Arero Corp. v. Erb (G & D) Date:, 2010 MBCA 111

Citation: Arero Corp. v. Erb (G &

D) Date: 20101208 Holdings Ltd. et al., 2010 MBCA 111 Docket: AI 10-30-07344 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Mr. Justice Alan D. MacInnes Madam Justice Holly C. Beard BETWEEN : ARERO CORPORATION ) P. Halamandaris ) for the Appellant (Plaintiff) Appellant ) ) D. G. Hill and - and - ) M. E. Low ) for the Respondents G & D ERB HOLDINGS LTD., D &

M) ERB HOLDINGS LTD. and F & L ERB ) Appeal heard: HOLDINGS LTD. ) November 3, 2010 ) (Defendants) Respondents ) Judgment delivered: ) December 8, 2010 MONNIN J.A. 1 This is an appeal and a cross-appeal from the order of a judge granting a motion for

summary judgment dismissing the appellant’s claim in part . 2 On January 27, 2006, the appellant and the respondents entered into a purchase and sale agreement whereby the appellant would purchase a parcel of land of approximately 47 acres from the respondents. The land being purchased was part of a larger parcel owned by the respondents. The sale price was $1,014,360. The agreement provided for a deposit of $10,000 that was to become non- refundable once the appellant waived a general condition of sale, which it did on February 26, 2006 (see

Schedule B, clause 2). 3 The agreement contained a number of conditions. The following are the ones that are relevant to this appeal: 3) It is understood and agreed that no representation, warranty, collateral agreement, promise, undertaking, guarantee or condition affecting this Agreement or the property has been made by the Seller or the Agents other than as expressed herein in writing. . . . . . This Agreement, when accepted by the Seller, shall constitute a binding contract of purchase and sale, and time shall, in all respects, be of the essence thereof. This Agreement shall enure to and be binding upon the successors and assigns of the parties hereto.

SCHEDULE “B” ADDITIONAL TERMS & CONDITIONS OF OFFER TO PURCHASE

1) DEVELOPMENT STRATEGY The Purchaser shall at its sole cost and expense prepare a development plan and proceed with site investigations for the Property (which may include but is not limited to full topographical survey, geo-technical evaluations, drainage study, servicing options, environmental assessment, etc.) to enable its desired planning process for the entire site, but applications for development plan designation, rezoning and subdivision amendments shall proceed in phases as required by Purchaser and in keeping with the purchase

schedule of land set out herein. 2) GENERAL CONDITIONS OF SALE This Agreement is conditional until March 1, 2006, for Purchaser to notify Seller in writing that: a. the Purchaser is satisfied at its sole discretion that Parcel 1 is suitable for the Purchaser’s development plans; and b. the Purchaser, at its sole cost and expense, has filed whatever development plan amendment(

s) and/or re-zoning and initial subdivision applications that may be required to proceed with Purchaser’s proposed “Phase-1” subdivision development of the Property (herein defined as Purchaser’s “General Conditions of Sale”). If the Purchaser does not waive this General Condition of Sale on or before March 1, 2006, then this agreement shall be null and void and the Purchaser and Seller shall have no further rights or obligations with respect to this agreement.

If the Purchaser waives such General Conditions of Sale on or before March 1, 2006, then the $10,000.00 becomes nonrefundable and will remain in the Seller’s solicitors trust account. Said deposit will be applied at closing to the Purchase price if the Purchaser removes remainder of conditions as set out below. If the Purchaser is unable to remove the remainder of its conditions and close the Seller’s solicitor will distribute the $10,000 nonrefundable deposit to the Seller.

If the Purchaser does not waive General Condition of Sale then the $10,000 deposit held in the Seller’s solicitors trust account will be returned to the Purchaser and this agreement shall be null and void. 3) CONDITIONS OF SALE The Purchase of the Property shall be conditional for 180 days from the date of Acceptance of this Offer to Purchase for Purchaser to obtain whatever development plan amendment(

s) and/or re-zoning and initial subdivision applications required, including all approvals required to legally commence underground servicing work for a residential subdivision (hereinafter defined as “Approvals”) for Purchaser’s proposed Phase-1 development of the Property.

