Centennial Tire Ltd. - v. -, 2013 SKPC 151

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2013 SKPC 151 Date: September 5, 2013 File: 17-11 Location: Moose Jaw _____________________________________________________________________________ Between: Centennial Tire Ltd. - and - Derrick Anderson and Royal LePage Landmart Mr. Anthony Tibbs For the Plaintiff Mr. David Chow For the Defendants _____________________________________________________________________________ JUDGMENT D.

KOVATCH , J _____________________________________________________________________________ BACKGROUND [ 1 ] The plaintiff owned a commercial building in the City of Moose Jaw. The defendant, Derrick Anderson, executed a written agreement to purchase this property and made a $10,000.00 deposit to that purchase with the defendant, Royal LePage Landmart. The defendant abandoned the purchase of this property, and the plaintiff brought this action claiming its entitlement to the $10,000.00 deposit. The defendant, Royal LePage Landmart really took no

part in the proceedings. This defendant simply confirmed that it held the $10,000.00 deposit, and advised it would pay out that deposit in accordance with the judgment of this Court.

THE EVIDENCE [ 2 ] Mr. Ken Bullied gave evidence for the plaintiff. He testified that he is a principal in the plaintiff company, and executed various documents relevant to this matter on behalf of the plaintiff company. [ 3 ] On April 3, 2010, the defendant, Mr. Anderson, executed a standard form Saskatchewan realtor contract of purchase and sale before Mr. Walz, a realtor with Royal LePage Landmart. Under the terms of this contract, the defendant offered to purchase the property for the total sum of $460,000.00. He made a cash deposit of $10,000.00 with the realtor.

The offer was subject to the approval of financing, a satisfactory environmental report and municipal approval of the buyer’s intended use. The closing date for the transaction was to be July 1, 2010. [ 4 ] Later that same day, Mr. Walz met with Mr. Bullied and his spouse, being the principals in the plaintiff company. The Bullieds executed a counteroffer to the defendant. The counteroffer was to the effect that the purchase price would be $475,000.00. It further stated that all other terms and conditions “as stated in the original offer” were acceptable.

Later that same day, being April 3, 2010, the defendant, Mr. Anderson executed his acceptance of the counteroffer. According to the original offer, the conditions attached to the purchase namely approved financing and the environmental report were to be removed by April 23, 2010. On April 23, 2010, the parties executed a short amending agreement, extending the deadline for removal of conditions to April 30, 2010. This amending agreement was executed in person by the defendant, Mr. Anderson and Mr.

Walz executed the agreement on behalf of the plaintiff, indicating he had been instructed by phone call to accept. [ 5 ] On April 30, the parties executed a further amending agreement, extending the deadline for removal of conditions to May 10, 2010. On this occasion, Mr. Walz executed on behalf of both parties, “as per phone call”. On May 10, 2010, Mr. Anderson executed a notice that: All conditions of sale are hereby removed. Sale may proceed. [ 6 ] This same notice was personally executed by the Bullieds on May 11, 2010. [ 7 ] At trial, Mr.

Anderson testified that he had not received any environmental report by May 10, and that he did not understand he was waiving the environmental report condition. Rather, he believed it was no longer important for him to have this condition contained in the agreement for sale, as the satisfactory environmental report would now be required by the mortgage company, Conexus Credit Union, as a condition of granting financing. [ 8 ] Both parties testified that the building contained a large industrial air compressor. This air compressor was hardwired into the building.

It would seem to me that it was at least arguable that this air compressor was a fixture to the building and a part of the real estate. Nevertheless, the parties reached a collateral agreement that Mr. Anderson would purchase the air compressor for the additional sum of $2,100.00. This was paid for by a cheque dated May 21, 2010. [ 9 ] Under the terms of the executed contract of purchase and sale, the agreement was subject to Mr. Anderson receiving “satisfactory environmental report at buyer’s sole cost”.

