Smith v. Commerical 8 Investments Inc. Date:, 2011 BCPC 227

Citation: Smith v. Commerical 8 Investments Inc. Date: 20110825 2011 BCPC 0227 File No: 10-29185 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: ROBBIN NEIL SMITH CLAIMANT AND: COMMERCIAL 8 INVESTMENTS INC. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE N.N. PHILLIPS Appearing on their own behalf: R. Smith Counsel for the Defendant: G. Hagel Place of Hearing: Vancouver , B.C.

Date of Hearing: July 5 & August 16, 2011 Date of Judgment: August 25, 2011 Overview [ 1 ] In April 2008, the Claimant, Robbin Neil Smith (hereinafter “Smith”), agreed to purchase a condominium from the Defendant company, Commercial 8 Investments Inc. The condominium was to be constructed in a project called Credo, a 33 unit strata complex the Defendant developer was to build on East 8 th Avenue in Vancouver. [ 2 ] At the pre-construction stage the Claimant was given the choice of either a light or a dark colour scheme for the interior of his condominium.

Smith chose the lighter colour scheme but when the May 22, 2009 completion date approached, he discovered the dark colour had been applied in error. Upon this discovery, the parties took steps to try to deal with the problem but ultimately were not able to resolve the matter to their mutual satisfaction and the real estate deal fell apart. This Court has been asked to decide in this trial which party should be entitled to have the $27,800 deposit paid for the unit in question.

The Evidence at Trial [ 3 ] At the trial of this matter, both parties produced a number of documents (mostly in the form of email correspondence) and lead witness testimony to provide the details of this dispute for the Court. Although the parties were not in complete agreement about what happened between them after the colour scheme error was discovered, for the most part there was little factual dispute in this case. What is in issue is the application of the law to the facts. A review of the evidence is necessary to address the contested elements of the dispute.

[ 4 ] On April 2, 2008, the parties entered into a Contract of Purchase and Sale wherein the Claimant agreed to buy from the Defendant a condominium in a complex to be built by the Defendant. The Contract documents show that Smith chose the lighter of two colour options used in the complex. The purchase price for the condominium unit was $278,000. Pursuant to the terms of the Contract, the Claimant paid a $27,800 deposit.

The deposit monies continue to be held in trust pending a decision at trial. [ 5 ] Clause 2 of the Contract stated the following re: Completion Date : The Completion Date for this Contract, subject to it being extended as provided for hereinafter, will be a date established by the Vendor and set out in a written notice to the Purchaser or the Purchaser’s lawyer or notary public, which shall be a minimum of fourteen (14) days after the date on which the Vendor has delivered the aforesaid notice to the Purchaser or the Purchaser’s lawyer or notary public.

The completion shall be after the date that the City of Vancouver has given permission to occupy the Strata Lot. … The notice of completion delivered by the Vendor or the Vendor’s solicitors to the Purchaser or the Purchaser’s lawyer or notary public may be based on the Vendor’s estimate as to when the Strata Lot will be ready to be occupied.

If the Strata Lot is not ready to be occupied on the Completion Date so established, then the Vendor may delay the Completion Date from time to time as required, by notice of such delay to the Purchaser or the Purchaser’s lawyer or notary public, but any such delay shall not exceed in the aggregate ninety (90) days from the date of the originally specified Completion Date.

AND FURTHER PROVIDED THAT if the Completion Date has not occurred within six (6) months after the date of the originally specified Completion Date, then this Contract shall be terminated and the deposit shall be returned to the Purchaser as the sole remedy unless the parties agree in writing to extend the Completion Date further.

If the Vendor is delayed from completing construction of the Development as a result of any event whatsoever beyond the reasonable control of the Vendor, then such outside date for completion will be extended for a period equivalent to such period of delay. … The Vendor anticipates that the Completion Date for the purchase of the Strata lot will be in March 2009… [ 6 ] Clause 6 of the Contract states the following regarding deficiencies: The Purchaser shall inspect the Strata Lot with a representative of the Vendor prior to the Completion Date.

At such time the parties will prepare and sign a list of defects and deficiencies and the Vendor warrants that they will correct such defects and deficiencies on a timely basis. The Purchaser agrees that there will be no holdback for these defects and deficiencies. [ 7 ] Clause 9 of the Contract relates to “Risk and Time” and states: …Time will be of the essence of this Contract and will remain of the essence notwithstanding the extension of any of the dates herein.

