



COURT OF APPEAL FOR BRITISH
COLUMBIA




Citation:



Szechuan Chongqing Seafood Restaurant (1993) Ltd. v.
  Wang,









2014 BCCA 25




Date: 20140123

Docket:
CA040772

Between:

Szechuan Chongqing
Seafood Restaurant (1993) Ltd.

Respondent

(Plaintiff)

And

Yi Tong Wang

Appellant

(Defendant)




Before:



The Honourable Mr. Justice Chiasson

The Honourable Mr. Justice Willcock

The Honourable Mr. Justice Goepel




On appeal from:  An
order of the Supreme Court of British Columbia, dated
March 8, 2013 (
Szechuan Chongqing Seafood Restaurant (1993) Ltd.
v. Wang
, 2013 BCSC 397, Vancouver Docket S117111).




Counsel for the Appellant:



W.J. McMillan





Counsel for the Respondent:



H.H. Van Ommen, Q.C.
and N.R. Hurlburt





Place and Date of Hearing:



Vancouver, British
  Columbia

November 26, 2013





Place and Date of Judgment:



Vancouver, British
  Columbia

January 23, 2014









Written Reasons by:





The Honourable Mr. Justice Chiasson





Concurred in by:





The Honourable Mr. Justice Willcock

The Honourable Mr. Justice Goepel








Summary:

The
appellant agreed to purchase the assets of the respondents restaurant business
subject to a number of Buyers Conditions, one of which was that he be
satisfied that consents and approval required to effect the transaction have
been or will be obtained.  He waived the conditions.  The appellant was to
have possession of the assets on closing.  The premises in which the business
was being conducted were leased.  The written consent of the landlord was
required if the premises were to be occupied by an entity other than the
respondent.  The landlord advised the respondent that it would consent to the
appellants occupancy and would do so in writing if necessary.  The appellant
refused to complete contending that the landlords written consent was a
condition precedent to his occupancy of the premises.  The trial judge
dismissed the appellants claim for the return of a deposit and ordered that he
pay damages to be assessed on the basis that, by waiving the condition, the
appellant assumed the risk that consent would not be obtained.

Held:
appeal dismissed for different reasons.  Because the contract was silent on the
appellants right to occupy the premises, it was necessary to imply a term that
he would be given occupancy of the premises on closing.
Obtaining the landlords
consent to the appellants occupancy was the respondents obligation
(Hutchingame v. Johnstone).  The fact that the appellant had an opportunity to
consider and be satisfied with the lease and to be satisfied that the required
consents were or would be obtained did not alter that fact.  The obligation to
obtain consent and the risk it might not be obtained did not shift to the
appellant because he removed the Buyers Conditions.  Consent was obtained.

Reasons
for Judgment of the Honourable Mr. Justice Chiasson:

Introduction

[1]

This appeal considers the effect of the removal by a buyer of conditions
in a contract for the purchase and sale of business assets on the obligation of
the vendor to provide occupancy of the business premises to the buyer.

Background

[2]

On August 22, 2011, the parties entered into a contract whereby the
appellant was to purchase a restaurant business operated by the respondent. 
The purchase price was $395,000.  It was to be paid in two tranches on
October 4, 2011 and March 31, 2012.  The parties used a standard form
contract from the Real Estate Board of Greater Vancouver, with handwritten
modifications and three addenda.  The contract was subject to a number of
Buyers Conditions as follows (with handwritten modifications italicized):

4.         BUYERS CONDITIONS:

The Buyers offer set forth above
is subject to the satisfaction or waiver in writing by the Buyer not later than
September 10 , yr.  2011

(the Due
Diligence Period) of the condition that the Buyer, acting reasonably, is
satisfied that the Business and the Business Assets being purchased and assumed
pursuant to this Contract conform in all material respects to the Business and
the Business Assets represented to the Buyer prior to the date hereof,
including, without limitation, the Buyer being satisfied with the following
(whether or not previously provided to the Buyer):

(a)        the
financial statements for and financial condition of the Business; (
May to
August, 2011)
[initials]

(b)        the
terms of all contracts, licenses, leases and permits to be assigned to the
Buyer;

(c)        the
liabilities to be assumed by the Buyer (if any);

(d)        the
ability of the Buyer to obtain an assignment of the lease of the Business
premises (if any); and

the lease agreement
[initials]

(e)        that
all other consents and approvals required to effect this transaction have been
or will be obtained.

The foregoing condition is for the sole benefit of the
Buyer.

