Citation:
Hutchingame v. Johnstone,
2007 BCCA 74
Date: （略）
Docket: CA034081
Between:
Eric Hutchingame
Appellant
(Plaintiff)
And
David Ian Johnstone and
Margaret Anne Wheeler
Respondents
(Defendants)
Before:
The Honourable Madam Justice Rowles
The Honourable Madam Justice Ryan
The Honourable Mr. Justice Lowry
J. C. McKechnie
Counsel for the Appellant
J. R. Jordan and P. Pelzer
Counsel for the Respondents
Place and Date of Hearing:
Vancouver, British Columbia
November 14, 2006
Place and Date of Judgment:
Vancouver, British Columbia
February 7, 2007
Written Reasons by:
The Honourable Mr. Justice Lowry
Concurred in by:
The Honourable Madam Justice Ryan
Dissenting Reasons by:
The Honourable Madam Justice Rowles (P. 15, para. 26)
Reasons for Judgment of the Honourable Mr. Justice Lowry:
[1] As part of the sale to Eric Hutchingame of two waterfront lots on a coastal island, the vendors, David Johnstone and Margaret Wheeler, agreed to assign their interest in the adjacent foreshore under a lease from the Provincial Crown. The lease provided in part:
7.1 You must not … assign … this Agreement … without our prior written consent, which consent we may withhold in our sole discretion.
* * *
7.4 Prior to considering a request for our consent under section 7.1, we may require you to meet certain conditions, …
[2] Although both the purchaser and the vendors were represented by solicitors, the Crown's consent to the assignment had not been requested by the date on which the transaction was to have closed such that the sale was not completed. The purchaser took the position that, because the vendors were not able to assign the lease (i.e., they were not "in title"), they were in breach of and had repudiated the agreement. He subsequently commenced this action for specific performance. It was tried before Mr. Justice Myers and dismissed: 43 R.P.R. (4th) 292, 2006 BCSC 771. Time was determined to have been of the essence and the sole issue on this appeal is whether it was the vendors or the purchaser who bore the obligation to request and obtain the required consent.
The Agreement
[3] The agreement of purchase and sale was signed using a standard Real Estate Board form prepared by a real estate agent. The only reference to the foreshore was in the description of the property and that was confined to "Dist. Lt. 2318, Rupert District". Initially, there was no reference to a lease or to any assignment thereof, but an addendum signed subsequently did reference the "foreshore lease". It was accordingly an implied term of the agreement that the vendors would assign their leasehold interest in the foreshore to the purchaser providing the Crown's consent could be obtained.
[4] When a request contemplated by clause 7.4 of the lease is made, the Crown does require that certain conditions (as outlined below) be met. If they are met, consent to an assignment of a foreshore lease is invariably given as a matter of course. The required consent was a condition precedent to the completion of the transaction. It was a future uncertain event, the happening of which was dependent upon the will of a third party: McCauley v. McVey, [1980] 1 S.C.R. 165, Laskin C.J. for the majority, at 170, quoting Judson J. in Turney v. Zhilka, [1959] S.C.R. 578 at 583. If, after it had been requested and the necessary steps had been taken to meet the Crown's conditions, the Crown's consent had not been given, the agreement would have been at an end.
[5] It follows that it was then an implied term of the agreement that the vendors would assign their leasehold interest in the foreshore to the purchaser, and in order to enable them to do so a request for the Crown's consent would be made and the necessary steps taken to meet the Crown's conditions. Who then was to make the request? And who was to take the steps necessary to meet the Crown's conditions?
The Trial Judgment
[6] The judge framed the question simply as which party bore the primary obligation to obtain the Crown's consent to the assignment of the foreshore lease (para. 68)? He considered Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072 to be a case where the Supreme Court had answered a similar question, although that case had nothing to do with the assignment of a lease. It arose out of an agreement for the sale of part of a piece of property. The agreement made no mention of the vendor's property being subdivided but it was known that the sale would require subdivision approval under the governing legislation. The approval had not been obtained at the time of closing, the sale was not completed, and the purchaser sued for specific performance. Unlike this case, the material question in that case was whether, as the vendor maintained, the agreement for the sale of the property was unenforceable by reason of there being no express provision as to which party was to obtain the required subdivision approval. Writing for the court, Dickson J. (later C.J.) concluded that the approval was an implied condition precedent that the vendor was obligated to fulfil, if it could, in order to sell its property. The judge quoted the following passages from Dynamic Transport at 1083-1084:
In appropriate circumstances the courts will find an implied promise by one party to take steps to bring about the event constituting the condition precedent: ...
There are many cases in which provisions of a contract were subject to the condition precedent of an approval or a licence being obtained, and one party was by inference in the circumstances held to have undertaken to apply for the approval or licence: see Hargreaves Transport Ltd. v. Lynch [[1969] 1 W.L.R. 215]; Brauer & Co. (Great Britain) Ltd. v. James Clark (Brush Materials) Ltd. [[1952) 2 All E.R. 497]; Société d'Avances Commerciales (London) Ltd. v. Besse & Co. (London) Ltd. [[1952] 1 T.L.R. 644]; and Smallman v. Smallman [[1971] 3 All E.R. 717]. This type of case is merely a specific instance of the general principle that "the court will readily imply a promise on the part of each party to do all that is necessary to secure performance of the contract": 9 Hals. (4th ed.), p. 234, para. 350: see also Chitty on Contracts, "General Principles", (23rd ed.) p. 316, para. 698, where it is said: "The court will also imply that each party is under an obligation to do all that is necessary on his part to secure performance of the contract."