Unless the Purchase Price is paid in accordance with the terms of this Contract the Vendor may, at its option, cancel this Contract and in such event all deposit monies previously paid by the Purchaser shall be absolutely forfeited to the Vendor on account of damages , without prejudice to the Vendor’s other remedies. [emphasis added] [ 8 ] The Contract contains a clause (10) relating to “Assignment” which states in part: The Purchaser may assign its rights under this Contract provided such assignment shall have received the prior written approval of the Vendor, such approval not to be unreasonably withheld, and shall be provided to the Vendor at least ten (10) days prior to the Completion Date.

If such assignment is approved, the Purchaser shall remain liable for the obligations of the Purchaser under this Contract.

As a condition of the Vendor providing such approval, the Purchaser, when requesting such approval, must pay to the Vendor an assignment fee equal to 1% of the Purchase Price… [ 9 ] The Contract contained an “Entire Agreement” clause (11) which provided: This Contract is the entire agreement between the parties and there are no other representations, warranties, conditions or collateral agreements, express or implied, whether made by the Vendor, any agent, employee or representative of the Vendor or any other person. [ 10 ]

Schedule “B” of the Contract of Purchase and Sale is titled “Colour Scheme & Assigned Facilities” and states: The following information forms an integral part of the Contract of Purchase and Sale respecting the Strata Lot, all as prescribed herein... [ 11 ]

Schedule “C” of the Contract provided “Additional Terms and Conditions” including: B. The Buyer is not allowed to advertise the Strata Lot for purposes of resale of the Strata Lot under any assignment arrangement unless written consent is obtained from the Seller.

The Seller reserves the right not to entertain any such request so long there remains any other strata lot on the Project that is still available for sale. [ 12 ] Document “E” to the Contract is titled “Disclosure of Remuneration” and sets out that the Claimant purchaser is a licensed realtor and that he would be receiving a buyer agent’s commission on the sale. [ 13 ] On November 19, 2008, the Claimant sent an email to the Defendant’s realtor, Cofa Tsui (hereinafter “Tsui”), asking to terminate the Contract and have his deposit returned to him, less an administrative fee.

In the email, Smith indicated he had purchased the condominium for someone else who had since died. The Defendant did not agree to terminate the agreement. The Defendant did say it would cooperate with an assignment should Smith find a buyer. [ 14 ] The Claimant admitted to the Court that he had in fact originally set out to buy the condominium as his own revenue property and potentially something to move into himself.

He agreed his story in the November 2009 email about buying the property for someone who had died was untrue. [ 15 ] In March 2009, the Claimant wrote again to Tsui asking permission to list his condominium for sale on MLS (the Multiple Listing Service) and indicating he had a potential buyer to view the suite. The email of March 6, 2009 states: …could you please ask the developer for permission that I list my suite as an assignment on mls. I feel it would be unreasonable to deny

me as I disclosed that I was purchasing it as an investment and the market is on a down turn… [ 16 ] The Defendant again did not consent to the Claimant’s request. The Court heard defence evidence that at this point in time eight to ten units in the complex remained unsold. [ 17 ] On April 27, 2009, Smith emailed Tsui asking again to advertise the condominium on MLS and stating “financing is not looking possible for me…”. Smith suggested as an alternative that the Defendant permit him to get out of the deal and the Defendant retain a portion of the deposit paid.

The Defendant did not agree to this proposal. [ 18 ] On April 27, 2009, legal counsel for the Defendant wrote to Smith to advise that the Completion Date for the condominium would be May 22, 2009. On May 11, 2009, a walk-through was conducted of the suite and it was at that time the error on the colour scheme was discovered. Smith told the Court he had chosen the lighter colour for his condominium as he thought it made the 500 square foot unit look bigger.

Defence evidence at trial established that the two colour schemes were about evenly split in the 33 unit complex. [ 19 ] On May 15, 2009, Tsui, emailed Smith setting out three options for resolving the problem with the colour of the unit. The email stated: …In your April 27 message you asked for permission to advertise the unit on MLS or to terminate the contract with surrender of part of your deposit paid.

I had informed you in subsequent conversations that the Seller did not agree to any of your requests and that we, Kevin and I, were trying to negotiate some terms for you so that you could extend your closing and advertise the unit on MLS. You were aware of this information and had agreed to wait for us for further information from the Seller. You seem to have changed your mind on Monday, May 11, 2009 when you found out that the suite was in a colour scheme other than agreed upon in the contract. … Accordingly, I hereby advise that the following three options are the Seller’s offer to remediate the situation.

