discretion of GPI allowing it to unilaterally determine what will satisfy the condition. [ 18 ] Nonetheless, ABS also raises the question of what would constitute a “food processing plant” as it is an extremely broad description. The Alberta Food Processors Association , for example, recognizes an extensive range of categories of food processing from “bakery” to “vegetables” and includes “entrées and ready-made meals” and “feeds” for animals.

In my view this does not make the description void for uncertainty. Rather, it permits a wide range of plants that could be built to satisfy the requirements.

GPI in agreeing to this broad description would have little room to complain if it felt that what was constructed did not fit some a narrow view it may have of what constitutes a food processing plant. [ 19 ] The second issue arises from the wording at the end of the definition of development: “...and which has a market value, excluding the fair market value of the bare Lands, and the Remaining Buildings, of at least $5,000,000 (including the building or buildings to be constructed on the Lands, fixtures and equipment).” [ 20 ] The quandary is how “market value” is to be determined?

It is not defined in this agreement nor is there a mechanism for its determination prescribed. Furthermore, how is the fair market value of the bare lands and the remaining buildings to be determined? How does market value differ from fair market value? Is an appraiser to be used? The language used seems to contemplate a valuation be obtained before construction. Does an appraiser rely on plans of proposed construction, anticipated costs of construction and/or some anticipated finished product? Is the appraiser to do a comparative market analysis based on this hypothetical plant being on the lands?

Or, recognizing the plant would be an income producing property does the valuation attempt to factor in income to arrive at a value? On what basis would future income be determined? [ 21 ] In sum with no clear definition of market value there is uncertainty. There is no prescribed mechanism or parameters set out that would make it ascertainable and additional terms must not be imposed or created to make it ascertainable. Conclusion [ 22 ] Certainty is a question of law ( Ko ) and when applied to the factual matrix set out above the Repurchase Agreement is unenforceable.

Accordingly, the Caveats are to be discharged. ABS will have their costs of the application on Column 1,

Schedule C of the Rules . Dated at the City of Edmonton, Alberta this 16th day of October, 2017.

L.A. Smart M.C.Q.B.A. Appearances: Grant Dunlop, Q.C. Ogilvie LLP for the Applicant Donald Wilson DLA Piper (Canada) LLP for the Respondent