Condo purchasers lose appeal; Carena developer keeps deposit, sells condo for higher price

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Liu v. Coal Harbour Properties Partnership,


2006 BCCA 385

Date: 20060830


Docket: CA033164

Between:

Wei Wei Liu and James Sheng Liu

Appellants

(Defendants)

And

Coal Harbour Properties Partnership

Respondent

(Plaintiff)


Before:

The Honourable Mr. Justice Hall

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Lowry

A.E. Farber

Counsel for the Appellants

J.C. McKechnie

Counsel for the Respondent

Place and Date of Hearing:

Vancouver, British Columbia

9 June 2006

Place and Date of Judgment:

Vancouver, British Columbia

30 August 2006

Written Reasons by:

The Honourable Mr. Justice Hall

Concurred in by:

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Lowry

Reasons for Judgment of the Honourable Mr. Justice Hall:

[1] The appellants, whom I will describe as the "purchasers", appeal from a judgment in favour of the respondent, whom I will term the "vendor". The relevant order in the case was pronounced on 14 June 2005 by Mr. Justice A.F. Wilson. The neutral citation for the case is 2005 BCSC 873. The action followed a real estate transaction that did not complete. The order made by Wilson J. provided that the deposit of $391,000 paid by the purchasers in that transaction could be retained by the vendor. There were previous proceedings which came to this Court and can be found at 2004 BCCA 283, but these earlier proceedings have limited relevance to what is at issue in this appeal.

[2] The facts are that the purchasers entered into an agreement with the vendor for the purchase and sale of two strata lots on 18 August 2001. The building that was to contain the strata lots had not yet been built. The agreed purchase price of the property was $1,955,000. The agreement provided that the purchasers would pay an initial sum as a deposit and then at intervals two subsequent sums totalling $391,000. These deposit or earnest money payments were made between 20 August 2001 and 12 December 2001. A controversy thereafter arose between the purchasers and the vendor involving parking stalls and ultimately this seems to have been the rock upon which the transaction of purchase and sale foundered. The purchasers refused to complete at the date when completion was required and the vendor accepted their repudiation of the agreement and claimed the sums paid earlier as a deposit on the purchase price.

[3] Wilson J. found that the appellants were not lawfully entitled to repudiate the agreement. The issue in the litigation then became one of whether or not relief from forfeiture of the sum of $391,000 ought to be available to the purchasers. The appellants argued that the sum of the deposit was in the nature of a penalty and argued that relief from forfeiture ought to be available to them. The respondent vendor countered that the sum stipulated had been agreed to be a genuine pre-estimate of damages and a deposit of earnest money and that accordingly relief from forfeiture should not be available to the purchasers.

[4] The relevant clause in the agreement between the parties reads as follows:

Time will be of the essence hereof and unless all payments on account of the Purchase Price, together with adjustments thereto as provided herein and all other amounts payable hereunder, are paid when due, then the Vendor may at its option:

(a) cancel this Agreement by written notice to the Purchaser and in such event the amount theretofore paid by the Purchaser and all accrued interest shall be absolutely forfeited to the Vendor as liquidated damages (the Vendor and Purchaser hereby agreeing that such amount constitutes a genuine pre-estimate of the damages which the Vendor will suffer as a consequence of the Purchaser's default) and the Vendor shall be entitled to be paid such amount upon written demand therefor[e] by the Vendor. The Purchaser agrees that the Vendor will be entitled absolutely to any deposit and all accrued interest and hereby irrevocably appoints the Vendor as its agent to advise the deposit-holder to pay the sum forfeited to the Vendor; ...

[Emphasis added.]

[5] Wilson J. noted that the agreement between the parties expressly provided that the amount of the deposit was stipulated clearly to be a pre‑estimate of damages. It was contemplated by the parties at the time the transaction was entered into that it might be in excess of two years between the time of payment of the deposit and the time when the balance of the sale proceeds would be receivable, the time of completion, during which period there was of course some risk that the real estate market in the area might decline. The judge found it to be irrelevant that the vendor had been able to subsequently sell the units for substantially more than the sum the purchasers had contracted to pay for them. The property was sold on 23 February 2004, for the sum of $2,750,000, a considerable increase from the original agreed contract price of $1,995,000.

