



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Peier v. Cressey Whistler Townhomes Limited
  Partnership,









2012 BCCA 28




Date: 20120119

Docket: CA039151

Between:

Michael Peier

Respondent

(Plaintiff)

And

Cressey Whistler
Townhomes Limited Partnership
and 629220 B.C. Ltd.

Appellants

(Defendants)






Before:



The Honourable Madam Justice Levine





The Honourable Mr. Justice Lowry





The Honourable Mr. Justice Frankel




On appeal from: Supreme
Court of British Columbia, June 14, 2011
(
Peier v. Cressey Whistler Townhomes Limited Partnership
, 2011 BCSC 773)




Counsel for the Appellants:



B. Cramer and A. H.
  Sabur





Counsel for the Respondent:



R. J. Kaardal and B.
  B. Olthuis





Place and Date of Hearing:



Vancouver, British
  Columbia

December 9, 2011





Place and Date of Judgment:



Vancouver, British
  Columbia

January 19, 2012









Written Reasons by:





The Honourable Mr. Justice Lowry





Concurred in by:





The Honourable Madam Justice Levine

The Honourable Mr. Justice Frankel








Reasons for Judgment of the Honourable
Mr. Justice Lowry:

[1]

This appeal raises a question of whether the following clause in an
addendum to a real estate developers standard form purchase agreement relieved
the purchaser of a newly constructed townhouse in Whistler, British Columbia,
from completing the transaction where the subject requirement was not fulfilled
until three weeks after the date on which the vendor had said completion was to
take place:

It is a condition of this
contract that the power/hydro lines on Nancy Greene Drive be buried prior to
completion.  Should the power lines not be able to be buried, the Purchaser may
cancel this contract at their option and have all deposit monies returned
including interest.

[2]

On the date for completion, the purchaser gave notice he was terminating
the agreement.  The vendor gave notice that the completion date was delayed. 
Five days later, the purchaser commenced this action for the return of his
deposit.  The vendor ultimately counterclaimed for damages and the action was
tried summarily before Mr. Justice Butler who, for reasons indexed as 2011 BCSC
773, gave judgment in favour of the purchaser.  The vendor appeals on a
question of law, contending, in the main, the delay in the requirement being
fulfilled served only to suspend the parties obligations to complete the
transaction; it did not entitle the purchaser to terminate the purchase
agreement.

The Purchase

[3]

The purchaser was Michael Peier; the vendor was a partnership, Cressey
Whistler Townhomes Limited Partnership and 629220 B.C. Ltd.  Their agreement for
the purchase of the townhouse the vendor was to construct was signed in May
2007.  The purchase price was $2.5 million.  The purchaser paid an initial
deposit and subsequently made two more payments for a total of $375,000.  The
estimated completion date was December 1, 2008.  If the completion date had not
occurred by December 1, 2009, referred to as the Outside Date (which the
vendor could for any reason extend for up to 120 days) the purchase agreement
would be terminated.

[4]

The purchaser raised a concern about BC Hydro overhead power lines along
the road where the townhouse was to be built.  He was told by the vendors
agent they would be buried before completion.  The two of them then agreed on
the wording of the clause in the addendum to the purchase agreement.

[5]

BC Hydro agreed to bury the power lines.  The vendor paid it to do so in
July 2008 and thereafter had no control over when the work would be done.  The
lines were not buried until December 11, 2009.

[6]

The construction of the townhouse was delayed.  It was not until October
2009 that it was ready for the purchasers pre-completion inspection.  The
required municipal certificate of occupancy was issued on October 21.  On
November 4, the vendor gave the purchaser an Official Notice of Completion
fixing November 18, 2009, as the completion date with possession the following
day.  The agreement provides the balance of the purchase price was to be paid
by 2:00 p.m. on the completion date.

[7]

The purchaser inspected the townhouse on two occasions, October 21 and
November 16, accompanied by a representative of the vendor.  He identified over
200 deficiencies that had to be rectified.  He maintains he made no mention of
the overhead power lines on either occasion.  He says he was told to confine
his inspection to the inside of the townhouse.