If all such approvals are not obtained within such 180 day period, the Seller will grant 30-day extensions for a maximum of 2 additional 30-day extensions (maximum 60 days) for the Purchaser to obtain such Approvals, provided that the Purchaser pays the Seller a non- refundable Five Thousand Dollars ($5,000.00) towards the purchase price per each 30-day extension requested.

Additional non- refundable monies to be provided to the Seller’s solicitor upon notification in writing to the Seller that it wishes to exercise its extensions. 4) CONDITIONS FOR BENEFIT OF PURCHASER All conditions herein are for benefit of Purchaser and may be waived by Purchaser at any time. ….

5) EXISTING DOCUMENTATION Within five (5) business days of acceptance of this offer, the Seller shall provide the Purchaser with copies of any and all documentation relating to the Property that the Seller has access to including but not limited to geotechnical, hydrological, environmental and other engineering reports, survey certificates, business plans, receipted tax statement for the most recent year and any other documents which may be in the Seller’s possession or control affecting the Property such as correspondence between the Seller and the municipality, other governmental entities, as well as with consultants and other interested parties with respect to the Property. . . . . . 7) PROPERTY INVESTIGATIONS With 24 hours advance notice, the Seller shall grant the Purchaser (and/or its professional consultants, etc.) access to the Property to enable the Purchaser to conduct any reasonable inspections the Purchaser may require including but not limited to: any soil and environmental tests (access storm water and sewer disposal engineering options), and a topographic survey of the Property that the Purchaser may deem necessary and generally to investigate and satisfy itself as to all matters relating to the physical and economic viability of any development it is investigating, including environmental, zoning, economic feasibility, geo-technical, development plans or agreements, access and egress.

The Seller by its acceptance hereof agrees to provide access to the Purchaser in order to complete its investigations and provide such authorizations as may be required by the Purchaser to complete the said tests, etc. above referred to.

All costs shall be for the Purchaser’s sole account and the Purchaser agrees to hold the Seller harmless as a result of the same and to return the Property to its original state prior to any such tests, etc. having been conducted. 4 Because of the fact that the parcel being purchased was part of a larger holding owned by the respondents, subdivision approval from the appropriate authorities was required before the sale land could be transferred to the appellant.

The respondents provided the appellant with the necessary authorization to obtain the approval. 5 On May 3, 2006, the parties entered into an amending agreement that provided that the closing date for the purchase and sale would be set back to December 1, 2006. 6 Notwithstanding that the appellant had made the necessary application for subdivision, it had not received the necessary approval within the 180-day period contemplated in clause 3 of

Schedule B when, on July 24, 2006, it purported to waive the condition in question. 7 In October of 2006, the subdivision approval had still not been obtained. Accordingly, on October 20, 2006, the parties entered into a second amending agreement that set back the closing date to April 16, 2007, and provided for the following: AND WHEREAS on or about September 27, 2006, the purchaser waived the conditions in paragraph 3 of

schedule B of the agreement for purchase and sale, making the agreement for purchase and sale unconditional and binding upon the parties; AND WHEREAS the purchaser is desirous of postponing the date of closing from December 1, 2006 until April 16, 2007; NOW THEREFORE, in consideration of the sum of $10.00 and other good and valuable consideration and the mutual promises contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. The vendor agrees to postpone the date of closing of the purchase and sale to April 16, 2007 upon the following express conditions:

a) The Vendor [ sic ] on or before November 15, 2006 shall make a further non refundable payment towards the purchase price in the amount of $150,000.00 by certified cheque or bank draft to the Vendor’s solicitor to be released to the Vendor for the Vendor’s use;

b) The Purchasers agree to pay interest on the outstanding balance of the purchase price (after the payment of $150,000.00 as aforesaid will be $788,000.00) at the rate of 5% compounded annually and payable monthly, not in advance, each interest payment shall be in the amount of $3,283.33 and the payments shall commence on January 1, 2007 and on the first day of each month thereafter up to and including April 1, 2007, together with a final payment of $1,619.18 on April 16, 2007.

