SYLVAN LAKE GOLF & TENNIS CLUB LTD. Plaintiff (Defendant by Counterclaim) - v. -, 1999 ABQB 479

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd., 1999 ABQB 479 Date: 19990614 Action No. 9510-00011 IN THE COURT OF QUEEN ’ S BENCH OF ALBERTA JUDICIAL DISTRICT OF RED DEER BETWEEN: SYLVAN LAKE GOLF & TENNIS CLUB LTD. Plaintiff (Defendant by Counterclaim) - and - PERFORMANCE INDUSTRIES LTD. and TERRANCE O ’ CONNOR Defendants (Plaintiffs by Counterclaim) ______________________________________________________________________________ REASONS FOR JUDGMENT OF THE HONOURABLE MR. JUSTICE L.D.

WILKINS ______________________________________________________________________________ [ 1 ] In mid-December 1989 Fred Bell (“Bell”) and Terrance O’Connor (“O’Connor”) verbally agreed to complete the purchase of golf club property at Sylvan Lake, Alberta pursuant to an offer to purchase made by Bell under the right of first refusal held by Sylvan Lake Golf & Tennis Club Ltd. (“Sylvan”). Each agreed to hold title in their respective corporations. Bell’s company was Sylvan, O’Connor’s company was Performance Industries Ltd. (“Performance”).

The closing date on the exercise of Sylvan’s rights of first refusal from N.A. Properties (“N.A. Properties”) was December 31, 1989.

[ 2 ] O’Connor instructed his solicitor (“Forgues”) to prepare a written Agreement. O’Connor and Bell attended the office of Forgues and executed that Agreement on December 21, 1989. The Agreement provided for Bell to enjoy exclusive possession of the golf course property for a period of five years with O’Connor having the right to purchase the same at the end of that term at an agreed price.

The Agreement also provided for the sale for residential development of a portion of the 18 th hole of the golf course at a stipulated price of $400,000. [ 3 ] On attempting to proceed with a residential development on the 18 th hole either jointly with O’Connor or by himself Bell was informed by Forgues that such a development could only proceed strictly in accordance with the provisions of the Agreement. Bell then claimed that the Agreement failed to accurately set out the terms of the parties’ verbal agreement.

He claimed to have signed that Agreement and a subsequent Amending Agreement dated the same date (hereinafter referred to as “the Agreement”) under the mistake of fact that the Agreement did accurately reflect the terms agreed to verbally between the parties. [ 4 ] The issues to be determined at this trial are: 1. Did Bell sign the Agreements of December 21, 1989 under a unilateral mistake of fact? 2. Is Bell entitled to a rectification of the Agreement to conform with what he states the verbal agreement to be? 3.

In the event that rectification can no longer be equitably ordered in view of subsequent actions by the parties, is Bell entitled to damages in lieu of rectification and if so what is the extent of his damage? 4. Is the conduct of O’Connor in relation to this transaction and this litigation, and his evidence pertaining thereof such a nature and kind as to permit the court to consider an award of punitive damage, and if so what is the proper extent of such an award? 5. Is Bell entitled to full indemnity costs on a solicitor-client basis for this trial and for the previous trial as was ordered by the trial judge?

BACKGROUND [ 5 ] In August 1979 Bell and Fred Bentley (“Bentley”) formed Sylvan to operate an 18 hole golf course at Sylvan Lake, Alberta. Bell had previously worked with Bentley for Air Canada. In 1979 Bentley was working for Allarco Developments (“Allarco”) who owned the golf course and had been operating it rather unsuccessfully for the previous two years. Bentley invited Bell to come out to view the property and operation to determine whether he had any interest in leasing the same.

Those discussions led to the formation of Sylvan whose shareholdings were equally divided between Bentley and Bell and the entry of a ten year Lease between N.A. Properties Ltd. and Sylvan commencing 1979.

The Lease contained the right of first refusal and an option to renew for a further ten years. [ 6 ] Bell and Bentley operated the golf course as Sylvan for the first ten years of the Lease and expected to renew the Lease for an additional ten year term. [ 7 ] O’Connor was familiar with the golf course operation having played frequently in that initial term and having hosted his corporate tournament at that site for some period of years.

[ 8 ] Unknown to Bell, O’Connor began to make inquiries as to the purchase of the Sylvan Lake golf course in the first part of 1989. He had instructed his lawyer, Mr. Forgues, to pursue on his behalf ongoing inquiries concerning the availability of the golf course for purchase. He had applied for financing to complete the purchase of the golf course with Federal Business Development Bank (“FBDB”) and had received an offer of mortgage approval in the amount of $750,000 to allow the completion of that purchase. The FBDB commitment was first authorized March 31, 1989. Forgues had been negotiating with N.A.

Properties relative to the purchase of the golf course property based on the availability of possession free from the renewal Lease term at a price of $1.2 million. [ 9 ] In September of 1989 a purchaser unrelated to O’Connor or Performance offered N.A. Properties $1.4 million for the golf course property. Pursuant to the right of first refusal N.A. Properties gave notice to Sylvan of that offer.

Before the expiration of the time for exercise of the right of first refusal it was discovered that the offer itself contained an additional piece of property not covered by the Lease. [ 10 ] On November 3, the same purchasers submitted an additional offer to N.A. Properties for the property contained within the Lease and right of first refusal for $1.3 million. Mr. Bell caused Sylvan Lake to exercise its right of first refusal offering to purchase the property from N.A. Properties at the same price with a deposit of $130,000.

The offer contemplated an additional cash deposit of $70,000 on or before December 1, 1989 which was paid by Sylvan. That offer to purchase contemplated closing of the purchase at December 31, 1989. [ 11 ] On October 20, 1989 Bell returned a telephone message left with his wife by O’Connor. Bell testified O’Connor told him then that he had learned the golf course was sold or being sold. Bell corrected him to advise the course was being purchased by he and Bentley. He testified O’Connor offered financial help if it was needed.

Bell testified he advised O’Connor that that assistance was not needed. [ 12 ] After exercise of the right of first refusal, Bell began to look for financing for the balance of the agreed purchase price. Bentley testified he had indicated that he would not be proceeding with Bell in the purchase of the property due to his health concerns and his belief that the price was too high. He offered to assist Bell in arranging financing to complete the purchase. To that end he spoke to Robert Manning of Caftan Holdings in Edmonton in November 1989. Although Mr.

Manning expressed an interest, he later called to say that the principal of the company, Mr. Allard did not want to participate. Bell applied to Central Guaranty Trust for mortgage assistance and received an offer of mortgage finance December 7, 1989 in the amount of $500,000. In late October or November of 1989 Mr. Bell approached Brad Hoedel, a Red Deer businessman, who he knew as a member of the golf course and who had expressed some prior interest in being part of the golf course purchase. Hoedel testified Bell was looking to him for financing of approximately $650,000 to complete the purchase.

Hoedel declined to assist as he had undertaken a major financial commitment in August 1989. Bell testified that in the latter part of November or early December he recalled the offer of financing made by O’Connor and made an appointment to go and see him at his office in Terroco Oilfield Supply Limited (“Terroco”). [ 13 ] At that meeting Bell outlined the conditions of his purchase under the right of first refusal. Mr.

O’Connor expressed interest in the purchase and indicated he was anticipating the payment of approximately $300,000 from a job from Ontario which could be used to fund his share of the purchase if he chose to proceed. On the basis of each of the two participants putting up $300,000 it would be necessary to borrow $700,000 to meet the offer. In addition to monies deposited, Bell would need another $100,000 which was available to him. [ 14 ] The parties continued to have numerous meetings often very early in the morning at the Terroco offices.

The offer received from Central Guaranty Trust December 7 was shown to Mr. O’Connor who expressed the view that better financing could be obtained elsewhere. Mr. O’Connor indicated to Bell that he had established banking relationships with Parkland Savings & Credit Union, the Royal Bank of Canada and the Federal Business Development Bank and had every confidence they would be able to find the necessary funding from one of those sources. Parkland Savings & Credit Union had no interest in the project from the outset. O’Connor and Bell attended at the Royal Bank to discuss the project with Mr.