And the Seller has emphasized and herby advises that these are without prejudice negotiations and the Buyer does not have the right to terminate the contract. … [ 20 ] The first option the Defendant offered Smith was to take the unit ‘as is’ but with a $3,000 discount on the price. The second option was to keep the existing colour scheme in the unit and extend the closing for three months to enable a sale of the unit by Smith. With this second option, Smith would have to assume some of the monthly strata costs but he would receive a 50% discount on the assignment fee.

The third option was to complete the purchase with the Defendant correcting the colour scheme and providing a new closing date when complete. If the Claimant did not indicate his choice of options, the letter stated the ‘default’ position would be to change the colour and postpone closing.

By way of an email reply dated May 18 th , 2009, Smith advised his choice was to have the colour scheme corrected (i.e. the third option). [ 21 ] At trial, both the Claimant and the Defendant said they were ready, willing, and able to conclude the purchase and sale on May 22, 2009 and would have done so but for the problem with the colour scheme.

To this end, the Claimant provided the Court with bank documents showing he had financing in place to conclude the transaction, despite his email in April raising concerns about his ability to finance the deal. [ 22 ] The Claimant told the Court that when he sent his May 18 th email to the Defendant he had made a firm decision to have the colour scheme corrected and to complete the home purchase. However, after his choice was conveyed to the Defendant a number of other ways to resolve the problem were discussed by the parties.

Smith told the Court he did not initiate these on-going discussions. [ 23 ] On May 21, 2009, the Defendant’s lawyer wrote to counsel for Smith giving notice that the property was not ready for occupation on the original completion date of May 22, 2009 and that the completion date would be delayed until July 8, 2009. Smith testified he accepted the new date and did not repudiate the contract. [ 24 ] On May 24 th , 2009 Tsui wrote to Smith stating: I have had the chance to present and explain your proposal (i.e., the 5 th option as per our discussions this afternoon) to the developer shortly after our meeting.

They told me to inform you that they could not accept this proposal. Their idea is this: Whether the current colour scheme of the suite can be maintained, or must be changed, has to be concluded now, so that things can move forward based on one decision. And I also explained to them the 4 th option (compensation plus extension and MLS consent) and they are agreeable to this approach.

I believe this is best to your benefits as well as you would be able to maximize a sale price in the current hot market. [ 25 ] Tsui testified that during the May 24 th meeting Smith had suggested he be allowed to advertise the condominium for sale for three months and if he was unable to sell during that time, he would complete the purchase of the unit with the corrected colour scheme (the “5 th option”). Smith also proposed that the developer could keep the colour scheme ‘as is’ if Smith were permitted to list the unit for sale on MLS.

Tsui testified that at most meetings Smith wanted compensation for the colour error and a chance to sell the unit himself (including permission to list the unit on MLS). [ 26 ] On May 25, 2009, Smith replied by email “… This evening I notified you that I am not interested in any other options. However I would still like to meet and clear up the measures I requested to be taken for the renovation. After all our meeting was officially to do so yesterday…” [ 27 ] On June 16, 2009, counsel for the Defendant wrote to Smith’s lawyer proposing Smith be permitted to list the condo for sale on MLS on certain terms.

The letter referred to the two lawyers having discussed the problem of the condominium prior to the June 16 th

letter being sent. The Claimant himself wrote to the Defendant’s lawyer on June 16 th rejecting the proposal. Smith’s email states: You Tony were Cc’d from me on May 18th 2009 advising you once again that the original colour scheme was to be put in place. We have had no further discussions. Why is it that your side chooses to breach the contract? You should not reasonably think that by continually giving me options that I am involved in these discussions. Once again I reiterate that I want the original contract fulfilled and to have the colour scheme as per the contract be installed.

You and your realtors have asked unilaterally to me on several occasions whether I would accept any other option. To which I have consistently replied no.

You have it appears made no efforts to begin renovations of the suite yet there are only 3 weeks to July 8th which is the revised Completion Date set by you… So I ask that you commence the renovation immediately and to give a realistic Completion Date… In addition I am requesting now from the developer permission to advertise my suite for sale on the Multiple Listing Service; this request does not absolve the developers responsibility to put the correct colour scheme in the suite.