2. The Vendor agrees and acknowledges that in the event of default of the payment of the $150,000.00 or any interest payment as aforesaid, the agreement for purchase and sale and any amending agreements will be terminated without notice to the purchaser and that all monies paid to the vendor by the purchaser will be retained by the vendor and will become the property of the vendor and notwithstanding, the vendor will retain all of its remedies at law for any damages incurred by them. 3.

The parties acknowledge and agree that there will not be any further postponement of the closing date, however the purchaser may advance the closing date to a date earlier than April 16, 2007 upon 14 days written notice to the vendors and in such event, the interest will abate as of the earlier closing date. 4. The parties further agree that this agreement can only be amended in writing signed by all the parties. 5.

In all other respects the agreement for purchase and sale and the amending agreements and the waiver of conditions shall remain the same. 8 The motions judge noted that a lthough the amending agreement, executed October 20, 2006, refers to the date of the waiver of clause 3 of

Schedule B as being September 27, 2006, the waiver document is actually dated July 24, 2006. No explanation has been advanced to explain this discrepancy. 9 The appellant paid the sum of $150,000 in accordance with this agreement and also paid out the sum of $14,752.50 in interest as contemplated by the agreement. 10 Subdivision approval was not obtained by April 16, 2007, and the respondents declined to extend the closing date any further.

They took the position that the agreement was at an end and they could retain the $10,000 deposit, as well as the sum of $150,000 paid on account of the October agreement and also the $14,752.50 in interest paid pursuant to that agreement. 11 The appellant placed a pending litigation order against the land that was to be purchased. On application, a Court of Queen’s Bench judge refused to vacate it ( 2008 MBQB 40 , 224 Man.R. (2d) 178). The respondents brought an appeal to this court ( 2008 MBCA 88 , 228 Man.R. (2d) 286).

In allowing the appeal and removing the pending litigation order, Hamilton J.A. wrote (at paras. 10, 12-14, 17-18): Fundamental to the issue here is the fact that the purchase and sale transaction could not close without subdivision approval. Without such approval, the appellants could neither transfer title to the sale land, nor could the respondent pay the balance of the purchase price because its mortgage financing was premised on subdivision approval.

The motions judge went on to note that two conditions in the offer to purchase, which referred to, among other things, subdivision approval, were waived by the respondent. This, she said, had the effect “to remove these conditions from consideration” [at para. 27]. Whether or not such waiver did remove these conditions from consideration need not be decided. The crucial point is that the subdivision approval was required by law to permit the transfer of the sale land to the respondent.

When one reads the affidavits filed on this motion, it is apparent that obtaining the subdivision approval was the respondent’s responsibility, and it was viewed by all as integral to the closing. Nowhere in the accepted offer to purchase and the amending agreements, or in the correspondence between the parties’ solicitors, is there any discussion of a bifurcated closing whereby possession would be given to the respondent prior to subdivision approval and prior to payment. The motions judge stated that the appellants “refused to close the transaction” (at para. 14). In so concluding, she erred.

The transaction did not close for the simple reason that subdivision approval had not been obtained to permit the closing on April 16, 2007. The parties were unable to agree on the terms of any further extension. The agreement set out that time was of the essence. In the circumstances, the appellants were entitled to consider the transaction at an end. Thus, I am of the view that the appellants have demonstrated that there is no triable issue as to whether the respondent has a reasonable claim against the appellants’ land and the appellants are entitled to an order discharging the pending litigation order.