Beaton the manager and made application for financing. Mr. Beaton expressed the view that it would be difficult to put the financing into place for the closing December 31. [ 15 ] A mortgage commitment was received from the Royal Bank of Canada December 14, 1989 in the amount of $600,000 requiring personal guarantees in the amount of $100,000 from each of Mr. O’Connor and Mr. Bell. Mr. Bell testified that he never saw this offer of financing.

Bell testified that O’Connor continued to express confidence in the availability of the required financing from FBDB. [ 16 ] The parties continued to talk about issues to be resolved in their proposal for joint development and in particular discuss the principles that Mr. Bell would operate the golf course for a period of five years with no involvement from Mr. O’Connor on a day-to-day basis after which O’Connor could buy out his entire interest and other details in relation to the operation of the venture.

[ 17 ] Both Bell and O’Connor testified to a meeting outside the court room which followed a hearing in court proceedings commenced by Sylvan Lake against N.A. Properties relating to the alleged breach of the Lease in which Sylvan had been successful. The parties then arranged to meet at the residence of Bell on the weekend of December 16 and 17. [ 18 ] On that weekend the parties met for approximately two and a half hours at the Bell residence at Sylvan Lake, Alberta. Bell testified they came to a verbal agreement as to the terms of their joint venture. That agreement was further expanded at the request of Mr.

O’Connor while Bell accompanied him in O’Connor’s truck on the 19 th or 20 th of December. At that time O’Connor suggested to Bell that they should establish a price to be paid by a possible third party developer for the development land. He suggested Bell set the price.

Bell suggested a price of $400,000 which was agreed to by O’Connor. [ 19 ] At trial there was no dispute that the terms of the Agreement prepared by Forgues on the instructions of O’Connor and signed by Bell in Forgue’s office on December 21 accurately recorded the terms of the verbal agreement with the exception only of the provisions of paragraph 18 as they related to the residential development on the 18 th hole. [ 20 ] In the result Performance and Sylvan, each as to an undivided one-half interest as tenants in common purchased the golf course lands from N.A.

Properties Ltd. and were accordingly registered as owners. The purchase price was $1.3 million for the full golf course property comprising 171.53 acres more or less. By terms of the Agreement Sylvan and Bell were to have sole possession of the property for a period of five years, receiving all incomes and paying all expenses, including mortgage, interest and principal in relation to that operation.

After five years Performance was obliged to buy and Sylvan obliged to sell the fifty percent interest of Sylvan at a price of $1.1 million. [ 21 ] The sale was concluded on the basis of the Federal Business Development Bank funding originally offered to O’Connor in the amount of $750,000. That authorization was amended to reflect O’Connor’s participation with Bell in the golf course purchase. The revised offer was submitted by the Red Deer office of Federal Business Development Bank December 20, 1989 and authorized December 21, 1989 by the Alberta Vice President.

That funding contemplated a corporate guarantee by O’Connor’s company Terroco and O’Connor personally limited in the amount of $300,000. No personal or corporate guarantee was required from Bell. [ 22 ] Mortgage documentation was prepared by solicitors acting for FBDB and executed by Bell and O’Connor in the office of Forgues December 21. When Bell remarked at the principal amount of the mortgage being $750,000 rather than the $700,000 required he was told that the borrowers could draw down any amount they chose and the amount to be drawn would be $700,000.

Similarly although the interest was expressed at 14¼% the borrowers could elect the interest rate of 13%. [ 23 ] Bell testified to acting as a courier for the delivery of all FBDB and other documentation to the office of Mr. Hancock in Edmonton. Mr. Hancock’s firm had been corporate solicitors for Sylvan and was acting for Sylvan in an action against N.A. Properties. Mr. Hancock was engaged by Bell to facilitate the rush registration of documentation to permit the close of the right of first refusal transaction before close of business December 31, 1989.

The corporate seal at Sylvan was affixed to the Agreement and mortgage documentation by Mr. Hancock on December 21, 1989. [ 24 ] Both Bell and Hancock testified all copies of the December 21 Agreement had been left at Hancock’s offices after their meeting of December 21. On December 22 Hancock took the opportunity to review the terms of the December 21 Agreement and recommended certain changes which Bell authorized by telephone.

These changes included the conversion of an option to Performance on the purchase after five years to a compulsory purchase and sale, the insertion of a right of assignment by Sylvan of its rights to a numbered company of its choosing and a provision for the recovery of capital costs incurred by Bell in the five years of operation as an add-on to the take out price by Performance. The request for these changes was relayed to Mr. Forgues by phone and fax and approved by O’Connor. A replacement Agreement also dated December 21 was re-executed by O’Connor in Mr. Forgue’s office and thereafter by Mr.

Bell in Hancock’s office on December 27, 1989 prior to the closing of the transaction. The transaction duly closed and the parties took possession of the property with Bell operating the property through to the fall of 1994. [ 25 ] Bell began to experience cash flow difficulties with respect to the payment of all of the expenses including principal and interest on the FBDB mortgage in the 1990 golf season.

At Bell’s request, O’Connor agreed to modify the terms of the Agreement to provide that Sylvan would pay only the principal portion of the mortgage henceforth with Performance paying the interest portion and receiving a credit for the full amount so paid against the take out purchase price at the end of five years. The proposal in relation to those matters

was contained in a letter from Mr. Forgues to both parties dated November 6, 1990 setting out his perceived advantage to each party and a table indicating that the required interest would amount to $306,510.64 which would then reduce the take out price to be paid by Performance December 31, 1994 by an equal amount. [ 26 ] The parties executed an Amending Agreement dated December 17, 1990 containing terms to that effect which reflected the balance of the take out price as $37,500. Attached to the Amending Agreement was an additional copy of the Agreement of December 21, 1989.

Bell was provided a copy of that Agreement for review over the weekend before Bell and O’Connor attended at the office of Mr. Forgues for execution of that Agreement. [ 27 ] Bell testified that he began to undertake inquiries and explore opportunities for residential development on the 18 th hole of the golf course in 1990. Bell testified he had contacted Mr. Steve Scott of Avalon Homes about a residential development. He also testified he had spoken to Mr. Forgues about that contact in 1990 prior to the execution of the Amending Agreement. Mr. Bell also testified as to the contact he had with Mr.

Bernie Bleskie of UMA, an engineering company from Calgary with offices in Red Deer. Bleskie had been recommended to Bell by Steve Scott. Bell toured the course with Bleskie in August of 1992 outlining the areas of development Bell had in mind. [ 28 ] UMA Engineering had earlier produced a design for residential development on the Sylvan Lake Golf Course on behalf of Allarco in 1980. An additional design was prepared for the in-house use of UMA by Mr. R. Klatt in August of 1992.

At a similar time Bleskie caused a proposal for golf course residential development to be prepared by UMA Engineering and forwarded to Bell. That proposal contemplated single family lots of approximately 120 feet in depth and 50 feet of width in a cul-de-sac configuration to be located roughly within the 18 th hole of Sylvan Lake Golf Course.

The proposal also suggested a further assessment of all areas within the golf course property that may have a potential for single family residential development and addressed changes to the existing golf course layout which could improve some of the holes. [ 29 ] Bell did not pursue that proposal further with UMA. [ 30 ] Bell contacted Norm Trouth a development consultant in the latter half of 1992 and provided Trouth with a copy of the UMA proposal. Bell and Trouth talked about development of the 18 th hole and conducted a physical tour of the golf course.

Trouth proposed that there were several locations which would have the potential for development of residences. He recommended that Bell obtain a legal survey to outline those locations that might afford room for more development lots than could be obtained on the 18 th fairway. It was felt that those developments might be more marketable. With Bell’s agreement Trouth did a preliminary cost estimate, investigated utilities and other matters and produced a revenue profit/expense sheet for 100 lots.

It was Bell’s evidence that he calculated the area encompassed by the 18 th hole to be roughly 110 yards by 500 yards which would be approximately 12.5 acres. Bell testified that in late December of 1992 or early January of 1993 he met with Mr. O’Connor and left for his consideration the proposal and sketches prepared by Mr. Trouth. He testified that as the lands in the golf course had been annexed to the town of Sylvan Lake in 1991 there was potential for residential development throughout the golf course.