The suite is worth in my opinion tens of thousands of dollars with the colour scheme I originally selected… [ 28 ] Smith wrote a separate email on June 16, 2009 referencing two other units in the complex being listed on MLS and seeking permission to list his property on the service. [ 29 ] Counsel for the Defendant wrote to Smith on June 19, 2009 seeking to confirm whether he wanted permission to advertise the condominium for sale or whether he wanted the colour scheme changed.

On June 24, 2009, Smith’s lawyer wrote back confirming Smith required the correct colour scheme to be installed. [ 30 ] Eric Sze (hereinafter “Sze”), project manager for the condominium development, testified that on June 24 he ordered new cabinets in the proper colour for the re-installation project in Smith’s unit. The supplier advised it would take four weeks for the new cabinets to be manufactured. Sze testified he had made earlier inquiries with the suppliers prior to this date to see what options were available to fix the colour scheme and to inquire about the price and aesthetics of the options.

Sze told the Court that as a result of those earlier inquiries he had determined the only option was to completely replace all of the bathroom and kitchen cabinets, countertops, backsplashes and tile.

He said that prior to June 24 he thought negotiations for solutions other than the re-installation were being pursued and hence he waited until this date to start ordering materials. [ 31 ] The Claimant told the Court he was not actively pursuing other options after he communicated his written decision to have the proper colour installed on May 18 and he denied anything other than playing a passive role in discussions with the Defendant’s realtors or legal counsel after that time about other options.

In particular, he said he agreed to attend the June 24 meeting with the Defendant only because he thought it would give him the opportunity to address the renovation construction concerns he had articulated in his May 18 email to the Defendant. In that email, Smith expressed serious concerns about having to undergo such a large renovation prior to even taking possession of his condominium and urged the Defendant to take all measures available to ensure no damage was caused to his unit in the process.

The email also asked that the work be done in a timely manner. [ 32 ] On June 29, 2009, counsel for the Defendant wrote to Smith’s lawyer extending the completion date to August 11, 2009. [ 33 ] On July 7, 2009, Smith wrote to the Defendant’s lawyer stating that if the correct colour scheme was not installed by July 8, 2009 Smith would consider the Defendant to have breached the Contract.

On July 9, Smith wrote again stating: Please be advised that the Purchaser will not be completing on this sale now or at any time in the future and is terminating the contract of purchase and sale due to the Vendors material breach of the contract “time remaining of the essence” with respect to the proper colour scheme being installed by July 8th, 2009 which was the completion date. We ask that all deposit monies will be returned to the Purchaser. No further extensions will be acceptable to the Purchaser from the Vendor.

We expect the deposit monies to be returned by July 17th, 2009… [ 34 ] On July 14, 2009, the Defendant wrote Smith accepting his repudiation and stating it would attempt to recover damages beyond the deposit amount. At the outset of this trial, the Defendant told the Court it was not pursuing the matter of consequential damages. On November 26, 2009, the Defendant completed the sale of the unit to another purchaser for $275,000. No evidence was lead at trial about the costs paid by the developer to make this sale.

Positions of the Parties [ 35 ] The Claimant asked the Court to find that the use of the wrong colour scheme in the condominium was a fundamental breach entitling him to repudiate the contract and have his deposit monies returned. The Claimant maintained that the Defendant’s failure to rectify the colour scheme in a timely way and the postponement of the Completion Date breached the “time is of the essence” term of the contract. The Claimant also asked the Court to apply the doctrine of contra proferentem and interpret unclear terms in the contract against the Defendant author.

In the alternative, Smith asked that the Court grant him relief from forfeiture of the deposit money under the Law and Equity Act . [ 36 ] The Defendant submitted that the use of the wrong colour scheme was not a fundamental breach so to entitle Smith to repudiate the contract. Once Smith asked the Defendant to change the colour scheme (and the Defendant agreed to do so) it was not open to Smith to walk away from the contract.