[8]

On November 18, the purchaser was ready and able to complete the
purchase.  The townhouse may in fact have been unfit for occupancy then because
of the work required to rectify two of the deficiencies in particular: a
hardwood floor had to be lifted and some drywall had to be replaced.  The
purchaser went to the townhouse twice that day.  He photographed the power
lines.  He said nothing to the vendor.  He apparently made no inquiry as to
when BC Hydro would have the lines buried.  Rather, he instructed his
solicitors to give the vendor notice he was terminating the purchase agreement
because the power lines had not been buried.  Counsel for the purchaser wrote the
vendor at 12:36 p.m., notifying it accordingly and asking for a refund of the
purchasers deposit with accumulated interest forthwith.  The vendor responded
at 1:49 p.m.  It extended the Outside Date to March 1, 2010.  It also said the
completion date would be delayed to December 3 because of the work necessary to
rectify the deficiencies.

[9]

The purchase agreement provides the purchaser was required to complete
the purchase despite outstanding deficiencies.  It also provides the vendor
could delay the completion date if the townhouse was not ready to be occupied,
although it would be deemed to be ready to be occupied once the municipality
had given its permission, whether temporary, conditional, or final.

[10]

The purchaser commenced this action on November 23, 2009.  Thereafter
the vendor sought to perform the purchase agreement, giving further notices
delaying the completion date to accommodate the ongoing rectification of the
deficiencies, ultimately to December 21.  The purchaser maintained there was no
longer any agreement.  When the purchaser did not complete on December 21,
2009, the vendor gave notice it would pursue its remedies.  The action
proceeded to trial in January 2011.

[11]

With the onset of recession in 2008, the Whistler real estate market
declined.  The vendor sold the townhouse in the spring of 2011 (while judgment
was reserved).  The sale price was $1.9 million.

The Judgment

[12]

The judge considered the issues to be two: whether the power lines clause
permitted the purchaser to terminate the agreement and whether the vendor had
the contractual ability to extend the completion date.  He began his analysis
by quoting the following from
Kingsway General Insurance Co. v. Lougheed
Enterprises Ltd.
, 2004 BCCA 421 at para. 10, [2004] 11 W.W.R. 427, as the
governing principles:

It will, I hope, suffice to note
that in terms of contractual interpretation, the same principles of
construction applicable to other commercial contracts apply to insurance
contracts ...; that the court must search for an interpretation from the whole
of the contract which promotes the true intent of the parties at the time they
entered into the contract ...; that the plain meaning of the words used should
be given effect unless it would bring about an unrealistic or commercially
unreasonable result ...; that evidence of the factual background or setting of
the contract known to the parties at or prior to the date of the contract may
be considered even in the absence of an ambiguity ...; that at the same time,
the words of the contract must not be overwhelmed by a contextual analysis ...;
and that in cases of true ambiguity or doubt as to the meaning of the words
used, the
contra proferentem
rule of interpretation may be applied .... 
[Citations omitted.]

[13]

With respect to the first issue, the vendor contended the applicable
provision of the power lines clause  the first sentence  is not a condition,
as stated, but a warranty that did not entitle the purchaser to terminate the
agreement: the purchaser was required to complete the transaction on November
18 and could then sue for any loss caused by the warranty having been
breached.  The vendor maintained the second sentence of the clause, which
provides for the purchasers termination of the agreement in the event the
power lines could not be buried, would otherwise be redundant.  The focus of
the case as argued in this regard appears then to have been on whether the
first sentence of the clause is a warranty.  The judge decided it is not.

[14]

The judge concluded the purchaser was entitled to terminate the
agreement based on two considerations: the clear language of the power lines
clause and the relationship between the two sentences of the clause.

[15]

Although he recognized the terminology employed in contractual language
is not determinative, he considered the parties having agreed it was to be a
condition of the contract that the power lines be buried prior to completion
was indicative of their intention concerning their obligations if that was not
done.  After quoting from this Courts discussion of what constitutes a
fundamental term of an agreement in
Gulston v. Aldred
, 2011 BCCA 147, he
held the burial of the power lines prior to completion to be a condition of the
agreement because of its importance to the purchaser: it was fundamental to the
agreement.  Further, relying on what was said in dissent in
Jorian
Properties Ltd. v. Zellenrath
(1984), 10 D.L.R. (4th) 458, 46 O.R. (2d) 775
at 780 (C.A.), he added the purchaser would not have entered into the agreement
without assurance of strict performance.  He stated at para. 45 that because
of the significance to the purchaser of the lines being buried, the parties had
agreed:

a)         the power lines had to be buried prior to completion; and

b)         if the power lines were not
able to be buried, he did not have to wait until completion to terminate the
Contract.