The area for the proposed development in the materials left for O’Connor related to sections of the golf courses other than the 18 th hole itself and comprised about 15 acres. The material was left with Mr. O’Connor on the basis he would look at it while Bell was recuperating outside of the country and should he have any questions he could contact Mr. Trouth. [ 31 ] Bell returned to Sylvan Lake in May of 1993 and had a chance encounter with O’Connor. Bell inquired as to whether O’Connor had made any decision about the development proposal. O’Connor promised to review the matter and get back to Bell.

Bell then attempted to reach O’Connor by phone but was unable to do so until Mrs. Bell arranged an appointment for him in late May 1993. [ 32 ] At that meeting O’Connor indicated to Bell that he would look at it right away and either get back to Bell or have Mr. Forgues get back to Bell. [ 33 ] Shortly after June 8, 1993 Mr. Bell received a letter from Mr.

Forgues indicating that no residential development of the golf course would be permitted except in strict compliance with the terms of the Agreement dated December 21, 1989 and in particular pointing out that that development would be restricted to a strip of land along the eastern boundary of the golf course adjacent to the 18 th hole containing approximately 3.6 acres.

[ 34 ] Mr. Bell was incensed upon receipt of the letter and attended the offices of O’Connor for what he described as a “heated” meeting. He had looked at the copy of the Agreement and in particular clause 18 which he had at the club house pro shop before attending that meeting. He specifically asked O’Connor if it was O’Connor who put the dimensions in that clause to which he states O’Connor answered no.

Bell then said the only other person involved was Chris Forgues and insisted on having a meeting with Forgues present right away. [ 35 ] That meeting never occurred. [ 36 ] Notwithstanding a number of attempts to find a solution, including the attempts of Mr.

Strilchuk to negotiate a resolution, the engagement of lawyers by Bell to make two offers to purchase the lands roughly comprising the 18 th hole, and the threat of litigation, O’Connor continued to insist that Bell’s right to develop residential property was limited to a strip of land on the easterly boundary of the golf course adjacent to the 18 th hole in accordance with the Agreement. Apart from possible minor modifications of size no other development would be permitted by O’Connor. [ 37 ] O’Connor refused to complete any sale to Bell of any larger portion of the 18 th hole lands.

Bell refused to give up possession of the lands. In December 1994 O’Connor tendered the balance calculated to be due under terms of the original Agreement which included the provision for the remedying of defaults and amounts due to be paid by Bell. O’Connor commenced an action for specific performance pursuant to the Agreement of December 21, 1989.

An order directing specific performance was granted by the court delivering vacant possession to Performance Industries in April or May 1995. [ 38 ] In late 1994 Bell caused Sylvan to commence the current action for rectification of the terms of the December 21, 1989 Agreement, damages in lieu thereof, and punitive damages and solicitor-client costs against O’Connor and Performance. EVIDENCE IN RELATION TO ISSUE #1 [ 39 ] There are only two parties directly involved in the discussion at the Bell residence and the subsequent meeting in Mr.

O’Connor’s truck during which the terms of the verbal agreement entered into between the parties were alleged to have been finalized. The lawyer Mr.

Forgues was not called to offer any evidence as to what information may have been provided to him by O’Connor when he received instructions to prepare the Agreement signed by the parties December 21, 1989. [ 40 ] The evidence offered respectively by Bell and O’Connor as to the terms of their verbal agreement relating to the future development of a portion of the golf course was in direct conflict. [ 41 ] Bell testified that the meeting at his home took place at the dining room table. The dining room was adjacent to and open upon a family or living room area in the cabin style home.

His former wife, Kathleen Bell and mother-in-law Maureen Henderson were present in the living room attending to the new born son of the Bells. The meeting lasted approximately 2½ hours. In cross-examination Bell testified: Q And what were you discussing on that occasion? A Well, we went over basically since now we were clear to continue after the hearing on the 15 th , we pretty much covered all the things that we had talked about because it had never been put down in an organized form, shall we say. Mr. O’Connor used to do bits and pieces, it was my understanding, and give them to Mr.

Forgues, and he would do something with them and then throw them away. So what was being discussed was the contents of what was going to be in our agreement, and we went over all the points basically that were there. And at that point, that is when he had agreed that basically Mr. O’Connor would have the course -- or I would have the course for five years, he would then buy it for five years; that was one of the main clauses. And the other main clause is I wanted an option in there so that the 18 th hole could be developed for residential properties or houses.

Q And did you say that it could be -- it could be sold or you could develop it together or you could develop it? Is that what you’ve told us before, haven’t you? A There were three options. The whole piece of the hole could be sold to a developer. Mr. O’Connor and I, if we felt there was more money to be made possibly, would develop it ourselves. And, thirdly, either Mr. O’Connor or myself could buy the other person out to do it themselves. That was the three options. Q But that wasn’t really set out in the written agreement, was it?

A I don’t believe it’s in -- I can’t think off the top of my head if it’s in there, but it was discussed, sir. Believe me, it was discussed. [ 42 ] Bell testified that at that meeting he showed to Mr. O’Connor and discussed with him two photographs of the Bayview Golf Course near Toronto on which Bell had lived in a cul-de-sac residential development immediately adjacent to the golf course. He testified that he told O’Connor that he felt such a development was well suited to the area of the 18 th hole of the Sylvan Lake Golf Course.

He testified he also showed and discussed with O’Connor the UMA plans that had been generated by the former owners of the property, Allarco. He also showed to O’Connor and discussed with him a sketch prepared by Nielsen which indicated a strip of a single row of houses along the 18 th fairway.

Bell testified that he specifically indicated to O’Connor that he considered a strip type of development to be a waste of land and an uneconomic use of the 18 th hole. [ 43 ] Bell testified that at that meeting he discussed with O’Connor how Bell wanted to secure another five years of operation of the golf course with a chance at the end of that time to secure his retirement by the development of the 18 th hole on any one of three possible options. [ 44 ] At the end of the meeting Bell testified that he and O’Connor had agreed on all of the terms that would govern their joint venture including the availability of the 18 th hole for future residential development.

He testified he was elated to know that he would be able to complete the purchase under his right of first refusal with the terms finally agreed. The parties could then turn their attention to ensuring that the necessary financing was secured. [ 45 ] At the subsequent meeting in which he accompanied O’Connor in his truck, he testified O’Connor suggested they should fix a price in advance for the development land to which Bell agreed. At O’Connor’s suggestion Bell suggested a price of $400,000 for the parcel.

He testified that that figure was selected from his general knowledge of the value of lakefront property in the Sylvan Lake area. On cross-examination he acknowledged it was a figure he pulled out of the air. [ 46 ] Bell testified that he did not read the provisions of clause 18 of the Agreement prepared by Mr. Forgues before he signed the same December 21, 1989 in Forgue’s office. He candidly admitted that he would have seen the measurements if he had read the clause. He did not. He testified that Forgues did not review the terms of the Agreement word for word though he did go over the points in general terms.

He testified that the Agreement was signed at the same time as the FBDB documentation in the office of Forgues. He testified that he never would have signed the Agreement had he been aware of the provisions of clause 18 describing the property to be developed because that description was definitely not what he and O’Connor had agreed to. When asked how he came to sign that document Bell testified: A I have thought about that question almost every day for the last few years. I don’t know how I signed that.

I know that I would never have signed it had I noticed or been pointed out those figures because they were not the figures that I discussed. I didn’t discuss any figures. We just discussed the 18 th hole. [ 47 ] O’Connor testified that in a series of meetings he had with Bell prior to December 15 all of the terms and conditions of their Agreement together had been agreed on in principle except clause 18 which “was an addition later”. Mr. O’Connor testified to the meeting at Bell’s house in Sylvan Lake on the weekend following his contact with Bell at the court house December 15 as follows:

A Well, the house was a cottage style or a cedar log house, a log style house, I would think cedar log. It’s a low one-storey house. When you enter through a hallway and then you turn right into the house which is the - - immediately there was the kitchen or the dining - - the dining area I guess you would say. And when I entered the house, Mr. Bell took my jacket and he went down the hall to my right to hang the jacket or put it in a room, I’m not sure exactly which. And at the - - right in front of me there was a table, and there was two ladies, one I recognized as Mrs.

