Cressey failed to complete purchase contract

Released: October 24, 1991 No. C903065

Vancouver, BC

 

 

IN THE SUPREME COURT OF BRITISH COLUMBIA

 

 

 

 

 

BETWEEN: )

)

CRESSEY DEVELOPMENT CORPORATION )

)

) REASONS FOR JUDGMENT

Plaintiff )

AND: ) OF THE HONOURABLE

)

Anthony BRECKNER, Phyllis Szvoboda ) MR. JUSTICE HOOD

BRECKNER and THE CORPORATION OF )

THE TOWNSHIP OF RICHMOND )

) (IN CHAMBERS)

Defendants )

)

AND: )

)

Anthony BRECKNER, Phyllis Szvoboda )

BRECKNER and William D. O. BEES )

)

Third Parties )

 

 

 

 

Counsel for the Plaintiff: P. S. Grahame

 

 

Counsel for the Defendant Anthony Breckner

and Phyllis Szvoboda Breckner: D. B. Kirkham, Q.C.

 

and P. J. Brown

Counsel for The Corporation of the

Township of Richmond: H. M. Thomas, Q.C.

 

 

Counsel for the Third Party Bees: R. Cooper

 

 

Dates and Place of Hearing: May 15 and 17, 1991

Vancouver, BC


INTRODUCTION

 

This is an 18A motion brought by the defendants, Anthony Breckner and Phyllis Szvoboda Breckner (the defendants) and which only concerns them and the plaintiff. They seek an order dismissing the plaintiff's action with costs and other alternative relief which I need not deal with.

 

The action involves the sale by the Breckners of the back portion of certain property they own, and which was situate at 9251 Granville Avenue in Richmond. The portion of the property is called the "Backlands". An Interim Agreement dated November 26, 1986 was entered into by the parties as were, subsequently, four addenda thereto. Cressey sues the defendants for damages, alleging, among other things, that the defendants breached the Interim Agreement by failing to obtain subdivision approval in a timely manner, or to perform their obligations in connection therewith, by the closing date of March 30, 1990, with the result that the sale to Cressey could not be completed. The defendants defend the action on the basis that it was Cressey's obligation under the Agreement to subdivide the Backlands so that they could be conveyed to Cressey, and to tender the purchase price, on the closing date. They say that since Cressey failed to do so, the Agreement was then at an end.

 

 

 

THE EVIDENCE

 

The defendant, Phyllis Szvoboda Breckner, is now 75 years of age. Her husband is 81 years of age. He suffers from Parkinsons Disease, and has been retired since 1974.

 

Cressey Development Corporation is a real estate development company. It has been engaged in that business since 1975, primarily carrying on business in the Lower Mainland. Since entering the real estate development business, it has completed approximately 100 multiple family residential developments.

 

In late 1986 a real estate agent approached the Breckners to see if they were interested in listing the Backlands for sale. They told him that they were not interested. However, he persisted, advising them that several of their neighbours along Garden City Road and Alberta Road had decided to list their properties for sale with him. He was hoping to sell all of the lots to a developer as a package deal. The Breckners eventually agreed to list the Backlands for sale with him.

 

The agent subsequently attended at their home and presented them with an offer from Cressey to purchase the Backlands. The offer, which was accepted by them on December 4, 1986, is contained in the Interim Agreement dated November 26, 1986. The Agreement is referred to by the parties as the Contract, and I will do the same.

 

The Backlands is described in the Contract as follows:

 

Backlands of remainder L32, Blk, Sec. 10, B.N. R6W Pl.24011 S and E. P.L. 69878. That portion 46 meters north of Granville Avenue to the north boundary, approximately 58,905 square feet or 1.32 acres.

 

It is common ground that before Backlands could be conveyed to Cressey it was necessary to subdivide the Breckners' property; also that access to Backlands would have to be achieved over an adjoining property which was not owned by the Breckners. They had earlier built a home on the smaller or front part of their property.

 

I will refer here to a number of the terms or conditions of the Contract. Clauses 1, 2 and 3 are as follows:

1.At the closing, vendor to deliver title free and clear of financial encumbrances.

 

2.The purchase of the above-mentioned property is subject to the purchaser being able to obtain zoning from the Municipality of Richmond, B.C. to develop a condominium project, or a townhouse project on the existing property satisfactory to the purchaser on or before March 31, 1988.

 

3.This offer is also subject to the purchaser obtaining from the Municipality of Richmond a commitment that a sewer line will be extended to the proximity of the project site, which commitment to be received by January 29, 1988.

By Clause 4 the offer was subject to Cressey being able to enter into agreements to purchase certain properties adjacent to Backlands prior to a specific date. Clause 8, a most important clause, provides:

 

8.Vendor agrees to sign all documents necessary for rezoning and any other documents requested by municipality to allow purchaser to obtain necessary approvals.

 

 

The Contract also provides:

There are no representations, warranties, guarantees, promises or agreements other than those contained herein, all of which contained herein will survive the completion of the sale.