[3]

An addendum to the contract provided:

The Buyer and the Seller agree
the payment terms as follows [
sic
]:

(i)         The
Purchase Price [$395,000] will be payable by two instalments: $280,000 will be
payable on October 4, 2011, the rest and balance of [$115,000] will be
payable on MARCH 31, 2012.



(iii)       The lease will remains under
the name of the Seller and will transfer to the Buyer on April 1, 2012 and
the Seller will help the Buyer in his efforts for the transfer of name between
the landlord and the Buyer or the Seller agrees to remain as tenant and the
Buyer will responsible the rental and payable the Seller directly [
sic
].

[4]

The lease of the premises provided:

13.01
Consent Required

Except to an Eligible Corporation the Tenant will
not, and will not permit a subtenant to, assign this Lease in whole or in part,
or sublet all or part of the Premises, or mortgage or encumber this Lease or
the Premises or part thereof, and will not permit the occupation or use of all
or any part thereof by others other than an Eligible Corporation, without the
prior written consent of the Landlord in each case, which consent will not be
withheld unreasonably except that it may be withheld in any event if the
permitted use of the Premises stipulated in Section 7.01 would be
changed.  It will not be unreasonable for the Landlord to consider the
following factors before giving or withholding its consent:

Any covenants made by the Landlord
with another tenant of the Shopping Centre, the financial background and
status, business history, capability in the Tenants line of business and the
quality of merchandise of the proposed assignee, sublessee or occupant.

The consent by the Landlord to
an assignment or subletting will not constitute a waiver of its consent to a
subsequent assignment or subletting.  This prohibition against assignment or
subletting includes a prohibition against an assignment or subletting by
operation of law.  If this Lease is assigned or
if all or part of the
Premises is sublet or occupied by anybody other than the Tenant, in any case
without the consent of the Landlord when required, the landlord may collect
rent from the assignee, subtenant or occupant, and apply the net amount
collected to the rent herein reserved, but no such assignment, sublease,
occupancy or collection will be considered a waiver of this covenant, or the
acceptance of the subtenant or occupant as Tenant
.  Despite an assignment
the Tenant remains fully liable under this Lease.  An assignment of this Lease,
if consented to by the Landlord, will be prepared by the Landlord or its
solicitors, and all legal costs of its preparation will be paid by the Tenant.

[Emphasis added.]

[5]

The Buyers Conditions had to be satisfied or waived by no later than
September 10, 2011.  The appellant removed these conditions on September 9,
2011 and that day paid a required $50,000 deposit.  Completion of the
transaction was to take place on October 4, 2011.

[6]

Subsequent to removing the Buyers Conditions, the appellant asked the
respondent to assist him in obtaining a five-year extension of the lease, which
was set to expire on October 31, 2013.  The respondent approached the landlords
agent, which wrote on September 15, 2011 as follows:

RE:  Assignment of Lease
for premises at Unit 205  1668 W. Broadway, Vancouver, BC.

With reference to the intention to assign the lease agreement
from current tenant, Szechuan Chongqing Restaurant Ltd. & Szechuan Chongqing
Seafood Restaurant (1993) Ltd. to the potential buyer, Yi Tong Wang, please
note the following terms:

1.         The
Lease will stand as it is.

2.         The
current tenant Szechuan Chongqing Restaurant Ltd. & Szechuan Chongqing
Seafood Restaurant (1993) Ltd., will be held liable for the balance of the
current lease term.

3.         1 option
for the term of 5 years will be granted to the prospective tenant.

4.         Prospective
tenant, pays a security deposit of $46,000;

5.         Legal and
administration fee of $840.00 ($750.00 + $90.00 HST) relating to preparation of
the assignment of lease document would be paid by the tenant(s);

6.         We will
hold back $1,000.00 from Szechuan Chongqing Restaurant Ltd. for operating
expenses to be reconciled at year end.

7.         The outstanding
rent arrears $40,591.94 ($63,591.94  deposit $24,000 + $1,000 Holdback) to be
paid to Unicorn Properties Ltd.;

8.         The
effective date of the assignment is October 1, 2011;

9.         If the
prospective tenant is a company, the principal of the company shall be the
covenantor to the Lease.

Should the above mentioned terms
and conditions are agreed, please sign below and return a signed copy to us. 
Upon receipt of your agreement we will prepare the legal document for your
signature.

[7]

Neither the appellant nor the respondent signed and returned the
letter.  The respondent advised the appellant that his concurrence was required
before it could sign.  There is no evidence why the appellant did not sign,
although on appeal he states that the terms were onerous and unacceptable to
him.

