IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Earthworks 2000 Design Group Inc. v. Spectacular Investments (Canada) Inc., |
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2005 BCSC 22 |
Date: 20050106
Docket: S83651
Registry: New Westminster
Between:
Earthworks 2000 Design Group Inc. and 659686 B.C. Ltd.
Plaintiffs
And
Spectacular Investments (Canada) Inc. and Daniel Preston
Defendants
Before: The Honourable Mr. Justice Slade
Reasons for Judgment
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Counsel for the Plaintiffs: |
R.J. Morton |
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Counsel
for the Defendant, |
T. Keast |
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Counsel
for the Defendant, |
D. Marks |
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Date and Place of Trial/Hearing: |
October 12, 2004 |
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New Westminster, B.C. |
I. INTRODUCTION
[1] The plaintiff ("Earthworks") owns a parcel of land, comprised of eleven separate lots, in Surrey (the "Property").
[2] On September 30, 2003, Earthworks offered to sell the Property to 7-Eleven Inc.
[3] On October 10, 2003, Earthworks offered to sell the Property to the defendant, Spectacular Investments (Canada) Inc. ("Spectacular"). Spectacular says that it accepted the offer, in writing, within the time provided for in the offer.
[4] 7-Eleven accepted Earthworks' offer on October 22, 2003.
[5] On November 13, 2003, after it learned of Earthworks' agreement with 7-Eleven, Spectacular registered a caveat over eight of the eleven lots comprising the Property.
[6] On December 8, 2003, Earthworks commenced an action against Spectacular, in which it claims that the agreement of purchase and sale between Earthworks and Spectacular is unenforceable. Earthworks also asserts a claim against Spectacular for inducing breach of Earthworks' contract with 7-Eleven. Spectacular, by counterclaim, seeks specific performance of the agreement to purchase the Property from Earthworks.
[7] The present application is brought by Earthworks, which seeks, pursuant to Rule 18A, an order striking Spectacular's claim for specific performance.
[8] Spectacular cross-applies for an order joining 7-Eleven as a defendant by counterclaim, and for leave to amend its counterclaim accordingly.
II. ISSUES
[9] The primary issue raised on Earthworks' application is this: has Spectacular established a basis for specific performance of an agreement to purchase the Property?
[10] Spectacular opposes the application on the primary ground that it is not suitable for disposition pursuant to Rule 18A.
[11] Spectacular also seeks orders for the cross-examination of the deponents of affidavits filed by Earthworks in support of its application.
III. THE LAW: SPECIFIC PERFORMANCE
[12] The decision of the Supreme Court of in Semelhago v. Paramadevan et al., [1996] 2 S.C.R. 415, 136 D.L.R. (4th) 1, visited, albeit in obiter dicta, the question of remedies in cases of vendors' breach of contracts for the purchase and sale of land. Although the issue in that case arose over residential land, the court addressed the question of remedies in relation to land purchased for commercial purposes.
[13] Sopinka J. noted the tendency of courts to treat all real estate as unique and to order specific performance unless there was some other reason for refusing equitable relief. He found that, with the advent of modern real estate development in which properties are mass produced as with other consumer products, it is no longer appropriate to maintain a distinction in the approach to specific performance as between realty and personalty. It should no longer be assumed that damages for breach of contract for the purchase and sale of real estate will be an inadequate remedy (¶20-21). He concluded:
Specific performance should, therefore, not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available. The guideline proposed by Estey J. in Asamera Oil Corp. v. Sea Oil & General Corp. (1978), 89 D.L.R. (3d) 1, [1979] 1 S.C.R. 633, 5 B.L.R. 225, with respect to contracts involving chattels is equally applicable to real property. At p. 26, Estey J. stated:
Before a plaintiff can rely on a claim to specific performance so as to insulate himself from the consequences of failing to procure alternate property in mitigation of his losses, some fair, real and substantial justification for his claim to performance must be found.
(At ¶22)
[14] Subsequent decisions in which Semelhago was considered have articulated the need for the property in issue to have some unique quality if specific performance is to be granted.
[15] In 1174538 Ontario Ltd. v. Barzel Windson (1984) Inc. (1999), 29 R.P.R. (3d) 256, [1999] O.J. No. 5091 (S.C.J.), McDermid J. considered the question of what constitutes a unique property in law. He took it into account that the property in issue in the case before him was purchased as an investment, for profit, with special attributes of location, favourable price, and the possibility of further development. He found that the property was not unique in the sense required to found a basis for specific performance. Damages were capable of being assessed, and would form an adequate remedy to the plaintiff.
