Complications in commercial real estate matters can derail business operations. Disputes may arise, including in relation to the amount of the purchase price, where there are multiple written documents.
This article looks at the recent decision of the Supreme Court of British Columbia in Zhao v Chandi. In this case, the plaintiff claimed that the defendant failed to pay the full purchase price for a one-half interest in her blueberry farm. It highlights the importance of having consistent and clear real estate contracts.
Plaintiff purchased blueberry farm and agreed to sell a one-half interest to the defendant
In January 2016, the plaintiff purchased a 16.55-acre blueberry farm in Delta for $1.205 million. She wanted to build a high-end dog resort featuring buildings in which dogs could be boarded and outdoor play areas.
In May 2016, the plaintiff agreed to sell the defendant an undivided one-half interest in the farm. The plaintiff claimed they had a short-lived romantic relationship and that the defendant induced her to sell him the one-half interest by misrepresenting his financial status and resources. She said they reached a verbal agreement in which he would pay $700,000 for the one-half interest and invest $800,000 over three years in building a house on the property. She would invest the same amount in the dog resort, and they would both contribute towards the cost of improving the blueberry business.
The defendant claimed that he had agreed to pay $600,000 for the one-half interest in the farm, including farm equipment. When they later agreed that this equipment would not be included in the agreement, he said that she accepted his lower offer of $400,000.
Parties executed the conveyance documents and disagreed on the purchase price
On May 13, the plaintiff signed a contract for the sale of the one-half interest for $600,000, comprised of a $400,000 deposit and the balance to be paid within one month of the completion date. She claimed that the defendant signed a promissory note, promising to pay another $100,000 by July.
Six days later, the plaintiff executed the conveyance documents and signed an addendum to the contract that stated that the purchase price was reduced to $400,000. She thought this was a reference to the deposit only and produced a promissory note signed the same day by the defendant that contained a payment schedule with an overall purchase price of $700,000.
Plaintiff sued for the balance of the alleged purchase price
After the deposit was paid, the defendant failed to pay the next instalment. The plaintiff said he signed another promissory note confirming he owed $250,000, and they later attended a lawyer’s office to formalize it. The defendant claimed that the plaintiff drugged him, took naked photos of him and threatened to go to the police and falsely accuse him of rape if he did not sign several blank pieces of paper.
In 2017, the City of Delta expropriated the property for $1.572 million to build a highway. The plaintiff commenced proceedings seeking $300,000 for money not paid under the contract. In addition, each party claimed that during the brief time they owned the farm, the other made substantial profits from the sale of blueberries and cedar trees. They sought damages equivalent to a share of these profits.
Court found farm equipment was never part of the agreement
Justice Horsman explained that when it comes to contractual interpretation, the objective is to determine the intent of the parties and the scope of their understanding. The court must consider the words used by the parties, and also the surrounding circumstances, which consist of objective facts that were known, or ought to have been known, by both parties at the time the contract was formed.
Her Honour first examined the defendant’s claim that the parties agreed to reduce the purchase price after farm equipment ceased to be part of the agreement. In response to his claim that the plaintiff prepared an equipment list during the negotiations, her Honour concluded that the defendant created the equipment list in an attempt to manufacture an explanation for the reduction in the purchase price reflected in the addendum.
The defendant voluntarily signed the promissory notes and was ordered to pay the balance of the purchase price
Justice Horsman did not accept the defendant’s explanation of how his signature came to appear on the various promissory notes. Her Honour found the drugging explanation implausible for various reasons, including that he claimed not to have attended the lawyer’s office to formalize the note, which was contradicted by the lawyer’s evidence.
Her Honour concluded that the parties agreed to a purchase price of approximately $700,000 and that the defendant breached the terms of the agreement. The defendant was ordered to pay the purchase price balance to the plaintiff before the parties split any remaining funds from the expropriation. However, her Honour disagreed with the plaintiff’s additional claims that the defendant made fraudulent misrepresentations to induce her to enter the agreement and that the agreement was unconscionable.
Finally, on the issue of accounting for profits from blueberries and cedar trees, Justice Horsman decided that neither party had adduced evidence to establish that the other had sold goods for a profit or to quantify the amount. As a result, the court dismissed these claims.
Contact Meridian Law Group in Vancouver for Representation in Real Estate Disputes
Meridian Law Group represents sellers and purchasers in various residential and commercial real estate litigation matters. Our real estate litigators are dedicated to understanding our clients’ needs and devising legal strategies to resolve their concerns. We advocate for clients’ rights and take swift, decisive legal action to protect their legal and financial interests under real estate agreements. We will explore all opportunities for early settlement of a dispute while always positioning you for success in any dispute resolution process, including negotiation, mediation, arbitration, or litigation.
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