* * *
In a purchase and sale situation, the "person who proposes to carry out a subdivision of land" is the intending vendor. It is he who must divide his parcel of land, which has hitherto been one unit, for the purpose of sale. If a purchaser carried out the actual work in connection with the application, he could only do so in the vendor's name and as his agent. The vendor is under a duty to act in good faith and to take all reasonable steps to complete the sale. I cannot accept the proposition that failure to fix responsibility for obtaining planning approval renders a contract unenforceable. The common intention to transfer a parcel of land in the knowledge that a subdivision is required in order to effect such transfer must be taken to include agreement that the vendor will make a proper application for subdivision and use his best efforts to obtain such subdivision. This is the only way in which business efficacy can be given to their agreement. In the circumstances of this case, the only reasonable inference to be drawn is that an implied obligation rested on the vendor to apply for subdivision.
[7] The judge's consideration of this and some other authorities he reviewed led him to conclude, at paragraph 71, that it was the circumstances under which the agreement was made, and what happened thereafter, that determined which party bore the obligation of requesting and obtaining the required consent to the assignment. He found that (had a request been made) meeting the Crown's conditions required significantly more from the purchaser than from the vendors and concluded that it was the purchaser who bore the primary obligation to obtain the Crown's consent to the vendors assigning their leasehold interest in the foreshore. He said:
[75] I therefore conclude that, in order to give the contract business efficacy, the primary obligation to obtain Crown approval of the foreshore lease assignment rests with the purchaser of the lands to which the lease is attached. The purchaser is obligated to act in good faith and take all reasonable steps in obtaining the approval. The vendor is under an implied obligation to cooperate in this by performing the steps [previously] outlined.…
[8] I understand him to have meant that the purchaser was required to request the consent and to take the steps necessary to meet the Crown's conditions before the request would be considered. The vendors bore only the obligation to co-operate with the purchaser as necessary to permit the conditions to be met.
[9] The judge said he found support for his conclusion in the evidence of two conveyancing solicitors (who were in no way involved in the subject transaction) to the effect that, as a matter of practice, it is the purchaser's solicitor who assumes responsibility for obtaining a foreshore lease assignment.
Discussion
[10] I can say at once that I see little logic in the implication of a term that would have required the vendors to assign their leasehold interest but required the purchaser to make the request for the consent and then to take the steps necessary to meet the conditions to be met before the request was considered, particularly when the purchaser was not a party to the lease in question. There will be instances where consent to an assignment requires negotiation between a landlord and a proposed assignee of a lease, perhaps over a variation to accommodate the purchaser's intended use of the land, such that it will be desirable to burden the purchaser with obtaining consent to the assignment. But that is not a consideration in this case and, in any event, I would expect it to be a matter of express agreement between the vendors and the purchaser as in North West Value Partners Inc. v. Vancouver Hong Kong Properties Ltd., 20 R.P.R. (4th) 85, 2004 BCSC 768.
[11] In the absence of a stipulation to the contrary, every agreement for the purchase and sale of land implies an agreement on the part of the vendor to make good title: Halsbury's Laws of England, 4th ed. reissued, vol. 42 (London: Butterworths, 1999) at para. 137. The implication arises as a matter of law and burdens the vendor with the obligation of being in a position to convey good title as he has agreed to do. In McCauley, which was concerned with an agreement for the sale of land that was subject to a vendor obtaining a survey, Laskin C.J. stated the proposition as follows, at 168:
It is, of course, trite law that a vendor is under an implied obligation to give title even if the contract is silent, and a purchaser cannot be forced to take less than a full title unless the bargain has been for a lesser one.
[12] It must then be equally trite to say that, absent a stipulation to the contrary, vendors who agree to assign leasehold interests have always borne an obligation implied by law to obtain any necessary consent. The purchaser cites what was said long ago by Erle C.J. in Winter v. Dumergue (1865-66), 14 W.R. 281 at 282, aff'd 14 W.R. 699, a case where a vendor had sought to obtain the consent (or licence) required for the assignment of her leasehold interest in a piece of property but had been unsuccessful such that the purchaser claimed and obtained judgment for the return of his deposit:
I am also of opinion that by law the vendor of a lease, of which no valid assignment can be made without the consent of the lessor, is bound to make a good title, for which it is positively necessary to obtain the consent; and that otherwise there would be a failure of the condition to obtain a title. Here it is found that the vendor has been unable to get a license to assign, and that the attempts have been continued down to long after the time mentioned in the contract; and so that it never at any time was in the power of the vendor to get from her lessors a license to assign to the vendee. That, I think, was a failure of a condition precedent between the vendor and vendee, and of the essence of the contract; and if you fail to make good a step in the series of things to be done under the contract, which step is an essential part of the contract, the other side has a right to say the contract is at an end and to treat it as rescinded; and, if it is lawfully rescinded, to claim back the deposit paid on the assumption that it would be performed.
[13] We have been referred to no case upon which it could be suggested that the principle stated by the Chief Justice (with the concurrence of the other two members of the court sitting with him) has ever been undermined. To the contrary, an example of its application in relation to obtaining the consent of the Crown is to be found in Maas v. McMahon (1921), 62 D.L.R. 317 (Alta. S.C. (A.D.)), applied in Euroclean Canada Inc. v. Sonotek Ltd., [1982] O.J. No. 592 (H.C.J.) (QL) and Martin Architectural Woodwork v. Wicket Holdings Ltd., [1984] O.J. 1384 (H.C.J.) (QL). In Maas, where a vendor in a property transaction had contended that it was for the purchaser to obtain the consent of the Federal Crown to the assignment of certain leases, it was said, at 321-322:
The restriction upon assignment without leave of the Crown was a possible difficulty in the way of the plaintiff fulfilling his agreement, which it was his duty, and not the defendant's, to remove. He had taken the leases on that condition. He had to do the assigning and it was to him that consent had to be given. Surely it was for him to obtain that consent....