[16] In John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2001), 56 O.R. (3d) 341, [2001] O.J. No. 4397 (S.C.J.), Lax J. articulated the relationship between uniqueness and the inadequacy of the remedy of damages. He said:
… Semelhago asks us to examine in each case, the plaintiff and the property. The danger in framing the issue as one of uniqueness (a term that carries with it a pre-Semelhago antediluvian aroma) is that the real point of Semelhago will be lost. It is obviously important to identify the factors or characteristics that make a particular property unique to a particular plaintiff. The more fundamental question is whether the plaintiff has shown that the land rather than its monetary equivalent better serves justice between the parties. This will depend on whether money is an adequate substitute for the plaintiff's loss and this in turn will depend on whether the subject matter of the contract is generic or unique.
What then are those factors that will determine when it is just to order specific performance? The inquiry begins with Semelhago by asking if a substitute property is readily available, but it does not end there. …
Uniqueness is a matter of proof and the onus lies on the party seeking the remedy. …
(At ¶55-57)
[17] Lax J. concluded that locational factors uniquely desirable to the plaintiff (purchaser) in that case, including proximity to a complimentary business enterprise (a large theme park) and a similar property (a hotel) already owned by the purchaser, weighed in favour of specific performance.
[18] In United Gulf Developments Ltd. et al. v. Iskandar et al. (2004), 235 D.L.R. (4th) 609, [2004] N.S.J. No. 66 (C.A.), Roscoe J.A. referred to both Semelhago v. Paramadevan, supra, and John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. supra. He held that Semelhago does not stand for the proposition that specific performance is never available as a remedy for a breach of contract for the sale of land. Rather, it is no longer appropriate to assume that it is always the suitable remedy, and should not be granted as a matter of course (¶16). He found that:
… [T]he applicability of the specific performance remedy will not depend entirely on the issue of uniqueness. As indicated in Neighbourhoods of Cornell Inc. v. 14401066 Ontario Inc., 2003 Carswell Ont. 2757 (S.C.J.), para. 112 et seq., uniqueness is only part of the equation. The essential question is whether damages are capable of compensating the loss and whether accurate assessment of the damages will be possible, or whether the exercise will be chiefly speculative and conjectural.
(At ¶19)
[19] In Trinden Enterprises Ltd. v. Ramsay, [2004] B.C.J. No. 294, 2004 BCSC 226, Meiklem J. considered Semelhago and John Dodge Holdings in determining a Rule 18A application in which the applicant sought an order dismissing the plaintiff's claim for specific performance of the purchase and sale of a commercial property. There, the applicant's evidence addressed uniqueness, but did "not answer the question as to why damages are not adequate compensation…" (¶50). The claim of the remedy of specific performance was dismissed. On the subject of "uniqueness", Meiklem J. observed:
Clearly this location was especially suitable for the plaintiff's purposes but the plaintiff's purpose is nevertheless a commercial investment purpose and the suitability factors merely go to optimizing the use of the facilities and consequently maximize revenues and, in turn, profits. … (At ¶49)
[20] In Ali v. 656527 B.C. Ltd., [2004] B.C.J. No. 1248, 2004 BCCA 350, Lowry J.A. held at ¶23:
Where specific performance once was regarded as a presumptive remedy for a seller's substantive breach of a contract for the purchase and sale of real estate, it is now accepted that the purchaser seeking that remedy must prove that the property is unique to the extent that a substitute would not be readily available and that there is a fair, real, and substantial justification for the decree that is sought: Semelhago v. Pramadevan, [1996] 2 S.C.R. 415, 136 D.L.R. (4th) 1 [paragraph] 21-22. The considerations are most recently discussed in United Gulf Developments Ltd. v. Iskandar (2004), 235 D.L.R. (4th) 609, 2004 NSCA 35. See also Cormack v. Hardwardt, [1998] B.C.J. No. 2684 (S.C.), and Taberner v. Ernest & Twins Development Inc. (2001), 89 B.C.L.R. (3d) 104, 2001 BCSC 367.
[21] It is plain from United Gulf Developments, supra, and Trindan Enterprises, supra, that the onus is on the party claiming specific performance to demonstrate that damages are not adequate compensation.
[22] Semelhago, and other decisions mentioned above, reveal that an assessment of uniqueness must take account not only of the attributes of the property, but also the attraction or value of those attributes to the particular purchaser. A property which is generally considered desirable due to locational or other market factors will not necessarily be considered sufficiently unique to satisfy the test for specific performance. Similarly, a property which has an intrinsic value to a particular purchaser, if readily substituted by another available property, will not be sufficiently unique to establish a basis for specific performance. Further, assuming that some aspect of uniqueness can be made out, it remains for the purchaser seeking specific performance to establish further justification for specific performance. This may take the form of proof that damages are not adequate compensation.