 

Time shall be of the essence hereof, and unless the balance of the cash payment is paid and such formal agreement to pay the balance as may be necessary is entered into on or about the date of completion of the sale, the owner may at the owner's option cancel this agreement. And in such event the amount paid by the purchaser shall be absolutely forfeited to the owner as liquidated damages.

 

 

I now turn to the four addenda to the Contract, the first of which is dated December 18, 1986. By it Clause 4, which provided that the offer was subject to Cressey being able to purchase the adjacent properties, was removed.

 

By addendum No. 2, dated September 4, 1987, the time within which the purchaser could obtain the rezoning from the Municipality of Richmond was extended from March 31, 1988 to January 31, 1990. The completion date was also extended from May 29, 1988 to March 30, 1990. Also Condition No. 3 relating to the sewer line was deleted. The other provisions of the addendum would not appear to be relevant.

 

Addendum No. 3 dated October 2, 1987 is said to be a typed version of addendum No. 2. Addendum No. 4 is dated January 19, 1990 and provides as follows:

 

The purchaser hereby removes all subjects regarding the above-mentioned property.

 

This is now a firm and binding contract.

 

Vendors acknowledge receiving the sum of $25,000 (twenty-five thousand dollars) non-refundable but applicable towards total purchase price.

 

All other terms and conditions remain the same.

 

By this addendum then the rezoning condition, that is Condition 2, of the Contract, was removed. Each of the four addenda forms has the term "all other terms and conditions contained in the said Agreement remain the same and in full force and effect" just above the signatures of the parties to the addendum. In the case of the last referred to addendum, it is noted that in addition the phrase "all other terms and conditions remain the same" has been typed on the face of the Contract.

 

It was common ground that at the time the Contract was entered into, that before Cressey could receive a registrable conveyance of the Backlands, it was essential that the Breckners' property be subdivided. The requirements for subdivision are set out in the Land Title Act R.S.B.C. 1979, Ch. 219. They include preparation of a subdivision plan, necessary and reasonable access to all new parcels of land by means of a sufficient highway, and approval of the plan by Richmond's approving officer.

 

Cressey knew that in order to subdivide the Breckner property it was necessary to get the Municipality of Richmond's approval and that Richmond would not approve a subdivision unless both of the new lots had street access; that the only three access "candidates", in the event that the Breckner property was subdivided, were Granville Avenue, Garden City Road or Alberta Road. Cressey knew that the Breckners could not provide access to the Backlands. Cressey in fact planned to provide access to the Backlands over other property which it was acquiring at 6760 Garden City Road. The lot at 6760 Garden City Road was purchased by or for Cressey on March 30, 1990.

 

Cressey planned to consolidate the lot at 6760 Garden City Road with the Backlands in order to provide access to the Backlands. To that end, on March 20, 1990, Cressey delivered to the Municipality of Richmond Planning Department a letter enclosing a sketch of Backlands and of the front portion of the defendants' property, together with a Development Application to the Corporation of the Township of Richmond. Cressey had had the Breckners execute the Application that day. The letter states:

We wish to subdivide the property into two lots as outlined in the appended sketch.

 

To provide access for the back portion, we propose to consolidate that portion with the property located to the east of the subject property (as outlined in the sketch).

 

Cressey Development Corporation will purchase the back portion of the property from the Breckners; all questions and correspondence should be directed to Cressey.

 

 

According to the testimony of Scott Everett Cressey, given on March 26, 1991 when cross-examined on his affidavit, he was Cressey's project manager. While he had seen the Contract around the time that it was signed, i.e., November 26, 1986, he did not recall knowing that the Backlands had to be subdivided at that time. He testified that he believed he first learned that it had to be subdivided in mid-March of 1990; that he then instructed Mr. J. Bysse, Cressey's development officer, to communicate with the Breckners and he did so.

 

According to the affidavit evidence of Mrs. Breckner, Bysse telephoned her sometime in late February or early March of 1990. He told her that he was in the process of preparing the documentation required to complete the purchase and sale transaction. He commented that he had not yet received from the Breckners any documentation pertaining to subdivision. Mrs. Breckner said that she told him that subdivision was Cressey's responsibility; that he then said that he would have to go back and look at the terms of the contract.

 

Bysse then spoke to Scott Cressey whose evidence in this regard, given on cross-examination, is as follows:

 

Q.Did you say to Mr. Bysse when he came back to you in mid-March 1990 that it was your position that the Breckners always had had the responsibility to subdivide the property?

 

A.No.

 

Q.What did you say?

 

A.I'm recalling that basically we said well, it was more the point, let's get on with it and try and help them provide us with the subdivision or we'll look after the subdivision from this point on.

 

Q.Did you know what was necessary to accomplish a subdivision?

 

A.I had Jorgen look into it with the Municipality of Richmond.

 

Q.Did he report back to you?

 

A.Yes he did.

 

Q.What did he say?

 

A.He said, "we have to go get them to sign some documents" at which I said, "go get them to sign the documents", and also look at the time it will take to do so.

 

Q.And that's when he went and got them to sign the subdivision approval?