He concluded the parties must have intended the failure
to bury the power lines would result in the termination of the agreement if the
completion date could not be extended.

[16]

The judge rejected the vendors contention that the right to terminate
arises only under the second sentence of the clause.  He interpreted the first
sentence and the second sentence as affording the purchaser that right; the
first sentence applying if the power lines were not buried prior to completion,
the second applying if they could not be buried at all.  He first said:

[38]      The issue is whether
the second sentence, which gives Mr. Peier the right to cancel the Contract at
any time in the event that the power lines cannot be buried, should be
interpreted in a way which rebuts the presumption that the obligation to bury
the power lines prior to completion is a condition.  The question is not
straightforward because there are two ways the second sentence can be
interpreted.  As Cressey argues, it may be that the parties intended that Mr.
Peier had the right to terminate only where the power lines could not be buried
at all.  However, the second sentence can also be interpreted as giving an
additional remedy to Mr. Peier; in that alternate interpretation, the first
sentence creates a condition which gives Mr. Peier the right to terminate
if the power lines are not buried prior to completion and the second sentence
grants a right to early termination, meaning termination prior to the
Completion Date, in the event that the power lines cannot be buried.

He then concluded:

[50]      Contrary to Cresseys argument, the two sentences
in the Power Lines Condition do not compel a conclusion that the right to
terminate is not available if the power lines are not buried at completion. 
Instead, I conclude that the two sentences are intended to cover two different
situations.  The first sentence establishes Cresseys obligation to bury the
power lines prior to completion and creates a condition.  The second sentence
deals with the situation where it is determined that it is not possible to bury
the power lines at all.  However, both give Mr. Peier the right to elect to
terminate the Contract:

1)         If the
power lines are not buried prior to completion, he has the right to elect to
terminate the Contract because of Cresseys breach of a fundamental condition;
and

2)         In the event it is determined
that the power lines are unable to be buried Mr. Peier has the right to elect
to terminate the Contract, prior to the Completion Date.

[17]

With respect to the second issue, the vendor contended that, even if it
was a condition that the power lines be buried prior to completion, the fact
the townhouse was not actually ready to be occupied on November 18 entitled the
vendor to delay the completion date under the terms of the agreement as it
purported to do.  The judge concluded that was not so.  He found it was not
open to the vendor to delay the closing date because, for the purposes of the
vendors right to delay the completion date under the agreement, the townhouse
was deemed to be ready to occupy once the municipal approval had been given as
it was on October 21.

[18]

Thus the judge concluded that, because the power lines were not buried
at the time the vendor had said the purchase was to be completed (November 18
at 2:00 p.m.), the vendor had by then no right under the agreement to delay the
completion date and the purchaser was at no time thereafter required to
complete the purchase.  Accepting that the first sentence of the power lines
clause is a condition as opposed to a warranty, the question becomes whether
the judge was right to conclude the clause entitled the purchaser to terminate
the agreement on November 18.

Discussion

[19]

In my view, the answer to the question lies in considering the nature of
the condition.  It is a condition precedent to the completion of the purchase
of the townhouse but not what in law is a true condition precedent.  A true
condition precedent is a condition that is precedent to the existence of any
contractual obligation.  It is an external condition dependent upon a future
uncertain event, the happening of which depends entirely on the will of a third
party:
Turney v. Zhilka
, [1959] S.C.R. 578, 18 D.L.R. (2d) 447.  A true
condition precedent is to be contrasted with other kinds of conditions
precedent where the condition is only precedent to the performance of certain
contractual obligations.  In his text,
The Law of Contract in Canada
,
5th ed. (Toronto: Carswell, 2006) at 430, G.H.L Fridman distinguishes a true
condition precedent from others as follows:

True conditions precedent, in the
Turney
sense, if they are to be distinguished at all, must be
distinguished because their inclusion in an agreement renders that agreement
ineffective to bind the parties until the event contemplated by the condition.
... In contrast with such true conditions precedent, other conditions precedent
do not affect the validity or binding quality of a contract, but simply suspend
performance of the obligations arising under the contract on the part of one,
or other, of the parties, or both, until the stipulated condition is fulfilled.

