2008 BCSC 585 Lalani v. Tremblay

Before: The Honourable Mr. Justice Pitfield

Reasons for Judgment

Counsel for the Plaintiff:	H. S. MacDonald
Counsel for the Defendants:	P.J. Fominoff
Date and Place of Trial:	April 7 - 10, 2008
	Vancouver, B.C.

[1] Mr. Lalani seeks specific performance of a contract for the purchase of property beneficially owned by Mr. Marsh, but registered in the names of his mother and step-father, Sally and George Tremblay. If Mr. Marsh is found to have breached the contract, then Mr. Lalani also claims damages for breach of warranty of authority as a result of the purchase price having been increased from $810,000 to $840,000 in circumstances which I will describe.

[2] In his defence, Mr. Marsh claims that the contract of purchase and sale dated May 1, 2006, but signed by all of the parties May 2, 2006, was terminated in accordance with its terms because Mr. Lalani did not provide written notice stating that the conditions contained in the agreement for Mr. Lalani's benefit had been waived or fulfilled on or before the date specified in the agreement.

[3] The outcome of the action turns on the answers to two questions:

1. Were the terms set forth in a document entitled "Contract of Purchase and Sale Addendum" conditions which Mr. Lalani was obliged to waive or declare fulfilled by written notice?

2. If written notice was required, was it provided on or before May 13, 2006?

[4] The action arises in the following circumstances.

[5] Mr. Marsh is the beneficial owner of property at 6051 - 152nd Street, Surrey, British Columbia. On March 1, 2003, Mr. and Mrs. Tremblay became the registered owners of the property as bare trustees for Mr. Marsh. The change in registration was made to protect the property from persons whom Mr. Marsh feared might become his creditors and seize the property.

[6] In March 2006, Mr. Lalani discovered the Marsh property as he was driving in the neighbourhood. The Lalanis had recently acquired a townhouse in the area. Mr. Lalani knocked at the door and was greeted by Mr. Marsh’s spouse, Louise Marsh. Mr. Lalani asked Mrs. Marsh if she would be interested in selling the property. She said that Mr. Lalani should talk to her husband.

[7] Mr. Lalani testified that he was attracted to the property because of the log house attached to the land, and because the property was in the vicinity of a school which he and his wife thought would be good for their son.

[8] Mr. Lalani spoke to Mr. Marsh who indicated that he would be prepared to sell. While Mr. Lalani is now a licensed real estate agent, he was not such, nor a lawyer or notary, at the time. He prepared a contract of purchase and sale using forms he obtained from the internet. The contract named Mr. Wayne Marsh, acting under a power of attorney for his mother, Sally Tremblay, as seller, and Mr. Lalani as buyer. The sale price was $800,000. A deposit of $10,000 was payable upon subject removal. Closing was to take place in August 2007. A contract of purchase and sale addendum was attached to the contract. Neither seller nor buyer consulted with a lawyer or a notary. The contract was signed on April 16, 2006, by Mr. Lalani and by Mr. Marsh, purportedly under a power of attorney from Ms. Tremblay.

[9] Soon after April 16, 2006, Mr. Marsh advised Mr. Lalani that Mr. Tremblay was one of the registered owners of the property. Mr. Lalani prepared a new agreement without the assistance of a lawyer or notary. The agreement named Sally and George Tremblay as sellers, and Mr. Lalani as buyer. The contract provided for payment of a $10,000 deposit, but the earlier term stating that it would be paid "upon subject removal" was not repeated. The contract of purchase and sale addendum was modified. On April 26, 2006, Mr. Lalani signed the revised contract as buyer, Mrs. Tremblay signed as seller, and she purported to sign under a power of attorney for Mr. Tremblay.

[10] On April 27, 2006, Mr. Lalani prepared another contract containing the same terms and conditions as the contract signed on April 26, 2006, but naming Mr. Marsh as seller, and Mr. Lalani as buyer. Mr. Lalani testified that he wanted that agreement because Mr. Marsh had advised the property would be transferred from Mr. and Mrs. Tremblay back to Mr. Marsh before transfer to Mr. Lalani and he wanted to ensure that Mr. Marsh would be obliged to complete the transfer.

