2016 QCCA 64, 2016 QCCA 64

Wang c. Demers Beaulne inc. (Groupe Sutton Royal inc.) 2016 QCCA 64 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-022522-122 (500-17-035936-072) MINUTES OF THE HEARING DATE: January 21, 2016 CORAM: THE HONOURABLE JACQUES J. LEVESQUE , J.A. MARK SCHRAGER , J.A. MARIE-JOSÉE HOGUE , J.A. APPELLANT JIAN CHEN WANG In person (absent) RESPONDENTS COUNSEL DEMERS BEAULNE INC. , trustee, in continuance of suit for Groupe Sutton Royal Inc . Mtre NOËMIE FRAPPIER ( BCF s.e.n.c.r.l.) 9089-5004 QUEBEC INC.

On appeal from a judgment rendered on February 16, 2012, by the Honourable Justice Louis-Paul Cullen, of the Superior Court, District of Montreal. DESCRIPTION : Service contract – real estate Clerk: Marcelle Desmarais Courtroom: Antonio-Lamer HEARING 9 :30 Continuation of the hearing of January 18, 2016. Judgment see –page 3. Marcelle Desmarais Clerk BY THE COURT JUDGMENT [ 1 ] The Appellant refused to give effect to his offer to purchase a motel. The judgment of the Superior Court rendered on February 16, 2012, District of Montreal (the Honourable Mr.

Justice Louis-Paul Cullen), condemned Appellant to pay the vendor’s real estate broker $61,500 as damages representing the commission that would have been earned had Appellant signed the deed of sale and paid the

purchase price. The judgment also condemned Appellant to pay interest and the additional indemnity plus costs. [ 2 ] In July of 2006, Respondent, 9089-5004 Québec inc., mandated co-Respondent Groupe Sutton Royal inc. (“Groupe Sutton” or “the broker”) to sell its immovable property known as the “Motel Complexe Rustique”. The property included a motel together with a restaurant and sport complex.

The commission was set at 5% of the sale price. [ 3 ] Appellant saw the broker’s listing and visited the property after which the representative of the broker showed him the financial statements of the motel business operated on the property for the periods ending March 31, 2004, 2005 and 2006. Appellant was told that he would be given copies if he made an offer. Though the motel was operating, the sport complex was closed. Appellant visited the property five or six times. The restaurant was operated by the owner’s friend who paid no rent.

The representative of the broker told him that the restaurant could potentially generate additional revenues to those produced by the rental of rooms in the motel. [ 4 ] On October 27, 2006, Appellant through his real estate agent presented an offer to purchase the immovable property for $1.25 million. The offer was made conditional to the following which was added, handwritten, to the standard form offer: 8.1 This offer is conditional upon verifying financial statements for the 3 last consecutive years and building inspection with satisfaction of buyer.

The buyer has 10 days from the acceptance of this offer to get a second mortgage of $150,000. All condition have to be waived in 15 (fifteen) days. The judge stated that: [30] Mr. Wang testified that he decided to offer $1,250,000 because he was not prepared to pay more than three times the Property's annual revenues (3 X $435,000 = $1,305,000).

He added that he intended to verify its financial statements for the three years ending in October 2006 because the restaurant and sport complex were closed in 2006, whereas they had been open previously. [1] [ 5 ] The signing of the deed of sale was fixed for December 11, 2006. [ 6 ] On November 1, 2006, following the acceptance of the offer, copies of the three financial statements were remitted to Appellant who thereupon requested from the broker, who accepted to provide, financial statements for the period April to October 2006. [ 7 ] On November 11, 2006, an amendment to the offer was agreed upon by the parties extending the date for the signature of the deed of sale to December 15, 2006 and providing that: Clause 8.1 to be removed within two weeks. [ 8 ] On November 27, 2006, the broker sent a letter by telecopier to a certain Peter Strifos to the effect that the conditions relating to the financial statements and building inspection were now waived.

Appellant denies receipt of such letter. [ 9 ] On December 17, 2006, Appellant mandated a building inspector who conducted a physical inspection of the motel on the same day. Appellant also mandated an accountant to verify the financial statements including revenues for the period April to December 2006.