If a lessee enters into an agreement to assign a lease for a valuable consideration but the lease is only assignable with the lessor's consent, certainly no one would suggest that he could sue for the consideration on a mere tender of the assignment without having first obtained that consent.
[14] Given that, as a matter of law, the vendors bore the obligation of obtaining the consent of the Crown to the assignment of the foreshore lease if they could do so, I do not consider it was open to the judge to imply a contrary term, one which required the purchaser to make the request for the Crown's consent. A term implied by law can only be displaced by express agreement: see Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986 at 1012-1013, McLachlin J. (now C.J.) concurring in the result, citing Sterling Engineering Co. v. Patchett, [1955] A.C. 534 (H.L.) at 543-544, per Viscount Simonds, and at 547 per Lord Reid; and see G. H. Treitel, The Law of Contract, 7th ed. (London: Stevens: Sweet & Maxwell, 1987) at 161-162.
[15] Even if that were not so, I would have difficultly seeing any sound basis for implying a term that would burden the purchaser with obtaining the Crown's consent to a vendor assigning his leasehold interest when it was held by the Supreme Court of Canada in Dynamic Transport that it is the vendor who must seek and obtain the approval for the subdivision of the property he wishes to sell. Put another way, in the words of Dickson J., at page 1084, quoted above, if the "common intention to transfer a parcel of land in the knowledge that a subdivision is required … must be taken to include agreement that the vendor will make a proper application for subdivision", it must follow that a common intention to assign a leasehold interest carries with it the vendor's agreement to make a proper request for any consent to the assignment that may be required, subject to express provision to the contrary.
[16] Here, as in Maas, the vendors had taken the subject lease on the condition expressed in clause 7.1 that it would not be assigned without the Crown's consent. They had to make the assignment and it was to them that consent had to be given. They were required to make the request for the consent and, as provided in clause 7.4, it was they who were required to meet the Crown's conditions. Consistent with what was said by Dickson J. in Dynamic Transport, the purchaser could only have sought the Crown's consent as an agent for the vendors. He was not privy to the lease agreement and, in the absence of any express term that would make him an agent for the purpose, there was no basis on which he could properly have approached the Crown.
[17] Before granting its consent to the vendors assigning their leasehold interest to the purchaser, the Crown would have required an assignment fee of $250.00 which the vendors would have had to pay. The Crown would have required the payment of all outstanding taxes. The vendors owed taxes for the previous year and had paid nothing in taxes for the first half of the current year. The vendors would have been required to submit the original lease or, if it had been lost, they would have had to provide a statutory declaration to that effect. The vendors were required to pay rent on the foreshore lease and, while it appears the state of their account may not be entirely clear, they would have been responsible for the payment of any outstanding balance of rent due at the time of the assignment.
[18] The Crown would also have required a security deposit of $5,000.00 for rent and a certificate of insurance on the foreshore for general liability coverage of $1.0 million which the purchaser would have had to provide.
[19] I do not share the judge's view that more was required from the purchaser than from the vendor. It seems to me to be quite the reverse. But, in any event, the vendors' legal obligation to obtain the Crown's consent is not altered. There is no reason why, with the purchaser's co-operation, the vendors could not have met the Crown's conditions. Had he been asked, the purchaser would have had to provide the required deposit and certificate of insurance because, as Dickson J. said in Dynamic Transport, the court will imply that each party is under an obligation to do all that is necessary on its part to secure performance of an agreement for the purchase and sale of land. But the obligation to obtain the Crown's consent to the vendors assigning their leasehold interest remained with them. Had they sought the consent they required, and had it been denied so that the condition precedent could not be fulfilled, this would have been a different case; the purchaser could have claimed no more than the return of his deposit. But that is not what happened. The vendors made no request and took no steps to obtain the Crown's consent which, on the evidence, would have been granted as a matter of course once the Crown's requirements were met.
[20] The vendors accept that they were obligated to convey good title to their leasehold interest at closing but say that the trial judgment is to be upheld on the basis of the conveyancing practice in this province whereby, as established by the evidence, it can be said that it is the purchaser's solicitor who obtains the Crown's consent to the assignment of foreshore leases in transactions of this kind. They cite Shaw Industries Ltd. v. Greenland Enterprises Ltd. (1991), 54 B.C.L.R. (2d) 264 (C.A.) where Southin J.A., speaking for the Court, said:
[24] Hundreds, perhaps thousands, of real estate transactions take place in British Columbia every year in which the parties use various standard forms of interim agreement prepared by various of the real estate boards in the Province. Invariably they require the purchaser to bear the cost of conveyance. As Mr. Justice Bouck pointed out in the Burtini [Burtini v. Sovilj (1975), 61 D.L.R. (3d) 505 (B.C.S.C.)] case there has grown up a practice of the purchaser's solicitors preparing the transfer from the vendor to the purchaser. That practice was not I think so well developed at the time that Stewart v. Friedrichsen [(1960), 24 D.L.R. (2d) 477 (B.C.C.A.)] was decided.
[25] In my opinion now in British Columbia the rules are these:
1. Where the cost of conveyance is to be borne by the purchaser it is for the purchaser to prepare the transfer. It is for the vendor to be ready to execute it.