Bell having seen her before but really not having met her before. Mr. Bell introduced me to his wife and to a lady that he introduced me to as his mother-in-law. Q Yes, go ahead. A And there was a new baby in the house, a matter of a few weeks old, it was in a basket or a baby chair, something along that line, and the ladies were working with the baby - - or taking care of the child. Q And what happened - - what did you do then and what did Mr. Bell do? A Mr.

Bell invited me into his sitting area or his living room which was just past the table into - - it’s an open concept, and just past the table into a sitting area, and the sitting area looks out over the - - it has glass windows on the front looking out over the lake. Q Sylvan Lake I suppose? A Sylvan Lake, yes. Q Yes. A And I sat at the coffee table, I sat on a couch, and Mr. Bell sat on a chair off to my right. Q Where were the ladies? A They were in the dining room area - - or the kitchen area, I guess you would call it, with the baby. Q What happened then?

A We continued to have a discussion on how we were going to close the deal, and how things had evolved, and - - that was probably - - I had assured Mr. Bell at that time that we were going to have the financing. [ 48 ] He testified further that: Q Now, were there any -- what discussions did you have on that occasion? Would you explain the subject matters. A Well, I have great difficulties on exact subject matters. I know that in all of my discussions with Mr. Bell up to that point, that was probably the most personal discussion I had had with him. Q On that occasion?

A Yes. Q And what was that? A Well, we talked about closing this deal, and I think by this time we had kind of concluded that we were going to be working together, and that day he explained to me a lot of -- a lot of, you know, his personal life. When I say “a lot”, I mean a bit of his personal life being that he would be probably moving to Toronto at the end of his term, five years, and that, you know, he’d -- his child would be old enough to go to school in about six years, and he wouldn’t mind moving back to the east. And then we talked about my business and the oilfield servicing.

It was just a general discussion about a lot of things. But first we’d covered that we were going to be, in fact, getting the financing and that was the most important thing, and then we had a general discussion. [ 49 ] As to the terms of the Agreement signed December 21 he stated in response to a question: ...But in substance, were the terms of the agreement agreed on that date? A No. We had agreed on the terms of the agreement prior to that. We were -- I think we were in agreeance (sic) that we had agreed on everything, let’s put it that way.

We never talked a lot about this agreement on the 16 th or 17 th at Mr. Bell’s house - - Q Were there any discussions on that date about development? A No, there was not. Q Was there any decisions about the 18 th hole or the 18 th fairway? A No. Q Had that ever been discussed prior thereto? A No, it had not. [ 50 ] In relation to the preparation of a written Agreement O’Connor testified: A I think that shortly after I talked to Mr. Bell on November 11 th , I would have referred to Mr. Forgues that I was going to look at doing an agreement with Mr.

Bell, so in the latter part of November, meaning in the next week and a half to two weeks after the 11 th , I would have formulated my ideas along with encompassing the suggestions Mr. Bell and I had discussed into an agreement. So it would have been in the latter part of November before -- basically agreed before I proceeded on with the attempting to get mortgages. Q Now -- now, you had -- you had a meeting with Mr. Bell on the 20 th . What steps had been taken by that time to draw up the agreement?

A This first agreement that you referred to here was complete, to my understanding, before the 20 th . Q By “complete”, what do you mean? A Well, everything that we had agreed on was, in fact, in the agreement up to the 20 th . Q And what is it that you had agreed on at that point? A Well, we had never talked about any development at all up until Wednesday the 20 th . [ 51 ] O’Connor testified that the first mention of the housing development on the golf course occurred on December 20, 1989 with Bell present in his truck. He testified that: A Clause 18 was not in the first agreement up to the 20 th of December.

Q Now, what happened in that meeting that you mentioned on the 19 th or 20 th ? A Mr. Bell had come to my office, probably about 7:30, 8:00, or 8:30, in that range, it was early in the morning. He came to my office and started chatting with me. And I had to run some errands downtown, or meet somebody -- I can’t remember exactly what they were -- so I had asked Mr. Bell to ride along with me, and he rode with me into downtown Red Deer, into red Deer downtown.

And at that morning, that’s when he first suggested to me that -- that -- in his words, to the best of my recollection, was that he said to me at one time a portion of the 18 th fairway was zoned for a row of housing. And he said, “Do you think we could put something in the agreement that could reflect it we could sell this property for housing that we could recoup some of our money, and could we work out something like this.” So I asked him what he had in mind for pricing because it was late in the agreement.

And he said, well -- he said, “We wouldn’t do it for less than 400,000; $200,000 for you and 200,000 for me, so we would have to sell it for a minimum of 400,000.” Q Now, was there any discussion on that occasion what portion of the golf course would be utilized? A No. When he said a row of housing, and there’s really only one side of the golf course that you could put a row of housing, and that’s along the fence line, so I can’t really recall any specifics. I don’t think there was specifics about where it would be at. It’s logical that it’s along the fence line because that’s the perimeter of the golf course.

Q Well, was there any discussions about where it would be put? A No. No, I don’t believe so. I don’t -- I think when he referred to me as a row of housing, I don’t think we went into details about where the row of housing would be, but in my mind I was satisfied that it was along the perimeter, I don’t know why, it’s just – Q Were any dimensions discussed? A No, there wasn’t. Q And now, what -- so -- as a result of that discussion, what did you do?

A I told Mr. Bell then that I will have a look at it and, yeah, if we can encompass that in there, that I wouldn’t mind. We had a brief discussion about when it had to be done. And we agreed that it would be done in his term of the lease. But also we’d talked about, you know, it was not going to interfere with the revenue of the golf course of working the golf course, that was the brief part of the discussion. So I said, Well, I will see what I can encompass into the agreement. And it was left at that. And Mr. Bell left. When we got back to the office, Mr. Bell left.

Q And did you -- you did give you instructions to Mr. Forgues to draft something? A Yes. I called Mr. Forgues – Q First of all, who drafted clause 18 -- who put the contents of clause 18 into the agreement? A Well, I informed Mr. Forgues what I wanted in the agreement, and he put the context in it. Q What did you inform -- what did you tell him? A I told him he wanted to put in the clause that we could sell a portion of land on the 18 th fairway. Q And did you tell him where? A Yes. Q What did you tell him there? A Along the fence line which is the eastern borders of the 18 th fairway.

Q And what else did you tell him? A Then I told him the size. Q Which was what? A 110 feet wide by approximately 480 yards long, and I got the 480 yards from the length of play of the golf course -- of that fairway. It could be a little longer, but we used that because that’s on the score card as the length of play at the fairway, and we certainly never attended the course to see that. So that’s why I put those clauses in. Q Why did you put in 110 feet? A 110 feet was -- comes to mind to me that a housing lot is -- it was my understanding is anywhere from 100 to 120 feet in depth, and 110 feet seemed reasonable.

So that’s why I put 110 feet in there.

Q And so that’s why you chose the 110 feet? A Yes. Q And so presumably that agreement was drawn up then on the 20 th ? A Yes. Like, it took a little more thought. I didn’t have a lot of time, but it took a little more thought from my part. It was a request by Fred -- or Mr. Bell, and it took a little more thought than that.

I wanted to make sure we maintained the proper length of the course, which that would do, and that the course would have the same format that it has -- had then and has today, that your 18 th hole would still return to the clubhouse and that we could accommodate 110 feet on that fairway for a development and still maintain the same format of the golf course. [ 52 ] As to the execution of the Agreement in the office of Forgues on December 21 Mr. O’Connor testified: A Mr. Forgues passed us a copy to Mr. Bell and myself, and we reviewed the agreement.

Q Now, when you say “reviewed it”, you would explain -- as far as you can recollect, would you tell His Lordship. A Well, when Mr. Forgues passed the agreement to both of us, and we were sitting in chairs across the desk from him like I say, and then he went through the agreement, item by item. Q Every item? A Yes, every item. Q What did he do, did he read the clause, did he paraphrase or whatever, what did he do?

A Well, what he did is he would start off and he’d say - - and I don’t recall the exact words, but he would start off and say, Now, clause 1 addresses the parties, and then clause 2, and he would read through it and say, And this says this, and clause 3, and he did that throughout the whole 18 clauses. Q But he didn’t actually read the whole agreement? A He read the clauses to us, but like he added some other words in the clauses, like that is what it reflects and that is what it said. That’s my understanding, but he definitely went through the whole agreement, item by item.

