A-392-91
CORAM: THE HONOURABLE MR. JUSTICE HUGESSEN
THE HONOURABLE MR. JUSTICE STRAYER
THE HONOURABLE MADAME JUSTICE DESJARDINS
Between:
WILLIAM MACK GREENWAY,
Appellant,
- and -
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at
Vancouver, B.C., on September 19, 1996)
HUGESSEN, J.A.
This is an appeal from a judgment which dismissed the appellant's appeal of the Minister's disallowance for the taxation years 1980 through 1983 of certain "soft" costs in relation to a Multiple Unit Residential Building (MURB) development in which the taxpayer had invested. We are all of the view that the judgment cannot stand.
If we correctly understand the trial judge, the basis for his decision was his view that the various agreements entered into between the developer (Marbar), the appellant and his co-investors, and the numbered company (221,401) which acted as trustee for the latter were subject to certain unfulfilled conditions precedent and were therefore ineffective to convey beneficial ownership to the investors. He said:
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The conditions precedent inhere in the contract provisions earlier above recited. The contractor, Marbar's undertakings in paragraph 2.2.1(b) to negotiate contracts for general contracting and subtrades, in paragraph 2.2.1(c) to negotiate with all government agencies for obtaining all zoning and planning permissions and permits, in paragraph 2.2.2(a) to arrange interim financing and in paragraph 2.2.2(b) to obtain long-term mortgage financing by a series of unit strata-title mortgages, in paragraph 2.2.3 to arrange for off-site services, in paragraph 2.2.9 to obtain a murb type 31 certificate from C.M.H.C. and in paragraph 3.4 to convey title to 221,401 subject only to the aforesaid long-term unit mortgages and other usual reservations and easements, are all conditions precedent without the fulfilment of which the whole elaborate scheme would be, and in some instances was, reduced to utter futility. There is nothing or record here to show that nay one of those conditions precedent, among all of such conditions inhering in the terms agreed by the parties, was fulfilled . . . . |
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(Reasons, Appeal Book pp. 297-298) |
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Try as we might, we are unable to see in any of the provisions cited by the learned judge anything remotely approaching a true condition precedent. Nowhere is the agreement said to be contingent upon the fulfilment of one or more of those conditions, nor is there any suggestion that the consequence of their non-fulfilment will be the nullity of the agreement. They are all simple promises and undertakings by the contractor to do certain things which are commonly found in contracts of this nature.
Manifestly the intention of the parties was that the various agreements should be effective forthwith, and that is what happened: the appellant and his fellow investors acquired a beneficial interest in the property on the relevant date, December 17, 1980.
The respondent also sought to support the result reached by the trial judge on two grounds mentioned but not relied on by the latter. The first is based on the developer's non-compliance with subsection 50(6) of the Real Estate Act (R.S.B.C. 1979, c.356):
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(6) No developer, and no person on behalf of a developer, shall sell, or lease, or offer for sale or lease, or knowingly assist in the sale or lease or offering for sale or lease of, subdivided land or a time share interest, unless a prospectus is the form and including the particulars required under section 51 is submitted to, and accepted and filed by, the superintendent. |
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The consequence of such non-compliance is set out in section 62 of the same statute:
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62. No promise or agreement to purchase or lease any subdivided land or time share interest is enforceable against the purchaser or tenant by a person who has breached any of the provisions of this Part, or by a successor in title of that person. |
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In our view there is simply no merit in the contention that this provision has the effect of rendering non-complying agreements void. By its terms the section simply makes the agreement unenforceable against the purchaser (here 221,401 and, through the latter, the appellant and the other investors) at the suit of the developer (here Marbar). Clearly that is quite different from saying that the agreement is void or an absolute nullity.
The second alternative argument is equally unfounded. It is based on the contention that the various agreements in issue were executed under seal. It is said that this resulted in the Purchase and Development Agreement between Marbar and 221,401 being unenforceable against the investors (including the appellant) who were not parties to it. Assuming the premise to be correct, the alleged unenforceability of the agreement against the investors does not deprive the latter of their beneficial interest in the property. Whether they be viewed as undisclosed principals or as beneficiaries of a trust, it is clear that they intended to and did acquire such an interest through the vehicle of the numbered company upon execution of the Purchase and Development Agreement.
For these reasons the appeal will be allowed, the judgment of the Trial Division will be set aside and the matter will be referred back to the Minister for reassessment on the basis that during the relevant taxation years the appellant held a beneficial interest in the subject property. The appellant is entitled to his costs to be taxed both here and at trial.
(Sgd.) "James K. Hugessen"
J.A.
APPEAL FROM A JUDGMENT OF THE TRIAL DIVISION DATED APRIL 4, 1991, TRIAL DIVISION FILE NO. T-2705-86
PLACE OF HEARING: Vancouver, B.C.
Delivered from the Bench on September 18, 1996, by: HUGESSEN, J.A.
Ms. Joske Tremblay for Respondent (Defendant)
Mr. Douglas C. Morley for Appellant (Plaintiff)
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