 

A.And tell them the process and the difficulties and what was going to happen.

 

 

As I have already stated, Bysse then attended at the Breckners' residence on March 20, 1990 and presented them with the Development Application to the Corporation of the Township of Richmond, which they signed. The document provides that the Breckners are the applicants, but that all correspondence and calls are to be directed to Cressey. As I understand it, the Development Application is the first step in the process of obtaining the approval of the Richmond approving officer to the subdivision of the Backlands, and the consolidation of the subdivided Backlands with the lot at 6760 Garden City Road. Bysse delivered the Development Application to the Planning Department of the Municipality of Richmond, with his letter outlining Cressey's consolidation and access plan, together with the sketch to which I have already referred, on March 20, 1990.

 

Bysse's affidavit evidence with regard to his attendance at the Breckners' home on March 20, 1990 is as follows:

 

11.During this meeting I advised Mrs. Breckner that it was not possible for the plaintiff to make the application for the subdivision since the plaintiff was not the owner of the property to be subdivided. I further advised Mrs. Breckner that it was necessary for Mr. & Mrs. Breckner to apply for the subdivision so that the Backlands could be transferred to the plaintiff in accordance with the terms of the agreement with the plaintiff.

 

12.During this meeting with Mr. & Mrs. Breckner I also told Mrs. Breckner that the subdivision process would take some time and might not be completed in time for the March 30, 1990 closing date for the sale of the Backlands, and during the course of those discussions Mr. & Mrs. Breckner signed the subdivision application and asked me to submit it to the Corporation of the Township of Richmond ("Richmond") on their behalf.

 

 

Mrs. Breckner states in her affidavit sworn January 29, 1991:

27.Sometime in mid-March 1990 Mr. Bysse came to our house and presented my husband and I with a "Development Application", the effect of which when submitted to Richmond would be to commence the process of subdividing off the Backlands from the property and consolidating the Backlands with property owned by Cressey at 6760 Garden City Road. The document was prepared by Cressey. My husband and I signed the document and Mr. Bysse took it with him when he left.

 

She said also:

 

25.It was always our understanding that Cressey was responsible for obtaining Richmond's approval to the subdivision and that Cressey would make some of its property available to be consolidated with the Backlands, and thereby provide the necessary access from either Garden City Road or Alberta Road. At no time was it ever discussed that my husband and I were responsible for obtaining Richmond's approval, that we were responsible for providing access to the Backlands, or that we would provide the necessary access to the Backlands to the portion of the property that we were to retain.

 

 

On March 27, 1990 Bysse received a letter from Richmond advising him that the processing time for minor subdivision applications was approximately six weeks from the date of receipt of the application. The letter is dated March 22, 1990.

 

On March 30, 1990 Cressey couriered a letter to the Breckners then solicitor, William Mulholland, with regard to the sale of the Backlands saying:

 

With respect to the above-noted transaction, we enclose here a copy of the extension of completion which we are presenting to your clients this afternoon.

 

The enclosed document was an addendum dated March 30, 1990 to the Contract, and provided for the extension of the date of completion to a date fourteen days after subdivision of the property was duly registered in the appropriate Land Titles Office.

 

On the same date, that is March 30, 1990, the closing date under the Contract, Bysse attended at the Breckners' residence to ask them to extend the closing date, and met with them and their son. Bysse's affidavit evidence with regard to that meeting is as follows:

 

24.On arriving at Mr. & Mrs. Breckner's residence I met Mrs. Breckner and her son and was advised by him that the Breckners previous solicitor, Mr. Mulholland, was no longer their solicitor, and that the form of addendum produced as Exhibit "D" seemed acceptable but would have to be reviewed by the solicitor for a company owned by Mrs. Breckner's son.

 

25.During this meeting I advised Mrs. Breckner and her son that according to Richmond the time necessary to process the subdivision application would be approximately four weeks.

 

26.At no time during this meeting did Mrs. Breckner or her son indicate that Mr. & Mrs. Breckner considered the agreement with the plaintiff to be at an end, or that the plaintiff had somehow repudiated its agreement to purchase the Backlands.

 

His evidence in this regard on cross-examination was as follows:

Q.No. What I am asking you is what you recall and everything you recall about what was said by the Breckners, nothing more, nothing less.

 

A.OK. I recall that Raymond Breckner would like to take the document to his lawyer to, so he can familiarize himself with the transaction. That's how I recall.

 

Q.And he wanted to do that?

 

A.Yes.

 

Q.Prior to Mr. & Mrs. Breckner signing the document?

 

A.That's correct.

 

Q.And no one said to you that they would sign the document?

 

A.No one said to me that they would sign it, no.

 

 

I will not refer to Mrs. Breckner's evidence as to her conversation with Bysse at the March 30, 1990 meeting, as it is in conflict with that of Bysse. For the purposes of the trial, the defendants accept Bysse's evidence as to the March 30 discussion.

 

On March 30, 1990 Cressey did not tender the purchase price or the closing documents. The transaction did not complete.