While the accountant immediately (December 19, 2006) set to work and verified the three financial statements referred to above, the information for the period after April was not yet available. [ 10 ] A further amendment to the offer was signed on December 21, 2006, whereby the price was lowered to $1.23 million as a function of certain repairs identified by the building inspector.

As well, the signing date was extended to January 16, 2007. [ 11 ] During this period, Appellant had arranged for the financing foreseen by the offer. [ 12 ] On January 12, 2007, Appellant received information regarding the revenue generated by the motel for the period January to December 2006 and was dismayed to learn that the revenues were less than $300,000 and as such, considerably less than the $435,000 represented by the broker. [ 13 ] Accordingly, on January 15, 2007, through his real estate agent, Appellant advised that he would not purchase the motel.

A meeting was immediately convened and the representative of the broker explained that revenues for January to December 2006 were actually $385,000. As a consequence of this representation, Appellant asked to verify the actual books for one month.

After inspecting the receipts for June 2006, he discovered that the revenue was actually $19,775 and not $39,000 as represented by the broker. [ 14 ] The next day, Appellant was given documents with respect to the revenues for the periods April to September 2005 and April to September 2006. [ 15 ] On January 19, 2007, Appellant indicated that he would not be signing a deed of sale. [ 16 ] The broker instituted proceedings in March of 2007, and judgment was rendered in first instance on February 16, 2012.

The broker subsequently became bankrupt pending the appeal and the trustee appeared in continuance of suit as of July 2015. [ 17 ] The judge concluded that:

i) The offer was not conditional on receipt of financial statements through to October 2006 but only to March 2006; ii) Neither the broker nor the owner misrepresented the annual revenues of the motel; iii) Appellant did not act as a reasonably prudent and diligent person in the circumstances and thus, knowing that a commission would be payable to the broker, he engendered his extra-contractual liability to pay damages which the judge fixed at the amount of the unpaid commission, or $61,500.

[ 18 ] We are of the opinion that the judgment is affected by a series of palpable errors of mixed fact and law which have led to an incorrect result. [ 19 ] The handwritten clause 8.1 in the offer to purchase, quoted above, was interpreted by the judge as subjecting Appellant’s obligation to purchase the immovable property to receive financial statements for the three years ending March 2006. However, the judge indicated that immediately following the signature of the offer, Appellant’s request for financial statements through to October 2006 was agreed to by the representative of the broker.

There was no indication in the judgment that there was any objection or dispute to providing such information, irrespective of what clause 8.1 may have meant when originally drafted. Accordingly, it appears that the parties agreed to verbally amend or add to the content of clause 8.1. The facts as reflected in the judgment indicated that Appellant’s requests for this material were ongoing (albeit verbal) and were not refused. The information was remitted to him in January 2007.

The behaviour of the parties confirms that this was the bargain they struck. [ 20 ] Secondly, the words “with satisfaction of buyer” apply both to the provision of financial statements and to the building inspection. Though poorly drafted, the syntax permits such

interpretation as does the context.

Article 1426 C.C.Q. provides as follows: 1426. In interpreting a contract, the nature of the contract, the circumstances in which it was formed, the

interpretation which has already been given to it by the parties or which it may have received, and usage, are all taken into account. 1426. On tient compte, dans l'interprétation du contrat, de sa nature, des circonstances dans lesquelles il a été conclu, de l'interprétation que les parties lui ont déjà donnée ou qu'il peut avoir reçue, ainsi que des usages. Why would only the physical inspection be subject to purchaser’s satisfaction and not the financial data of the building?

Why did the broker continue to entertain Appellant’s request for the information until January (when the information was finally provided) if there was no agreement to provide it?

It is reasonable (and the vendor apparently thought it so) that a purchase of such a revenue property in which the receipts of the business conducted therein could fluctuate, would require up-to-date financial information prior to finalizing a purchase. [ 21 ] This aspect of the facts received no attention in the judgment and such total absence of consideration of uncontradicted proof renders the errors palpable. [2] The financial statements for the period ending March 2006 were clearly unsatisfactory to Appellant if only because the information was not current and the information updated to December 2006 once produced was all the more unsatisfactory for its content and contradictions.

