Vancouver, Harbourside Park: Purchaser loses suit after developer changed layout and offered free washer and dryer; the good news is that this purchaser did not have to pay for leaky condo repairs

    Date:  19980622
Docket: C960739
Registry: Vancouver











Counsel for the Plaintiff: D. Stuart Gray

Counsel for the Defendants: Dwight C. Harbottle
and Tannis Braithwaite

Place and Date of Hearing: Vancouver, B.C.
May 19 - 22, 1998

[1] The plaintiff seeks the return of deposits totalling
$84,432 made on a pre-sale contract to purchase a condominium
unit in a residential tower complex ["Harbourside Park"]
developed by the defendants. The contract was made May 25,
1993. It required a down payment on acceptance, three staged
deposits during construction, and the balance on completion.

[2] The plaintiff made the following payments:

(a) $3,000 down payment May 25, 1993;

(b) $25,144, stage 1 deposit June 3 and 9, 1993;

(c) $28,144, stage 2 deposit between November 18 and 25,
1993; and,

(d) $28,144, stage 3 deposit May 30, 1994.

[3] On December 11, 1995, by letter of his solicitor, the
plaintiff advised the defendants he was rescinding the purchase
contract. The defendants refused to accept his failure to
complete. They have retained the deposit monies as forfeit
claiming the plaintiff breached the contract by failing to
complete on December 18, 1995 as required.

[4] The plaintiff commenced this action on January 31, 1996.
The basis of his claim was the floor plan of the suite
purchased had materially changed from the one presented at the
time he entered the agreement. Fraud on the part of the
defendants was alleged.

[5] On September 24, 1996 the Statement of Claim was amended
to allege defects or deficiencies in the quality of materials
and finish of the suite. These allegations were formally
withdrawn during the course of trial.

[6] The defendants' main position is that after the plaintiff
learned of the changed floor plan in April 1994, he complained
to the defendants. The matter was resolved by the plaintiff
accepting the defendants' offer to provide and install a washer
and dryer without charge.

[7] The defendants allege that within a few months of his
purchase, the plaintiff expressed concern to the defendants'
sales representative that he had overpaid for the suite.

[8] He continued his theme of complaining about price on
several further occasions.

[9] The suite was resold October 16, 1996 by the defendants
for $296,700, substantially less than the $354,000 the
plaintiff contracted to pay. Resale and carrying costs
amounted to $18,737.64.

Vancouver, Harbourside Park: Developer Laxton loses appeal in dispute over payments to general contractor

                                                      No. CA21853
Vancouver Registry

Court of Appeal for British Columbia





carrying on business as "S.P.F. PROPERTIES INC.",
and the said S.P.F. PROPERTIES INC.


Before: The Honourable Mr. Justice Hinkson
The Honourable Madam Justice Prowse
The Honourable Madam Justice Huddart

D.C. Harbottle and
R.D. Gibbens Counsel for the Appellants

H. Shapray and
B. Cramer Counsel for the Respondent

Place and Date of Hearing: Vancouver, British Columbia
31 May 1996

Place and Date of Judgment: Vancouver, British Columbia
2 July 1996

Written Reasons by:
The Honourable Madam Justice Huddart

Concurred in by:
The Honourable Mr. Justice Hinkson
The Honourable Madam Justice Prowse
Court of Appeal for British Columbia

Metro-Can Construction (HS) Ltd.


Noel Developments Ltd. and SPF Properties Inc.


1 This is an appeal from an order granting judgment under Rule
18 for the enforcement of a letter agreement and certain terms in
a subsequent construction contract made between owners and a
general contractor.

2 The only defence raised by the evidence is a cross-claim for
deficiencies and the consequences of delay offered by way of
equitable set-off.

3 The appellants say that the chambers judge exceeded the
jurisdiction conferred on her by Rule 18 when she determined that
the parties bargained to exclude the defence of set-off.
Alternatively, they say that she erred in not exercising her
discretion under Rule 18(2)(a) to impose a stay of execution of the
judgment until the determination of their cross-claim.

