Executive Summary: Key Legal and Evidentiary Issues

• Central issue was whether the Seller breached the Purchase Agreement by failing to provide documents required under the Due Diligence Condition.

• The Buyer contended that the Seller’s failure to provide a lease, Real Property Report and Compliance Certificate (RPRCC), and plans/specifications suspended the deadline for waiving the Due Diligence Condition.

• The court examined the allocation of obligations between Buyer and Seller regarding the satisfaction of the Due Diligence Condition.

• Seller’s obligation to provide documents was limited to those available and in its possession or control; Buyer was required to raise deficiencies before the condition deadline.

• The court found no breach by the Seller of the Due Diligence Condition or Clause 5 of the Purchase Agreement.

• Costs were awarded to the Defendant, and funds paid into court were ordered to be released to the Defendant.

Facts of the case

The Plaintiff, 799869 Alberta Ltd. (the “Buyer”), offered to purchase property in Edmonton, located at 12804 Fort Road, from 681154 Alberta Ltd. (the “Seller”), using a standard form Commercial Real Estate Purchase Contract dated March 11, 1999 (the “Purchase Agreement”). The Property was vacant land except for two billboard advertising signs. The purchase price was $19,500. The Purchase Agreement included a Due Diligence Condition (Clause 3(b)), which required the Seller to provide certain documents “if available” within five business days of acceptance, and for the Buyer to waive the condition by 4:00 pm on March 31, 1999.

The Seller sent a letter on March 12, 1999, authorizing the Buyer to apply for a development and building permit and stating that the signs were owned by Pattison Outdoor Group, with no signed contract and an annual rental fee of $700. No documentation was sent with that letter. The Buyer entered into a conditional sign lease with Urban Outdoor on March 22, 1999, conditional on completion of the Purchase Agreement. The Buyer claimed to have sent a letter to the Seller on March 23, 1999, asking questions about the sign structure, but the Seller denied receipt of this letter.

On March 24, 1999, the Buyer applied for a development and building permit for a “replacement sign permit.” On March 31, 1999, about ten minutes after the 4:00 pm Due Diligence Condition deadline, the Seller gave notice of termination of the Purchase Agreement, stating the Buyer had failed to waive the Due Diligence Condition. The Buyer later discovered a signed lease agreement between Norphil Enterprises and Pattison, dated September 13, 1985, and obtained a copy from Pattison in July 1999, after the Seller had terminated the Purchase Agreement. The Seller’s principal testified that the written lease expired in 1988 and that a verbal agreement for $700 per year followed.

Procedural background

The underlying action by the Buyer against the Seller was dismissed for delay. The present action was then initiated against James Culkin, who had conduct of the underlying action on behalf of the Buyer when it was dismissed. This action was for professional negligence. The matter was heard as a streamlined trial, with the issue at trial limited to adjudication of liability in the underlying action.

Discussion of policy terms and clauses at issue

Clause 3(b) (Due Diligence Condition) required the Seller to provide, “if available,” documents including copies of all contracts pertaining to the property, a Real Property Report with Compliance Certificate from the municipality, and any plans and specifications relating to the property, within five business days after acceptance. Failure to remove all conditions precedent in writing by the respective condition dates would result in the contract becoming void. Clause 4 required the Seller to provide a letter authorizing the Buyer to apply for a permit on the property. Clause 5 provided for a possession date of June 18, 1999, and required the property to be vacant of all tenancies except those listed (none were listed).

Analysis and findings

The court found that the Due Diligence Condition was for the sole benefit of the Buyer, giving the Buyer discretion to waive the condition even if document production was incomplete. The Seller’s obligation was limited to providing documents “if available” and in its possession or control. The Buyer was required to notify the Seller of any deficiencies before the deadline. The Buyer did not do so, nor did it prove the Seller received the March 23, 1999 letter.

Regarding specific documents:

• The Seller was not obligated to provide the Norphil lease, as it had expired and was no longer in force.

• The court concluded that neither party expected the Seller to provide the RPRCC, and the Buyer did not give notice of any expectation to receive it.

• The Seller was not required to obtain plans/specifications from third parties unless the Buyer gave notice of that expectation.

• Clause 5 was not breached, as it was a closing obligation that never arose due to non-completion of the transaction.

Ruling and overall outcome

The court concluded that the Seller did not breach the Purchase Agreement. The Defendant was awarded costs of the trial. Funds paid into court pursuant to an Order dated October 27, 2022, were ordered to be released to the Defendant in payment of a costs award made either by agreement, assessment, or Court Order. No specific monetary amount was awarded beyond costs. The successful party in this case was the Defendant, Roger Hofer, as personal representative for the Estate of James Culkin.