2. This rule will not apply in any circumstance where title to the lands is not registered in the Land Title Office in the name of the vendor. Thus, where the vendor must get in title he must prepare the documents.
[26] Although the first rule was not the rule at common law, it is a rule perfectly apt to our system of registration of land title and has the virtue of simplicity.
[21] What was said there has only to do with the preparation of transfer documents and is, in my view, of no assistance to the vendors. If anything, it supports the purchaser. Crown foreshore leases are not registered in the Land Title Office, thus it cannot be said that, based on this Court's statement in Shaw, it was for the purchaser to prepare the request for the Crown's consent or to meet the Crown's conditions before the request would be considered.
[22] I do not consider the evidence of the conveyancing practice to be relevant to resolving the issue on this appeal. Whatever the practice, it cannot alter the obligation borne by the vendors, as a matter of law, to obtain the consent needed to put them in title and to make the assignment of their leasehold interest, which they agreed to make. They cannot claim to be relieved of that obligation in the absence of express agreement, such that nothing can be implied from the conveyancing practice. It was for the vendors to do what was necessary to obtain the consent, albeit with the co-operation of the purchaser as discussed above, or make alternative arrangements with the purchaser in that regard. It must have been obvious to the vendors' solicitor some time prior to the closing date that the purchaser was not seeking the Crown's consent because he had received no request for any of the information that would have been required, but he apparently took no steps to raise any concern with the purchaser's solicitor before the closing date.
Conclusion
[23] I conclude then that it was not open to the judge to imply as a term of the agreement that the purchaser was obligated to obtain the Crown's consent to the vendors' assignment of their leasehold interest in the foreshore. Indeed, I have difficulty seeing why it could be said that the purchaser was the more appropriate of the two parties to this agreement to bear that obligation in any event. It follows that it was the vendors who, in my view, did not discharge the obligation they bore such that they were in breach of the agreement at the time the transaction was to have closed and the purchaser is entitled to succeed in his action against them. In my view, to conclude otherwise would be to erode a longstanding principle of law and unnecessarily burden a purchaser with an obligation that has always been borne by a vendor who, in the absence of an agreement to the contrary, must obtain consent to the assignment of a leasehold interest he has agreed to convey.
[24] The vendors have now entered into an agreement for the sale of one of their two properties to a third party such that specific performance is no longer available to the purchaser. His remedy will be confined to damages.
Disposition
[25] I would allow the appeal, set aside the order appealed from, grant judgment to the purchaser, and remit the matter to the trial court for the assessment of the purchaser's damages.
“The Honourable Mr. Justice Lowry”
I agree:
“The Honourable Madam Justice Ryan”
Reasons for Judgment of the Honourable Madam Justice Rowles:
I. Overview
[26] The appellant sued for specific performance of a contract for the purchase and sale (the "Agreement") of two adjacent waterfront lots and a foreshore lease appurtenant to one of the lots on Malcolm Island near Sointula, British Columbia. The action was dismissed by Myers J. on 12 May 2006: 43 R.P.R. (4th) 292, 2006 BCSC 771.
[27] One of the two issues at trial was whether time remained of the essence through to the final closing date. The appellant argued that time ceased to be of the essence because of amendments that changed the closing date and because of the conduct of the parties. The judge held that "the time is of the essence" clause was in effect as at the closing date and that finding is not challenged on the appeal.
[28] The second issue was who had the obligation to obtain the Crown's consent to the assignment of the foreshore lease and what effect the failure to obtain the consent had on the Agreement. The first agreement between the parties was made on 9 February 2004 and was to close on 30 April 2004. A copy of the foreshore lease was given to the dual agent on 14 February 2004. The parties subsequently entered into a new agreement with a closing date of 17 June 2004.
[29] The lease, which is not registered in the Land Title Office, requires the consent of the provincial Crown for assignment. By the terms of the lease, consent to assignment of the lease could be withheld in the Crown's sole discretion. The Agreement was silent as to whether the vendor or purchaser was required to obtain the consent. Neither party took steps to obtain the consent of the Crown for the assignment of the lease before the date for completion of the Agreement.
[30] The judge summarized the appellant's argument on the second issue, as follows:
[50] ... With respect to the foreshore lease, the plaintiff says that the Crown's approval of the foreshore lease was a condition precedent to the agreement. He says that there was an implied obligation on the part of the defendants to apply for, and cooperate in, obtaining the approval and that this was not done. Therefore, even if time was of the essence, the defendants cannot rely on this since they were in breach of their contractual obligation.
[31] The appellant's alternate position was that "there is an implied obligation on the defendants to cooperate in the obtaining of the approval, and that they failed to do so."
[32] The respondents argued at trial that "the obligation was on the plaintiff to obtain the approval, but he did nothing until it was too late." The respondents denied that they had failed to cooperate in obtaining the approval and took the position that they were entitled to treat the contract as at an end when it did not close on the completion date.
[33] On the appeal, the appellant argues that "[i]t is an error of law to imply a term in a contract as a matter of fact that contradicts a term implied by law." The appellant argues that the judge erred in law in concluding that, as a matter of business efficacy, a term should be implied into the Agreement that the appellant had an obligation to obtain the consent of the Crown to an assignment of the lease. The appellant contends that the judge, by implying such a term, erred because he failed to consider that, expressly in the Agreement and impliedly at law, the vendor was required to deliver "a free, clear, and marketable title." In the appellant's submission, the judge applied the wrong test and misdirected himself in respect of the fundamental difference between conveyancing practice and the obligation of a vendor to deliver title when he implied such a term.