 

On April 4, 1990 William Bees, the Breckners new solicitor, telephoned Scott Cressey and advised him that he was now representing the Breckners. During the conversation Cressey and Bees apparently discussed the terms of the Contract between the parties, and other matters. On April 6, 1990, Bees faxed a letter to Cressey in which he says that he is summarizing several telephone conversations he had with Cressey on April 4. He says also:

 

The purpose of this letter is to confirm with Cressey Development Corporation ("Cressey") what its terms of this proposed sale now are, so that I can get instructions from the Breckners as to whether they are prepared to continue or not. This letter does not contain an offer on the part of the Breckners to continue with the sale, nor is it a refusal to continue with the sale.

 

 

Bees goes on to set out "terms offered by Cressey" and later has this to say with regard to the subdivision of the subject property:

 

Before the sale can be completed, permission must be obtained from the Corporation of the Township of Richmond to subdivide the property into the front lot and the back lot as shown on the attached sketch. The parties acknowledge that such subdivision would be dependent upon access being able to be obtained to the back lot, and that Cressey is in a favourable position to supply access. Cressey was responsible in the original agreement for applying for subdivision of the property and failed to apply in time to complete on March 30, 1990. Cressey has begun the application several weeks ago, but does not anticipate getting approval for six weeks.

 

The letter ends:

This covers all points which I believe we discussed. Please respond to this letter as soon as possible, indicating your desire for alterations, or indicating that this letter represents Cressey's position on this proposed sale.

 

Apparently Cressey did not reply to the letter until April 11, 1990 and I will refer to his letter in a moment.

 

Seven days later, on April 11, 1990, Bees faxed a further letter to Cressey stating, among other things:

The failure of Cressey Development Corporation to attend to this subdivision, and the failure of Cressey Development Corporation to tender the purchase price on March 30, 1990, is Cressey Development Corporation's repudiation of this contract.

 

Phyllis Breckner and Anthony Breckner hereby accept this repudiation. This contract is at an end.

 

 

On the same date, that is, April 11, 1990, Scott Cressey faxed a letter to Bees stating, among other things:

 

I wish to clarify my understanding of our telephone conversations and to correct your letter dated April 6, 1990.

 

And

Based on the original agreement, we accept no responsibility to obtain subdivision. Because it was not done in time to have a legal identity at closing, we took it upon ourselves to get it done, which is in process at this time.

 

This completes my resume of the evidence before me. I should note here that some of the evidence, of course, is not admissible on the issue of the construction of the Contract. I refer, for example, to the post-March 30, 1990 letter to which I have just referred, and to the evidence relating to the subjective intentions of the parties. The only evidence which is admissible on the issue referred to is evidence of the surrounding circumstances with reference to which the words to be interpreted were used. I will have more to say about this in a moment.

 

 

THE ISSUES

It would appear that counsel are in agreement that in the main there are two issues before me (l) whether the defendants application for judgment dismissing the action, may appropriately be determined by an 18A trial; and (2) if so whose obligation was it to obtain the subdivision of the Backlands. There is a third issue raised by the plaintiff which I must also deal with, and that is the issue of waiver. Was the time for performing the subdivision obligation postponed or waived.

 

 

IS 18A APPLICABLE?

Examinations for discovery have been conducted between the plaintiff and the defendants. Numerous affidavits have been filed and cross-examination on some of the affidavits has taken place.

 

Counsel for the defendants says that the case turns solely on contract interpretation, with particular regard to Clause 8 in the Contract dated November 26, 1986. The issue before me is a question of law. There is no conflicting evidence having any bearing on the interpretation of the Contract.

 

He argues that the case is ideal for an 18A trial; that a substantial trial involving other issues, and substantial legal fees, can be avoided simply by deciding the interpretation to be given to Clause 8. The defendants, he says, are "prepared to win or lose on the agreement issue", and seek a judgment on it. If the plaintiff is right, he says, that is that the defendants were obligated to subdivide the property, then the defendants breached the Contract.

 

Counsel argues that the plaintiff's main reason for asserting that the case is not capable of being determined under Rule 18A is the allegation that expert evidence is required. He submits that expert evidence is irrelevant and inadmissible, that it could be of no assistance to me in interpreting Clause 8 or interpreting relevant statutes. He argues further that if the plaintiff believed that expert evidence would assist, it was incumbent on the plaintiff to bring forward such evidence at the 18A hearing. No such evidence was forthcoming.

 

Counsel for the plaintiff argued that the issues between the parties could not be appropriately resolved by an 18A trial. She said that there were numerous factual issues to be resolved which could not be resolved under Rule 18A. The plaintiff wishes to join the defendants' son and their solicitor Bees in the action, and allege that they induced a breach of contract between the defendants and the plaintiff. The examinations for discovery revealed numerous conflicts, between the evidence of the plaintiff and that of the defendants, with regard to the parties "intentions regarding subdivision and the meaning to be attached to Clause 8 of the agreement", what was said during the March 20 and 30, 1990 meetings, and as to what transpired between Bees and the plaintiffs' solicitor during a telephone conversation on April 20, 1990. Again, she says the plaintiff's claim is substantial, in excess of $1 million.