PLAINTIFF ’ S ARGUMENT [ 53 ] The Plaintiff argued that the evidence placed before the court clearly established a unilateral mistake by Fred Bell relating to his

execution of the Agreement of December 21, 1989. Although conceding that the authorities require a high standard of proof to support such a finding, the Plaintiff argued that the evidence in this case was overwhelming, uncontradicted in any material matter and easily met the highest standard. In this case it was argued that Bell was mistaken as to property described in clause 18. He did not read it prior to its execution. He believed it to contemplate residential development of the entire 18 th hole.

The Plaintiff further argued that the evidence also proved that O’Connor knew of Bell’s mistake and knew that the description of development property in clause 18 did not accurately reflect the terms of the verbal agreement between himself and Bell. The Plaintiff seeks the equitable jurisdiction of the court to provide relief to the Plaintiff where it would be unfair, unjust or unconscionable not to correct the effect of Mr.

Bell’s mistake. [ 54 ] The Plaintiff’s counsel referred to the evidence of a number of witnesses called on behalf of the Plaintiff and stated: A number of individuals testified on behalf of the plaintiff. As a general comment, the following can be said about those witnesses, and that is that they testified in a fair and straightforward manner, they did not seek to embellish, they conceded matters which ought to be conceded, and were on any material issue unshaken in cross-examination.

The evidence they presented was not only corroborative, but in all material respects consistent with and complementary to the evidence provided by Mr. Bell. They provided independent verification and corroboration regarding Mr. Bell’s state of mind by virtue of his subsequent conduct, his prior conduct, and further -- particularly in the case of Mr. Hancock -- his prior conduct in a critical period from December 19 to 22, 1989. [ 55 ] The Plaintiff further argued that the defence filed would succeed or fail solely on the evidence of Mr. O’Connor.

Counsel stated: ...In addition, and in any event, it is submitted that O’Connor, for various reasons, it is not worthy of belief by Your Lordship. His evidence was consistent only to the extent that by turns it was false, evasive, and riddled with inconsistencies and instantaneous 180 degree turns. Further, he was not prepared to accept the obvious when confronted with his own evidence or documents.

He waffled, prevaricated, and generally discredited himself throughout the course of his testimony. [ 56 ] Counsel offered to the court an itemization of portions of the cross-examination of O’Connor as a sample of the inconsistencies in the evidence given by O’Connor indicating alleged false statements, reversals of testimony and explanations offered by O’Connor for answers provided under oath. That itemization is appended to these Reasons. Counsel further argued that there was no corroboration whatsoever of the evidence of O’Connor.

In particular the Defendants had failed to call Chris Forgues who could reasonably be expected to have testified on many important points of conflict in the evidence. Counsel argued that the failure by O’Connor to call the lawyer with whom he closely worked in relation to all of these matters and whose evidence could have corroborated O’Connor should lead the court to draw an adverse inference that Forgue’s evidence would have been harmful rather than helpful to O’Connor.

Counsel argued that by being the long term solicitor for O’Connor it was not possible to suggest that that witness could equally have been called by the Plaintiff. [ 57 ] On the other hand Plaintiff’s counsel argued that the testimony of Mr. Bell was entirely consistent and corroborated by many other witnesses. The existence of his intention and dreams for the development of the 18 th hole preceded his agreement with Mr. O’Connor. That evidence was offered by Kathy Bell and Mr. Bentley. That intention was further corroborated by the evidence of Mr.

Hancock and notes of telephone conversations Bell made on December 20. After completion of the transaction that intention was further manifested by his contacts with Steve Scott of Avalon Homes, Bernie Bleskie and Norman Trouth as well as the correspondence from Mr. Hollohan of Central Guaranty Trust. DEFENDANT ’ S ARGUMENT [ 58 ] The Defendant argued that there is a heavy onus of proof on the Plaintiff whether it is “beyond reasonable doubt” or “convincing proof” to establish relief based on unilateral mistake. [ 59 ] The Defendant argued that Mr.

Bell should not be believed when he stated he did not read the Agreement and in particular clause 18. Bell acknowledged it was not a mistake arising from his misreading that clause. He acknowledged he was afforded the opportunity to read the Agreement and clause. Counsel argues that his statement about not having read the clause is falsely made as that is the only basis on which he can seek relief from the actual and clear wording of the clause. Counsel argues that Bell was under a lot of pressure to conclude the deal to prevent the collapse of his offer under right of first refusal and loss of $200,000 deposit.

He made the deal knowing that the terms of clause 18 and subsequently regretted it and has later tried to deny it.

[ 60 ] Counsel argued that nothing done by O’Connor or his solicitor Mr. Forgues in relation to the examination of the golf course prior to dealing directly with Bell has any relevance at all. O’Connor had nothing to do with the offer obtained from the Wilson Group by N.A. Properties which obliged Bell to make an offer pursuant to the right of first refusal. Counsel for the Defendant denied the suggestion by Plaintiff’s counsel that O’Connor was in any way misleading Bell as to the availability of FBDB financing.

He argued that the loan to complete the joint purchase of the golf course between Bell and O’Connor was recommended by the local manager December 12, 1989 and not approved until December 19, 1989. The Plaintiff’s counsel argued with reference to authorities that Mr. Bell ought to be held bound to the Agreement that he had signed. He referred to the “point by point” review made by Mr. Forgues prior to its execution. He pointed to the subsequent attendance by Mr. Bell on Mr. Hancock and his prior discussion with Mr. Hancock as to the terms of the deal.

He pointed to the revisions to that Agreement which were prepared by Forgues and agreed to by both O’Connor and Bell. He refers to the correspondence of Mr. Hancock of January 2 which talks about a division of half the proceeds payable pursuant to clause 18 as indicative of a consideration by both Hancock and Bell of that clause. He argues that the provisions of clause 18 were the last provisions of the Agreement immediately above the signature lines.

Bell admitted that the figures describing the parcel for development should have leapt out at him. [ 61 ] Counsel urged the court to look with suspicion on the evidence provided by both Bell and Hancock because they should have seen clause 18 and should have raised objection if it was not in accordance with the verbal agreement according to Bell. Counsel suggested that the court should conclude that Bell really knew what deal was being offered to him. He also knew that if he did not accept that deal he would lose the golf course and his exclusive access to the revenues from it for five years.

It was his only chance to preserve his $200,000 deposit and get the additional five years of revenue. Counsel suggested that as Bell was a self admitted gambler, perhaps he gambled on taking the deal that was offered in the hope that he might secure a more favourable transaction by negotiations with O’Connor at a later date. [ 62 ] Counsel for the Defendant pointed to the evidence of Mr. Bentley about a visit with Bell some time in 1990 when Bell talked about development of the 18 th hole and referred to a strip along the 18 th fairway.

Counsel argued that Bell’s thoughts about a larger development did not occur until after he met with Mr. Norm Trouth. Counsel further suggests that a review of the financial statements would clearly indicate only a nominal receipts by Bell of funds from the golf course. Counsel urged the court to conclude that having regard to his lifestyle, the cost of his house and other available funds the court must conclude that some of the receipts from the golf course were received directly by Bell outside the company and its financial statements.

In that regard, counsel points as well to the evidence of the gross revenues of the course in 1995, the first year of operation by Mr. O’Connor which generated approximately twice the gross income as any of the previous five years under the operation of Bell. He further points out that that revenue was generated after a late start to the golfing season and without the benefit of a club house. [ 63 ] Defendant’s counsel argues that none of Bell’s plans for development of the golf course were communicated to O’Connor until delivery of the plans late in December of 1992.

Counsel for the Defendant spent considerable time in review of the evidence of Mr. Strilchuk in relation to a meeting held in Mr. O’Connor’s office on October 7, 1993. That evidence he suggests should be considered as inconsistent with the trial testimony of Bell and going to his credibility. [ 64 ] He argues for very careful review of the evidence of Bell in relation to the meeting December 16 which he suggests indicates it is not clear that there was any real agreement done.