As well, the Defendant submitted that Smith’s conduct always showed he wanted to re-sell the condominium and his consistent statements to that affect after the colour scheme problem was discovered show time was not of the essence in terms of possession of the property and that Smith did not really want to buy the home himself. The Defendant asked the Court to find that, in contrast, it was ready, willing and able to complete the sale transaction on May 22, 2009 except for the fact that Smith insisted on changing the colour scheme. Applicable Law

[37] The issue in this case is whether, as a result of the improper colour scheme, Smith was entitled to repudiate the contract and totreat it as rescinded. A party to a contract may repudiate it if there is a breach, but that breach must be a fundamental one. [38] In Gee et al v. Gordon’s Home Sales Ltd. [2007] BCSC 634 Lander, J. cited with approval the following

summary of“fundamental breach” (at paragraph 11): An overall

summary of the law on fundamental breach was provided by Professor Fridman in his The Law of Contract in Canada, 5thed. (cite) at 588-89: In every instance, it is a question of fact whether the breach complained of by the innocent party amounts to a fundamental breach.

Thatquestion, in turn, depends upon: the terms of the contract; the intended benefit to the innocent party; the purpose of the contract; thematerial consequences of the breach; and, perhaps, though this has never been discussed in the cases, the extent to which the lossincurred by the innocent party can be remedied adequately by an award of damages. One point is clear. Whether a breach is fundamentaldoes not appear to depend upon any express terms of the contract. The determination of a fundamental breach is a teleological questionnot one that involves construction of the contract in the narrow, literal sense.

The concept of fundamental breach seems to transcend thenormal issues of contractual

interpretation. It involves investigation of the underlying nature and purpose of the contract into which theparties have entered, and the respective benefits designed to be obtained or ensured by the agreement. [39] In Genesis Tower Ltd. v. Cheung [2002] B.C.J.

No. 2386, the Court of Appeal adopted with approval the following test offundamental breach (at paragraph 14): A fundamental breach occurs where the event resulting from the failure by one party to perform a primary obligation has the effect ofdepriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from thecontract. Syncrude Canada Ltd. v. Hunter Engineering Company Inc., (SCC), [1989] 1 S.C.R. 426 at 499, 57 D.L.R.(4th) 321.

The test has also been stated slightly differently - a fundamental breach is based on "some act which substantially deprives the innocentparty of the intended benefit such party was to obtain under the contract". Lau v. 1755 Holdings Ltd. (1995), 46 R.P.R. (2d) 249(B.C.S.C.) at 261, aff'd (1996), (BC CA), 6 R.P.R. (3d) 152 (B.C.C.A.). The test as to whether there has been a fundamental breach of a contract is an objective one and the subjective consideration of the partyclaiming fundamental breach is not relevant.

Lau (S.C.), at 254, para. 15. [40] In Genesis, the Court of Appeal did not find a fundamental breach made out where a finished condominium included threeconcrete columns not included in the marketing materials for the property. [41] In Hunter Engineering Co. v. Syncrude Canada Ltd., (SCC), [1989] 1 S.C.R. 426, Madam Justice Wilsonstated (paragraph 137): The formulation that I prefer is that given by Lord Diplock in Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.),at p. 849.

A fundamental breach occurs "Where the event resulting from the failure by one party to perform a primary obligation has theeffect of depriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain fromthe contract" (emphasis added). This is a restrictive definition and rightly so, I believe. As Lord Diplock points out, the usual remedy forbreach of a "primary" contractual obligation (the thing bargained for) is a concomitant "secondary" obligation to pay damages. Theother primary obligations of both parties yet unperformed remain in place.

Fundamental breach represents an exception to this rule for itgives to the innocent party an additional remedy, an election to "put an end to all primary obligations of both parties remainingunperformed" (p. 849). It seems to me that this exceptional remedy should be available only in circumstances where the foundation ofthe contract has been undermined, where the very thing bargained for has not been provided. [42] In Sail Labrador Ltd. v. Challenge One (The) (SCC), [1998] S.C.J.

No. 69, the Supreme Court of Canadaconsidered the effect of deficient performance of the terms of a lease upon an owner’s right to cancel a purchase option expressly madeexercisable subject to full performance of the terms of the lease. Speaking on behalf of the Court, Bastarache, J. stated (paragraph 30): Both Treitel and Waddams recognize that, as a general rule, parties to a contract must perform their obligations specifically as dictatedby the contract.

However, if the performance is deficient, for example in quality, quantity or timeliness, it is accepted that the defect inperformance must attain a certain minimum degree of seriousness to entitle the non-offending party to rescind the contract. The failurein performance must substantially deprive the other party of what was bargained for. This concept is referred to as substantial non-performance or as a requirement that a breach go to the "root" of the contract. In English legal literature, the expression "substantialfailure" is used.