[20]

The principles for distinguishing between conditions precedent which are
not true conditions precedent were articulated in
Wiebe v. Bobsien
(1984), 59 B.C.L.R. 183 (S.C.), affd 64 B.C.L.R. 295 (C.A.).  The action arose
out of the sale of a home that was subject to the purchaser selling his home,
which he did, by a certain date.  But before he did, the vendor purported to
cancel the agreement.  The purchaser sued for specific performance.  The issue
was whether the parties had a binding agreement.  On his review of the
authorities, the trial judge said at 189:

A condition precedent may be of a
nature that creates no binding agreement or it may just act as an ingredient
which suspends performance of an otherwise complete contract. It all depends
upon the intention of the parties as expressed in the contract itself and as
shown by surrounding events.

and at 191-92:

From these English,
Canadian and American authorities a general rule is laid down that in a real
estate transaction a condition precedent which must be performed by the
purchaser will not usually prevent the formation of a contract but will simply
suspend the covenant of the vendor to complete until the condition precedent is
met by the purchaser.

[21]

The majority in this Court agreed with the trial judges reasoning and
upheld the decree he granted the purchaser.  While he disagreed in the result
on the basis the subject clause was not sufficiently certain, Mr. Justice Lambert
recognized three kinds of conditions precedent at 298-99:

Each condition precedent case must be
considered on its own facts.  As Bouck J. indicated, some conditions precedent
are so imprecise, or depend so entirely on the subjective state of mind of the
purchaser, that the contract process must still be regarded as at the offer
stage.  An example would be subject to the approval of the president of the
corporate purchaser.  In other cases, the condition precedent is clear,
precise and objective.  In those cases, a contract is completed; neither party
can withdraw, but performance is held in suspense until the parties know
whether the objective condition precedent is fulfilled.  An example would be
subject to John Smith being elected as Mayor in the municipal election on 15
October of this year.

But there is a third
class of condition precedent.  Into that class fall the types of conditions
which are partly subjective and partly objective.  An example would be subject
to planning department approval of the attached plan of subdivision.  This
looks objective, but it differs from a truly objective condition in that
someone has to solicit the approval of the planning department.  Perhaps some
persuasion of the planning department will be required.  Can the purchaser
prevent the condition from being fulfilled by refusing to present the plan of
subdivision to the planning department?  This type of case has been dealt with
by implying a term that the purchaser will take all reasonable steps to cause
the plan to be presented to the planning department, and will, at the proper
time and in the proper way, take all reasonable steps to have the plan approved
by the planning department.

What he said has been recognized as the most helpful
statement of the law on the various kinds of conditions precedent:
Mark 7
Development Ltd. v. Peace Holdings Ltd.
(1991), 53 B.C.L.R. (2d) 217 (C.A.)
at 223-24, leave to appeal refused, [1991] 3 S.C.R. ix.

[22]

I consider the power lines clause to fall squarely within the third kind
of condition precedent.  It was objective to a point.  Burying the lines was
something BC Hydro was to do, but the vendor was required to make arrangements
and to pay to have it done.

[23]

Where there is such a condition precedent, the court will imply a term
whereby the party responsible for having the condition fulfilled promises to
make a
bona fide
effort to have it done.  Until the condition is
fulfilled or waived, the obligations of the parties to complete the transaction
will be suspended.  A condition precedent may be waived under s. 54 of the
Law
and Equity Act
, R.S.B.C. 1996, c. 253, by one party if the condition
benefits that party alone.

[24]

In
Dynamic Transport Ltd. v. O.K. Detailing Ltd.
, [1978] 2 S.C.R.
1072, the Court had to consider an agreement for the purchase of land that was
known by both parties to be subject to subdivision approval.  Which party was
to apply was not stipulated.  The vendor refused to complete on the date provided
for in the agreement.  It maintained there was no agreement.  Writing for the Court,
Mr. Justice Dickson held there was a binding agreement subject to a
condition precedent.  It was for the vendor to seek the necessary approval.  A
promise on its part in that regard was to be implied.  He found the agreement
would be enforceable if the approval was given, but would not if, after the
vendors
bona fide
application was made, the approval was denied.  In
the interim, the parties obligations to complete the transaction were said to
be suspended.  He said at 1082-83:

The parties created a binding agreement.  It is true that the
performance of some of the provisions of that agreement was not due unless and
until the condition was fulfilled, but that in no way negates or dilutes the
force of the obligations imposed by those provisions, in particular, the
obligation of the vendor to sell and the obligation of the purchaser to buy. 
These obligations were merely in suspense pending the occurrence of the event
constituting the condition precedent.