He submits there is ample evidence to corroborate O’Connor that the clause 18 deal was done in the truck on December 20 very much at the last moment and in a hurry. Counsel also points to contradictions within the evidence of the former Mrs. Bell and Mrs. Henderson. [ 65 ] In relation to the evidence of O’Connor he argued that in the last trial Mr. O’Connor faced very tricky questions which were capable of misinterpretation. He states in particular: ...The word “false” was used in a completely different context. He did not mean that he was giving false evidence. We’re dealing with a matter being correct.

It was on review of the evidence it was quite clear that those questions were tricky. I submit, My Lord, that all those questions were answered, and I think if Your Lordship carefully goes through the transcript on this, you will find that -- that I think he -- I think he has met the threshold to show that he is, in fact, a believable witness. ISSUE #1- DID BELL SIGN THE AGREEMENTS OF DECEMBER 21, 1989 UNDER A UNILATERAL MISTAKE OF FACT?

[ 66 ] The Plaintiff has the onus in this case to establish both that Bell was mistaken as to the description of the development property when he signed the Agreement and that O’Connor knew of his mistake. [ 67 ] The standard of proof to be applied by this court in its assessment has been the matter of some debate. That debate is set forth in the review of authorities on the point contained in the judgment of Madam Justice Hunt (as she then was) in Barrett v. Krebbs (1995), 1995 CanLII 9024 (AB KB) , 27 Alta.

L.R. (3d) 27 at page 37. [ 68 ] A review of those authorities indicates that the standard is beyond that of a mere preponderance of probability which is usual in a civil case. At a minimum the authorities require “convincing proof”. For the purposes of the determination of this case this court accepts the proper legal principle to be as stated by the Supreme Court of Canada in Point Anne Quarries Ltd. v. M.F.

Whalen (1921), 1921 CanLII 57 (SCC) , 63 D.L.R. 545 at page 568 where the court states: Where one of the parties (O’Connor) denies the alleged variation, the parole evidence of the other party (Bell) is not sufficient to entitle the court to act. Such parole evidence must be adequately supported by documentary evidence and by considerations arising from the conduct of the parties satisfying the court beyond reasonable doubt that the party resisting rectification did in truth enter into the agreement alleged.

It is not sufficient that there should be a mere preponderance of probability, as the case must be proven to a demonstration in the sense in which in a court of law an issue of fact can be established to a demonstration, that is to say, the evidence must be so satisfactory as to leave no room for such doubt. [ 69 ] Fundamental to the court’s decision in relation to this issue is the determination of the respective credibility of Bell and O’Connor.

Their evidence to the formation of the verbal agreement between them in relation to the development of any land on the golf course is in direct conflict. [ 70 ] There is no doubt in my mind that the evidence of Bell was both accurate and truthful while that of O’Connor was not. [ 71 ] There was nothing inherently different between the respective testimonial capacities of Bell or O’Connor. Both present a full measure of intelligence, understanding and ability to communicate. Both witnesses claimed a full and firm memory of the events to which they testify.

Apart from the full evaluation of their evidence, it was not possible for this court to point to the demeanor of either witness as being in any way conclusive or determinative of their credibility.

Taken apart from the balance of the evidence adduced at trial it cannot be said that the testimony of O’Connor in relation to the formation of the Agreement and its reduction to writing is inherently unbelievable. [ 72 ] However when the evidence of O’Connor is evaluated on the basis of its inconsistency with that of the other witnesses and with the documentary evidence introduced at trial it must be found to be incredible.

Upon that evaluation of the evidence the testimony of O’Connor is not credible particularly when he states: 1) That there was no discussion between he and Bell relating to the development in the area of the 18 th hole until the meeting in O’Connor’s truck December 20. The evidence of Bell to the effect that the residential development on the 18 th hole was extensively discussed at the meeting in Bell’s residence December 16 or 17 is accepted by this court. That evidence was confirmed by the testimony of Kathy Bell, and Mr. Hancock which are accepted by this court. Mr.

Hancock testified to having been advised of the verbal agreement including the provision for development on December 19, 1989. 2) That the discussions between Bell and O’Connor occurred in the living or family room area of the Bell cottage. The evidence of Bell, Kathy Bell, and Maureen Henderson that that meeting took place over the dining room table while Kathy Bell and Maureen Henderson were in the family room area is accepted by this court. 3) That O’Connor and Bell had agreed to development of only a strip of land on the east boundary of the golf course.

This court accepts the clear evidence of Bell that he showed to O’Connor the Nielsen plan indicating such a strip development and that Bell

rejected that proposal as being inappropriate and uneconomical and not the best use of that land. This court accepts the evidence of Bell as it was corroborated by the evidence of Kathy Bell that during discussions at the Bell residence the photographs of the Bayview cul- de-sac residential development were shown to O’Connor. Bell stated his opinion that such a development was possible on the 18 th hole of the Sylvan Lake Golf Course.

Bell’s position and evidence in that regard is further supported by the correspondence introduced in evidence from the manager of the Central Guaranty Trust following the closing of the transaction in which he returns documentation relative to the development of the 18 th hole which was submitted with Bell’s application prior to the November 7, 1989 approval of funding by Central Guaranty Trust. 4) O’Connor’s assertion that the provisions of clause 18 reflect the Agreement verbally entered into between himself and Bell.

In his cross-examination O’Connor acknowledged that there was no discussion between he and Bell concerning any measurements as they appeared in the Agreement and that he had inserted those measurements describing the developmental property in his instructions to Forgues.

He further admitted that he had inserted the provisions in clause 18 that otherwise limited the development of residential property so as to ensure the “continued, uninterrupted existence of the golf course consisting of no less than 6250 (6250 yards) in length with all 18 fairways well divided, defined and reasonably wide (for reference sake the parties agree the fairways of the golf course are, at the date of this Agreement, for the most part well divided, defined and reasonably wide)”. The testimony of Bell on the other hand was supported and corroborated by the evidence of other witnesses.

His profession of a long range dream for the development of residential property on the 18 th hole similar to the Bayview Ontario development prior to December 21, 1989 was attested to by both Kathy Bell, Mr. Hoedel and Mr. Bentley who was called on behalf of the Defendant. Mr. Bell’s testimony as to that intention is further supported by his reference to the 1980 UMA development proposal made for Allarco. That development contemplated approximately 32 acres inclusive of the 18 th hole. [ 73 ] Mr.

Bell’s evidence that he was mistaken as to the description of the development property described in clause 18 is further corroborated by the steps he undertook after execution of the Agreement in relation to the development of the 18 th hole. On a visit with Bell from Victoria in 1990 after Mr. Bell had control of the land, Bentley testified Bell informed him there was a potential for development of the 18 th fairway. He testified he agreed about that possibility stating that: A And I agreed with him, having been in the development business, that I saw that it was a possibility.

And in earlier times, 32 acres of that golf course had been zoned as potential development, so, yeah, we -- you know, he told me that that’s what -- he thought that was an area of which, you know, there was some money to be made, and I agreed with him; but as I was not involved, I don’t know how, when or where. Q Was there any discussion about any specific area or dimensions or anything like that? A Oh, no. I think the general area was up that east side of the 18 th fairway.

He wanted to take a swath out of there that would leave the 18 th fairway as still being playable, but he could have development on the -- I guess it would be the east side of the land. [ 74 ] In 1992 Mr. Bell consulted UMA Engineering. The evidence of Mr. Bleskie and the plans, sketches and proposal outlined by UMA to Bell were specifically directed to a residential development on the 18 th hole of the Sylvan Lake Golf Course. The evidence of Norm Trouth confirmed that Mr.

Bell had spoken to him about the possibility of development of residential housing on the 18 th hole leading to a re-design of that hole for purposes of play on the golf course. No indication was given to any of those persons by Bell that the extent of the development might be restricted to a strip of land running along the east boundary as is provided for in clause 18.

The actions of Bell before the formation of the verbal agreement and his subsequent actions relative to the development of the 18 th hole are entirely consistent with his testimony concerning the verbal agreement. [ 75 ] Counsel for the Defendant sought to rely on the evidence of Mr. Hancock as proof that Bell was not telling the truth when he said he had not read the Agreement.

Counsel pointed out that before meeting Bell on December 21 at which time the corporate seals were affixed to the Memorandum of Agreement, Bell had discussed with Hancock the general terms of the Agreement including Bell’s desire to develop the 18 th hole. He points to the evidence of Hancock to the effect that his normal practice would have been to review with the client the terms of the Agreement prior to its completion.