[11] After April 27 and before May 1, 2006, Mr. Marsh advised Mr. Lalani that in fact his mother did not hold a power of attorney on behalf of George Tremblay. Mr. Marsh told Mr. Lalani that the April 26 agreement was not effective because it had not been executed by the registered owners. He also advised Mr. Lalani that he and his wife wished to defer the sale of the property until such time as they could "sort out their affairs".

[12] Mr. Lalani persuaded Mr. and Mrs. Marsh to meet with him and his wife at the Swiss Chalet in Langley on May 1, 2006. Following a lengthy discussion and lunch, Mr. Marsh agreed that he would sell the property provided that the sale price was increased to $840,000. Mr. Lalani reluctantly agreed. He did not advise Mr. Marsh of his view that Mrs. Tremblay had misrepresented her authority to sell at a price of $800,000 and would be liable in damages for breach of warranty of authority as a result.

[13] Mr. and Mrs. Marsh left the Swiss Chalet and returned to Mr. Marsh's place of business. Mr. and Mrs. Lalani preceded them. The Lalanis presented Mrs. Marsh with a plant and expressed their appreciation for the Marshes’ co-operation in connection with the sale. Mr. Lalani and Mr. Marsh engaged in a discussion. Mr. Lalani provided Mr. Marsh with a new contract of sale dated May 1, 2006 which he had prepared, and which provided for sale at a price of $840,000. The agreement provided for a deposit of $10,000, the due date for which was not specified, and a closing date of August 28, 2007. As was the case with the earlier contracts, the May 1, 2006 agreement contained a contract of purchase and sale addendum bearing the same date.

[14] The understanding between Mr. Marsh and Mr. Lalani was that Mr. Marsh would visit his parents that evening to obtain their signatures on the contract of purchase and sale and the contract of purchase and sale addendum. Mr. Marsh and Mr. Lalani agreed to meet the next morning at which time Mr. Marsh would deliver the signed agreement to Mr. Lalani and Mr. Lalani would sign.

[15] Mr. Lalani and Mr. Marsh met on May 2, 2006, as planned. The agreement had been signed by Mr. and Mrs. Tremblay. Mr. Lalani signed, as did Mr. Marsh.

[16] On May 3, 2006, Mrs. Lalani delivered a bank draft in the amount of $10,000 to Richards, Buell, Sutton, the solicitors who were to act on behalf of Mr. Lalani on the closing. On May 5, 2006, the solicitors wrote to Mr. Marsh advising that they were holding the deposit in trust.

[17] On May 24, 2006, Mr. Marsh's solicitor wrote to Mr. Lalani's solicitor to say that because the conditions in the addendum to the contract of purchase and sale had not been removed, the contract was terminated and the deposit could be dealt with by Mr. Lalani’s solicitors as directed by him.

[18] When he learned that Mr. Marsh’s solicitor had advised that the contract was terminated, Mr. Lalani provided his solicitor with a signed copy of a letter dated May 2, 2006 relating to the remove of the “subject to” clauses. He instructed his lawyer to respond to Mr. Marsh's solicitor saying that the subjects had been removed and there was a binding agreement between the parties.

[19] In due course, Mr. Lalani commenced this action.

[20] The first issue is whether the terms of the agreement required Mr. Lalani to give any notice that the subjects had been removed. Counsel on his behalf says he was not. In support of his argument counsel cites Sky Ranches Limited v. Nelson (1980), 30 B.C.L.R. 162 (C.A.) and McNabb v. Smith (1981), 30 B.C.L.R. 37 (S.C.). Each of those cases is readily distinguishable because neither contained any provision regarding notice in relation to the fulfilment or waiver of conditions in the agreement for the benefit of the buyer.