This condition was removed on May 10, 2010, by the parties executing a document entitled “Notice to Remove Conditions”. However, the environmental report remained important in that it was required by the mortgage company, Conexus, before it would advance the mortgage funds. The agreement for sale provided that the deal was to close on July 1, 2010. However, by the stated possession date, the environmental report had not yet been received. In the early part of July, the environmental report determined that there was some property contamination as a result of a fuel spill.

This required some excavation and replacement of soil to remediate the problem. I gather that the cost of this remediation was covered by the plaintiff, but the work may have been supervised by Clifton and Associates, the firm doing the environmental assessment. In August, following completion of the remediation work, Clifton and Associates supplied a further environmental assessment report, indicating there were no

environmental problems so that the transaction was then clear to proceed. Mr. Anderson testified that along with the final environmental assessment report, he received invoices from Clifton and Associates, for preparation of those reports, totalling approximately $9,200.00. He testified that he believed that the cost of the environmental assessments would be fairly minimal, and that these costs were way more than what he anticipated. Because these costs were surprisingly high, he decided not to proceed with the transaction.

He testified that he has not yet paid Clifton and Associates for these invoices, but acknowledges that he is legally responsible for that payment. He testified that he wished to obtain the return of the $10,000.00 deposit to cover that cost. [ 10 ] Mr. Bullied testified that while he owned the property, it was leased to third party tenants. Further, that these tenants were paying rent of $5,000.00 per month. I gather that these tenants remained in the property until October 1, 2010, at which time the plaintiff sold the property to new third party purchasers.

The plaintiffs received all rent from the tenants until the property was sold and the tenants vacated the premises. [ 11 ] However, Mr. Anderson testified that in July, he received a telephone call from Jacquie, the receptionist for the renters or tenants. The tenants assumed that with the stated July 1 st possession date, that Mr. Anderson was responsible for the building after July 1 st . Jacquie advised that there was a problem with the old water heater in the building, in that it had sprung leaks and water was running down the walls. At this time in July, Mr.

Anderson still believed that the transaction would proceed. He testified that he had prior dealings with the principals in C & E Mechanical Inc. and knew them well. He called them and instructed that they replace the water heater. They quickly did that, and issued him an invoice for $599.50, inclusive of all taxes, for purchase and installation of the water heater. [ 12 ] Mr. Bullied testified that he knew the water heater was 31 years old, but denied that there was a problem with the water heater or that it required replacement. He simply did not believe Mr.

Anderson’s testimony on this point. [ 13 ] On August 5, 2010, Mr. Cornea, the solicitor acting for both parties in the sale transaction, wrote to Mr. Anderson. He advised that the problem with the contamination “has been remediated which should now remove the last hold up on this sale proceeding ...”. He advised Mr. Anderson to meet with Mr. Walz at Royal LePage Real Estate to amend the terms of the offer extending the possession date. He advised Mr. Anderson to execute documents at Conexus Credit Union so that they could immediately issue mortgage instructions. As mentioned above, Mr.

Anderson testified that when he learned of the cost of the environmental assessment, he decided that he would not proceed with the transaction. [ 14 ] Mr. Anderson testified that he purchased the air compressor because he wanted it to remain part of the building, and intended on using it in the business after he took possession of the property. He had absolutely no intention of removing the compressor either before or after the transaction was abandoned.

As a result, when he determined that the transaction would not proceed, he approached the plaintiff and asked that the $2,100.00 that he paid for the air compressor be returned. The plaintiff refused to do that. On September 22, 2010, Mr. Cornea wrote to Mr. Anderson instructing that the compressor be removed from the building by October 1, 2010. That did not happen. Mr. Anderson testified that when he later contacted the new owners, they advised it was their view that they had purchased the air compressor with the building. [ 15 ] Mr.

Cornea, then acting on behalf of the plaintiff, wrote to Royal LePage Landmart, asking that the $10,000.00 deposit be turned over to the plaintiff. Royal LePage Landmart declined to do that, and advised they would pay out the funds in accordance with the judgment of the Court. Mr. Cornea then filed a claim on behalf of the plaintiffs, commencing this action. The matter was set for trial to commence on February 7, 2012. At that time, counsel for Mr. Anderson asked that the trial be adjourned, pending a ruling from the Law Society as to whether Mr. Cornea could continue to act as counsel for the plaintiffs. Mr.

