Malhi v. Krahn

2009 BCCA 59 Malhi v. Krahn COURT OF APPEAL FOR BRITISH COLUMBIA Citation: Malhi v. Krahn, 2009 BCCA 59 Date: 20090209 Docket: CA036037 Between: Balbir Singh Malhi and Amarjit Kaur Malhi Respondents (Plaintiffs) And Stanley Krahn Appellant (Defendant) Before: The Honourable Madam Justice Rowles The Honourable Madam Justice Levine The Honourable Mr. Justice Lowry Oral Reasons for Judgment R.G. Kuhn M. Morgan Counsel for the Appellant A. Narang Counsel for the Respondents Place and Date: Vancouver, British Columbia 9 February 2009 [1] LOWRY J.A.: This is an appeal of the order of 8 April 2008 of Mr. Justice Pitfield, who, for reasons indexed as 2008 BCSC 409, resolved only the first of the issues arising between the parties in this action for specific performance, leaving the ancillary issues to be tried separately. [2] Balbir and Amarjit Malhi wished to purchase 11.07 acres of a 12.35 acre property from Stanley Krahn which he proposed to subdivide. The property had been in Mr. Krahn’s family for many years and was used to grow raspberries. Mr. Krahn had obtained from the City of Abbotsford a preliminary layout approval subject to certain conditions, one of which required the removal of one of the existing dwellings prior to submitting the subdivision plans to the Land Title Office for registration. Following the exchange of offers and counter-offers, the parties arrived at a price of $950,000. Upon considering the Malhis’ offer for that amount, Mr. Krahn penned the following condition precedent in addition to several such conditions the offer contained: Subject to the buyer and seller agreeing to the conditions relevant to the second title (severance) and the second house before June 24/04. [3] Mr. Krahn’s final counter-offer was taken to the Malhis by the parties’ mutual agent. They endorsed their acceptance on 9 June 2004. The transaction was to be completed on 31 August. No further agreement between the parties was made. The date for the removal of the subject clauses was ultimately extended to 15 September 2004 with a completion date of 30 September. Mr. Krahn refused to complete the transaction. He ultimately obtained subdivision of the property in November 2004. The Malhis commenced this action to compel specific performance of the transaction. [4] The issue the judge addressed was whether the parties had entered into a binding agreement. He concluded they had. Mr. Krahn appeals. He contends the judge erred, maintaining there was at best nothing more than an agreement to agree. The issue turns on the clause Mr. Krahn added in the counter-offer he made on 9 June. The Malhis maintain the interpretation the judge placed on the clause is supportable and deference is now to be shown in that regard. [5] The judge took the view that in a case of this kind the court should strive to recognize and uphold the reasonable expectations of the parties, citing Boult Enterprises Ltd. v. Bissett (1985), 67 B.C.L.R. 273 (C.A.), and G.S.B. Developments Ltd. v. Chiulli (1979), 15 B.C.L.R. 381 (S.C.), aff’d (1981), 28 B.C.L.R. 157 (C.A.). He said: [35] Mr. Krahn had obtained preliminary layout approval from the City. The regulatory authorities had approved the proposed subdivision. The parties knew of the land which Mr. Krahn intended to sell and the Malhis intended to purchase. The price was settled. All that remained to be done was to obtain a final survey of the subdivision, and to settle on the removal of one of the residences from the site to be sold and its placement on the homesite. [36] Given the point to which the subdivision proposal had proceeded with the authorities, the clause Mr. Krahn drafted must reasonably be regarded as a means of permitting minor adjustments in price and acreage in the event the final survey plan indicated that the subdivided lot which was the subject of the sale was greater or less than 11.07 acres. The clause did not accord Mr. Krahn the right to refrain from using his best efforts to formalize the subdivision in order that the sale could be completed. [6] The judge also attached significance to the parties’ conduct from 9 June onwards. Mr. Krahn permitted the Malhis to enter on the property to tend the crop of raspberries and to install a watering system. They spent $50,000. The judge said: [37] The fact the parties intended to be bound by the document they signed is evidenced by their conduct. The Malhis entered on the land they were to acquire in order to care for the growing crop on the land. Mr. Krahn did not participate in that task. The Malhis took steps to obtain a water supply for the property that was not dependent upon any neighbour. Mr. Krahn did not restrain them from doing so. Instead, he acquiesced to amendments to the offer and acceptance document when fully aware of the Malhis’ activities on the land, and after a well had been drilled and made operational for use in conjunction with a newly installed irrigation system. [38] The offer and acceptance signed June 9, 2004 were binding on the parties. [7] In my respectful view, the judge’s conclusion is not supportable. [8] The parties’ conduct may well have been indicative of their having intended to be bound by the terms of the document they signed, but the question is whether what they signed constituted what in law is an agreement. There are two considerations. [9] First, I am unable to read the clause Mr. Krahn added as merely a provision for minor adjustments once the subdivision survey was completed. It is not a provision about making adjustments. It calls for an agreement and renders the whole transaction subject to the parties agreeing to the conditions relevant to the second title and the second house before 24 June. No agreement with respect to either was made by that time or by the extended date. [10] What the parties contemplated the relevant conditions to be cannot be objectively discerned from the factual matrix, nor is there any extrinsic evidence of what they said to each other that would resolve the ambiguity because, on the evidence, the conditions were not discussed. The house was apparently expected to be moved to the part of the subdivided property Mr. Krahn was retaining. It would have been a substantial undertaking. I do not see how the required agreement on conditions relevant to that in particular (which the judge did not specifically address) could be said to amount to no more than a provision for minor adjustments. [11] Second, the agreement the clause contemplated was a wholly subjective condition of completion. In Mark 7 Development Ltd. v. Peace Holdings Ltd. (1991), 53 B.C.L.R. (2d) 217 (C.A.) at 223-224, the characterization of the three kinds of condition precedent discussed in the dissenting judgment in Wiebe v. Bobsien (1985), 64 B.C.L.R. 295 (C.A.) were recognized: subjective, objective, and subjective-objective. In Wiebe, Lambert J.A. explained as follows, at 298-299: 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. [12] I consider the agreement for which the clause Mr. Krahn added to be akin to the first example given. There is nothing in the clause involving the approval or other action of any third party or some event over which the parties had no, or limited, control. What was required was the parties’ agreement. Their agreement being entirely a subjective matter, their negotiation never got past the offer stage. [13] I conclude the parties made no binding agreement. [14] I would allow the appeal, set aside the order, substitute an order declaring there was no agreement between the parties for the purchase of the property, and remit the matter to the trial court. [1] ROWLES J.A.: I agree. [2] LEVINE J.A.: I agree. “The Honourable Mr. Justice Lowry”