He points out that Hancock and Bell met for approximately one hour on December 27 at which time the replacement Agreement was executed and presumably the terms of that Agreement again reviewed with Bell. He further points to Hancock’s letter of January 2 requiring a split of the $400,000 as further proof that both Hancock and Bell had considered clause 18.

[ 76 ] In response to that argument this court accepts the evidence of Hancock as being forthright and truthful. In his testimony he admitted that he had not directed his mind to the limitations of the size of the development parcel found in clause 18 nor had he made any note of bringing those to Mr. Bell’s attention which would have been his normal practice. He could offer no explanation for why he had not done so other than the fact that his focus on receipt of the Agreement signed by Bell was to ensure the completion and registration of documentation to facilitate the closing of the N.A.

Properties purchase on or before December 31, 1989. This court accepts the evidence offered by Mr. Hancock and that of Bell that they at no time discussed the description of property contained in clause 18. [ 77 ] In further assessing the evidence of O’Connor on this aspect of credibility the court must ask itself why O’Connor would instruct his solicitor to prepare clause 18 on those terms if he knew that was not the verbal agreement between himself and Bell. [ 78 ] It is this court’s conclusion that O’Connor perceived it to be to his advantage to do so.

O’Connor knew that Bell could not finance the purchase from N.A. Properties Ltd. by himself. O’Connor knew that the availability of the FBDB financing was tied to Terroco Industries Ltd. and O’Connor. O’Connor knew that Bell could not get any other partner or outside financing in sufficient time to close his N.A. Properties offer December 31, 1989. O’Connor knew Bell would forfeit his $200,000 non-refundable deposit in the event he failed to close the N.A. Property transaction. O’Connor knew that if that offer failed, the property would again be put on the market by N.A.

Properties Ltd. who were mandated to realize upon it. He knew that FBDB could be counted on to provide financing of $900,000 to permit O’Connor to make such a purchase direct from N.A. Properties Ltd. In short O’Connor knew he had nothing to lose by insisting on a restricted development of the 18 th hole even though he knew that was not the agreement reached verbally with Bell. [ 79 ] This court is satisfied beyond any reasonable doubt that O’Connor knew of Bell’s mistake and he chose to permit Bell to sign it in the mistaken belief that it represented the verbal agreement.

He did so with the full intention that he would in the future rely on the terms of the Agreement to thwart or reduce any plan by Bell to develop an increased area of the golf course for residential development. [ 80 ] There was no evidence offered by the defence capable of supporting the testimony of O’Connor on several key issues. Bentley testified to discussions with Bell early in 1990 in which he said Bell described his proposal for development in “the general area was up that east side of the 18 th fairway.

He wanted to take a swath out of there that would leave the 18 th fairway as still being playable and he could have development on the - I guess it would be the east side of the land”. Counsel for the Defendant suggested that this evidence described a strip of development along the east boundary of the golf course as was stated in clause 18. That is not what the witness stated and it is not capable of being so cast. [ 81 ] There was an additional witness who may have offered evidence to corroborate the testimony of Mr. O’Connor on at least two points in issue at this trial. Mr.

Forgues could surely have testified as to the nature and extent of the review provided by him of the terms of the Agreement at the time it was signed by Bell in his office. In particular he may have offered evidence as to a discussion on the description of the development land contained in clause 18. In addition he could have also testified as to when he had first made Mr. O’Connor aware of Bell’s plans for development on the 18 th hole which Bell’s testimony and Forgue’s diary notes indicate occurred in December of 1990. The failure of the defence to call Mr.

Forgues with this evidence obliges this court to draw an adverse inference against Mr. O’Connor, that such evidence would have been harmful rather than helpful to the defence case. Certainly the particular relationship described between Mr. O’Connor and his lawyer Mr. Forgues will preclude any argument that the Plaintiff was equally able to present that evidence through this witness. [ 82 ] O’Connor’s subsequent actions in relation to that development were entirely consistent with his decision.

He avoided every opportunity to advise Bell of his misunderstanding of the agreement up to the point in late May or early June 1993 when Bell’s insistence on an answer caused him to have Forgues write a letter insisting on strict compliance with clause 18. [ 83 ] In assessing the truth of the respective versions of the agreement this court is entitled to consider whether or not the terms of the Agreement as signed and propounded by Mr. O’Connor would lead to a result no reasonable person could be supposed to have contemplated in these circumstances. In City of Toronto v. W.H.

Hotel Ltd., [1966] 56 D.L.R. (2d) page 539 at page 548 the Supreme Court of Canada states: ...I agree that this transaction being an ordinary commercial transaction it is the duty of the court in interpreting that document to avoid

such an

interpretation as would result in commercial absurdity. Duff, J., in Reddy v. Strople (1911), 44 S.C.R. 246 at p. 257, added to the canon that the primary meaning if unambiguous should be adopted, the proviso that it should be “sensible with reference to the extrinsic circumstances...” In such a course the learned late Chief Justice of this Court adopted in terms the “golden rule of

interpretation” as stated by Lord Wensleydale in Grey v. Pearson (1857), 26 L.J. Ch. 473 at p. 481 . I suggest it is also put with accuracy and relevancy to the question here at issue by Rigby, L.J., in Diederichsen v.

Farquharson Bros. , [1898] 1 Q.B. 150 at p. 159 : If the literal construction leads to an absurdity, repugnancy, or inconsistency which reasonable people cannot be supposed to have contemplated under the circumstances, it ought if possible to be modified so as to avoid such a result. [ 84 ] It is common ground that O’Connor invited Bell to set the price for the development lands because of Bell’s greater knowledge of the Sylvan Lake real estate market.

Although Bell testified he picked the figure of $400,000 out of the air he also swore the price was based on the area of the 18 th hole which he believed to contain between 10 and 12 acres. Bell testified that a price of $400,000 for the 3.6 acres which were described in the written Agreement would preclude any commercial opportunity for residential development in the economic climate existing in 1994 in Sylvan Lake.

This court accepts the expert testimony offered by Norman Trouth also to the effect that it would be economically unfeasible to attempt any marketing or development of the strip of residential houses along the east side of the golf course with the land costing $400,000. When the court looks to the independent assessment performed by FBDB at the request of O’Connor in 1989 it is indicated that the golf course lands comprising 171.8 acres were conservatively valued at $5,000 per acre.

The parties to this agreement had agreed to purchase the golf course at a total price of $1.3 million an acre and further agreed that O’Connor could buy out the interest of Bell five years later for $1.1 million. [ 85 ] It was established in evidence that the area defined in the Agreement as being 3.6 acres was approximately one-third of the size of the 18 th hole. If a price of $400,000 was properly stated for the smaller area, it would necessarily follow that the whole of the 18 th hole would have a value for development purposes of $1.2 million, an amount greater than what Mr.

O’Connor was to pay for the entire course being 171.6 acres.

If this does not lead a commercial absurdity it certainly demonstrates an inconsistency which reasonable people cannot supposed to have contemplated under the circumstances. [ 86 ] On all the evidence adduced before this court, the Plaintiff has proved beyond any reasonable doubt that he signed the Agreement of December 21, 1989 under a unilateral mistake as to the descriptions of the development property contained in clause 18 and further that O’Connor knew he had signed that Agreement by mistake. [ 87 ] O’Connor’s conduct in attempting to take advantage of the mistake he knew Bell to have made in signing the Agreement is equivalent to a fraud or a misrepresentation amounting fraud or sharp practice.

It would be unjust, inequitable and unconscionable for this court not to offer redress to Bell in the face of that conduct. ISSUE #2 - IS BELL ENTITLED TO A RECTIFICATION OF THE AGREEMENT TO CONFORM WITH WHAT HE STATES THE VERBAL AGREEMENT TO BE? [ 88 ] It is clear from the evidence as found by this court that Bell is entitled at law to a rectification of clause 18 of the Agreement to provide for the residential development of the whole of the 18 th hole of the Sylvan Lake Golf Club. [ 89 ] Such a rectification would however not be equitable at this stage of the proceedings.

