Executive Summary: Key Legal and Evidentiary Issues

• Enforceability of a fixed price home construction contract amid rising material costs and pandemic-related delays.

• Interpretation and application of Clause 23 regarding the builder’s right to terminate for causes “beyond its control.”

• Validity of the builder’s attempt to terminate the contract and whether it constituted a breach or repudiation.

• Appropriateness and discharge of the Plaintiff’s Certificate of Lis Pendens (CLP) on the property title.

• Sufficiency of evidence to support summary judgment on damages for breach of contract.

• Determination of proper parties liable under the contract and unresolved assessment of damages.

Facts of the case

Sawan Preet Singh (Plaintiff) and Park Royal Homes, an Alberta corporation (Defendant), entered into a written agreement dated March 15, 2021 (“Purchase Contract”) for the construction and sale of a home on a specified lot. The contract price was $429,645.05, to be completed under a fixed price contract. Key provisions included the impact of change orders on timing, anticipated construction timelines, a termination clause (Clause 23) allowing the builder to cancel if unable to commence construction within 60 days due to causes beyond its control, a mediation requirement for disputes (Clause 24), and an entire agreement clause.

The Plaintiff paid deposits and waived the financing condition precedent. Concerned about delays, the Plaintiff contacted Park Royal’s President and CEO on May 11, 2021. Park Royal’s general manager, Colin Wilson, responded on May 12 and 13, 2021, citing increased lumber prices and costs, and suggested returning the deposit to avoid the agreement. The Plaintiff rejected this and expected Park Royal to fulfill its obligations.

Between June 2021 and March 2022, the parties executed written change orders, mainly related to a legal basement suite. The Plaintiff claimed the extras totaled approximately $3,000, increasing the contract price to $432,649.00, while the Defendants claimed the extras increased the price by $21,153.00, for a total of $454,281.45 including taxes.

The building permit was issued, with the Plaintiff stating January 18, 2022, and Park Royal stating on or about March 1, 2022. On March 3, 2022, Wilson sent a letter to the Plaintiff entitled “Cancellation Notice of Job #1999 MC,” citing unprecedented material price increases, supply issues, and pandemic-related delays. The letter invoked Clause 23 to cancel the agreement but offered to proceed if the Plaintiff covered $49,639.50 of the increased amount. Park Royal also offered to refund the deposit in full, waiving the right to deduct expenses.

The Plaintiff replied on March 11, 2022, asserting the contract was fixed price and that Clause 23 did not apply, and invoked mediation under Clause 24. Park Royal’s lawyers responded on March 15, 2022, confirming termination under Clause 23 and stating Clause 24 no longer applied, but again offered a discounted price adjustment.

The Plaintiff commenced this action by Statement of Claim filed April 19, 2022, seeking specific performance and damages, and a Certificate of Lis Pendens (CLP) was issued the same day. The Plaintiff’s Statement of Claim was amended on May 17, 2022, to add related Defendants. The CLP was filed against the title to the lot on June 8, 2022.

On June 14, 2022, the Defendants’ lawyers confirmed Clause 24 applied and invited mediation, also offering to sell the home for $506,402.93 without prejudice to the Plaintiff’s right to claim damages of $66,186.00. The Plaintiff did not accept. On June 21, 2022, Park Royal Homes (2016) listed the lot for sale and continued construction, completing the home in December 2022. The Plaintiff looked into buying another house but could not afford it due to increased prices.

On December 5, 2022, the Defendants applied to strike the Plaintiff’s claim for specific performance and for a stay pending mediation. A Statement of Defense was filed January 27, 2023, asserting, among other things, that Park Royal Homes is the trade name of Park Royal Homes (2016) Ltd, the lot owner was 1981072 Alberta Ltd, the lot was not unique, and delays were due to causes beyond Park Royal’s control, including the Plaintiff’s change orders and industry-wide issues. On February 3, 2023, the Plaintiff applied for summary judgment. On May 2, 2024, Park Royal Homes (2016) Ltd and 1981072 Alberta Ltd filed a Counterclaim for damages arising from the CLP, to which the Plaintiff responded on May 15, 2024.

Discussion of policy terms and clauses at issue

Clause 23 allowed the builder to terminate if construction could not commence within 60 days due to causes beyond its control, with examples such as inability to obtain permits or developer conveyance, or the purchaser’s failure to qualify for a mortgage. Clause 24 required mediation before other dispute resolution. The Plaintiff argued price increases were not a valid ground for termination under Clause 23, especially under a fixed price contract. The Defendants argued pandemic-related delays and supply chain issues justified termination.

Procedural history and applications

The Defendants applied to discharge the CLP, arguing the Plaintiff was not entitled to specific performance and could not close the sale at a higher price. The Plaintiff applied for summary judgment on damages for breach of contract. The Defendants counterclaimed for damages for the CLP.

Court’s analysis and outcome

The Court found that Park Royal’s termination was a “qualified termination,” as it was willing to proceed if the Plaintiff paid more, indicating the termination was not strictly for causes beyond its control as required by Clause 23. The Court concluded this constituted a breach of the fixed price contract. The Plaintiff was no longer seeking specific performance, so the CLP was ordered discharged.

The Court found the Plaintiff’s evidence for damages insufficient for summary judgment, noting unresolved disputes about the amount of extras, comparable house prices, interest rates, and rental values. The Plaintiff’s summary judgment application for damages was dismissed, but both parties were allowed to adduce further evidence in future proceedings. The Defendants’ claim for damages relating to the CLP was also deferred due to lack of evidence.

Ruling and overall outcome

The Court held that Park Royal Homes (2016) Ltd’s qualified termination was a breach of contract. The Plaintiff’s summary judgment application for damages was dismissed due to insufficient evidence, and the CLP was ordered discharged. The issue of damages for breach of contract and for wrongful filing of the CLP remains unresolved and will be determined in future proceedings. No exact amount was awarded at this stage, and costs will be determined after the damages issue is decided. Park Royal Homes (2016) Ltd is the only Defendant found liable under the contract, with claims against other Defendants dismissed.