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Condo purchasers lose $391,000 deposit to developer of Carena

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Coal Harbour Properties Partnership v. Liu,


2005 BCSC 873

Date: 20050614
Docket: S88224
Registry: New Westminster

Between:

Coal Harbour Properties Partnership

Plaintiff

And

Wei Wei Liu and James Chien Shen Liu

Defendants

And:

Parolin & Company,
Coal Harbour Properties Partnership,
Delta Real Estate Services Ltd. and Anthony Li

Defendants by CounterClaim

Before: The Honourable Mr. Justice A.F. Wilson

Reasons for Judgment

Counsel for the plaintiff and
Defendants by counterclaim:

J.C. McKechnie

Counsel for the defendants:

A. Farber

Date and Place of Hearing:

December 16, 2004
February 21, 2005
May 9, 2005


New Westminster, B.C.

I. Introduction

[1] The plaintiff in this action, Coal Harbour Properties Partnership (“Coal Harbour”) is a partnership operated by Carina Properties Ltd., and Coal Harbour Management Ltd. Coal Harbour entered into an agreement in writing dated August 18, 2001, (“the Agreement”) to sell to the defendants, Wei Wei Liu and James Chien Sheng Liu (“Mr. and Mrs. Liu”) two strata lots in a condominium development in Vancouver. The sale was not completed, and Coal Harbour seeks a declaration that the deposit paid by Mr and Mrs Liu, plus accrued interest on that deposit, is forfeited to Coal Harbour as liquidated damages, plus costs. Mr. and Mrs. Liu seek to have the claim dismissed and seek a declaration that they are entitled to the return of the deposit plus interest, on the basis that Coal Harbour breached the contract. Alternatively, they claim that, if Coal Harbour did not breach the contract, they are entitled to relief from forfeiture. They also counterclaim for damages for breach of contract.

[2] On this hearing, there were two applications, both pursuant to Rule 18A. The first is pursuant to a Notice of Motion of Mr. and Mrs. Liu dated August 6, 2003, seeking to have the Statement of Claim struck out, and the claims of Coal Harbour dismissed, and for an order that the deposit and accrued interest be returned to them. The second is pursuant to a Notice of Motion of Coal Harbour dated October 7, 2003, seeking a declaration that the deposit, plus accrued interest, is forfeited as liquidated damages, and that the defendant’s counterclaim be struck out or dismissed. On the hearing, however, Mr. and Mrs. Liu also took the position that the matter is not appropriate for disposition under Rule 18A, and that it should be referred to the trial list.

II. Issues

[3] The issues to be determined on this hearing are :

(a) whether it is appropriate for disposition under Rule 18A;

(b) whether there has been a breach of the contract by Coal Harbour such that Mr. and Mrs. Wei are entitled to repudiate the contract and recover their deposit;

(c) if there has not been such a breach of the contract by Coal Harbour, whether:

i) the deposit is a genuine pre-estimate of damages, or a penalty;

ii) if payment of the deposit was a penalty, was the bargain unconscionable such that Mr. and Mrs. Liu are entitled to relief from forfeiture.

III. Background

[4] The properties in question are two strata lots in a condominium development by Coal Harbour, referred to as “Carina Coal Harbour” at 1239 West Cordova Street, Vancouver. At the time the Agreement was entered into, the building had not yet been constructed. Under the Offer to Purchase and Agreement of Sale, accepted by Coal Harbour on August 18, 2001, Mr. and Mrs. Liu agreed to purchase two strata lots, suite numbers 1201 and 1202, for the purchase price of $1,955.000.00. The Agreement provided for an initial deposit, and two subsequent deposits, totalling $391,000.00, which deposits were paid by Mr. and Mrs. Liu. Completion of the purchase and sale was to take place on a date specified by Coal Harbour following issuance of the certificate of occupancy by the City of Vancouver, and registration of the strata plan in the Land Title Office. The certificate of occupancy was issued by the City in early May, 2003, and a completion date set for May 23, 2003.

[5] The Agreement, the schedules attached to it, and the disclosure statement delivered to Mr. and Mrs. Liu before the Agreement was entered into contain a number of provisions relevant to these applications.


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