12 That decision did not end matters. The statement of claim, in its original form, stated: The plaintiff says the defendants failed to disclose documentation and reports in their possession or control affecting the Property, including but not limited to geotechnical, hydrological, environmental and engineering reports. 13 The appellant alleged that the respondents had failed to comply with clause 5 of

Schedule B of the original agreement. This allegation had to do with whether or not the respondents were aware that the proposed subdivision would encounter approval difficulties because of the capacity of the municipal sewage lagoon. 14 With the consent of the respondents, the appellant amended its statement of claim to include the following relief: [R]eturn of all deposits and payments made to the defendants in the amount of $174,752.50; …. 15 That claim is based on the following allegation by which the statement of claim has been amended: In the alternative, the plaintiff says that clause B of

schedule “B” of the Agreement, provided that the Agreement was conditional on the plaintiff obtaining all necessary development plan amendments, re-zoning and initial subdivision approval (the “Approvals”) for a residential subdivision. The plaintiff says that clause B of

Schedule “B” was a true condition precedent to the formation of the Agreement and was not capable of being waived by the plaintiff. The plaintiff says that despite its best efforts, it was unable to obtain the necessary Approvals, such that the condition was not capable of being satisfied. In the premises, the plaintiff says that the Agreement was void and never came into effect. As a result, the plaintiff is entitled to all payments made to the defendants in the amount of $174,752.50. 16 In the alternative, the appellant sought relief from forfeiture of the $150,000 payment made to the respondents.

Although this relief has not been pleaded, the respondents consented to it being raised and the appellant has indicated to us that an amendment to its claim will be forthcoming if it is successful in this appeal. 17 The respondents then brought the motion that is the basis for the appeal before us. 18 In his reasons, the motions judge set out the issues as he perceived them (at para. 23): … (

i) Is the issue of “true conditions precedent” a developing area of law, such that it should not be dealt with on a

summary basis; (ii) Is there a triable issue in relation to plaintiff’s allegation that defendants failed to disclose documentation and reports in their possession and control in contravention of para. 5 of

Schedule “B” of the offer to purchase; and (iii) Is there a triable issue in relation to plaintiff’s claim for the return of $174,752.50? 19 He was clearly aware of the test to be applied on a

summary motion to dismiss. He wrote (at paras. 17-18):

The Manitoba Court of Appeal summarized the law governing motions for

summary judgment in Chaves et al. v. Shum et al. , 2004 MBCA 56 (CanLII) , [2004] M.J. No. 168 , 184 Man.R. (2d) 164 ; 318 W.A.C. 164 ; 2004 MBCA 56 , as follows: 7 The principles to be applied in this province on applications for

summary judgment are now well established and little purpose will be served on this appeal in discussing them at any length. Simply stated, once the moving party raises a prima facie case for the relief sought, then there is an obligation upon the responding party to satisfy the court that there “is an issue which requires determination at trial” ( Atlas Acceptance Corp. Ltd. et al. v. Lakeview Development of Canada Ltd. et al. (1992), 1992 CanLII 2769 (MB CA) , 78 Man.R. (2d) 161 (C.A.) at para. 34 ).

In order to answer this question, the court must take “a hard look at the merits of an action” and determine whether there is a “real chance” that it will be successful ( Podkriznik v. Schwede (1990), 1990 CanLII 2617 (MB CA) , 64 Man.R. (2d) 199 (C.A.) at paras. 15-16 , per Twaddle, J.A., quoting with approval Vaughan v. Warner Communications, Inc. et al . (1986), 1986 CanLII 2533 (ON SC) , 56 O.R. (2d) 242 at 247 (H.C.J.) ). 8 It is generally accepted that if there is an issue of credibility involved in the dispute, a trial will ordinarily be required, and

summary judgment should not be granted. But it is clear that this is so only if the issue of credibility is “genuine.” See Irving Ungerman Ltd. et al. v. Galanis et al . (1991), 1991 CanLII 7275 (ON CA) , 83 D.L.R. (4th) 734 (Ont. C.A.) . Where, as in the present case, defendants seek dismissal of an action, they bear the initial burden of showing that, prima facie, the case will fail.