The existence of a
condition precedent does not preclude the possibility of some provisions of a
contract being operative before the condition is fulfilled, as for example, a
provision obligating one party to take steps to bring about the event
constituting the condition precedent: see, for example, the recent decision of
the Appellate Division of the Alberta Supreme Court in
Steiner v. E.H.D.
Investments Ltd.
[(1977), 78 D.L.R. (3d) 449] (leave to appeal to this
Court denied December 14, 1977).

[25]

Dynamic
was specifically followed by the majority in this Court
in
Wiebe
stating nothing required any distinction to be drawn.  I regard
what was said in
Dynamic
to be in material respects applicable here.

[26]

Under the purchase agreement, with the power lines clause, the burial of
the lines prior to completion can be said to have been essential to the purchaser
but the time of completion was clearly not.  Indeed, the agreement contained no
more than an estimated completion date (December 1, 2008) with the choice of
the actual date for completion being entirely at the discretion of the vendor. 
Though the agreement provided time was of the essence, the date for completion
was by no means of the essence.  The only date on which the purchaser could
rely was the Outside Date (March 1, 2010 as extended) on which the agreement
would be terminated if the completion date had not occurred.

[27]

What can be seen to have been important to someone in the purchasers
position was a condition that he did not have to pay the purchase price until
the lines were buried, such that his leverage in that regard was preserved.  If
they could not be buried, or if they could be buried but were not buried prior
to the Outside Date, the purchase price would never have to be paid and the
deposit would be returned.  There was a condition precedent that suspended the
purchasers obligation to pay the purchase price, but the suspension was not
open-ended.  The Outside Date served to give certainty to the agreement.

[28]

Under the first sentence of the clause, the parties agreed the power
lines would be buried prior to completion or the purchase agreement would
terminate on the Outside Date.  Under the second sentence, they agreed that if
the lines could not be buried the purchaser could, at his option, terminate the
purchase agreement.  What they did not agree is that the purchaser could
terminate the agreement if the lines were not buried until after a date chosen
by the vendor for completion.  In my respectful view, that is simply not what
the clause provides.

[29]

The vendors Official Notice of Completion setting November 18 as the
completion date that was given on November 4, and its subsequent notices of later
dates for completion because of the rectification of deficiencies, confused the
situation.  I consider those notices to have been of no effect save for the
notice that the completion date would be December 21 after the power lines were
buried.  The vendor was not entitled to be paid the purchase price before the
lines were buried.  Thus, it was not open to it to choose a date for completion
to take place before that could occur.  The notice of the November 18
completion date the vendor gave could not have been effective because the
obligations of both the purchaser and the vendor to complete the purchase were
suspended until the lines were buried.  The vendor was not entitled to choose a
date for completion when completion could not occur.  The condition precedent
required that the power lines be buried prior to any date chosen.  Only then
could there be a completion date.

[30]

Once the construction of the townhouse was finished, I consider the
purchaser was obligated to complete the purchase whenever the power lines were
buried providing that was done prior to the extended Outside Date.  He was
obligated to complete the purchase on the date the vendor chose after that was
done: December 21.  Prior to that, his obligation was suspended, but he was
never entitled to terminate the purchase agreement, obtain the return of his
deposit, and effectively walk away from his commitment to pay for the townhouse
the vendor had constructed for him pursuant to their agreement.

[31]

Nothing more need be said for the disposition of the appeal.  The vendor
does challenge the trial judges conclusions in other respects which pertain
principally to the question of whether the completion date was properly
delayed, but I need not address the submissions made.

Disposition

[32]

I would allow the appeal and dismiss the purchasers action.  I would
remit the question of the remedies available to the vendor to the trial court
to be determined on the existing record.

The Honourable Mr. Justice Lowry

I agree:

The
Honourable Madam Justice Levine

I agree:

The
Honourable Mr. Justice Frankel