Subsequent to his assumption of possession of the golf course land Mr. O’Connor has caused another of his wholly owned corporations to develop an extensive club house on lands immediately adjacent to the 18 th hole, subdivided for this purpose. It is common ground that development of the former 18 th hole for residential purposes is no longer possible or practicable on the basis that existed prior to December 31, 1994. [ 90 ] In addition the personal circumstances of the Plaintiff have been substantially altered since his development right should properly have been exercisable. He is now divorced.

He lacks the initiative or drive and determination to proceed with such a development at his present age. [ 91 ] Counsel for the Plaintiff has asked this court to exercise its equitable jurisdiction to award damages in lieu of rectification. This

court believes that the Defendants would concur that actual rectification is neither equitable nor practicable in these circumstances. ISSUE #3 - IN THE EVENT THAT RECTIFICATION CAN NO LONGER BE EQUITABLY ORDERED IN VIEW OF SUBSEQUENT ACTIONS BY THE PARTIES, IS BELL ENTITLED TO DAMAGES IN LIEU OF RECTIFICATION AND IF SO WHAT IS THE EXTENT OF HIS DAMAGE? [ 92 ] This court is of the view that Bell is entitled to an award of damages in lieu of his legal entitlement to rectification.

Those damages must be assessed at the amount of money that Bell would have been entitled to have received had he been permitted to complete the residential development of the 18 th hole in accordance with the terms of the rectified clause 18. The measure of his damage would be the extent of the profit he could have expected to realize on the development and sale of single family residential housing less the cost of re-design of the golf course to facilitate its continued play.

That development would necessarily have occurred during the period of Bell’s occupancy of the course prior to December 31, 1994. [ 93 ] The proposal of UMA Engineering contemplated a construction start in the late fall of 1992 and early 1993. Bell’s attempt to explore with O’Connor the development of alternate sections of the golf course in lieu of the 18 th hole development would necessarily have delayed completion of the 18 th hole residential development.

However, I am satisfied that the development could have quite properly been constructed and substantially marketed prior to December 31, 1994. [ 94 ] The evidence as to the reasonably expected profit Bell could realize on the development of the 18 th hole was provided by Norman Trouth who was accepted by the court as a witness capable of offering expert opinion in the areas of land development including land planning, zoning, marketing, land valuation, costing and revenue estimate of development projects as well as the feasibility and commercial and reasonableness of land development.

No contrary expert or lay evidence was offered by the defence in relation to the issue of damages although Mr. Trouth was cross-examined extensively. Evidence in relation to the costs associated with the re-alignment of the golf course property to accommodate the proposed residential subdivision was offered on behalf of the Plaintiff by Mr. Albers and on behalf of the Defendant by Gary Browning both of whom were accepted as experts in golf course construction and re-design. [ 95 ] Mr.

Trouth provided a proposed residential subdivision cost revenue statement which was expressed on an alternate basis of 50 lots of 50 feet wide on 8.5 acres and 58 lots of 50 feet wide on 10.91 acres. The net revenue attributed to 50 lots was determined to be $665,600 while 58 lots would net $820,100. The proposed development was based on the lots having a minimum depth of 110 feet with a central road system servicing the lots on both sides and having a minimum width of 55 feet. The opinion of Mr.

Trouth was that single family lots of this size was the highest and best use for a property in the area at that time: Q And can you explain to the court approximately how many single family residential lots could be developed on that area of land comprising the 18 th hole of the Sylvan Lake golf course? A If you produce all 50-foot lots, which would produce a depth of lot of a little under 140 feet, which are really quite nice-sized residential lots, you could get 58 lots in the 480 yards of length quite comfortably.

If you wanted to struggle with narrower widths or putting some duplexes or something in, you could get more. Q And you can explain to the court what the layout would be of such a development?

A It would be a long cul-de-sac terminating at the north end and originating on a street at the south end with 50-foot lots up both sides of the -- of the street and a bell on the end of the cul-de-sac for turning fire trucks and so forth around to the standards of the town. [ 96 ] He further stated: Q Could you explain to the court what your opinion is about the market opportunities for a development that is a residential housing on the 18 th hole of the Sylvan Lake golf course in the 1994 and 1995 period?

A As you’re no doubt aware, Sylvan Lake is a dormitory town for Red Deer as well as being a very popular resort area, and I felt that the market was top -- tops for a development at that time and would sell out in no more than two years. [ 97 ] The opinion of Mr. Trouth was received in evidence and it remains the only evidence of the expected net revenue which could have been realized by Mr. Bell on a development of the 18 th hole. [ 98 ] Mr. Trouth’s estimate of the net profit available to Mr.

Bell included provision for restoration of the golf course in the amount of $100,000 which was based on a plan for restoration and an estimated budget provided by Mr. Albers. [ 99 ] Mr. Albers testified as to his experience in the golf course business and provided his proposed design of change and his estimate for costs of the same in a gross amount of $100,000, being the amount utilized by Mr. Trouth. [ 100 ] The Defendant called Gary Browning who testified that his preliminary construction cost estimate for a proper re-design that would amount to $246,875. [ 101 ] In cross-examination Mr.

Browning acknowledged that in the preparation of his expert report he had not seen the Sylvan Lake Golf Course; had not had occasion to traverse the course until immediately prior to his testimony; and that he had not been provided a description of the specific nature of the greens and tee boxes of the existing Sylvan Lake Golf Course. Mr. Browning acknowledged that his estimate of costs would necessarily have produced a substantial upgrading of the golf course in the areas that were touched by renovation.

In response to a question from the court he indicated that he would not allow his name to be associated with any development that did not upgrade the course in relation to greens and tee boxes to an acceptable standard. It is clear from a review of Mr. Browning’s estimate of costs that his proposal represents re-development of the golf course arising from the subdivision that was far beyond the requirements of the provisions of clause 18 of the Agreement between Bell and O’Connor and far beyond anything the parties could have contemplated. [ 102 ] On the other hand the evidence of Mr.

Albers was to the effect that he had successfully done many country style golf course developments which were developed on a similar basis to the existing Sylvan Lake Golf Course. It was his opinion that re-development necessitated by the subdivision should be accomplished in those few areas to be re-designed in a manner to be consistent with the rest of the golf course. It was his opinion that any substantial upgrade to the holes being re-designed would make the golf course less attractive and less playable. Mr.

Albers spoke of costs on the basis of his experience and his assessment of the needs of the golf course after having thoroughly examined the course and the requirements on the course for changes arising from the proposed residential development. [ 103 ] There is nothing in the evidence offered by Mr. Browning in his criticisms of the Alber’s proposal which convinces this court on a balance of probability that the proposal by Mr. Albers could not have permitted the reasonable modification of the golf course as contemplated by clause 18 at the cost quoted by Mr. Albers. It is clear that the cost projected by Mr.

Browning cannot be used as a proper basis for challenge to Mr. Alber’s proposal for costs. The respective proposals are for golf courses of entirely different types in a manner that a Cadillac and a Volkswagen are cars of different types. [ 104 ] It is the conclusion of this court that the true measure of damages suffered by Mr. Bell for the denial of his opportunity to develop a residential subdivision of single family lots on the 18 th hole of the Sylvan Lake Golf Course should be assessed on the basis of 58 lots and that the cost of restoration of the golf course would be in the amount quoted by Mr.

Albers of $100,000. As projected by Mr. Trouth, Bell’s net revenue from that development would be in the amount of $820,100, after making the payment to O’Connor for his interest in the land in accordance with clause 18. Bell is entitled to a judgment or damages in that amount. [ 105 ] Bell shall also have judgment against the Defendant in the additional amounts of $10,000 representing my reasonable assessment of damage for the value of the club house developed by Bell during the term of his occupancy in accordance with the provisions of paragraph 8 of the December 21 Agreement.

Finally Bell will also have judgment in the amount of $17,710 being the net balance due to be paid by O’Connor after the defaults of Bell and payments due during his period of occupancy have been offset against the final balance due under the Agreement, as declared by the judgment of the Court of Queen’s Bench in the specific performance action.

ISSUE #4 - IS THE CONDUCT OF O ’ CONNOR IN RELATION TO THIS TRANSACTION AND THIS LITIGATION, AND HIS EVIDENCE PERTAINING THEREOF SUCH A NATURE

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