Once this has been established, the plaintiff must then establish there is a genuine issue that requires determination at trial. 20 He proceeded to dispose of the first issue as follows (at para. 26): I agree with the submission of defendants that the law governing true conditions precedent has now been established for a number of years and that, accordingly, it can be the subject-matter of an application for

summary judgment. I therefore conclude that plaintiff cannot succeed on this ground. 21 In coming to his decision with respect to the disclosure issue, he accepted the respondents’ argument and wrote (at paras. 28- 29, 32): Defendants candidly admit they have not provided any evidence on this motion in response to that allegation. That, however, does not mean they have not established a prima facie case. Pursuant to clause 7 of

Schedule “B”, plaintiff was provided access to the property to conduct whatever property investigations it deemed necessary. Further, defendants say the offer to purchase specifically provided that plaintiff were [ sic ] reliant on their own inspection of the property and not on any representations made by the defendants or their agents. Therefore, while plaintiff is technically correct in its assertion that defendants have adduced no evidence specifically in relation to this matter, the offer to purchase provides that ultimate responsibility for inspection of the property rested with the plaintiff.

Further, para. 25 of the statement of defence represents a specific response to para. 31 of the statement of claim. In it, defendants deny they failed to disclose documentation and reports in their possession or control and say they provided plaintiff with all documentation in their possession in accordance with the terms of the agreement. Plaintiff has not adduced any evidence establishing the existence of any such documentation. For these reasons, I conclude there is no issue relating to the requirement to provide documentation pursuant [to] clause 5 of

Schedule “B” that would justify proceeding to trial. Simply put, there is no real chance of the plaintiff succeeding on that issue. 22 The motions judge then dealt with the return of the funds paid out in the context of whether a condition precedent existed or not. He made no specific finding as to whether there existed a true condition precedent. Rather, he simply concluded that the condition with respect to the obtaining of the subdivision approval had been waived by the appellant.

He said (at paras. 47, 50): In the present case, unlike both Turney [ 1959 CanLII 12 (SCC) , [1959] S.C.R. 578 ] and Barnett [ 1975 CanLII 33 (SCC) , [1976] 2 S.C.R. 531 ], the terms of the offer clearly state that the conditions are for the benefit of the purchaser and that the purchaser maintains the right of waiver. That constitutes a clear distinction between those and the present case and permits the waiver of the condition relating to the subdivision.

Clearly, the inclusion of a reservation of a power of waiver defeats the sanctity of a condition precedent as described in Turney . Therefore, plaintiff’s argument that this issue raises a genuine issue for trial and holds a real chance of success must fail. 23 The motions judge then dealt with the return of the $150,000 in these words (at paras. 53-54): Even though para. 1(

a) of amending agreement 2 describes the payment of $150,000.00 as being “non refundable” and permits its release “to the vendor for the vendor’s use”, that in itself is not determinative of the issue. The court should review the circumstances at the time of the making of the contract to determine whether, as a matter of

interpretation, the payment is liquidated damages or rather a penal provision stipulated in terrorem of the offending party. Among other considerations is whether or not the sum of $150,000.00 is extravagant and unconscionable when compared to the greatest possible loss. Further, there is the question of whether the amount of the payment renders it a penalty. The aforementioned are real issues that warrant a determination at trial. Having taken a hard look at the merits of the plaintiff’s action on this ground, I conclude there is a real chance it will be successful. I therefore deny defendants’ application for

summary judgment dismissing this part of plaintiff’s claim. 24 A decision on whether a party has met its burden with respect to the test for

summary judgment involves the exercise of a discretion. Therefore, the respondents argue that such an order should not be overturned unless the judge has misdirected herself or himself, or the decision is so clearly wrong that it amounts to an injustice.

The appellant takes the position that the facts in this case are not in issue, but that the matter before the motions judge required him to apply the relevant law to those facts and that his failure to do so should be reviewed on a standard of correctness. 25 The matter of the proper standard of review in a case such as the one before us was considered by Freedman J.A. in Towers Ltd. v. Quinton’s Cleaners Ltd. et al. , 2009 MBCA 81 , 245 Man.R. (2d) 70 . He wrote (at paras. 24-28): Finally, and in this case significantly, the judge made decisions involving the exercise of his discretion.

See Homestead Properties [2007 MBCA 61 , 214 Man.R. (2d) 148 ] at para. 13: “Moreover, the granting or denying of a motion for

summary judgment is in a judge’s discretion …” The two most important such decisions were that Perth’s had made out a prima facie case and that Quinton’s had not met the then-shifted burden of establishing that there was a genuine issue for trial. Each of those two decisions required the judge to apply his judicial experience and expertise to all the relevant facts and applicable law and then to make a judgment as to whether the required burden of proof had been met.