If this minimum standard is not met, rescission will not be available to the non-offending party. This party will beforced to settle for a remedy in damages. Thus, courts are concerned with the consequences of the deficient performance and the natureof the prejudice caused to the non-offending party when determining whether rescission is available (Treitel, at pp. 685-86; Waddams, atpp. 394-96). The case of Hongkong Fir Shipping Co. v.

Kawasaki Kisen Kaisha Ltd., [1962] 2 Q.B. 26 (C.A.), stands for the propositionthat courts will apply this type of substantial non-performance test to determine if rescission is available in cases involving charter partycontracts like the one in question. [43] A problem that is capable of being repaired or replaced in the form which was expected does not constitute a fundamental breach(Lau v. 1755 Holdings Ltd. (BC CA), [1996] B.C.J. No. 2441 (CA) at paragraph 14). [44] In Qualico Developments (Vancouver) Inc. v. Scott [2003] B.C.J.

No. 2745 (SC) the Court stated (at paragraph 17): In Williamson Pacific Developments Inc. v. Johns, Southward, Glazier, Walton and Margetts [1996] B.C.J. No. 2797 (B.C.S.C.) VickersJ. reiterated the general rule that where a contract ends by default of the purchaser, then in the absence of an agreement to the contrary,

the deposit, being a guarantee of performance, becomes the property of the vendor. It matters not if the property eventually resells for an increased price and therefore greater profit to the vendor. [ 45 ] The Claimant submitted that

section 24 of the Law and Equity Act [RSBC1996]

Chapter 253 should be applied in this case so to not allow the Defendant to keep the deposit.

Section 24 states as follows: The court may relieve against all penalties and forfeitures, and in granting the relief may impose any terms as to costs, expenses, damages, compensations and all other matters that the court thinks fit. Analysis [ 46 ] I begin by examining whether the evidence establishes that the use of the wrong colour in Smith’s condominium was a fundamental breach. I accept that Smith had a strong personal preference for the light colour and he believed it would make his small condominium look larger. I also accept that he was disappointed when he learned the wrong colour scheme had been used.

Obviously a degree of personal pleasure is derived from having the proper colour choice and dissatisfaction from the incorrect one. Aesthetics no doubt play a significant role in decisions people make when buying homes. While it is likely that aesthetic considerations play a lesser role in decisions made involving revenue properties, they may still be a factor. [ 47 ] Smith also claimed that having the lighter colour scheme in the condominium would have made the unit worth considerably more but he provided no evidence to support his contention.

Given that half of the units were said to have gone with the darker colour choice, I find it unbelievable that there would have been any difference in investment value of the condominium simply on the basis of the different colour schemes. Given that the Claimant was contemplating using the condominium for revenue purposes, it is hard to see that a significant loss would flow from the incorrect colour scheme. [ 48 ] The question for the Court is not whether the developer made an error which made Smith unhappy, but rather whether the error deprived Smith of the “intended benefit” of the contract.

The test is an objective one. Despite the mistaken colour, the developer essentially stood ready on May 22, 2009, to give Smith what he had bargained for, namely a 500 square foot inhabitable condominium in the Credo project. A significant error was made but ultimately it was only cosmetic in nature. The “underlying nature and purpose of the contract” was not affected and “the respective benefits designed to be obtained or ensured by the agreement” were fulfilled.

Smith was not deprived of what he had bargained for ( Sail supra). [ 49 ] Having found that the Defendant was in a position to deliver the condominium to Smith as agreed, there can be no finding of fundamental breach. Moreover, having communicated his decision to complete the purchase with the Defendant correcting its error, I do not see how Smith could later change his mind and attempt to rescind the contract. [ 50 ] Smith argued that the developer was not entitled to change the possession date once the City occupancy permit had been granted.

His submission seemed to be that the postponement of the possession date was in breach of the Contract. Given the scope of the renovations required to repair the colour scheme and the agreement the parties had reached to do so, I do not see how Smith could then argue that the delayed possession date which the renovation necessitated could then be used to find the developer in breach of the agreement.

Clause 2 of the Contract permitted the parties to extend the possession date and I can find no breach of contract on the basis of the complained of conduct herein. [ 51 ] Although the Claimant stated both in his negotiations with the Defendant and in his testimony at trial that time was of the essence, the facts show that the Claimant was willing to postpone possession for some period of time in order to either list and sell the unit or to obtain some compensation from the Defendant as a result of the colour error.