 

Finally, counsel for Cressey argues:

 

The issues for determination by this court, and in particularly whether subdivision approval would, or could have been, obtained in this case, may properly be the subject of expert evidence.

 

 

I agree with the submission of counsel for the defendants on the question of expert evidence. I am not satisfied that such evidence is admissible or that it would be of any assistance to me in the task at hand. Again, I see no reason why such evidence was not tendered in these proceedings if the plaintiff truly believes it to be necessary.

 

Counsel did not elaborate on the numerous factual issues she said had to be resolved, which could not be resolved in the 18A proceedings, and bear on the interpretation of the Contract. It seems to me that the only evidence which might have a bearing on the interpretation of the Contract, would be evidence of the surrounding circumstances at the time that it was entered into, and that evidence is before me. Most of the evidence counsel refers to, for example, the evidence of the parties "intentions regarding subdivision and the meaning to be attached to Clause 8 of the Agreement" is not admissible. Only evidence of the surrounding circumstances, from which the object which the person using the words had in view may be inferred, is admissible.

 

Again, the issue of waiver will depend in the main on the conduct of the defendants in relation to the performance of the obligation to subdivide, and again that evidence is before me. Counsel did not satisfy me that the conflicts in the evidence of the plaintiff and the defendants referred to, justify the action being returned to the trial list. I do not see how the conflicts in the evidence, or the evidence to be forthcoming on the issues between the plaintiffs and the new defendants, would be admissible or of assistance to me in the interpretation of the contract documents and, in particular, Clause 8 of the Interim Agreement. It is clear to me that, as submitted by counsel for the defendants, and at least partly conceded by counsel for the plaintiff I thought, that the real issues between the parties are matters of contract interpretation; that in any event interpretation of the contract document will determine the issues between the parties. Hence, I am of the opinion that an 18A trial is indeed appropriate for the resolution of the matters at issue between the parties.

 

 

 

WHOSE OBLIGATION WAS IT TO OBTAIN THE SUBDIVISION OF THE BACKLANDS?

I will set out Clause 8 again:

8.Vendor agrees to sign all documents necessary for rezoning and any other documents requested by Municipality to allow purchaser to obtain necessary approval.

 

The Contract and all addenda were prepared by Cressey and presented to the defendants for signature. It was Cressey which used those words.

 

Counsel for Cressey submits that Clause 8 is limited to the approval necessary for rezoning only; that it relates only to Clause 2, the rezoning clause of the Contract. That clause provides in part as follows:

2.The purchase of the above-mentioned property is subject to the purchaser being able to obtain zoning from the Municipality of Richmond, B.C. ....

 

Counsel for the defendants says that Clause 8 is not so limited. He says that the first part of the clause clearly relates only to rezoning. It refers to the defendants having to sign "all documents necessary for rezoning". But the clause is disjunctive. There is a second and distinct covenant thereafter in the words "and any other documents requested by Municipality to allow purchaser to maintain necessary approvals." He argues that this latter covenant applies to the subdivision of the property. Under it the defendants, the vendors, are required to sign all documents which the Municipality requires to be signed in order for the purchaser, the party who is required to do the subdividing, to obtain the necessary Municipal approvals.

 

Counsel points out that by virtue of the last addendum the subject to relating to Cressey obtaining zoning from the Municipality was removed, and that rezoning no longer had anything to do with the Contract. However, the addendum referred to not only has the form provision that all other terms and conditions contained in the Contract should remain the same and in full force and effect, it also has a typed provision that:

All other terms and conditions remain the same.

 

Counsel points out that if the argument advanced on behalf of Cressey was correct, then Clause 8 became meaningless on the execution of the addendum. But the addendum prepared by Cressey does not remove Clause 8 from the Contract. It expressly provides that Clause 8 and all other terms and conditions remain the same.

 

Counsel says that by addendum No. 4 the parties make it clear that Clause 8 has scope beyond rezoning. At that point the only approvals required from the Municipality for the completion of the Contract was the approval relating to the subdivision of the property. Clause 8 was still alive and necessarily imposed, on the one hand, the obligation on Cressey to subdivide and to obtain necessary approvals, and on the other hand, the obligation on the defendants to sign any documents requested by the Municipality to allow Cressey to obtain Municipal approval.

 

I think it important also to note the position of Clause 8 in the Contract. It is not attached to, nor is it a part of, Clause 2 which relates to Cressey's obligation to obtain rezoning. It would seem that it stands alone and was not intended to go automatically the way of Clause 2. In fact it is the last of eight specific provisions typed into the Contract, and would seem to apply to two matters (1) the defendants signing all documents necessary for rezoning and (2) the defendants signing every other document requested by the Municipality to allow the purchasers (not the vendors) to obtain necessary approvals.