[21] In this case, clause 3 of the May 1, 2006 agreement provided:

3. TERMS AND CONDITIONS: The purchase and sale of the Property includes the following terms and is subject to the following conditions:

Each condition, if so indicated, is for the sole benefit of the party indicated. Unless each condition is waived or declared fulfilled by written notice given by the benefiting party to the other party on or before the date specified for each condition, this Contract will be terminated thereupon and the Deposit returnable in accordance with the Real Estate Act.

No text was inserted in the space provided.

[22] In the agreement which Mr. Lalani had prepared on April 16, 2006, he had inserted the following text:

This agreement is signed by way of power of attorney, copy of such is attached to and forms part of this agreement.

[23] The April 16, 2006 contract of purchase and sale did not recite any conditions. However, the parties signed a contract of purchase and sale addendum bearing the same date that set forth a number of conditions for the benefit of the purchaser.

[24] A contract of purchase and sale addendum was attached to the April 26, 2006 contract of purchase and sale. An addendum was also attached to the May 1, 2006 contract of purchase and sale. It provided as follows:

FURTHER TO THE CONTRACT OF PURCHASE AND SALE DATED May 1st, 2006, MADE BETWEEN Rahim Lalani AS BUYER, AND Sally Tremblay, George Tremblay, AS SELLER AND COVERING THE ABOVE-MENTIONED PROPERTY, THE UNDERSIGNED HEREBY AGREE AS FOLLOWS:

Subject to a new first mortgage being made available to the Buyer by May 13th, 2006. This condition is for the sole benefit of the buyer.

Subject to the Buyer, on or before May 13th, 2006 at the Buyer's expense, obtaining and approving an inspection report against any defects which may adversely affect the property's value. The seller will allow access to the property for this purpose on reasonable notice. This condition is for the sole benefit of the buyer.

Subject to the buyer, on or before May 13th, 2006, searching and approving title to the property against the presence of any charge or other feature, whether registered or not, that reasonably may affect the property's use or value. This condition is for the sole benefit of the Buyer.

Subject to the buyer obtaining legal advice that is satisfactory to the buyer by May 13th, 2006.

The seller agrees to repair the roof leak as soon as possible and notify the buyer when it is done.

The property has two tenancies which the seller will provide details for by May 13, 2006. The buyer understands that the property contains unauthorized accommodation.

The purchase price includes a mobile home that is rented on a month to month basis.

In consideration of the sum of $10.00 (Ten Dollars) paid by the Buyer to me, I Wayne Marsh Hereby Covenant and agree with the Buyer that in the event the property or any part thereof is transferred to me, the within contract shall be binding on me with respect to the interest in the property transferred to me and I shall be bound by all of the interests in the property transferred to me and I shall be bound by all of the covenants and obligations thereunder on the part of the Seller as thought [sic] I had initially signed this contract as seller.

The contract of purchase and sale addendum was signed concurrently with the principal agreement.

[25] In my opinion, the addendum dated May 1, 2006 cannot be construed as a collateral contract. It comprised a vital part of the contract of purchase and sale between the parties. The words “each condition” appearing in clause 3 of the contract cannot reasonably be restricted to conditions enumerated in the body of clause 3. In the ordinary course reference will be made in clause 3 or its equivalent that the conditions to which reference is made are those set forth in the addendum. Clause 3 should reasonably be construed as applying to any conditions contained in any part of the agreement. The clause specifically provides that unless each condition was waived or declared fulfilled by written notice given by the party for whose benefit it was inserted to the other party on or before the date specified in respect of the condition, the contract would be terminated. The contract provided that written notice had to be given on or before May 13, 2006.

[26] The fact that Mr. Lalani asserts that he provided notice on May 2, 2006 dispels any doubt on the question of whether Mr. Lalani was aware of the written notice requirement and its application to the conditions intended to benefit him that were contained in the contract of purchase and sale addendum. Anything other than written notice of fulfilment or waiver was not sufficient.

[27] The second question then is whether Mr. Lalani provided written notice on or before May 13, 2006. I find as a fact he did not.