[8]

Ms. Woo, a representative of the landlords property manager, stated
in her affidavit that sometime after the September 15, 2011 letter she
attended a meeting with the respondents representatives, the appellant and the
appellants advisor, the purpose of which was to discuss the assignment and
extension of the Lease and the purchase by the [appellant] of the
[respondents] business and assets.  The appellant and his advisor asked many
questions.  According to both Ms. Woo and Ms. Wong, the respondents
director and secretary, the appellant stated that he would get back in touch
but never did.

[9]

In her affidavit, Ms. Wong stated that Ms. Woo advised that she
was not concerned about who operated the business provided [the respondent]
remained as a tenant and continued to be responsible for all obligations under
the Lease.  Ms. Woo confirmed this and deposed that [i]f asked we
certainly would have documented our consent to the [appellants] occupation of
the premises in writing.

[10]

On September 27, 2011, counsel for the respondent asked counsel for the
appellant for a response to the landlords terms for an assignment and
extension of the lease as set out in the September 15, 2011 letter.  On the
same day, counsel for the appellant replied, stating that he had pressed his
client for instructions, but had not heard from him.  On September 28,
2011, new counsel for the appellant advised the respondent that his client took
the position there was not a binding contract between the parties.  Among the
grounds advanced for this position was the contention that the landlord had not
consented to the appellant operating the business on the premises.

[11]

On September 30, 2011, counsel for the respondent replied, taking issue
with the assertions in the letter from counsel for the appellant.  Among other
things, she stated:

I have confirmed with [the
landlords agent] that if so requested, the Landlord will issue a letter  confirming
it has no objection to [the appellants] operation of the business at the
Leased Premises.  This is a non-issue in view of [the] Landlords cooperation.

She
added:

As you correctly point out, [the
appellants] latest request is different from the terms of the Contract.  If
[the appellant] now no longer wants the outright assignment and 5 year renewal
option, then everything will simply close according to the original terms of
the Contract.

[12]

The appellant did not respond to the September 30, 2011 letter.  The
transaction did not close on October 4, 2011 as stipulated in the
contract.  On October 7, 2011, new counsel for the respondent wrote to
counsel for the appellant noting the letter of September 28, 2011 in
which you advised that your client was repudiating the Contract and refused to
close the transaction on the closing date.  He stated that the respondent
accepted the appellants repudiation and that it will be seeking damages, not
limited to the deposit, for your clients breach of contract.

[13]

The respondent sued the appellant for damages.  The appellant
counterclaimed for the return of his deposit.  The chambers judge dismissed the
appellants claim, declared that he breached the contract and ordered that he
pay damages to the respondent, to be assessed.

[14]

I would dismiss this appeal for the reasons that follow which differ
from the reasons of the trial judge.

Chambers judgment

[15]

After reviewing the basic facts, the judge stated at para. 28 that
[p]rior to Completion, [the respondent] knew that [the landlord] would consent
to [the appellants] occupancy of the businesss premises until the time of an
assignment of the lease.

[16]

The judges analysis is not lengthy.  I reproduce it in full.

[46]      The issue is whether or not there is any need for
the Court to imply a condition that Szechuan was obligated to obtain Unicorns [the
landlords] consent for Mr. Wangs occupancy of the Businesss premises as
of October 4, 2011. In my view, the answer is found in the Buyers
Conditions.

[47]      The Buyers Conditions provided Mr. Wang with
a due diligence period, which allowed him to satisfy himself with respect to
the Business and Business Assets he wished to purchase. In particular, Mr. Wang
had time to satisfy himself with respect to the lease agreement (Buyers
Condition 4(d)). He also had time to satisfy himself that all other
consents and approvals required to effect this transaction have been or will be
obtained (Buyers Condition 4(e)).

[48]      In my view, the language of Buyers Condition 4(e)
is clear: it refers to 
all other
consents and approvals [emphasis of
the chambers judge]. This language captures Unicorns consent to Mr. Wangs
occupancy of the Businesss premises as of October 4, 2011. It also
captures Unicorns consent to the assignment of the lease upon the payment of
the balance on March 31, 2012 (or occupancy beyond this date).

[49]      If Mr. Wang, acting reasonably, could not
satisfy himself as to the ability to obtain the necessary consents and
approvals, he would be under no obligation to complete and his deposit would be
returned.

[50]      Although not relevant to the case at bar, as the
crossed-out language of Buyers Condition 4(d) shows, it may not be
unusual for a buyer to first satisfy himself or herself that the assignment of
the lease of the vendors business premises will be obtained before removing or
waiving Buyers Conditions.