4 The test to be applied on a Rule 18 application for judgment
is well-settled. Is there a bona fide triable issue? The onus is
on the applicant to negative the existence of such an issue beyond
a reasonable doubt: Montroyal Estates Ltd. v. D.J.C.A. Investments Ltd. et al.
(1984), 55 B.C.L.R. 137 (C.A.).

5 The appellants say that two issues require a trial: first,
the construction of the contract; and secondly, the entitlement to
equitable set-off. They do not point to any disputed issues of
fact that need to be decided before the agreements can be
construed. Rather, they take the position that all contested
interpretations are triable issues. They also say that the
application of the principles of equitable set-off always requires
a factual context.

6 The first proposition cannot stand in the face of previous
decisions of this Court: Douglas Lake Cattle Co. v. Smith (1991), 78
D.L.R. (4th) 319, 54 B.C.L.R. (2d) 52, and First City Development Corp. Ltd.
v. Stevenson Construction Co. Ltd. (1983), 3 D.L.R. (4th) 505, 48 B.C.L.R.
242. In my view, the chambers judge was obliged to interpret the
terms of the construction contract in the process of determining
whether it was clear that the facts did not raise a triable issue.

7 The second proposition states the general rule. If the
defence of set-off is not excluded by contract, its application
will usually require an analysis of the relationship between the
parties and the nature of their respective claims. That is because
such an analysis is likely to involve disputed facts.

8 These facts are not disputed.

9 The parties agreed by letter of 13 January 1994 ("the Letter
Agreement") that Noel Developments Ltd. would pay "a completion
bonus" of $150,000 plus G.S.T. "upon the earlier of Substantial
Performance of the Work of the Project or . . . [not applicable]
. . . ." They also agreed that the letter was to form part of the
letter of intent of the same day. Its essential business term was
that the respondent would be paid $30,850,000 to complete two high-
rise towers by 31 October 1995. Construction was to begin on 8
February 1994.

10 The letter of intent became part of a written agreement dated
2 March 1994 ("the Construction Contract") between the respondent
and both appellants. Article A-1(c) provided that time was to be
of the essence in the performance of the work of the Construction
Contract ("the Work"). The Construction Contract contained these
relevant provisions from the Standard Construction Document CCDC2-

(a) Subject to applicable legislation and the
provisions of the Contract Documents, and in
accordance with legislation and statutory
regulations respecting holdback percentages and,
where such legislation or regulations do not exist
or apply, subject to a hold back of ten
percent (10%), the Owner shall:

. . .

(2) upon Substantial Performance of the Work
as certified by the Consultant pay to the
Contractor the unpaid balance of holdback
monies then due, and
(3) upon Total Performance of the Work as
certified by the Consultant pay to the
Contractor the unpaid balance of the
Contract Price then due.

* * *


(a) The duties and obligations imposed by the Contract
Documents and the rights and remedies available
thereunder shall be in addition to and not a
limitation of any duties, obligations, rights and
remedies otherwise imposed or available by law.

* * *

(Hereinafter referred to as the General Conditions.)


1.6 In the event of conflicts between Contract
Documents the following shall apply:

. . .

(e) Supplementary Conditions shall govern over the
General Conditions, and
(f) the executed Agreement between the Owner and
Contractor shall govern over all documents.

Notwithstanding the foregoing, documents of later
date shall always govern.
* * *


3.5 Based on the Consultant's observations and his
evaluation of the Contractor's applications for
payment, the Consultant will determine the amounts
owing the Contractor under the Contract and will
issue certificates for payment in such amounts, as
provided in Article A-4 -- PAYMENT AND GC 1 --

3.6 The Consultant will be, in the first instance, the
interpreter of the requirements of the Contract
Documents and the judge of the performance
thereunder by both parties to the Contract.
Interpretations and decisions of the Consultant
shall be consistent with the intent of the Contract
Documents and in making his decisions he will not
show partiality to either party.

