Executive Summary: Key Legal and Evidentiary Issues

• The sale of a newly constructed residential property in Abbotsford, B.C. collapsed when the sellers failed to provide the buyer with an unconditional occupancy certificate by the completion date.

• Central to the dispute was the interpretation of the "Substantial Completion Provision," which allowed "other evidence satisfactory to the Buyer" as an alternative to an unconditional occupancy certificate.

• At trial, the judge applied a "reasonable person" standard to interpret the buyer's contractual discretion, finding her exercise of that discretion unreasonable, unfair, and contrary to good faith.

• On appeal, the Court found the trial judge committed two interrelated legal errors: using the duty of good faith as a tool of contractual interpretation and incorrectly equating "reasonableness" with an objective reasonable person test.

• Contested evidence remained unresolved, including whether the buyer used the Substantial Completion Provision as a pretext to exit the Contract amid declining property values.

• A new trial was ordered because the trial judge's factual findings were inseparable from the flawed legal framework he applied.

The property sale and the parties involved

In January 2022, Tejinder Pandher and Iqbal Pandher (the respondents/sellers) began constructing a four-bedroom, four-bathroom house on a bare-land strata property they owned in Abbotsford, British Columbia. They retained Titan Key Development Corporation as the general contractor; Gurvinder Kahlon is the principal operator and owner of Titan. Other houses within the subdivision were also under construction at the time. Sandeep Kaur Dhanesar (the appellant/buyer), a Canadian citizen who lived and worked in Houston, Texas, had spent her teenage years in Abbotsford and visited frequently as her sister and other relatives continued to live there. On January 29, 2022, following negotiations, Ms. Dhanesar entered into a Contract of Purchase and Sale with the Pandhers. The purchase price was $1.515 million with a completion date of October 7, 2022, and Ms. Dhanesar paid a $75,000 deposit.

The Substantial Completion Provision

The Contract was based on a standard form prepared by the British Columbia Real Estate Association and the Canadian Bar Association, with additional terms and conditions inserted by the buyer's realtor to reflect the fact that the house was not yet built. The most critical of these additional terms was the "Substantial Completion Provision," the only clause in the Contract that the parties labelled a "fundamental term." It required the sellers to have finished all work and delivered to the buyer, by the completion date, "an unconditional Municipal/City/Regional District Occupancy Certificate or other evidence satisfactory to the Buyer that construction is finished." Another clause in the same section provided that if the house "does not have occupancy or is not ready by September 27, 2022 then at the [buyer's] sole discretion the buyer may extend completion for up to 90 days." A separate provision also required the buyer and an authorized technical representative of the seller to together conduct a deficiency walk-through inspection of the Property no later than 14 days before the completion date for the purpose of identifying deficiencies to be remedied.

Events leading to the failed closing

As the October 7, 2022 completion date approached, several complications arose. The buyer had applied for financing from the Canadian Imperial Bank of Commerce ("CIBC"), which on September 27, 2022, conditionally approved financing subject to certain conditions including the receipt of a property disclosure statement. The buyer did not request this statement from the sellers until October 3, and received it on October 6. At trial, the parties agreed that the Contract did not require the sellers to provide a property disclosure statement, and the buyer did not advise the sellers prior to October 7, 2022, that she required one to finalize her financing. CIBC issued the buyer's final mortgage approval on October 19, 2022—after the completion date had already passed. Meanwhile, on September 27, 2022, the sellers' counsel, Ishpreet Rai, sent a letter to the buyer's counsel, Leighton Meyer, requesting closing documents by October 5, 2022. Mr. Meyer responded on September 29, asking when the buyer would be able to complete the walk-through, and noted that the delay in scheduling it had put the completion date beyond October 7, 2022. A dispute ensued between the parties over who was responsible for the delay. The trial judge did not resolve this dispute. The walk-through ultimately took place on the completion date of October 7, 2022. The buyer's sister and nephew attended along with a licensed building inspector, while the buyer remained in Texas.

The occupancy certificate dispute

On October 3, 2022, Mr. Meyer emailed Mr. Rai to inquire about whether the sellers had an occupancy permit and, if not, when they expected to obtain one. Mr. Rai did not respond to this inquiry; his letter of October 5, 2022, detailed his position that the buyer had delayed the walk-through but did not address the occupancy permit. On October 6, 2022, Mr. Kahlon contacted the City of Abbotsford to arrange for a final inspection of the Property. The City provided Mr. Kahlon with an inspection slip indicating that the application had been "rejected" and that reinspection was required. The stated reasons for the rejection were the need for a final retaining wall and the planting of a tree "as per covenant." The inspection slip stated it was "OK to apply for provisional, [manager's] approval required." On the same day, Mr. Kahlon applied for and received approval for provisional occupancy. The City provided him with a slip indicating provisional occupancy was permitted with "Final by 6th April 2023." On the afternoon of October 6, 2022, Mr. Kahlon emailed the Provisional Occupancy Slip to the sellers, stating "Please see attached final. Congratulations." Mr. Kahlon did not inform the sellers that the final building inspection had been rejected, did not send them the Inspection Slip, and did not explain the reasons why only provisional occupancy had been approved. The sellers assumed the document was a final permit because Mr. Kahlon referred to the attachment as being "final." The sellers did not immediately share the Provisional Occupancy Slip with the buyer. In the meantime, the buyer learned from the City's website that the final inspection had been rejected and only provisional occupancy was granted. Mr. Rai forwarded the Provisional Occupancy Slip to Mr. Meyer on the afternoon of October 7 by way of an email that simply stated: "Please find attached occupancy permit." Neither the sellers nor Mr. Rai explained to the buyer at this time why the final inspection was rejected and only a provisional occupancy was permitted. The purchase did not complete on October 7, 2022. On October 13, 2022, Mr. Meyer responded to the sellers' litigation counsel, stating that the sellers had not provided an unconditional occupancy permit, but only an approval for provisional occupancy, and that the buyer was entitled to refuse to complete the purchase. He requested the return of the buyer's deposit. The sellers filed their notice of civil claim on October 17, 2022. The buyer filed a response to civil claim on December 9, 2022, and a counterclaim on December 12, 2022.