The judge’s analysis of the financial information to question Appellant’s conclusions is uncalled for because it was, as per the terms of the offer to purchase, the Appellant’s decision to make as to whether he was or was not satisfied. As such, the judge’s conclusion that the discrepancy in revenues was only $10,000 is an irrelevant consideration since it was for Appellant to decide if the financial statements were to his satisfaction. [3] Equally, whether the revenues were sufficient to service the mortgage debt was a determination for Appellant to make, not the judge.

The only reason to enter into an analysis of the financial data on the part of the judge would be to examine whether Appellant’s dissatisfaction was a conclusion arrived at in bad faith since Appellant was obliged to exercise his contractual rights in good faith (Article 6 C.C.Q. ). There is however no indication of Appellant’s bad faith. To the contrary, he was diligent in pursuing the transaction including obtaining mortgage financing.

It was only after pressing for additional information and obtaining inconsistent or contradictory information that he indicated his refusal to execute a deed of sale because he was not satisfied with the financial information and questioned the vendor’s and broker’s credibility. [ 22 ] The initial delay indicated in clause 8.1 of ten days (to expire on or about November 6, 2006, amended to November 25, 2006) was not an obstacle to Appellant refusing to sign the deed of sale based on his absence of satisfaction with the financial statements.

In fact, the broker and vendor continued to remit financial data requested by Appellant until January 16, 2007. Moreover, the building inspection took place on December 17, 2006 well beyond the delay written into the offer to purchase as amended and led to a reduction in the purchase price of $20,000.

All of the foregoing events occurred after the telecopied letter of November 27, contending that the conditions contained in clause 8.1 had been waived given the passage of time. [ 23 ] The jurisprudence is consistent that unless clearly stipulated otherwise in a contract and observed from the manner in which the parties gave effect to their agreement, delays are not “de rigueur”. [4] The offer to purchase nowhere provided that the delays were to be strictly observed and the behaviour of the parties described above clearly indicated that they did not interpret the offer in such manner. [ 24 ] Given that the Appellant was within the delays and was not satisfied with the financial statements, the condition reflected in clause 8.1 was not fulfilled so that he had the right to withdraw from the deal.

Therefore, there are no grounds for the broker to seek damages for lost commission on an extra-contractual basis. [ 25 ] Though the foregoing is sufficient to dispose of the matter, there was another failing in the judgment, which merits mention. The judgment does not mention whether the building was subsequently sold and whether a commission was generated by such sale and paid to the broker.

Our Court has decided that such a payment would be relevant to fixing the quantum of damages in the circumstances of a case such as this. [5] The joint record in this case is silent on the point and given the silence of the judgment, we assume that the point was not raised at trial. It is important to bear in mind in such circumstances, the provisions of

Article 292 C.C.P. [6] : 292. At any time before judgment, the presiding judge may draw the attention of the parties to any gap in the proof or in the proceedings and permit them to fill it, on such conditions as he may determine. 292.

En tout temps avant jugement, le juge qui préside le tribunal peut signaler aux parties quelque lacune dans la preuve ou dans la procédure, et leur permettre de la combler, aux conditions qu'il détermine. [ 26 ] Some juridical pronouncements have elevated the discretion to a duty, [7] while other dicta maintain that the power is merely discretionary. [8] However, a judicious exercise of the discretion to bring the parties attention to a gap in the proof does not include the luxury of the judge simply committing the same oversight as the parties. [9] The circumstances of the case required that the question, at the very least, be asked by the judge and that some mention be made in the judgment.

Again, because of the lack of evidence in the joint record and the disposal of the appeal on other grounds, we make no further comment on this point.

FOR THESE REASONS, THE COURT: [ 27 ] ALLOWS the appeal; [ 28 ] SETS aside the judgment in first instance; [ 29 ] DISMISSES the action in first instance; [ 30 ] THE WHOLE with legal costs limited to disbursements (including translation) in appeal and in first instance. JACQUES J. LEVESQUE, J.A. MARK SCHRAGER, J.A. MARIE-JOSÉE HOGUE, J.A.