* * *

14.3 The Consultant will, not later than ten (10) days
after the receipt of an application from the
Contractor for a certificate of Substantial
Performance of the Work, make an inspection and
assessment of the Work to verify the validity of
the application. The Consultant will, no later
than seven (7) days after his inspection, notify
the Contractor of his approval or the reasons for
his disapproval of the application. When the
Consultant finds that Substantial Performance of
the Work has been reached he will issue such a
certificate. The date of Substantial Performance
of the Work shall be as stated in this certificate.
Immediately following the issuance of the
certificate of Substantial Performance of the Work,
the Consultant, in consultation with the
Contractor, will establish a reasonable date for
the Total Performance of the Work.

* * *

The Construction Contract also contained these relevant modified
Supplementary Conditions:
14.4 Immediately following the issuance of the
certificate of Substantial Performance of the
Work the Consultant will issue a certificate for
payment of holdback monies less such sums as the
Consultant shall determine for all incomplete or
deficient Work and amounts due to the Owner by
the Contractor. The holdback monies authorized
by this certificate shall become due and payable
on the day following the expiration of the
statutory limitation period stipulated in the
lien legislation applicable to the Place of the
Work . . . and the Owner's receipt of
confirmation that title to the Place of Work is
not subject to any claim of builders' liens by
any Subcontractor, material supplier employee of
the Contractor or any other person claiming under
the Contractor and that no actions for payment or
garnishment proceedings have been issued against
the Owner by the Contractor or its suppliers,
employees or Subcontractor providing that the
Owner may retain out of such holdback monies any
sums required by law to satisfy any liens against
the Work or other monetary claims against the
Contractor and enforceable against the Owner and
that the Contractor has submitted to the Owner a
sworn statement that all accounts for labour,
subcontracts, products, construction and
machinery and equipment and other indebtedness
which may have been incurred by the Contractor in
the Substantial Performance of the Work and for
which the Owner might in any way be held
responsible have been paid in full except
holdback monies properly retained. Monies will
continue to be retained by the Owner following
issue of such certificate on account of
uncorrected or incomplete items an amount [sic]
equalling twice the agreed value of each such
item as established by the Consultant in
accordance with GC 14.3. As the Contractor
completes uncorrected or incomplete items he
shall be entitled to make application for payment
for the work completed.

[italics in original, underlining added]

* * *

14.15 The Owner shall pay an amount equal to the
builders' lien holdback applicable to Phase 1 of
the Work . . . and shall pay an amount equal to
the remainder of the builders' lien holdback for
the Work following the issuance of the first
occupancy permit by the City of Vancouver for
Phase 2 of the Work or the Consultant's
certificate of Substantial Performance of the
Work, whichever is earlier. In both cases to the
Owner's solicitors, to be deposited in trust on
the following conditions:

. . .

(b) the holdback amount due to the Contractor on
account of the balance of the Work shall be
paid to Contractor within five (5) working
days following the expiry of a forty-one
(41) day holdback period following the
Consultant's certification of the
Substantial Performance of the Work, subject

(i) the Owner's confirmation that:
(1) the property title to the Place of
Work is not subject to any claim
of builders' lien and
(2) no action for payment or
garnishment proceedings have been
issued against the Owner
by the Contractor, any Subcontractor,
material supplier, employee of the
Contractor or any other person claiming
under the Contractor.
(ii) The Owner's continued retention of
holdback on account of uncorrected
deficiencies in the Work.

11On 18 January 1996, the Consultant issued a Certificate of
Substantial Performance. He then determined the amount to be
retained for "all incomplete or deficient Work and amounts due to
the Owner by the Contractor" at $464,950 exclusive of G.S.T. ("the
Deficiency Retention Fund"), and certified that the respondent was
entitled to $1,348,779.77. Almost the entire amount was paid into
the appellants' solicitor's trust account on 11 January 1996. The
respondent satisfied the conditions of Supplementary Condition
14.15(b)(i) but the solicitors refused a demand for payment,
apparently on the instruction of the appellants. The appellants
concede that they owe the respondent the amount of money to which
the Consultant certified they were entitled, subject only to their

12 These cross-claims, founded on alleged deficiencies and
delay, total $3,900,000 to date. The appellants anticipate a
further $1,000,000 in costs. Those claims are offered in this
proceeding only by way of defence, not yet pleaded. The respondent
has claims for extras and delay totalling $2,300,000 that are not
part of this proceeding.