It was not unreasonable for the Defendant to try to negotiate a resolution short of a major renovation and to be afforded a reasonable amount of time to do so. Although Smith told the Court he was only a passive player in the negotiations with the Defendant, his own emails suggest a willingness to consider other ways of resolving the problem and an active involvement with the on-going negotiations which Smith must have seen as being potentially beneficial to himself. [ 52 ] When efforts to come to another solution broke off on June 24, the Defendant then set about to obtain supplies for the renovation.

That there would then be a delay for the materials to be manufactured was not completely in the Defendant’s ability to control. Accordingly, there can be no relief granted to Smith on the basis that the Defendant breached its’ contractual obligation to act in a timely manner. [ 53 ] However, it should be noted that a failure to comply with the requirement to perform under the contract in a timely way might have afforded the Claimant an opportunity to sue for any damages suffered had the deal completed.

However, in law the failure to perform in a timely way is not akin to a breach of contract giving rise to the remedy of rescission. Imperfect compliance with the requirement to perform contractual obligations in a timely way does not necessarily permit the parties to walk away from the contract and any obligations under it. [ 54 ] As noted earlier, Smith submitted that the doctrine of contra proferentem should be applied against the Defendant in this case. The rule is used where the meaning of a contractual term is ambiguous and an ordinary

interpretation would lead to an absurd result in which case the court is permitted to construe the language against the author of the contract (the Defendant herein). However, in coming to a decision at this trial, I have not found any of the relevant contractual provisions unclear or vague and thus there is no need to resort to this doctrine. As well, given that Smith is an experienced realtor, there is not the inequality of bargaining power a court would typically have before it when applying the doctrine against a party. [ 55 ] The Claimant also submitted that the use of the language “an integral part” in relation to

Schedule “B”, the colour scheme document, should be interpreted as necessarily meaning that a failure to comply must be fundamental to the contract. The word “integral” is defined in the Concise Oxford English Dictionary as:

(

a) of a whole or necessary to the completeness of a whole;

b) forming a whole ( integral design) ;

c) whole, complete… [ 56 ] The Contract of Purchase and Sale does not refer to the colour scheme as being essential or fundamental to the agreement. Had Smith wanted to make the colour scheme fundamental to the agreement he made with the developer, he should have negotiated such a clear condition in the contract. Without such clarity, I am not satisfied the Court should interpret the contract to find that the failure to provide a certain colour was fundamental. The word integral reflects the fact

Schedule “B” was a necessary part of the whole Contract of Purchase and Sale, not that it was fundamental to the agreement. [ 57 ] Finally, I need to consider the Claimant’s argument that s. 24 of the Law and Equity Act should be applied to relieve him from losing his deposit money. However, relief against forfeiture only applies if the $27,800 deposit paid herein was a penalty rather than an agreed upon pre-estimate of the damages to be suffered in the event Smith failed to complete the purchase.

To charge a condominium purchaser 10% of the purchase price is not disproportionate to the potential damages the Defendant might suffer if the deal did not complete (necessitating a re-sell in a changing real estate market). The deposit paid by Smith was thus not a penalty and s. 24 of the Act is not applicable. [ 58 ] It is worth noting that had the Claimant completed the purchase of the condominium with the incorrect colour scheme, he would have likely been successful in a law suit for damages sustained.

Similarly, had he been delayed in taking possession of the premises while the developer rectified the problem, Smith would also have likely succeeded in a claim for any damages he incurred as a result of any such delay. However, for the reasons set out above the Claimant was not entitled to treat the contract as repudiated and seek to have his damage deposit returned on that basis. Result [ 59 ] In the result, the Claimant has failed to establish fundamental breach or a breach caused by the Defendant failing to proceed in a timely way.

Thus the claim brought for the return of the deposit money to the Claimant is dismissed. In accordance with clause nine of the Contract (and the common law), the Defendant is entitled to keep the deposit money. [ 60 ] As the successful party at trial, the Defendant is also entitled to its reasonable court costs including filing and service fees. I delegate to the Registrar authority to resolve the matter of costs upon satisfactory proof of any additional disbursements by the Defendant.

If the matter cannot be resolved in that fashion, the parties will be at liberty to bring an application before me to address the matter. ____________________ N.N. Phillips Provincial Court Judge