A discretionary decision such as described above is reviewed on appeal according to a highly deferential standard, often described in this way; see Elsom v. Elsom , 1989 CanLII 100 (SCC) , [1989] 1 S.C.R. 1367 ; 96 N.R. 165 (at p. 1375): … [A]n appellate court will be justified in intervening in a trial judge’s exercise of his discretion only if the trial judge misdirects himself or if his decision is so clearly wrong as to amount to an injustice. … The standard described in Elsom is universally applicable. It has been applied, for example, in criminal law: R. v.

Regan (G.A.) , 2002 SCC 12 (CanLII) , [2002] 1 S.C.R. 297 ; 282 N.R. 1; 201 N.S.R. (2d) 63; 629 A.P.R. 63; 2002 SCC 12, at para. 117; in commercial law: Trico Developments [2009 MBCA 3 , 236 Man.R. (2d) 91 ], at para. 27; in family law: Hickey v. Hickey , 1999 CanLII 691 (SCC) , [1999] 2 S.C.R. 518 ; 240 N.R. 312; 138 Man.R. (2d) 40; 202 W.A.C. 40, at para. 12; in estate law: Garwood v. Garwood Estate (2007), 2007 MBCA 160 (CanLII) , 225 Man.R. (2d) 30 ; 419 W.A.C. 30 ; 2007 MBCA 160, at paras. 37-39; in administrative law: Association of Administrative and Professional Staff v.

University of British Columbia et al. (2008), 2008 BCCA 337 (CanLII) , 258 B.C.A.C. 287 ; 434 W.A.C. 287; 297 D.L.R. (4th) 274; 2008 BCCA 337, at para. 9; and other areas of civil litigation: Canada (Minister of Citizenship and Immigration) v. Tobiass et al., 1997 CanLII 322 (SCC) , [1997] 3 S.C.R. 391 ; 218 N.R. 81, at para. 87. When the judge had to decide, for example, whether Perth’s had made out its case on a prima facie basis, he considered all the evidence and the applicable law.

He then weighed and balanced the various factors and applied to them his judicial experience and expertise to reach his conclusion that a prima facie case had been established. Assuming he made no errors in his consideration of the facts and law according to the applicable standards described in

a) above, the result of that judicial reasoning process is a decision with which an appellate court ought not to interfere except in the clearest of cases. Those would be the cases, hopefully quite rare, where the judge’s decision has resulted in an injustice. The standard for intervention in a discretionary decision is very high. It is not enough that the appellate judges think the trial (or

motions) judge simply reached a wrong result; there rarely is, in truly discretionary matters, a “right” or “wrong” result. It is not enough that the appellate judges would have decided differently; they are to respect, and not replicate, the unique role of trial judges.

Assuming there have been no reversible errors on fact or law, the appellate judges are not to usurp the trial judge’s role in discretionary matters, barring a decision so “clearly wrong” as to yield a truly unjust result. 26 In this case the decision of the motions judge is due considerable deference unless he is clearly wrong on an issue of law, to which I will refer later in these reasons, or where his decision is so clearly wrong as to amount to an injustice. 27 The appellant argues that the motions judge was in error in relying on the content of clause 7 of

Schedule B of the agreement to ground his finding that the appellant had received all of the disclosure he was entitled to receive. It also argues that the respondents failed to demonstrate on a prima facie basis that the appellant’s claim on this issue would fail and in fact placed the onus on the appellant to prove its case initially. 28 I agree with the appellant’s argument on this issue. As the motions judge himself noted in his reasons, the respondents failed to provide the required evidence to even shift the burden of proof onto the appellant.

Inappropriately shifting the burden unto the other party was an error in law. Furthermore, I am of the view that the motions judge misinterpreted the agreement when he concluded that clauses 5 and 7 provided an answer to the appellant’s claim. 29 That, however, does not end the matter. The nature of the error is such that the motions judge’s decision is owed no deference and this court can then look at the matter afresh and substitute its own decision for that of the motions judge. In doing so, however, I come to the same conclusion that he did, but for different reasons.