13 The respondent began this action to have the Supreme Court
determine whether the Construction Contract requires that the
Deficiency Retention Fund be paid to the appellants' solicitor in
trust, whether those solicitors are required to pay the holdback
monies to the respondent, and whether the appellants are obliged to
pay the monies owing under the Letter Agreement to the respondent.

14 The only dispute between the parties is whether the payment
of any of these monies should await the determination of the other
claims and counter-claims.

15 Because the monies are in trust, it is not particularly
material to the appellants whether they obtain a stay of execution
of a judgment until their counter-claim is determined or leave to
continue the action to a trial where they can put forward their
defence of set-off. Simply put, they say that equity requires that
they have security for their counter-claim.

16 Because the appellants' Consultant has certified that the
respondent has substantially performed the work and the respondent
has met the condition in SC 14.15(b)(i) by arranging with its
subcontractors and material suppliers not to encumber the
appellants' title with liens, the respondent considers that it is
entitled to the monies payable under the Construction Contract.
Its simple proposition is that justice requires that it and those
who claim under it be paid for the work done and materials supplied
that have enabled the appellants to sell out the project and earn
a handsome profit, all in accordance with the reasonable
expectations of the parties when they entered into the Construction
Contract early in 1994.

17 Faced with these conflicting positions, the chambers judge
read the Construction Contract and concluded, at 9:

As the Court noted in First City (supra), any
right of set-off which the owner may have is subject
to the contract between the owner and the
contractor. Here, I am satisfied that read
together, Clauses A-4, GC 3.5 and SC 14.15(b)
constitute an agreement to the contrary. I agree
with Mr. Shapray that had the owner wished to
reserve a right to set-off as against the Phase 2
holdback monies in addition to the deficiency
retention set out in 14.4 and SC 14.15(b)(ii), the
owner could and should have expressly articulated
that right in SC 14.15. The entire scheme of the
contract militates against such a right.

18 Having concluded that the appellants were not entitled to
equitable set-off against the holdback monies and no other defence
having been raised by the evidence, the chambers judge made orders
to require payment of all the monies, subject to SC 14.4 with
regard to the Deficiency Retention Fund. She refused a stay of
execution or an order of other security because either would amount
to a re-writing of the contract and a form of pre-judgment security
not in keeping with the principles in Aetna Financial Services Ltd. v.
Feigelman, [1985] 1 S.C.R. 2, 15 D.L.R. (4th) 161.


19 The appellants allege that the chambers judge erred in
construing the Construction Contract to exclude set-off. They say
she overlooked the provisions of Article A-5(a) that should have
been paramount in her consideration of the meaning of the
Construction Contract because of GC 1.6(f). They say that failure,
combined with the failure to consider the effect of the default
provisions (GC 5.4 and 5.5), induced the error that caused her to
conclude that the entire scheme of the Construction Contract
militated against set-off.

20 The Construction Contract does not contain an express waiver
of the right of set-off. While the only provision that is
inconsistent with the exclusion of the defence of set-off is
Article A-5, that provision is paramount, as Mr. Harbottle argues.
For that reason, I prefer Mr. Harbottle's view that the defence to
set-off is a right "available by law", "in addition to and not a
limitation of" contractual rights. In the face of that provision,
it is difficult to read the inclusion of the provision for the
Deficiency Retention Fund in SC 14.4 as sufficient to exclude the
right of set-off as a defence to the payment of monies under the
Letter Agreement.

21 It does not follow, however, that the chambers judge reached
the wrong conclusion. The question for the chambers judge was
whether the defence of set-off was a bona fide issue triable in
this proceeding.