Vancouver, MacGregor Tower & Court: Buyer loses deposit to seller after seller convinced judge seller did not know that MacGregor Tower was leaking and rotting despite million dollars spent repairing leaks and rot at MacGregor Court

Citation:

Xuan Ngo v. Michael Loke

Date:

20030114

2003 BCPC 0004

File No:

2002-73633

 

Registry:

Vancouver

 

 

IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

Small Claims Division

 

BETWEEN:

XUAN NGO

CLAIMANT

 

 

AND:

MICHAEL LOKE

DEFENDANT

 

 

 

 

REASONS FOR JUDGMENT

OF THE

HONOURABLE JUDGE SMYTH

 

 

 

 

 

 

 

 

Appearing in person:

Xuan Ngo

Appearing in person:

Michael Loke

Place of Hearing:

Vancouver, B.C.

Date of Hearing:

25 November 2002

Date of Judgment:

14 January 2003

 

 

[1] In this action the claimant says that the defendant is in breach of contract for failing to complete the purchase and sale of the claimant's condominium. She says that she is entitled to his $5000 deposit. The defendant replies that the deposit should be returned to him. He claims that he was entitled to rescind the contract because the claimant fraudulently misrepresented the condition of the condominium development in which her unit was situated. He says that, in any case, the deposit was meant to be applied to actual damages, and since the claimant sold the condominium to another buyer for more than the defendant had agreed to pay, she suffered none and is not entitled to it.

[2] The parties entered into the contract on 25 January 2002. The purchase price was $153,000 with completion 28 March 2002 and possession 1 April. The defendant deposited $1000 on the vendor's acceptance of his offer and was required to deposit a further $4000 on the satisfaction of several conditions attached to the offer, including these:

Subject to the Seller providing to the Buyer on or before February 8, 2002 and the Buyer approving on or before February 15th/2002 by 10 p.m...
The minutes of any meetings held between the period from Jan/2001 to Dec/2001 by the strata council, and by the members in annual, extraordinary or special general meetings, and by the members or the executive of any section to which the strata lot belongs.
And:
This offer is made on the condition precedent that the Buyer will approve the Property Condition Disclosure Statement on or before 5th February 2002. Such statement will be incorporated into and form a part of this contract. This condition is for the sole benefit of the Buyer.

The conditions were apparently met and the defendant deposited the additional amount.

[3] On 25 March 2002 the claimant was told by her realtor that the defendant would not complete the sale. She heard the same from her notary public on 27 March and on the same day she wrote to the defendant's solicitors telling them that she was "ready and able to complete the sale and purchase contract" and that she would hold the defendant liable for damages if he did not do so.

[4] The property in question was the claimant's tenth-floor apartment in a condominium complex which consisted of the high-rise building in which the claimant's unit was located, MacGregor Tower, and a separate, low-rise townhouse complex called MacGregor Court. In 2001 the developer of the complex spent more than $1 million on repairs to MacGregor Court to correct problems with water entry. As far as the evidence discloses the repairs were successful. Later, however, evidence that water was entering three of the more than 200 units in MacGregor Tower appeared. This problem was being investigated by professional engineers and the strata corporation's property managers at least as early as April, 2001 and had not been solved when the claimant completed the property-condition disclosure statement on 26 August 2001 or at the completion date.

[5] The disclosure statement contains the following questions and the claimant's answers under the heading "Structural:"

E. Are you aware of any damage due to wind, fire or water? No.
G. Are you aware of any leakage or unrepaired damage? No.

[6] In the submission of the defendant, these were dishonest answers. He contends that the past water-entry problem in McGregor Court and the current problem in McGregor Tower required that the claimant answer affirmatively.

[7] As to the claimant's non-disclosure of the MacGregor Court water damage, in my view the point was decided against the defendant by Chamberlist, J. in Alan Best v. Alain Lavoie and Nicole Lavoie (Unreported, 1999, Prince George Registry No. 00710) and Boyle, J. in Arsenault v. Pedersen (Unreported, 26 April 1996, New Westminster Registry No. SO21575). The questions in the disclosure statement that the defendant says were dishonestly answered were addressed to the state of things as of the date of the statement, and as of that date the claimant's answers were correct.  

