1704455 Alberta Ltd. Plaintiff - v. -, 2020 ABQB 776

Court of Queen’s Bench of Alberta Citation: 1704455 Alberta Ltd v Sage Property Development Inc, 2020 ABQB 776 Date: 20201211 Docket: 0903 08228 Registry: Edmonton Between: 1704455 Alberta Ltd. Plaintiff - and - Sage Property Development Inc Defendant _______________________________________________________ Reasons for Decision of the Honourable Madam Justice D.A.

Yungwirth _______________________________________________________ Introduction [ 1 ] This is an application by Sage Property Developments Inc (“Sage”) for an Order directing that the Caveat and Certificate of Lis Pendens filed by 1704455 Alberta Ltd. (“170”) against lands owned by Sage, be discharged from title.

Alternatively, Sage seeks an Order directing that upon payment by Sage of funds into Court in an amount determined by the Court, the Caveat and Certificate of Lis Pendens be discharged from title. [ 2 ] In addition, Sage seeks an Order setting aside the Noting in Default filed July 17, 2019 in this action.

Facts The Caveat registered by 170 claims an interest in the lands legally described as: Plan 7410194 Block 7 EXCEPTING THEREOUT ALL MINES AND MINERALS AREA: 6.33 HECTARES (15.63 ACRES) MORE OR LESS (the “Lands”) “....by virtue of an Assignment of Real Estate Purchase Contract Number 7574451.3 dated May 15, 2016, and made between170445 Alberta Ltd. As purchaser and 949886 Alberta Ltd as Vendor on to Sage Property Developments Inc as Purchaser...”. [ 3 ] The Lands are owned by Sage. Sage is building a new phased residential-commercial community development on the Lands.

The required financing for the construction is being delayed due to the Caveat and the Certificate of Lis Pendens on the Lands. [ 4 ] 170 had previously entered into an Offer to Purchase and Agreement of Purchase and Sale (“Purchase Agreement”) with 949886 Alberta Ltd. (“949”), on May 15, 2016, for the purchase of the Lands. [ 5 ] The Purchase Agreement provided that the Lands were being purchased by 170 for $11,000,000, with a closing date of May 31, 2017 or such other date as agreed to between the parties.

The Agreement also provided that the purchase price was to be paid, in part, by four non-refundable deposits totalling $1,200,000. [ 6 ] Despite an Amendment Agreement, which included additional non-refundable deposits, and an extension of the closing date to December 15, 2017, 170 paid only $900,000 of the required $1,200,000 in non-refundable deposits and was unable to meet the terms of the Agreement and complete the purchase of the Lands. [ 7 ] On December 5, 2017, 170 entered into an Assignment of Real Estate Purchase Contract (“Assignment Contract”) with Sage, pursuant to which the Purchase Agreement dated May 15, 2016 was assigned to Sage.

At that time, the shareholders of Sage were Matthew Kanavos, Anil Mall Investments Ltd, and 2034246 Alberta Ltd.

The Assignment acknowledges this in clause 1, which states: “Jaspal Singh Boparai, officer and director of 1704455 Alberta Ltd., the undersigned Purchaser, do hereby transfer and assign all its rights and interests in the Real Estate Purchase Contract #7574451.3 dated May 15, 2016 between 1704455 Alberta Ltd., as Purchaser and 949886 Alberta Ltd., as Vendor on to Sage Property Development Inc. owned by the individual Matthew J Karavos, and the corporations, Anil Mall Investments Ltd., and 2034246 Alberta Ltd.

Clause 4 of the Assignment provides that the assignee “shall assume all the rights and obligations under the aforementioned Offer to Purchase and Agreement of Purchase and Sale as aforementioned ”. [ 8 ] Pursuant to the Assignment Contract, the Purchase Agreement dated May 15, 2016 and 3 subsequent amending agreements, Sage purchased the lands from 949 for a purchase price of $11,000,000, with a closing date of March 2, 2018. [ 9 ] On April 18, 2019, 170 commenced an action against Sage. [ 10 ] The Statement of Claim alleges that Sage promised to pay 170 the sum of $1,430,000 in consideration for the Assignment Contract.

The Statement of Claim also states the 170 holds an interest in the Lands as if 170 was an unpaid vendor. [ 11 ] To his Affidavit sworn November 3, 2020, Jaspal Singh Boparai, officer and director of 170, attaches an unsigned Promissory Note for $1,430,000 (though he says that a signed one exists).

He also alleges that “in discussions with Krishan Mall, amongst others, in the summer of 2020 an agreement was reached whereby 170 would be paid $1,500,000.00 in exchange for its interest in the lands that are the subject matter of the Caveat”. [ 12 ] Sage denies that it promised to pay 170 the sum of $1,430,000 or any amount as consideration for the Assignment Contract or for any other reason. Mr. Sunil Mall, as representative of Sage, says that he and the other shareholders have not signed a Promissory Note and did not even see the Promissory Note until the unsigned Note was provided with Mr.

Boparai ’s Affidavit of November 3, 2020. Analysis [ 13 ] Section 141(1) of the LTA provides: 141(1) In the case of a caveat filed, except a caveat filed by the Registrar as hereinafter provided, the applicant or owner may at any time apply to the court, subject to the Alberta Rules of Court, calling on the caveator to show cause why the caveat should not be discharged, and on the hearing of the application the court may make any order in the premises and as to costs that the court considers just. [ 14 ] The Alberta Court of Appeal in Main v.