Cornea asked for costs for the plaintiff, as they had travelled back to Moose Jaw from out of the country, to be present for the trial. Later, there was a formal hearing before me on an application to disqualify Mr. Cornea. In a written decision now reported at 2012 SKPC 130 , I determined that Mr. Cornea could not continue to act for the plaintiffs at trial and reserved on the question of costs until conclusion of the trial. ISSUES 1) Could the parties extend the deadline for removal of conditions and remove those conditions the way that they did?

Is there a binding written agreement between the two parties? 2) Is the clause in the written agreement respecting forfeiture of the deposit a penalty clause? Is the plaintiff entitled to the deposit?

3) Is the plaintiff unjustly enriched by receipt of the new water heater and the air compressor? Is the defendant entitled to a remedy by reason of unjust enrichment? 4) Is the plaintiff entitled to costs to return to Moose Jaw for trial on February 7, 2012? What order for costs should be made in the cause? ANALYSIS 1) Could the parties extend the deadline for removal of conditions and remove those conditions the way that they did? Is there a binding written agreement between the two parties? [ 16 ] As I understand it, Mr. Chow, counsel for Mr.

Anderson, makes two related arguments respecting the agreement for sale and purchase and removal of conditions. Firstly, by a simple written document, the parties extended the deadline for removal of conditions to May 10, 2010. On May 10, 2010, Mr. Anderson executed a document stating “all conditions of sale are hereby removed. Sale may proceed.” This same document was executed by the plaintiffs on the morning of May 11, 2010. [ 17 ] As I understand it, Mr.

Chow argues that the formal agreement for sale and purchase had expired as of the end of day on May 10, 2010, as the removal of conditions document was not executed by the plaintiffs. The agreement for sale could not be revived by the plaintiffs executing this document removing conditions. Further, that there was no meeting of the minds. Mr. Chow argues that Mr. Anderson understood and believed that a satisfactory environmental assessment would still be required but that this formal condition need not be stated as this would be required by the mortgage company.

Because the plaintiffs had a different understanding, there was no meeting of the minds. [ 18 ] In my view, both of these arguments must fail. Firstly, the conditions placed upon the offer were placed there by the defendant Mr. Anderson, and for his benefit. It was up to him to remove them, and not up to the plaintiff. Mr. Anderson did in fact remove them by executing the document on May 10. I would be reluctant to conclude that the plaintiffs were required to execute this document in order to remove the conditions.

In any event, I would conclude that both parties were entitled to execute a document on May 11, that simply provided that all conditions were removed and that they would be bound by their earlier agreement. I would note that both parties testified that they believed they had a binding agreement and were acting accordingly throughout the balance of May, June and July. As a result, in my view, a binding agreement was in place. [ 19 ] With respect to the argument regarding a meeting of the minds, I note that both parties executed a formal written agreement.

That formal written agreement is clear and without contradiction. Mr. Anderson may have had some misunderstanding regarding some aspects of that formal written agreement. However, there was a meeting of the minds and a formal written agreement was executed. 2) Is the clause in the written agreement respecting forfeiture of the deposit a penalty clause?

Is the plaintiff entitled to the deposit? [ 20 ] During argument, immediately following the conclusion of the evidence, I questioned counsel as to the damages suffered by the plaintiff, and questioned whether the clause respecting forfeiture of the deposit was in fact a penalty clause. Counsel were given leave to file a formal written brief and direct me to case law on these questions.

Both counsel did file excellent briefs, for which I thank them. [ 21 ] I begin by noting that clause #10 of the agreement for sale and purchase, in part, reads as follows: If this offer is accepted and the buyer fails to execute any required conveyance or formal documents when prepared, or fails to pay any required cash payment or to comply with any other terms of this contract, this contract shall be void at the seller’s option and the buyer agrees that the said deposit shall be forfeited to the seller. [ 22 ] Counsel for the plaintiff, Mr. Tibbs, referred me to a number of cases. Two are of particular note.