The evidence discloses that the appellant appears to have accepted the respondents’ verbal assurance that they had not obtained a formal engineering report on the capacity of the sewage lagoon, but that they had received a verbal report from a local engineer who had done a visual inspection of the lagoon. The appellant appears not to have pursued any further disclosure.

When I consider this and all of the evidence and apply the “hard look” requirement of the test in a motion of this nature, that evidence reveals that the appellant chose to rely on representations made not by the respondents, but by the municipal authority that the sewage lagoon had the capacity to accommodate the proposed subdivision.

This particular allegation, being made against the respondents, has little chance of success at trial and I would dismiss it. 30 I do not propose to deal with the motions judge’s finding that the law relating to true conditions precedent is not a developing area of the law because, in my view, he is correct in so finding and the issue was in reality not addressed by either of the parties to this appeal. 31 That leaves me with the issues of true conditions precedent, the consequences of non-completion of the agreement as a result of true conditions precedent and the relief from forfeiture, which are all to a degree intertwined and intermingled in both the appeal and the cross-appeal. 32 Both parties to this appeal argued, contrary to the motions judge’s finding, that there existed a true condition precedent to this agreement, namely the obtaining of approval to subdivide the property prior to closing the transaction.

The appellant argues that such a condition is set out in subclauses 2(

a) and (

b) of

Schedule B and that such a condition could not be waived, contrary to the finding of the motions judge. The respondents simply rely on general principles of law that it is axiomatic that title could never pass from them to the appellant without subdivision approval because of the fact that the parcel of land had to be divided into at least two, if not more, parcels. 33 Where the parties differ, however, is in what results from the failure of the condition precedent being met or, in other words, what happens to the money.

The motions judge, as set out earlier, found that there existed a triable issue as to whether the $150,000 was to be treated as a deposit or a penalty in the context of a claim for relief from forfeiture. 34 The appellant argues that by reason of the unfulfilled true condition precedent the initial agreement is void, as are the amending agreements as they flow from the initial agreement, and therefore, it is entitled to the return of all of the monies it has paid out. Alternatively, it argues that it is entitled to relief from forfeiture. 35 The respondents take the position, based on Dynamic Transport Ltd. v.

O.K. Detailing Ltd. , 1978 CanLII 215 (SCC) , [1978] 2 S.C.R. 1072 , that the agreements are severable and that in particular the amending agreement of October 2006 is a stand-alone agreement that provided that they could retain the monies being paid under its terms as such payments were being made to, in effect, buy time.

Thus, they say that they are entitled to retain all of the funds that they have received. 36 Before dealing with the differences between the parties on the issue of the return or not of the funds paid, I must state that I agree with them that the motions judge erred in not finding that the requirement of subdivision approval was a true condition precedent. As well, I would conclude he erred in finding that the appellant could (and did) waive the condition precedent pertaining to subdivision approval.

I hasten to add, however, that in my view, it is immaterial on what basis such a condition exists, that is, whether it is based on specific clauses of the agreement or by the operation of law generally. 37 The respondents, in their cross-appeal, have not satisfied me that the motions judge was in error when he directed that this issue be resolved by way of trial, especially as they also argue that his decision must be reviewed on a deferential standard of palpable and overriding error.

The respondents, in my view, have not made out a prima facie case of their entitlement to the funds paid to them under the original agreement and the second amending agreement.

Moreover, their argument that the amending agreement is severable and can stand on its own must still be addressed because of my finding that the motions judge erred in dealing with the validity of the initial agreement itself. 38 I would accordingly dismiss both the appeal and cross-appeal and direct that the matter proceed to trial in order to decide if the amending agreement is a severable or stand-alone agreement and thus still valid notwithstanding that the initial agreement is void, whether the respondents are entitled to retain all or any of the funds that have been paid to them, and whether the appellant is entitled to relief from forfeiture in respect of the payment of $150,000.

39 Each party shall bear their own costs. J.A. I agree: J.A. I agree: J.A.