Jeerh , 2006 ABCA 138 at para 18 confirmed the test required to be met in a show causing hearing: “A claim must be based upon facts which if they are believed are complete and sufficient to justify the claim”. [ 15 ] If the party seeking to maintain the caveat establishes an interest in the land then the test will have been met. Ansar

Development Corporation v. Indus Development Corporation , 2015 ABQB 723 at para 10 . [ 16 ] In a show cause hearing the court does not weigh evidence or resolve issues of credibility. The facts must show that the judge can infer that the caveator has an interest in the land. The judge must reconcile actual inferences ( Ansar at para 11). [ 17 ] For the reasons that follow, I find that 170 has not established that it has an interest in the Lands. 1.

The Lands Did Not Transfer to 170 [ 18 ] 170 did not pay the balance owed under the agreement by the closing date and was unable to close the purchase transaction with 949. The Lands did not transfer from 949 to 170. [ 19 ] Further, “a purchaser can maintain a lien, only if the failure to close the transaction was not the fault of the purchaser” ( Ridge Development Corporation v Haji Holdings Inc . , 2009 ABQB 664 at para 38 ). [ 20 ] Given that 170 defaulted under the Purchase Agreement and the Amendment Agreement, such that they did not acquire an interest in the Lands, they cannot be an unpaid vendor. 2.

Non-refundable Deposits Do Not Establish an Interest in Land [ 21 ] According to the September 29, 2020 Affidavit of Krishan Mall, there were total deposits of $900,000 made by 170 under the Purchase Contract. Exhibit “M” referred to in the Affidavit of Krishan Mall are photographs of five payments from 170 Alberta to 949 Alberta totalling the amount of $800,000. These payments correspond roughly with the dates of the required non-refundable deposits outlined in

Article 5 of the Purchase Agreement. The Amendment Agreement outlines two additional non-refundable deposits (Affidavit of Krishan Mall, Exhibit “D”). The evidence indicates that the required deposits were not made and that 170 was not in a position to complete the purchase of the Lands. [ 22 ] A non-refundable deposit does not establish an interest in land. ( Ridge at para 38). Therefore, 170 did not acquire an interest in the Lands before entering into the Assignment Agreement with Sage. 3.

Pursuant to the Assignment Contract, 170 Released and Surrendered all of its Rights and Obligations under the Purchase Agreement [ 23 ] Under the Assignment Contract, Jaspal Singh Boparai, on behalf of 170 Alberta, assigned to Sage, 170’s rights, interests, and obligations in the Purchase Agreement between 170 Alberta as Purchaser and 949 Alberta as Vendor. [ 24 ] In the Assignment Contract, Sage acknowledged and agreed to the assignment and assumed all the rights and obligations in respect of the Purchase Agreement.

Subsequently, in March 2018, Sage purchased the lands from 949 Alberta. [ 25 ] 170 argues that the assignees under the Assignment Contract were Sage, and the shareholders of Sage. On the face of the Assignment Contract, the only assignee appears to be Sage. [ 26 ] 170 argues that by virtue of the Assignment Contract and a promise to pay (which is disputed), 170 became, in effect, an unpaid vendor as between 170 and the “Assignees”. 170 relies on Leacock v Leacock , 2009 ABQB 525 .

That case is distinguishable because the vendor in at that case owned the lands and the issue was whether the vendor’s agreement to take a promissory note replaced her right to claim a vendor’s lien. If 170 ever acquired any interest in the Lands, which does not appear to be the case, that interest was assigned to Sage. 4. Specific Performance is Not Available to 170 [ 27 ] 170 has no interest in the Lands capable of being enforced by specific performance. 170 Alberta cannot request the Lands back from Sage, nor are they trying to seek such a remedy. In 1244034 Alberta Ltd.

V Walton International Group Inc. , 2007 ABCA 372 at para 16 , the Court concluded that “it is axiomatic that if specific performance is not available, there is no interest in land and the caveat must be struck”. 5. An Unsigned Promissory Note and a Verbal Agreement Can Not Create and Interest in Land [ 28 ] To the extent that 170 is relying on an unsigned promissory note and a verbal agreement to create or confirm an interest in land, this violates the Statute of Frauds , 1677 (29 Cha 2), c 3 because it is not an agreement in writing and signed by the “party to be charged therewith”.

Conclusion [ 29 ] My conclusion, based on my review of the parties’ written submissions and materials, is that 170 has not met its burden of demonstrating that it has a prima facie claim to an interest in the land ( Ridge at para 24). A prima facie claim must be based upon “facts which if they are believed are complete and sufficient to justify the claim” ( Ridge at para 24). [ 30 ] Therefore, the application of Sage for an Order discharging the Caveat and Certificate of Lis Pendens is granted.

There will be an Order directing the Registrar of Land Titles for the South Alberta Land Registration District to register the discharge Order pursuant

to section 191(3)(

b) of the Land Titles Act , notwithstanding the requirements of section 191(1) thereof. [ 31 ] Regarding the Noting in Default, I am not satisfied, based on the evidence provided, that Sage was properly served with the Statement of Claim. In addition, I am satisfied that fairness requires that the Notice in Default be set aside because it appears that Sage did not become aware of the Statement of Claim until well after the Noting in Default was filed. Further, there appears to be a good defence on the merits.

The application to set aside the Noting in Default was brought within a reasonable period of time after learning of its filing and attempts at resolution. The Notice in Default of Sage Property Development Inc is therefore set aside. A Statement of Defence must be filed by not later than January 15, 2021. [ 32 ] Failing agreement on the issue of costs, they may be spoken to within 60 days. Heard in Chambers on November 9, 2020, with written submissions provided by November 27, 2020. Dated at the City of Edmonton, Alberta this 11 th day of December, 2020. D.A. Yungwirth J.C.Q.B.A. Appearances: Trevor R.

McDonald Burnet, Duckworth & Palmer LLP for the Plaintiff M. Engelking Engelking Law for the Defendant