[34] The appellant supports his proposition that the judge erred in law by implying a term in a contract as a matter of fact that contradicts a term implied by law by reference to McCauley v. McVey, [1980] 1 S.C.R. 165, 98 D.L.R. (3d) 577. That case holds that it is a fundamental term implied by law in every contract for the purchase and sale of land that the vendor is obligated to deliver to the purchaser a good title, that is, a marketable title, when called upon to do so. Laskin C.J. stated, at 168:
It is, of course, trite law that a vendor is under an implied obligation to give title even if the contract is silent, and a purchaser cannot be forced to take less than a full title unless the bargain has been for a lesser one.
[35] No one would take issue with that basic proposition. However, the respondents in this case do not suggest that the appellant was required to take title to the two properties and the foreshore lease without the Crown's consent to the assignment of the lease.
[36] It seems to me that what the appellant's argument overlooks is the foundation for and the effect of terms the trial judge implied to give business efficacy to the Agreement.
[37] The judge held that, when the Agreement was silent on the matter, it was necessary to imply a term that obtaining the consent of the Crown to the assignment of the lease was a condition precedent to the performance of the contract. He then implied a term that the vendor and purchaser were each under an obligation to do all that was reasonably necessary on their respective parts to obtain the required consent so that the condition precedent could be satisfied. The foundation for the judge's approach in implying the terms he did derives from the reasons of Dickson J., as he then was, in Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072, 85 D.L.R. (3d) 19.
[38] The judge went on to find, based on the evidence of the requirements to obtain the consent of Crown to the assignment of foreshore lease, that the appellant purchaser had to fulfil certain requirements that could not reasonably be fulfilled by the vendor and, in relation to those obligations, the appellant had not taken any steps to fulfil them within the time required to complete the Agreement.
[39] In my opinion, the trial judge did not err in law in the course of reaching the conclusion that the appellant was not entitled to an order for specific performance and I would dismiss the appeal.
II. The effect of the condition precedent and the terms which had to be implied to give the Agreement business efficacy
[40] In Dynamic Transport, the parties had agreed to a contract for the purchase and sale of land that had not yet been subdivided. Subdivision was needed in order to complete the sale of that portion of the vendor's property he had agreed to sell. Both parties were aware that subdivision approval was required under statute but the agreement was silent as to who had the obligation to obtain the approval. The vendor refused to complete and the purchaser sued for specific performance. The vendor argued that the agreement was unenforceable on the ground that the contract was silent as to which party was to obtain the required subdivision approval but Dickson J., for the Court, rejected that argument.
[41] Dickson J. held that the statutory requirement of obtaining subdivision approval became an implied term of the agreement and a condition precedent to the performance of the obligations of the contract. Thus the parties had a binding agreement but the obligation of the vendor to sell and the obligation of the purchaser to buy were in suspense pending the occurrence of the event constituting the condition precedent. Dickson J. said, at 1082-1084:
Both parties were aware that subdivision approval, pursuant to The Planning Act, was required, but the agreement is silent as to whether vendor or purchaser would obtain this approval. The statutory prerequisite became an implied term of the agreement. The obtaining of subdivision approval was, in effect, a condition precedent to the performance of the obligations to sell and to buy (see Turney v. Zhilka,[[1959] S.C.R. 578]; Barnett v. Harrison [[1976] 2 S.C.R. 531]). 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 . . .
In appropriate circumstances the courts will find an implied promise by one party to take steps to bring about the event constituting the condition precedent: see Cheshire v. Fifoot's Law of Contract, 9th ed. (1976), at pp. 137-8:
Where there is a contract but the obligations of one or both parties are subject to conditions a number of subsidiary problems arise. So there may be a question of whether one of the parties has undertaken to bring the condition about . . . There is a clear distinction between a promise, for breach of which an action lies and a condition, upon which an obligation is dependent. But the same event may be both promised and conditional, when it may be called a promissory condition. A common form of contract is one where land is sold 'subject to planning permission.' In such a contract one could hardly imply a promise to obtain planning permission, since this would be without the control of the parties but the courts have frequently implied a promise by the purchaser to use his best endeavours to obtain planning permission.
There are many cases in which provisions of a contract were subject to the condition precedent of an approval or a licence being obtained, and one party was by inference in the circumstances held to have undertaken to apply for the approval or licence: [citations omitted]. This type of case is merely a specific instance of the general principle that "the court will readily imply a promise on the part of each party to do all that is necessary to secure performance of the contract": 9 Hals. (4th ed.), p. 234, para. 350: see also Chitty on Contracts, "General Principles", (23rd ed.) p. 316, para. 698, where it is said: "The court will also imply that each party is under an obligation to do all that is necessary on his part to secure performance of the contract."
[Underlining added.]
[42] In Dynamic Transport, Dickson J. concluded that the vendor was under a duty to act in good faith and to take all reasonable steps to complete the sale. In that case, the vendor had agreed to sell a four acre parcel out of the five acres to which he held title. In order to complete the sale, it was necessary for the vendor to subdivide his property so that the portion he was selling had its own title. As the title holder, it was only the vendor who could apply for and carry out the requirements for the subdivision. In that regard, Dickson J. stated, at 1084-1085:
In a purchase and sale situation, the "person who proposes to carry out a subdivision of land" is the intending vendor. It is he who must divide his parcel of land, which has hitherto been one unit, for the purpose of sale. If a purchaser carried out the actual work in connection with the application, he could only do so in the vendor's name and as his agent. The vendor is under a duty to act in good faith and to take all reasonable steps to complete the sale. I cannot accept the proposition that failure to fix responsibility for obtaining planning approval renders a contract unenforceable. The common intention to transfer a parcel of land in the knowledge that a subdivision is required in order to effect such transfer must be taken to include agreement that the vendor will make a proper application for subdivision and use his best efforts to obtain such subdivision. This is the only way in which business efficacy can be given to their agreement. In the circumstances of this case, the only reasonable inference to be drawn is that an implied obligation rested on the vendor to apply for subdivision. . . .