[51]      I also note that Szechuan was generally required to
assist Mr. Wang. Terms and Conditions: 17) Further Assurances provides:

The parties will execute and
deliver all such further documents and instruments and
do all such further
acts and things
as may be required to carry out the full intent and meaning
of this Contract and to effect the transactions contemplated thereby [emphasis
of the chambers judge].

[52]      There was no reason that Mr. Wang could not
have spoken with Unicorn or its property manager in order to obtain the desired
consents prior to waiving the Buyers Conditions. Privity of contract does not
come into play; Szechuan was required to do all such further acts and things.
On our particular facts, Mr. Wang did meet with Unicorns property
manager, albeit after he removed or waived the Buyers Conditions, to discuss
the assignment of Unicorns lease and its extension beyond its scheduled term
ending October 31, 2013.

[53]      If Mr. Wang had obtained Unicorns consent, Mr. Wangs
solicitors could have then prepared and, on the Completion Date, provided
Szechuan with the necessary documents. Szechuan would have been required to
execute these documents (see Terms and Conditions: 1) Assignment and
Assumption of Benefits and Liability).

[54]      In short, Mr. Wang had a due diligence period
in which he could satisfy himself that all consents required to effect the
transaction had been or would be obtained. By removing the Buyers Conditions
on September 9, 2011, Mr. Wang assumed the risk associated with
obtaining the necessary consents, including occupancy as of the Completion Date
and any future assignment of the Unicorn lease to him. He cannot now say that
Szechuan has failed to obtain the necessary consents.

[55]      It is trite law that a
court will look to the language used by the parties to a contract and will be
reluctant to imply conditions. Here the language is clear and there is no need
for the Court to imply terms or otherwise fill a gap.

Positions of the parties

[17]

The appellant asserts that the judge erred in failing to find that the
landlords written consent to his occupancy of the premises was a condition
precedent to performance of the contract; and he also erred in finding that the
appellant had waived the requirement for written consent and in finding that
the respondent was ready, willing and able to perform the contract.

[18]

The respondent states that it was not necessary to imply a condition
precedent because the contract provided for any required conditions.  It
supports the judges conclusion that the appellant waived the condition that
captured the Landlords written consent and that it was ready, willing and
able to perform the contract.

[19]

The respondent also contends that even if the judge was incorrect on the
condition issue, the appellant is not entitled to rely on an unfulfilled
condition because he caused the condition to be impossible to fulfill.

Discussion

[20]

I agree with the chambers judge that an issue is whether there is need
for the court to imply a condition that the respondent was obliged to obtain
the landlords consent for the appellant to occupy the premises, but I do not
agree with his conclusion that it is not necessary to imply such a condition. 
I also do not think the answer is found in the Buyers Conditions.  It is found
in the terms of the contract.

[21]

There does not appear to be an express provision that the appellant was
to occupy the premises, but looking at the contract as a whole, it is apparent
that this was the agreement of the parties.  The contract, which is entitled
Contract of Purchase and Sale for Business Assets, was for the purchase and
sale of the property, assets and undertaking of the business including
business assets set out in a schedule.  The respondent was required to deliver
possession of the business assets on the completion date, October 4,
2011.  The scheduled business assets did not include the lease or a right to
conduct the business on the premises.  Pursuant to an addendum, the lease
remained with the respondent until April 1, 2012 when the second tranche
of the purchase price was due.

[22]

There are a number of provisions in the contract that show the parties
intended the appellant to occupy the premises on October 4, 2011.  The Buyers
Conditions state that the contract is for the sale of the business as well as
the business assets, as does the respondents acceptance of the appellants
offer.  Although the proviso addressing goodwill was struck from the contract
form, the contract provides for the use of the Chinese and English names of the
business.  In several addenda, the legal description is referred to as sale of
business only.  In an addendum, the respondent agreed to continue working with
and consulting for the business.

[23]

The parties did not suggest that they did not intend the appellant to
occupy the premises on October 4, 2011.  I am satisfied the appellant was
buying an operating business and that it was an implied term that he would occupy
the premises in which the business had been operating.

[24]

Because the appellant had time to undertake due diligence before
removing the conditions, the judge appears to suggest that the appellant should
have sought the landlords consent for his occupancy.  The judge concluded that
once the appellant removed the Buyers Conditions, he assumed the risk
associated with obtaining the necessary consents.  I do not agree.

