Court finds trial judge made legal errors in concluding developer breached purchase agreements
The British Columbia Court of Appeal has ordered new trials in a dispute arising from contracts of purchase and sale of various lots in a planned 32-lot Abbotsford subdivision.
The appeal court found the summary trial judge made several legal errors in concluding the developer breached the contracts in 2024. Errors included misstating when terms may be implied into a contract, failing to interpret agreements in light of the factual matrix, and improperly relying on post-contract conduct without first finding ambiguity. The court set aside the orders and directed that the matter proceed to new trials.
The appeals arose from three related summary trials concerning contracts entered into in March 2016 between purchasers and a developer for lots in a proposed 32-lot subdivision in Abbotsford. The dispute focused on a completion clause, amended in 2017, stating, “Completion, Adjustment and Possession Date will be 30 days from the date the City of Abbotsford accepts the building permit applications for the Property.”
The BC Supreme Court, following a summary trial, found that the amended provision created an open-ended condition precedent and that there was no implied requirement that the condition be fulfilled within a reasonable time. After the City confirmed in March 2024 that it would begin accepting building permit applications, the judge held that the developer was required to complete the transactions within 30 days and breached the contracts by failing to do so.
The developer appealed, arguing that the contracts should be interpreted as requiring completion within a reasonable time and that they had effectively terminated years earlier through the “effluxion of time”. The developer maintained that the purchasers were entitled only to the return of their deposits.
The BC Court of Appeal concluded that the trial decision rested on several extricable legal errors. First, the court held that the trial judge erred in treating the doctrine of implied terms solely as a protection for buyers. The appeal court said the proper inquiry is whether an implied term is necessary to reflect the parties’ objective intentions or to give the contract business efficacy, regardless of which party may benefit from the term.
The court also found that the judge failed to interpret the contracts within their factual matrix, including circumstances known to the parties when the agreements and later addenda were executed. In particular, the court said the amended disclosure statement, although not contractually binding, formed part of the surrounding circumstances relevant to interpretation.
A further error arose from the judge’s reliance on the parties’ conduct after the contracts were entered into. The Court of Appeal noted that post-contract conduct may be considered only where a contract remains ambiguous after examining its text and surrounding circumstances. The trial judge had not first found any such ambiguity.
The appeal court said those errors undermined the foundation of the finding that the contracts remained in force until 2024 and were breached when the developer failed to complete the transactions. However, it declined to determine the contractual interpretation issues itself, concluding that doing so would require factual assessments better left to trial.
Ultimately, the court allowed the appeals, set aside the orders below, and referred the matters back to the trial court for new trials.