[Underlining added.]
[43] In the case before us, it is clear that the parties' common intention was to have the two lots, together with the lease appurtenant to one of the lots, transferred to the appellant at the agreed upon price. That intention, coupled with the knowledge of both parties that consent to the assignment of the lease was needed, provided the foundation for the judge to imply a term that the obtaining of consent was a condition precedent to the completion of the Agreement. Obtaining consent to the assignment of the foreshore lease is analogous to completing the statutory requirements for subdivision of the vendor's property in Dynamic Transport.
[44] The appellant acknowledges that obtaining the Crown's consent to the assignment of the foreshore lease was properly viewed as a condition precedent to the completion of the Agreement. What the appellant takes issue with is the judge's conclusion that the appellant was obliged to take certain steps to bring about the event constituting the condition precedent.
[45] It is important to note that the judge could not and did not imply a term that either party was required to obtain the consent of the provincial Crown to the assignment of the lease. Such a term could not be implied because obtaining consent depended on the discretionary act of a third party and was thus beyond the control of either the vendors or purchaser to perform. Instead, the judge implied a term that obtaining the consent was a condition precedent to the completion of the Agreement and that the parties were each under an implied obligation to act in good faith and take all reasonable steps to obtain the consent in order to complete the Agreement.
[46] To imply terms that the consent was a condition precedent and that the parties were required to act in good faith and make their best efforts to obtain the consent for the assignment of the lease were necessary in order to give the Agreement business efficacy. To have held otherwise would have resulted in an unenforceable agreement. In my opinion, the judge's reasoning that those terms had to be implied to give the Agreement business efficacy accords with the Supreme Court's decision in Dynamic Transport.
[47] I now come to the appellant's argument that the judge was in error in implying a term that placed any obligation whatsoever on the appellant to obtain the Crown's consent to the assignment. The appellant contends that the purchaser could not be under any obligation to obtain the Crown's consent because, as a matter of law, the obligation to deliver title is always on the vendor and therefore the obligation to take the steps needed to obtain the Crown's consent had to fall entirely on the respondents' shoulders.
[48] I am unable to agree with the appellant's submissions.
[49] The judge determined, based mainly on the evidence from the office which handles the assignment of foreshore leases, what steps had to be taken to obtain the consent to the assignment. In his reasons the judge made reference to the appellant's argument, and then turned to consider the evidence:
[64] As indicated above, the plaintiff argues that even if time remained of the essence, the defendants had the primary obligation to obtain the Crown's approval of the foreshore lease assignment, which was a condition precedent to the performance of the contract. He says that the defendants, by not having applied for the assignment, were in breach of the contract and therefore cannot rely on the essentiality of time provision. In the alternative, the plaintiff says that there is an implied obligation on the defendants to cooperate in the obtaining of the approval, and that they failed to do so.
[65] The process for obtaining Crown approval of a foreshore lease is initiated by a request to the responsible office of Land and Water British Columbia Inc. to send out an "Assignment Information Sheet". This sheet sets out the requirements to obtain a transfer, including the following:
(a) An assignment fee of $250.00 plus taxes must be paid;
(b) the original lease must be submitted. If it is missing, a statutory declaration may be provided in its stead;
(c) the assignment agreement must be provided;
(d) evidence that there are no tax arrears on the lease area must be submitted;
(e) a certificate of insurance evidencing general liability coverage of $1,000,000 must be provided;
(f) a security deposit is to be provided;
(g) any rental arrears, as specified in the letter, must be paid; and
(h) a $5,000 security deposit is to be provided.
[66] Mr. Carlson, who heads up the Nanaimo office of Land and Water British Columbia Inc., testified that the Corporation will not provide the information on rental arrears without the written authorization of the lessor. That, however, cannot be quite correct since when [the appellant's solicitor] requested the information on the closing date, it was provided to him several days later without that authorization.
[67] Once the above requirements have been met, the approval is granted as a matter of course. Mr. Carlson could not think of any case in the eight years he has been with the Nanaimo office in which the approval was not forthcoming upon the requirements being met.
[50] No issue can be taken with the judge's reliance on the Assignment Information Sheet because the information contained in the Sheet reflects the provisions in the lease.
[51] Article 2 of the lease provided, in part:
2.1 On the terms and conditions set out in this Agreement, we grant you a lease of the Land for commercial wharf, dock, and water intake and outlet used in conjunction with the operation of an abalone hatchery and scuba diving training facility purposes.
[52] There was evidence that the appellant viewed the abalone business run by a tenant on one of the lots as a potential source of revenue. Whether the appellant anticipated any change in the use or activity on the lot or the property subject to the foreshore lease is unclear.
[53] Article 6 of the foreshore lease, which contains the requirements for security and insurance, is set out below:
ARTICLE 6 – SECURITY AND INSURANCE
6.1 On the Commencement Date, you will deliver to us security in the amount of $5,000.00 which will
(a) guarantee the performance of your obligations under this Agreement;
(b) be in the form required by us; and
(c) remain in effect until we certify, in writing, that you have fully performed your obligations under this Agreement.