The trial decision

At trial (Pandher v. Dhanesar, 2025 BCSC 316), the judge found in favour of the sellers. He interpreted the phrase "other evidence satisfactory to the Buyer" to mean evidence satisfactory to "a reasonable person with all the subjective but reasonable standards" of the buyer, relying on the British Columbia Court of Appeal's earlier decision in Griffin v. Martens and the Supreme Court of Canada's decision in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7. The trial judge used the common law duty of good faith to guide his interpretation of the Contract, concluding that an interpretation accounting for objective reasonableness aligned better with the development of the common law of good faith in contractual performance discretion. He also reasoned that because the words "sole discretion" appeared elsewhere in the Contract but not in the Substantial Completion Provision, the exercise of discretion under that provision must be based on something other than the buyer's sole discretion. He found that by the completion date, the sellers had provided the buyer with sufficient "other evidence" that construction was finished—including the house itself, a provisional occupancy permit, numerous photos and videos, and feedback from her realtor, sister, an appraiser and a home inspector. The trial judge noted the only outstanding work as of the completion date was minor, and referenced Mr. Kahlon's evidence that the remaining work carried out after the completion date cost only $1,000. Tejinder Dhillon, an inspection manager employed by the City, testified that as of October 6, 2022, there were no remaining life safety items and the home was complete, and that from the fact of a provisional occupancy permit being issued, it is "reasonable to say the house is complete." The trial judge held that the buyer's exercise of discretion was unreasonable, unfair, and contrary to good faith because she focused primarily on the absence of an unconditional occupancy certificate and "wrongly believed she had completely subjective discretion." The sellers were awarded damages of approximately $339,000, comprised primarily of the difference between the Contract price and the price for which the property was eventually resold. At the end of May 2023, the sellers had sold the Property to a new buyer for $1.190 million. The buyer's counterclaim for the recovery of her deposit was dismissed.

The appeal and the Court's analysis

On appeal to the British Columbia Court of Appeal (Dhanesar v. Pandher, 2026 BCCA 63), Madam Justice Horsman, writing for a unanimous panel that included Justice Fleming and Justice MacNaughton, identified two interrelated errors of law committed by the trial judge. First, the trial judge improperly applied the duty of good faith in the exercise of contractual discretion as if it were a principle of contractual interpretation, collapsing two distinct analytical steps—interpreting the contract and then applying the duty of good faith—into one. The Court explained that the proper approach under Wastech requires a court to first interpret the contract using ordinary principles of contractual interpretation to determine the purpose of the discretion, and then separately assess whether the party exercised that discretion in a manner connected to its purpose. The common law duty of good faith does not dictate the terms of the parties' bargain; it acts as a "minimum constraint" on the exercise of discretion once the terms of the bargain have been ascertained. Second, the trial judge erred in assuming that the duty of good faith in this context favours a standard of objective reasonableness. The Court clarified that the concept of "reasonableness" under the duty of good faith in the exercise of contractual discretion is not a reasonable person test. Reasonableness in this context, as defined in Wastech, means that discretion must be exercised honestly and in light of the purposes for which it was conferred. The Court noted that even in Wastech, where a contract granted "absolute discretion," the Supreme Court of Canada did not reinterpret the clause to impose a reasonable person standard; it held that discretion—even though couched in absolute terms—was not untrammelled and could not be exercised in a manner unrelated to the purposes for its conferral.

The ruling and outcome

Because the trial judge assessed the evidence under the wrong legal framework, the Court of Appeal held that his factual findings could not stand. The Court also observed that the trial judge's analysis of the evidence regarding the buyer's concerns about the lack of an unconditional occupancy certificate was not tied to the provisions of the Contract. The Substantial Completion Provision required the sellers to "deliver" satisfactory evidence to the buyer by the completion date, and the trial judge did not identify the source of the buyer's obligation to make inquiries of her professional advisors in order to gather evidence that was not provided to her by the sellers. The buyer sought to have the appeal court substitute its own ruling and order the return of her deposit, but the Court of Appeal declined, finding it was not feasible or in the interests of justice for the Court to conduct a fresh assessment of the evidence. Contested factual issues remained, including the proper interpretation of the Substantial Completion Provision and whether the buyer acted from a genuine concern about the state of construction or relied on the provision as a pretext to terminate the Contract for other reasons, particularly to avoid a loss due to declining property values. There was also a contentious question about whether the buyer could have closed on the completion date when she had not received final approval for financing from CIBC. The appeal was allowed in favour of the appellant buyer Sandeep Kaur Dhanesar, the trial judgment was set aside, and a new trial was ordered. No exact monetary award was determined at the appellate level, as the matter was remitted for fresh adjudication.