[28] Mr. Lalani testified that he discussed the removal of subjects with Mr. Marsh when they met at the Swiss Chalet on May 1, 2006. There is an entry in Mr. Lalani's Day-Timer to that effect. At a point in his evidence, Mr. Marsh testified that there was no discussion at that meeting about the removal of subjects. When directed to an answer given on his examination for discovery, Mr. Marsh modified his answer to say he did not recall whether Mr. Lalani advised him that he was removing the subjects. I find as a fact that it is more likely than not that the question of the “subjects” and their removal was discussed at that meeting.

[29] After that meeting, Mr. Lalani returned to his residence to revise the contract in order to reflect a purchase price of $840,000. He did not delete any of the subjects from the agreement.

[30] Mr. Lalani testified that after the meeting with Mr. Marsh at the Bread Garden on May 2, 2006, he returned to his residence where he prepared a letter dated May 2, advising that the subjects were being removed. Mr. Lalani testified that he then went to the Marsh residence where he found Mrs. Marsh's father doing some yard work. He testified he was told that Mr. Marsh was not home and Ms. Marsh was sleeping in the house. Mr. Lalani testified that he left the letter dated May 2, 2006 in the mailbox at the entrance to the property.

[31] Mrs. Lalani testified that she reviewed the subject removal letter on the computer on May 2, 2006, as it was being prepared by Mr. Lalani.

[32] Mr. Rob Chetner, a friend of Mr. Lalani's who was also a building contractor familiar with real estate development, testified that he accompanied Mr. Lalani to the Marsh property on the morning of May 2 and that while there, Mr. Lalani showed him the subject removal letter. He testified that he walked around the property with Mr. Lalani and before they left, he saw Mr. Lalani put the envelope containing the letter in the Marsh mailbox.

[33] Mr. Lalani further testified that he telephoned Mr. Marsh at 10:16 a.m. on May 2, 2006, to advise him that he was at the property and had just left a subject removal letter in the mailbox. Mr. Lalani testified to another phone call at 9:33 p.m. on May 4, 2006 during which Mr. Marsh confirmed receipt of the subject removal letter.

[34] Mr. Marsh acknowledged that he received a telephone call from Mr. Lalani at 10:16 a.m. on May 2, 2006, but he denies that Mr. Lalani said he was at the property and had just left the subject removal letter in the mailbox. Mr. Marsh testified that there was no discussion about a subject removal letter. Rather, Mr. Lalani thanked Mr. Marsh for engaging in the transaction and confirmed that the Lalanis would visit the property on May 6, 2006. Mr. Marsh denies speaking to Mr. Lalani at 9:33 p.m. on May 4, 2006. He said that Mr. Lalani left a voice mail message at that time confirming the inspection scheduled for May 6.

[35] The objective evidence does not support Mr. Lalani's evidence regarding the preparation and delivery of a subject removal letter.

[36] Had Mr. Lalani intended the subjects to be removed on May 1, 2006, as he testified was the case, he could have deleted the terms from the purchase and sale addendum before he delivered the contract to Mr. Marsh on that date in order that he could obtain the signatures of Mr. and Mrs. Tremblay.

[37] Mr. Lalani was familiar with the fact that changes could be made to a contract by striking through and inserting and initialling changes to the text in the contract. The parties had done that in the contract dated April 16, 2006, but did not do so in the contract of May 1 in order to delete the discrete conditions which Mr. Lalani said he intended to waive. Mr. Lalani testified that he left the conditions in the Agreement because of his prior concerns about the difficulties he had previously encountered in obtaining signatures from Mr. Marsh and Mr. and Mrs. Tremblay.

[38] A second opportunity to make the changes occurred on May 2, 2006 when Mr. Marsh delivered the contract signed by Mr. and Mrs. Tremblay. It was open to Mr. Lalani to delete the conditions which had been inserted solely for his benefit when he and Mr. Marsh signed that agreement, or to record the fact of waiver on the contract. That was not done.