 

It seems to me also that the limited obligation of the defendants with regard to title under Clause 1 lends support to the interpretation that it was Cressey, rather than the defendants, who was required to obtain the subdivision of the Backlands. Clause 1 provides:

At the closing, vendor to deliver title free and clear of financial encumbrances.

 

Cressey required clear title to the Backlands. The defendants were required to clear that title of financial encumbrances because they alone had the power to do so. They were not required to do anything else, for example subdivide and provide clear title to Backlands, because that was one of the obligations assumed by Cressey. Clearly the defendants had no interest in the subdividing of the property while Cressey had a substantial interest in the subdivision and the kind and the location of the access to Backlands.

 

In summary then, on a consideration of the language used in the Contract documents, particularly clauses 1, 2 and 8 of the Contract, and addendum No. 4 thereto, I am of the opinion that under Clause 8 of the Contract it was Cressey's obligation to obtain the subdivision of the Backlands. Further, it is my opinion that my interpretation of Clause 8 is bolstered when reference is had to the factual matrix or surrounding circumstances when the Contract was entered into and the object appearing from those circumstances.

 

While evidence of negotiations or of the parties' intentions is not admissible, evidence of the surrounding circumstances with reference to which the words of the Contract were used, and the object, appearing from those circumstances, which the person using them had in view, are admissible. See Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.), and Reardon Smith Line Ltd. v. Hanesn-Tangen, [1976] 3 All E.R. 570 (H.L.). The principles set out in these cases have been followed by the courts of this province.

 

Cressey is a developer and at the time that the Contract was entered into was assembling lots or parcels of land for the purposes of developing a condominium project on the consolidated land. Cressey would have known at the time that rezoning would be required, that the defendants' property would have to be subdivided, and that access to Backlands would have to be over adjacent property to be acquired by it. It seems to me as well that Cressey would have known that the defendants could not subdivide the property because they could not provide the required access. Only Cressey could do that using adjacent property. Further, the defendants would really have no interest in the subdividing or in the nature or location of the access road to Backlands. Cressey also knew, as argued by its counsel, that only the defendants, as owners of the property, could subdivide it. Thus, in my opinion, the second part of Clause 8 became necessary, the covenant by the defendant owners to sign all documents which would enable Cressey to obtain municipal approval to the subdividing of the defendants' property.

 

Counsel for Cressey relies on the decision of the Supreme Court of Canada in Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072. There the parties to an agreement to purchase and sell land had not specified who would apply for subdivision approval. Both parties were aware that subdivision approval was required. The agreement being silent, Dickson J., for the court, interpreted the Alberta Planning Act as obligating the vendor to apply for subdivision. He then went on to find that it was the vendor's obligation to make a proper application for subdivision and use his best efforts to obtain the subdivision. In this regard he says at page 1084:

In a purchase and sale situation, the

 

person who proposed to carry out a subdivision of land

 

is the intending vendor. It is he who must divide his parcel of land, which has hitherto been one unit, for the purpose of sale. If a purchaser carried out the actual work in connection with the application, he could only do so in the vendor's name and as his agent. The vendor is under a duty to act in good faith and take all reasonable steps to complete the sale. I cannot accept the proposition that failing to fix responsibility for obtaining planning approval renders a contract unenforceable. The common intention to transfer a parcel of land in the knowledge that a subdivision is required in order to effect such transfer must be taken to include agreement that the vendor will make a proper application for subdivision and use his best efforts to obtain such subdivision. This is the only way in which business efficacy can be given to their agreement. In the circumstances of this case, the only reasonable inference to be drawn is that an implied obligation rested on the vendor to apply for subdivision.

 

 

Counsel for the defendants says that Dynamic is distinguishable for two reasons. First, the Contract in the case at bar is not silent as to whether the vendor or purchaser is to obtain the subdivision. Clause 8 provides that it is the purchaser who is to do this. Second, in Dynamic there was no access problem. There was nothing which the purchaser had to do to complete the agreement. Here, the defendants could not subdivide the property because they could not provide access to the subdivided property, Backlands. Only Cressey could provide the access, and therefore only they could create the subdivision. I am fully in agreement with counsel's submissions on the first point and substantially in agreement with counsel's submissions on the second point. The defendants could have subdivided the property to a point, and left access to Cressey, that is, both parties could have performed both procedures together. However, as I have already indicated, that is not the way I interpret the wording of Clause 8, particularly in view of the surrounding circumstances.

 

Counsel for the defendants relies on the decision of Toy J., as he then was, in BEM Enterprises Ltd. et al. v. Campeau Corporation (1980), 24 B.C.L.R. 244. There the agreement was also silent as to who was obligated to obtain zoning approval and a building permit. The agreement was said to be subject to certain conditions, one of them being "(c) final zoning approval being obtained and a building permit being obtained." After referring to Dynamic with approval, Toy J. states at p. 250:

From those passages and other cases I have been referred to and from an examination of the words of Cl. 2 of the agreement and the surrounding circumstances, I could imply two obligations. Firstly, that it is upon the shoulders of the purchaser Campeau that falls the burden of trying to obtain the approvals, the permits and completing the sale. The second obligation I could imply is that the purchaser Campeau must use his best efforts to bring about the fulfilment of those obligations.