[25]

Obtaining the landlords consent to the appellants occupancy was the
respondents obligation (
Hutchingame v. Johnstone
, 2007 BCCA 74 at
paras. 11-12; although the case concerned consent to the assignment of a
lease, in my view, it is equally applicable to consent for occupancy).  The
fact that the appellant had an opportunity to consider and be satisfied with
the lease and to be satisfied that the required consents were or would be
obtained did not alter that fact.  The obligation to obtain consent and the
risk it might not be obtained did not shift to the appellant because he removed
the Buyers Conditions.

[26]

The conditions gave the appellant the right to be satisfied with  the
terms of all  leases  to be assigned to the [appellant], with the lease
agreement and that all other consents and approvals required to effect this
transaction have been or will be obtained.  Explicitly not a condition was that
he be satisfied with his ability to obtain an assignment of the lease of the Business
premises.  That provision in the standard form contract was struck out on the
face of the contract.

[27]

The appellant removed these conditions on September 9, 2011. 
He no longer had the right not to complete the transaction if he was not
satisfied with the terms of any lease to be assigned to him, with the lease
agreement itself or that other consents had been or would be obtained.  That
is, the contract then was final and binding on its terms.

[28]

The appellant apparently was satisfied that all required consents were
or would be obtained.  To put it another way, whether he was satisfied or not,
he gave up his right not to complete the transaction for that reason.  I do not
think the appellant thereby assumed the risk associated with obtaining the
necessary consents, including occupancy.  The appellant being satisfied that
the consents were or would be obtained did not obviate the respondents
obligation to obtain them if that was required by the contract.  If it were to
fail to do so, the appellant would have whatever remedies that would be
applicable.

[29]

Occupancy was a condition of the contract because the appellant could
not conduct business there without it.  As between the respondent and the appellant,
the respondent was obliged to give occupancy to the appellant as of
October 4, 2011.

[30]

It may be that the appellant was not entitled to insist on the written
consent of the landlord to his occupancy, but arguably that requirement was
necessary for him legally to occupy the premises.  As between the respondent
and the landlord, technically written consent to the occupation of the
appellant was required.  That must be put into context.

[31]

The consent could not be withheld unreasonably.  The obligation appears
to be somewhat ambiguous because the consent provision envisions occupancy
without consent (see para. 4 herein).  In that event, the occupier is
obliged to pay rent and the tenant remains liable on the lease.  This is
mirrored in the third provision in the contract addendum.  It also is
consistent with the position taken by the landlord.

[32]

It is clear on the evidence that the respondent took steps necessary to
ensure that the appellant could occupy the premises.  The respondent obtained
the concurrence of the landlord to the appellants occupancy.  It so informed
the appellant.  If written consent were required, it would have been
available.  There is no basis on which it can be said that the respondent was
not ready, willing and able to perform the contract on the completion date.  It
so advised the appellant on September 30, 2011.  The respondent was able
to give the appellant occupancy of the premises as of October 4, 2011.

[33]

In the September 30, 2011 letter, the appellant was asked whether he
wanted to pursue an assignment of the lease with an extension to the term or
whether he wanted to complete the transaction as set out in the contract.  The
appellant did not respond.

[34]

The appellant took no steps to perform the contract.  The September 28,
2011 letter by the appellants counsel conflates consideration of a lease
assignment, which was not a condition of the contract, with occupancy.  In the
September 15, 2011 letter from the landlords agent, occupancy was not
addressed.  The letter concerns an assignment of the lease.  It was written
after the respondent, consistent with its obligation to assist the appellant,
approached the landlord on his behalf concerning an assignment of the lease.

[35]

In his October 7, 2011 letter, counsel for the respondent stated that
his clients accepted the appellants repudiation of the contract.  Insofar as
counsel was referring to the appellants counsels letter of September 28,
2011, he was not correct.  The respondent rejected that repudiation and
affirmed the contract on September 30, 2011, but the appellants failure
to take any steps to complete the transaction on October 4, 2011 was a
further repudiation, which the respondent was entitled to and did accept (
Guarantee
Co. of North America v. Gordon Capital Corp.
, [1999] 3 S.C.R. 423;
Hadcock
v. Georgia Pacific Securities Corp.
, 2006 BCCA 536).

Conclusion

[36]

In my view, the appellant was not entitled to refuse to complete the
transaction.  Although I disagree with his reasons for doing so, the judge
correctly dismissed the appellants claim for the return of his deposit and
ordered that the respondent is entitled to damages to be assessed.

[37]

I would dismiss this appeal.

The Honourable Mr. Justice Chiasson

I agree:

The
Honourable Mr. Justice Willcock

I agree:

The
Honourable Mr. Justice Goepel