[39] The text of the letter of May 2, 2006 is inconsistent with contemporaneous drafting and preparation on May 2, 2006 immediately following the meeting at the Bread Garden. The text was the following:

Dear Mr. Wayne Marsh, George and Sally Tremblay,

I hope things are well. My family is very excited with our decision to purchase the log home and we thank you once again for giving us the opportunity to purchase such a wonderful property. As discussed, this location is ideal for us as it is very central to our sons school which is located across the street, as well as it is very close to our family that live nearby. As per my last conversation with Mr. Wayne Marsh this morning, I am happy to let you all know that I am removing all subjects that were stated in our Contract of Purchase and Sale Addendum dated May 1st, 2006. As per our agreement, my wife will be delivering a deposit of $10,000 (ten thousand dollars) to our Lawyer: Michael Leroux at Richards Buell Sutton LLP as per my agreement - in the next day or so to make this a firm deal. Our lawyers will inform you shortly of this. You can contact them if you wish, should you have any questions, as I will be out of town for the next couple of days. Their contact number is (604) 682-3664. Thank you once again, we look forward to moving forward with this.

Sincerely,

Rahim Lalani

[40] The tone of the letter is not consistent with the preparation of the letter immediately following upon a discussion at the Swiss Chalet or the Bread Garden. In addition, the font in which the letter of May 2, 2006 was prepared was markedly different from the font used for the purpose of inserting the conditions in the contract of purchase and sale addendum. It would have been possible to adduce evidence of the date on which the subject removal letter was drafted on Mr. Lalani's computer but that was not done.

[41] When Mr. Lalani sent the contract to his lawyer, he did not enclose a copy of the May 2 letter. That is evident from the solicitor's letter to Mr. and Mrs. Tremblay dated May 5, 2006 in which the solicitor states "we understand that you may not have a copy of the contract of purchase and sale for your records, and accordingly, we enclose herewith a copy of same". No letter confirming removal of the conditions was forwarded to Mr. and Mrs. Tremblay, notwithstanding that the letter was a material part of the contract.

[42] Mr. Lalani did not testify to any discussions between him and his lawyer regarding the removal of the conditions on or before May 13, 2006. I find that the first discussion with his lawyer occurred on May 25, 2006 after Mr. Marsh's solicitor had written to say that by virtue of notice of waiver or fulfilment not having been provided in writing, the contract of purchase and sale had been terminated in accordance with its terms.

[43] Finally, my assessment of Mr. Lalani’s credibility is affected by the fact that while Mr. and Mrs. Lalani testified to their attraction to the Marsh property because of the log house and their desire to move in, they were prepared to agree to a closing in August 2007, some 16 months after the negotiations with respect to the purchase, Mr. Lalani did not undertake any formal inspection of the residence, he did not inspect the basement which had been rented, and he admitted that he had made inquiries of others in the immediate vicinity regarding their willingness to sell their properties. Mr. Lalani testified to no immediate development interest in the property or the neighbourhood but acknowledged that redevelopment was a future possibility. He also agreed that he had spoken to his friend, Mr. Chetner, a builder and contractor, approximately 30 times in the period of the negotiations with the Marshes. All of Mr. Lalani’s conduct undermines the credibility of his stated intention regarding the property.

[44] Because I reject Mr. Lalani's evidence that a subject removal letter was prepared or delivered on May 2, 2006, it must be evident that I reject the evidence of Mrs. Lalani and Mr. Chetner to like effect. Their evidence regarding the preparation and delivery of a subject removal letter which was intended to reinforce Mr. Lalani's evidence is simply not credible.

[45] In the result, the contract of purchase and sale was terminated because written notice was not provided within the time specified by the parties in the agreement, including the addendum.

[46] Because the contract was terminated by Mr. Lalani's omission to provide written notice, he has and will be required to pay no amount on account of the purchase price. It follows that his claim for damages for breach of warranty of authority must also fail.

[47] The plaintiff's action is dismissed. The defendant is entitled to costs.

"The Honourable Mr. Justice Pitfield"

Citation:	*Lalani v. Tremblay,*
	2008 BCSC 586