 

 

In BEM counsel for the developer Campeau submitted that cases

such as Dynamic were distinguishable. His argument is contained in the following passage at p. 251:

He observed firstly that in all three cases ... that they were severance cases, and in each case it was found that it was the vendor's obligation to sever, then the courts imposed additional obligations on the vendor to take steps to procure the severance. There the severance was necessary because in the absence of a legal severance the vendor could never fulfil his ultimate obligation to deliver a good and registrable title.

 

 

Toy J. then responded to the argument, again at p. 251, as follows:

While all this is true, I do not concede that such is a justification for my distinguishing those authorities. In the case at bar an examination of the wording of Clause 2 indicates that it is the purchaser who was to obtain the approvals and the permits. The surrounding circumstances and what in fact happened after the signing of the agreement in question clearly shows that it was the purchaser and the purchaser alone who went about trying to obtain the various approvals and arranging for the purchasing of the additional properties. That being so, and taking cognizance of the corresponding obligation of the purchaser to buy, which is the ultimate object of the whole exercise, by analogy with the cases where the vendor has implied obligations I can see no good reason why the same obligation should not be imposed upon the purchaser to use his best efforts to obtain the necessary approval, and complete the sales so that it can fulfil its obligation to buy.

 

 

The facts in BEM are not identical to those in the case at bar. What was needed in BEM was zoning approval, while here it was subdivision. However, counsel cites the case for the proposition that where there is a condition that has to be met, and the agreement is silent as to who will fulfil it, the court can imply into the agreement that the purchaser is obligated to do it. It depends on the surrounding circumstances. In Dynamic it was the vendor who was found to be so obligated, while in BEM it was the purchaser. Counsel reiterates that under Clause 8 the plaintiff was obligated to obtain subdivision approval and that the defendants only obligation was to sign the necessary documents. He then goes further and says that even if I were to find that the Contract is silent as to who was obligated to obtain the subdivision approval, I should imply into the Contract such an obligation on the part of the plaintiff, as Toy J. did in BEM. He says that given the surrounding circumstances, including the fact that only the plaintiff could provide the access to Backlands necessary to enable the subdivision to take place under s. 75(1)(i) of the Land Title Act, I should imply that the burden of obtaining the subdivision rested with the plaintiff. Only the plaintiff had the power to achieve complete subdivision prior to closing. The term which should be applied is that Cressey would initiate the subdivision process by making land available to provide access to Backlands and then proceed to subdivide the property, including obtaining the defendants' signatures on necessary documents.

 

I am in agreement with counsel's argument which, of course, is an alternative one, based on the premise that I find that Clause 8 does not obligate Cressey to obtain the subdividing, and that accordingly the Contract is silent in that regard. I have already found that Clause 8 does in fact cover the situation. However, if I am wrong, then I am prepared to imply an obligation on Cressey to obtain the subdividing, and on the defendants to execute all necessary documents to allow Cressey to complete the subdivision. I base the implied obligations on the wording used in the Contract, particularly clauses 1 and 8, and upon the surrounding circumstances, particularly the fact that only Cressey had the power to achieve complete subdivision, albeit with the assistance of the defendants in the signing of necessary documents.

 

 

WAIVER

I turn now to the issue of waiver. It is provided in the Contract:

 

Time shall be of the essence hereof, and unless the balance of the cash payment is paid and such formal agreement to pay the balance as may be necessary is entered into on or before the date of completion of the sale, the owner may at the owner's option cancel this agreement, and in such event the amount paid by the purchasers shall be absolutely forfeited to owner as liquidated damages.

(My emphasis)

 

Counsel for Cressey refers generally to Di Castri's The Law of Vendor and Purchaser, 3rd Edition, Vol. 1, Paras. 445 and 455. She cites the general rule that, where time is made of the essence of a contract in relation to the sale of land, time can only be insisted upon as the essence of the agreement by a litigant who (a) has shown himself ready, willing and able to fulfil his agreement; (b) has not been himself in default or the cause of the delay; and (c) has not waived his right by subsequently recognizing the agreement as subsisting. I am satisfied that the defendants meet requirements (a) and (b) and that the only issue relates to requirement (c) as to which the onus, a fairly heavy one, is on Cressey.

 

In her able argument counsel says:

Where, as here, the vendor allows the closing time to pass, and the parties go on negotiating for the completion of the purchase, then the time is no longer of the essence of the contract unless time is reinstated by a proper and reasonable notice fixing a new date and stipulating that time is again of the essence.

 

She goes on to say that the conduct of the parties must be examined in detail to determine whether a waiver has occurred, citing Whittal v. Kur (1970), 71 W.W.R. 733 (C.A.). But the negotiating, or other conduct of the vendor, must evidence his continuing to recognize the Contract. Further, it is the conduct of the defendants which must be carefully scrutinized, when considering whether or not they waived their right to insist on time being of the essence.