6.2 Despite section 6.1, your obligations under that section are suspended for so long as you maintain in good standing other security acceptable to us to guarantee the performance of your obligations under this Agreement and all other dispositions held by you.
6.3 We may use the Security for the payment of any costs and expenses incurred by us to perform any of your obligations under this Agreement that are not performed by you and, if such event occurs, you will, within 30 days of that event, deliver further Security to us in an amount equal to the amount drawn down by us.
6.4 After we certify, in writing, that you have fully performed your obligations under this Agreement, we will return to you the Security maintained under section 6.1, less all amounts drawn down by us under section 6.3.
6.5 You acknowledge that we may, from time to time, notify you to
(a) change the form or amount of the Security; and
(b) provide and maintain another form of Security in replacement of or in addition to the Security posted by you under this Agreement;
and you will, within 60 days of receiving such notice, deliver to us written confirmation that the change has been made or the replacement or additional form of Security has been provided by you.
6.6 You must
(a) without limiting your obligations or liabilities under this Agreement, at your expense, effect and keep in force during the Term Comprehensive/Commercial General Liability insurance protecting us as an additional insured in an amount of not less than $1,000,000.00 inclusive per occurrence insuring against liability for personal injury, bodily injury and property damage, and claims for liability assumed under contract, arising from all accidents or occurrences on the Land or the Improvements;
(b) on the Commencement Date and immediately upon demand, deliver to us a completed "Province of British Columbia Certificate of Insurance" for all insurance required to be maintained by you under this Agreement;
(c) ensure that all insurance required to be maintained by you under this Agreement is
(i) placed with insurers licensed in British Columbia,
(ii) primary and does not require the sharing of any loss by any insurer that insures us, and
(iii) endorsed to provide us with 30 days' advance written notice of cancellation or material change; and
(d) deliver to us, immediately upon demand, certified copies of all policies of insurance required to be maintained by you under this Agreement.
6.7 You acknowledge that we may, from time to time, notify you to
(a) change the amount of insurance set out in subsection 6.6(a); and
(b) provide and maintain another type or types of insurance in replacement of or in addition to the insurance previously required to be maintained by you under this Agreement;
and you will, within 60 days of receiving such notice, cause the amounts and types to be changed and deliver to us a completed "Province of British Columbia Certificate of Insurance" for all insurance then required to be maintained by you under this Agreement.
[54] Article 7 provides, in part:
7.1 You must not sublease, assign, mortgage or transfer this Agreement, or permit any person to use or occupy the Land, without our prior written consent, which consent we may withhold in our sole discretion.
. . .
7.4 Prior to considering a request for our consent under section 7.1, we may require you to meet certain conditions, including without limitation, that you submit to us a "site profile", "preliminary site investigation", or "detailed site investigation" (as those terms are defined in the Waste Management Act) for the Land or other similar type of investigation of the Land.
[Underlining added.]
[55] To determine what obligations the parties had in making reasonable efforts to obtain the consent to the assignment of the lease, the judge said:
[73] Turning to the case at bar, an analysis of what needs to be provided to Land and Water British Columbia Inc. in order to obtain its approval of the assignment shows that the purchaser's role has greater substance than the vendor's. It is the purchaser who has to arrange for and provide evidence of insurance coverage. It is the purchaser who has to provide security for the rent to be paid by it. In the ordinary practice any sums owing by the vendor to governmental authorities would be paid by the purchaser, and accounted for between the parties in the statement of adjustments.
[74] On the other hand, the vendor need only provide the original lease and perhaps (see para. 66 above) the authorization to obtain the information on any outstanding rent, where it does not obtain the information itself directly. Of course, the vendor must sign an assignment agreement but that would have to be done as part of a closing even if no authorization was required. In sum, the acts which need to be performed by the vendor are rote and can be characterized as merely providing cooperation to the purchaser in obtaining the approval.
[75] I therefore conclude that, in order to give the contract business efficacy, the primary obligation to obtain Crown approval of the foreshore lease assignment rests with the purchaser of the lands to which the lease is attached. The purchaser is obliged to act in good faith and take all reasonable steps in obtaining the approval. The vendor is under an implied obligation to cooperate in this by performing the steps outlined in the previous paragraph: See North West Value Partners at para. 76. In my view, implying these terms is consistent with the criteria set out in London Drugs and Dynamic Transport Ltd.
[Underlining added.]
[56] I agree with the judge that after implying a term that obtaining the Crown's consent to the assignment was a condition precedent to the completion of the Agreement, it was necessary to imply further terms obliging the parties to act in good faith and to take reasonable steps to satisfy the condition precedent. In my view, the terms the judge implied are consistent with the reasoning in Dynamic Transport and with the criteria for implying terms set out in London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299, 97 D.L.R. (4th) 261.
[57] The judge went on to state that while his conclusion was "based on implying a term in order to give business efficacy to the transaction, it is bolstered by the expert evidence adduced at trial". As I understand the judge's reasons, the expert evidence supported but was not essential to his conclusion that there was an implied condition precedent or his conclusion that it was necessary to imply some further terms so that what the parties intended by their Agreement could be carried into effect.
[58] In my opinion, the appellant's argument that the vendors' obligation, as a matter of law, was to deliver "a free, clear, and marketable title" in relation to the lease, ignores the effect of the condition precedent which was to suspend the obligation of the vendors to sell and the purchaser to buy pending the occurrence of the event constituting the condition precedent. In particular, the appellant's argument ignores the implied term that each party was under an obligation to do all that was reasonably necessary on his part to secure performance of the contract. In this case, that meant that the purchaser had to arrange for the insurance coverage stipulated in Article 6 of the lease.