They are 869163 Ontario

Ltd. v. Torrey Springs II Associates Limited Partnership (2005), (ON CA), 76 O.R. (3d) 362 (Ont. C.A.) and Tang v.Zhang, 2013 BCCA 52. Both of those decisions indicate that a deposit provision in a real estate contract is generally not regarded as apenalty clause, and is forfeited by the buyer if he does not proceed with the transaction. Further, that this occurs without the sellerproving actual damages. It seems to me that the courts have trended away from striking down clauses on the basis that they are penaltyprovisions.

In my view, there is no legal basis here upon which I could strike down this deposit as a penalty provision. Accordingly, Imust rule that the plaintiff is entitled to retain the $10,000.00 deposit, subject to some further adjustment with respect to the issues that Ideal with hereafter. 3) Is the plaintiff unjustly enriched by receipt of the new water heater and the air compressor? Is the defendant entitled to a remedy byreason of unjust enrichment? [23] The defendant argues that the plaintiff has been unjustly enriched by the provision of a new water heater and retention of theair compressor.

I am satisfied that the plaintiff has been unjustly enriched and that there must be some compensation to the defendant inthis regard. [24] In July 2010, the plaintiff remained the owner of the property and received the rents from that property. As a result, heremained obligated to maintain that property, including having an operational water heater. The old water heater was 31 years old andclearly had no value.

The defendant replaced the old water heater with a newer and more valuable water heater, that no doubt made theproperty more attractive to the new third party purchasers that took over the property in October. The cost for replacing this water heaterwas fairly nominal, being $599.50. The plaintiff has assumed the benefit of this new hot water heater, and must pay for it or he isunjustly enriched. [25] The parties executed a collateral agreement with respect to the air compressor. However, in my view, this agreement wasclearly entered into in anticipation of the real estate sale proceeding.

It seems to me to be unfair that the plaintiff be allowed to keep thereal estate deposit because that transaction does not proceed, and keep the money for the compressor because that transaction doesproceed. In addition, if the sale of the air compressor is deemed to have proceeded and been completed, then the property in that aircompressor was vested in the defendant and that proprietary interest ought to have been protected by the plaintiff.

The plaintiff ought notbe able to receive payment for the compressor, not pass ownership to the defendant, and then sell the compressor again to the third partypurchaser, as he appears to have done here. He has been unjustly enriched for the air compressor in the amount of $2,100.00. 4) Is the plaintiff entitled to costs to return to Moose Jaw for trial on February 7, 2012? What order for costs should be made in thecause? [26] The matter was set for trial for February 7, 2012. It did not proceed at that time. Mr.

Cornea, advanced a request for costs forthe plaintiffs, on the basis that they had journeyed back to Moose Jaw for the trial. I reserved on that request. It seems to me that thetrial could not have proceeded on that day because Mr. Cornea was in a conflict, as I have previously ruled. Mr. Chow requested anadjournment and brought the motion to bar the plaintiffs from proceeding to trial with their previous solicitor. The defendant wassuccessful in that application.

Accordingly, it would not be appropriate for me to now allow costs to the plaintiff because they cameback on that date. [27] With respect to the costs in the trial proper, success was somewhat divided, but the larger portion of the funds will go to theplaintiff. As a result, the plaintiff will have costs on the trial of this matter which I hereby fix in the sum of $400.00. CONCLUSION [28] The plaintiff is entitled to receive the $10,000.00 deposit subject to adjustments for unjust enrichment and costs.

Thoseadjustments are as follows: The defendant is entitled to received $2,100.00 with respect to the air compressor and $599.50 for the water heater, for a total of$2,699.50. This sum is then reduced by the sum of $400.00 for costs in the cause, meaning the defendant shall receive from the depositthe total sum of $2,299.50. The entire balance of the $10,000.00 deposit, being $7,700.50 shall be remitted to the plaintiff. In the event

that any interest has accrued on the funds on deposit, that interest shall be divided pro-rata in accordance with the division of the deposit. [ 29 ] Dated at the City of Moose Jaw, in the Province of Saskatchewan, this 5 th day of September, 2013. D. Kovatch, J