IV. THE EVIDENCE
[23] The evidence includes affidavits of John Peckham, numbers 1, 2 and 3, sworn August 20, August 23, and September 16, 2004; an affidavit of Paul Jhooty sworn August 13, 2004; and affidavits of Ken Meiklejohn, numbers 1, 2 and 3, sworn on September 13, September 15, and October 8, 2004.
[24] Mr. Peckham is Earthworks' representative. Mr. Meiklejohn is the principal of Spectacular, and Mr. Jhooty represents 7-Eleven.
[25] The Peckham and Meiklejohn affidavits set out in detail the events leading to the transactions summarized above under the heading "Introduction". To the extent that there is any conflict in the affidavit evidence, it relates to issues that may arise over the validity of the alleged contract between Earthworks and Spectacular.
[26] The Jhooty affidavit relates to Earthworks' dealings with 7-Eleven.
[27] The Meiklejohn affidavits describe the Property and the business undertaking of Spectacular. The business of Spectacular is real estate development. The Property is located at the corner of King George Highway and 128th Street, Surrey. The Property is a high exposure corner site, ideal for a gas station and convenience store. It was, and remains, Spectacular's intention to develop the Property as a commercial property and to lease components of it to tenants.
[28] Mr. Meiklejohn is the sole shareholder of Spectacular. He also owns 95% of the shares of a parent company of two other companies, namely Spectacular Electronic Advertising (Edmonton) Inc. ("Spectacular Alberta") and Spectacular Electronic Advertising (B.C.) Inc. ("Spectacular B.C. "). Spectacular Alberta is an established sign leasing company. It has operated for over ten years, and owns large Pylon signs installed on shopping mall properties in Edmonton. Its revenue is earned from leasing advertising panels on the sign structures. Spectacular B.C. is pursuing the same business in British Columbia. It wishes to install large signs in strategic locations on heavily travelled highways in each market area in the province. According to Mr. Meiklejohn's affidavit #2, it "has been and remains the intention of Spectacular, in conjunction with Spectacular B.C., to install such a sign on the property". Mr. Meiklejohn deposes that the Property, due to location, is uniquely suited for the installation of such a sign, and this was one of the main reasons for Spectacular's interest in the Property.
[29] The Property is described in material provided by Earthworks' realtor, the defendant Mr. Preston, as a "high exposure corner site", located at the entrance to Surrey, British Columbia. Mr. Meiklejohn deposes that "the location of the sign should generate interest from advertisers which in turn will provide a stream of income to Spectacular and Spectacular B.C. that would be unavailable at any other location".
[30] Mr. Meiklejohn deposes in affidavit #3 that, based on property searches obtained by a realtor, the only site along the King George Highway suitable to support a convenience store and the proposed sign is the Property.
V. POSITION OF PARTIES
1) Plaintiff/Applicant
[31] Earthworks, as defendant by way of counterclaim, seeks summary judgment under Rule 18A, dismissing Spectacular's claim for specific performance. It argues that there are no conflicts in the evidence that would preclude the court from determining the central legal issue on this application. That issue is whether Spectacular's claim to specific performance can be sustained.
2) Defendant/Respondent
[32] Spectacular, as plaintiff by way of counterclaim, argues that the determination of this issue is not suitable for proceeding under Rule 18A. It contends that proceeding on this issue under Rule 18A would represent the "litigation in slices approach", which has been cautioned against by the B.C. Court of Appeal.
[33] Spectacular's position is that the court should not determine the issue of remedy without at the same time determining whether one or both contracts of purchase and sale are valid and enforceable, and determining which, if either, of the putative purchasers is entitled to specific performance. In order to facilitate the ultimate resolution, in one trial, of all of these issues, Spectacular seeks to join 7-Eleven as a defendant to its counterclaim against Earthworks.
[34] Spectacular contends that the task of the court, once 7-Eleven is added as a defendant, includes a determination of entitlement to specific performance, as between Spectacular and 7-Eleven and as against Earthworks, on the basis of the relative merits of each putative purchaser's claim to the property based on "uniqueness". To that end, Spectacular also seeks orders for the examination of Mr. Peckham and Mr. Jhooty.