[59] In view of the terms of lease, and the appellant's intended use of one of the lots and foreshore lease, it would be unreasonable to hold that the vendors, in order to satisfy the condition precedent, had to arrange for insurance coverage required by Article 6. After the purchase and sale was complete, the vendors would no longer be entitled to occupy either lot or control any activity on the foreshore lease. I add that it is doubtful that the vendors could obtain the insurance required because they would no longer have an insurable interest in the property. Similarly, it would be unreasonable to hold that the primary obligation to arrange for the $5,000 security deposit was on the vendors.
[60] In light of the provisions of the lease and the evidence of the appellant's proposed use of the lot and the foreshore lease appurtenant to that lot, I see no legal error in the judge having placed the primary obligation on the appellant to take the steps necessary to satisfy the insurance and security deposit requirements to obtain the consent for the assignment of the foreshore lease.
[61] To support his proposition that he ought not to have had any obligation to take steps to obtain the consent of the Crown to the assignment of the lease, the appellant referred us to several cases, including Maas v. McMahon, [1921] 3 W.W.R. 378, 62 D.L.R. 317 (Alta. S.C. (A.D.)). In my view, those cases do not undermine the approach taken by the trial judge in implying the terms he did, given the facts of the case and the nature of the order the appellant sought.
[62] In Maas v. McMahon, the plaintiff entered into an agreement which provided for the transfer of various properties as well as two Dominion grazing leases which required the assent of the Crown to assign. The agreement provided for certain payments to be made over three years and contained an acceleration clause. A number of complications arose, including the fact that the grazing leases could not be assigned to an alien. Although there appeared to be a way around the latter impediment through the incorporation of a company, the incorporation took time. There was never any suggestion that the provisions of the agreement, which also involved cross-transfers of property located in the United States, were separable. The vendor brought an action for damages for deceit and, relying on the acceleration clause, sought judgment for the balance of the purchase price. The claim for damages was dismissed and that was upheld on appeal. The remaining question on the appeal, as stated by Stuart J.A. at 383, was whether "when the action began, the plaintiff had done all that he was bound to do before demanding payments from the defendant." At the time the action was begun, consent to the assignment of the grazing leases had not been sought by the vendor. The observations concerning the vendor's obligation to obtain the consent to the assignment of the leases have to be considered in the context of the facts and the claim the vendor was advancing. What was said in the following paragraph of Stuart J.A.'s reasons, at 383-384, illustrates that point:
If this were an action for specific performance against a defendant who refused to carry out his bargain it might be possible to overlook the fact that the Crown's consent had not been obtained when the action was begun. But the whole of the contest in this case is over the very question whether when the action was begun the defendant was in default for not "making his payments".
[63] None of the other cases to which we were referred provides support for the appellant's arguments that any obligation to obtain the consent of the Crown could only fall on the respondents.
[64] In this case, the appellant sought an order for specific performance of the Agreement. In the concluding portion of his reasons, the judge turned to the question of whether the parties had fulfilled the obligations in the terms he had implied. Under the heading "Did the Parties Fulfill their Obligations in Relation to Obtaining Approval of the Assignment of the Foreshore Lease?", the judge said:
[80] I first turn to the question of whether the defendants breached their obligation to cooperate in obtaining the approval for the foreshore lease assignment.
[81] The plaintiff places great emphasis on the evidence of Mr. Smith [the parties' realtor] that about a week before closing, at the request of Mr. Hammond [the plaintiff's solicitor], he telephoned Ms. Wheeler to inquire as to whether there were any tax arrears on the property and that Ms. Wheeler never got back to him with that information. That is too slender a reed upon which to find that the defendants breached their obligation to cooperate. The request was not specifically directed to the foreshore lease information, but rather to tax information in general. The request was never followed up. It was made to the defendants directly rather than through their solicitor, Mr. McGregor. Finally, Mr. Hammond was able to obtain the information himself, although he waited until after the closing date to request it. I therefore reject the submission that this amounted to a breach of the defendants' obligation.
[82] The plaintiff also argues that the defendants failed to cooperate because they did not provide the original foreshore lease to the plaintiff. That argument has no purchase. The original lease would be surrendered to Land and Water British Columbia Inc., with all the other required documents. The transaction never got that far, because of the plaintiff's default. Further, Mr. McGregor insured that the defendants had the original lease on the closing day.
[83] I conclude that the defendants did not fail in their duty to cooperate.
[84] I turn now to the conduct of the plaintiff. As indicated above, the plaintiff made absolutely no efforts to do anything with respect to obtaining approval of the assignment until the day of closing. That was too late to enable the closing to take place on schedule. The plaintiff was well aware that there was a foreshore lease, and his agent, Mr. Smith, had been given a copy of the lease. The lease referred to the requirement of Crown approval of an assignment. The plaintiff not only failed to take all reasonable steps to obtain the required approval on time, he took no steps at all. The plaintiff has provided no satisfactory, credible explanation as to why that was the case.
[85] The plaintiff was therefore in breach of his contractual obligation to use reasonable efforts to obtain the approval.
[65] Based on the facts the judge found, I am of the view that the appellant's action for specific performance was properly dismissed.
III. Conclusion
[66] For the reasons I have stated, I am of the view that the trial judge did not err in implying the terms he did and the appellant has not demonstrated any basis for interfering with the judge's findings of fact. Accordingly, I would dismiss the appeal.
“The Honourable Madam Justice Rowles”
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