[8] The minutes that the defendant asked for included the minutes of a special general meeting held 1 November 2001 which recorded the approval of a resolution that the strata corporation execute certain documents, referred to as "the Agreement and the Release." The minutes contained no other details about these documents, but the notice of the meeting, which had been issued 5 October 2001, included copies of letters from lawyers which showed that "the Agreement and the Release" had to do with remedial work concerning what was described in one of the letters as "MacGregor Court Water Ingress Issues." The defendant says that he should have received the notice as well as the minutes. I do not agree. He had specifically asked for minutes and that is what he got. While the minutes of the 1 November meeting did not give the background to the agreement and the release, they brought them to the defendant's attention and included the text of the resolution. He was free to ask for more information. It has not been shown that the 5 October 2001 notice was withheld from the defendant for a dishonest purpose.

[9] What of the claimant's failure to disclose that a problem with the entry of water had been found in MacGregor Tower? She testified that she did not disclose the problem because she did not know of it. Her evidence is supported by the evidence of Mr. Jim Allison of the firm of property managers responsible for the complex. Mr. Allison testified that it was not until the annual general meeting of 14 March 2002 that owners first became aware of the problem. Those who, like the claimant, did not attend the meeting would not necessarily have learned of the problem until the minutes of the meeting were distributed in mid-April. I accept the claimant's evidence. I am satisfied that she was truthful in her answers on the disclosure statement.

[10] The contractual provision governing the deposit is this:

Time will 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 Completion Date, the Seller may, at the Seller's option, terminate this Contract, and, in such event, the amount paid by the Buyer will be absolutely forfeited to the Seller in accordance with the Real Estate Act, on account of damages, without prejudice to the Seller's other remedies.

[11] The defendant submits that the claimant suffered no actual damages because she sold the condominium for $7000 more than the defendant had agreed to pay and so the deposit should be returned to him. This point arose in similar circumstances in Williamson Pacific Developments Inc. v. Johns et al. [1997] B.C.J. No. 1109. In that case a sale of real property had collapsed and the seller later sold the property for considerably more than under the failed contract, but was nevertheless held at trial to be entitled to keep the purchaser's deposit. The contract had a term governing forfeiture of the deposit identical to the one in the present contract. The appellant argued before the British Columbia Court of Appeal that the words "on account of damages" imply that the seller must sustain actual damages against which the deposit might be applied, and so displace the common-law rule that a true deposit becomes the property of the seller where the contract fails owing to the buyer's default, even if the seller resells the property at a higher price. Rowles, J.A. delivered the reasons of the Court. She said this at para 14:

In view of the express stipulation that the deposit was non-refundable, I think the use of the words "on account of damages", found in clause 2(c), cannot have been intended by the contracting parties to mean that if the vendor incurred no damages, the deposit would be returned to the defaulting purchaser.  Use of the words "absolutely forfeited" in clause 2(c), in relation to the deposit paid by the purchaser, is consistent with the deposit being non-refundable, regardless of whether there were damages. [My emphasis.]

[12] Williamson Pacific differs from this case in that the contract there described the deposit as "non-refundable." The present contract does not do so, but it does use the words "absolutely forfeited," found by Rowles, J.A. to be consistent with the intention that the deposit be non-refundable. I conclude that, as in Williamson Pacific, the parties did not displace the common-law rule. It was the sense of their agreement that the deposit be a guarantee of the defendant's performance, to be forfeited to the claimant in case of his default and irrespective of whether the claimant suffered damages in the amount of the deposit or any damages at all.

[13] I conclude, then, that the defendant has not discharged the heavy onus on him of showing that the claimant behaved fraudulently. He was not entitled to rescind the contract. The defendant's $5000 is forfeited to the claimant. There will be judgment accordingly. The claimant is entitled to filing and services fees and such other expenses as the registrar approves.

 

 

_________________________________

D.I. Smyth, P.C.J.