VI. ANALYSIS
1) Suitability for Rule 18A Summary Trial
[35] The premise underlying Spectacular's applications for joinder and oral examination of Earthworks' representative, Mr. Peckham, and 7-Eleven's representative, Mr. Jhooty, is that the issue over the entitlement of either of the putative purchasers to specific performance must take into account, and resolve, their respective claims that the Property is, having regard for the particular interest of each in the Property, unique. This, Spectacular contends, militates against the determination, by summary trial, of its entitlement to pursue a claim for specific performance.
[36] I do not accept Spectacular's position on the suitability of the present issue for determination pursuant to Rule 18A.
[37] The existence of competing claims to specific performance of contracts for the purchase and sale of land does not, in and of itself, preclude the determination of either claim pursuant to Rule 18A. Where, as here, the facts relevant to the legal issue raised by the application may readily be determined, the central question is whether a determination of the issue pursuant to Rule 18A would be unfair to the respondent.
[38] Spectacular's argument on unfairness relies of the premise that only one of the putative purchasers could have a valid contractual claim to specific performance. This premise is incorrect. It may be that both putative purchasers may establish a basis on which specific performance may be ordered on the application of the principles reflected in the case law. In that event, other principles will come into play in a determination of which putative purchaser will be awarded the Property.
[39] It is not the court's task to weigh the merits of one putative purchaser's claim as against the merits of the others. Hence, it could not be unfair to either putative purchaser for the court to determine the entitlement of one putative purchaser's claim to specific performance without considering the merits of the competing putative purchaser's claim.
[40] Spectacular has, in its affidavit material, set out the basis for its claim that the Property, having regard to its particular interest as reflected by the nature of its business undertaking, is unique. There is no contrary evidence on that issue. Proceeding under Rule 18A is an efficient and appropriate means of determining the issue raised by Earthworks on this application.
2) Claim for Specific Performance
[41] The material before me does not state the area of the Property. It is, however, comprised of eleven sub-divided lots, and is of a size that could accommodate a convenience store and a gas station. In his affidavit #1, Mr. Meiklejohn deposes "that the location constitutes a unique commercial opportunity for a convenience store and gas station. I have received an offer to lease a portion of the property from another convenience store company".
[42] Considered as a commercial property suited to the above-mentioned purposes, this property would not be unique in the sense required to found a claim for specific performance. Such uses are entirely ordinary. Nor is the commercial retail usage, with the possible exception of commercial signage, unique to Spectacular.
[43] I take at face value Spectacular's evidence that it has at all times intended to develop the Property for commercial purposes which include rental of signage space. I also accept for the purpose of this application only that: (1) the Property, due to high visibility from a well-travelled highway, is well located for a commercial purpose, namely signage; and (2) signage is a business undertaking connected, through Mr. Meiklejohn's corporate shareholdings, to Spectacular. However, I see nothing unique in the pursuit of opportunities for land well located for advertising signs. Nor am I satisfied that alternate sites for that aspect of Spectacular's business undertaking, namely signage, are unavailable. The focus of the search referred to in Mr. Meiklejohn's affidavit number 3 is on sites which could support both a convenience store and the "proposed sign". There is no connection between the convenience store usage and the use for signage which would establish synergy comparable in quality to that discussed in John Dodge Holdings Ltd., supra, where the court allowed the claim of specific performance.
[44] Assuming, despite the concern expressed in the immediately foregoing paragraph, that the threshold test for "uniqueness" has been met, a further question remains for resolution. That question is whether, on the evidence, damages would be an adequate remedy.
[45] The onus is on the applicant to demonstrate that damages would not be adequate compensation (Trinden Enterprises Ltd. v. Ramsay, supra, at ¶50). The respondent has not adduced evidence from which it could be concluded that damages would not be an adequate remedy.
VII. CONCLUSION
[46] The claim of Spectacular to specific performance is dismissed. Spectacular is at liberty to amend its counterclaim to assert a claim for damages.
[47] The certificate of pending litigation registered against the Property will be vacated.
[48] I have not, for the purposes of this application, made any determination in relation to Spectacular's claim of a contractual relationship with Earthworks.
[49] Spectacular's application to join 7-Eleven as a defendant to its counterclaim, and to examine Mr. Peckham and Mr. Jhooty on their affidavits, is dismissed. In so finding, I take account of the relationship between Spectacular's application and its argument on the core issue over the availability of specific performance. Spectacular will be at liberty to reapply to join 7-Eleven, in the event that it considers the same advisable. I will not be seized of any such application.
[50] Costs will be in the cause.
“H.A. Slade J.”
The Honourable Mr. Justice H.A. Slade