 

In my opinion, the evidence does not established negotiations conducted after March 30, 1990, which evidenced a new contract as to the time for performance. In his letter dated April 6, 1990, Bees notes that he is now acting for the defendants and summarizes several telephone conversations he had with Scott Cressey on April 4, 1990. He states:

The purpose of this letter is to confirm with Cressey Development Corporation ("Cressey") what its terms of this proposed scale now are, so that I can get instructions from the Breckners as to whether they are prepared to continue or not. This letter does not contain an offer on the part of the Breckners to continue with the sale, nor is it a refusal to continue with the sale.

(My emphasis)

 

The letter makes it clear that a new proposal has been made, and more importantly, that the defendants have not as yet exercised their election.

 

I turn now to the conduct of the defendants on which Cressey relies as establishing waiver of the essentiality of time. The 2first instant occurred on March 20, 1990, ten days prior to the closing date, when Bysse attended at the defendants' home and had them sign the Development Application. At that time, according to Bysse, he told the defendants that the subdivision process "would take some time and might not be completed in time for the March 30, 1990 closing date for the sale of the Backlands". The defendants did not tell Bysse at that time that if the subdivision was not completed by March 30, 1990 they would treat the contract as repudiated. Counsel says that such conduct is evidence of waiver. I do not agree. In my opinion, silence in such circumstances is not evidence of an election on the part of the defendants to accept a delay in the performance of the Contract beyond March 30, 1990. It does not, either by itself or together with other evidence, affirmably establish, and irresistibly point to, a new contract as to the time for the performance of it, as the law requires.

 

As I have already stated, in my opinion what Cressey did on March 20, 1990 was what it was obligated to do by Clause 8. At the time, Cressey well knew that it had to have the subdivision completed, and to tender the purchase price, by March 30, 1990; that failing that they had to obtain from the defendants a written extension of the closing date. Such knowledge on the part of Cressey, which would be obvious, and the attempt to have the defendants execute a written extension subsequently, is not consistent with the effect of Cressey's position now, that on March 20, 1990, or any time for that matter, the defendants entered into a new contract as to the time for performance.

 

The second act or conduct on the part of the defendants which is said to be evidence of waiver, occurred on March 30, 1990, when Bysse tendered to the defendants an addendum containing an extension of time for the closing. His evidence is that when presented with the request, the defendants indicated to him that the document appeared to be in order. They did not indicate to him that they were of the opinion that the Contract was cancelled or was at an end. This is evidence of waiver, according to the argument.

 

But Bees' evidence goes much farther than that. He acknowledged that during the meeting he was never told by the defendants that they would sign the extension addendum, that is, that they would extend the time for completion. However, he was told that they wanted to take the document to their son's lawyer "so he can familiarize himself with the transaction", which I take to mean to obtain advice. Such conduct on the part of the defendants is not evidence of a new contract for the time for performance. It is evidence to the contrary. The defendants were simply telling Cressey that they wanted to seek the advice of their lawyer. They were not playing fast and loose in any way, for there was nothing that Cressey could do at that time to complete the subdividing. Further, there was no obligation on the defendants to make a decision at that time, as to what they would do in the event that Cressey chose not to tender the purchase price and to not complete the sale by closing time on that day. But there is something that Cressey could have done on that day, which I consider to be a matter of some importance, and which would have solved all problems. Cressey could have tendered the purchase price and completed the sale leaving the completion of the minor subdivision to be concluded soon thereafter.

 

Finally, counsel says that after March 20, 1990 the defendants' new solicitor, Bees, continued to negotiate with Cressey for a completion of the sale and did not tell Cressey of the defendants' position that the Contract was at an end until April 11, 1990. I have already dealt with this submission, at least in part. In my opinion, the contents of Bees' letter of April 6, 1990 clearly shows a contrary intent. By it the defendants were clearly reserving their right to consider the matter further, before deciding whether or not to exercise their election or option to cancel the contract pursuant to its provisions. At the same time, the parties were discussing other options and Cressey was not taking the position that there was still a binding contract between the parties. It did not take that position until well after April 11, 1990, the date on which Bees gave notice to Cressey of the defendants' election to cancel the Contract.

 

In summary then, I am of the opinion that the conduct of the defendants complained of falls far short of establishing that the defendants continued to recognize the Contract after March 30, 1990, and waived its performance date. Cressey has not discharged the onus on it of establishing waiver. In my opinion, the defendants were simply standing on their legal rights as they were entitled to do. In law they were entitled to a reasonable period of time in the circumstances, in which to decide or elect whether to cancel the Contract, or to keep it in force. In the circumstances of the case, I am satisfied that the defendants notified Cressey of their election with reasonable promptness, and that nothing they said or did, or was said or done on their behalf, during the election period, could reasonably be interpreted as evidencing an intention on their part to waive their contractual right that time was of the essence. The Contract was effectively cancelled on April 11, 1990.

 

 

The plaintiff's action is dismissed with costs to the defendants.

 

 

 

 

 

 

 

 

 

 

 

 

 

S. W. Hood J.

 

 

9 August 2002

Vancouver, BC