Judge orders land payment

Purchase of the site for the SmartCentres site in Salmon Arm must pay final $2 million to seller.

Land deal: The purchase agreement for property bordered by the Trans-Canada and 30th Street SW was the subject of a lawsuit.

Land deal: The purchase agreement for property bordered by the Trans-Canada and 30th Street SW was the subject of a lawsuit.

A BC Supreme Court judge has ordered the parties who purchased land for the planned SmartCentres shopping centre to pay the seller $2 million plus legal costs.

In a judgment delivered July 27 in Vancouver, Supreme Court Justice John Savage ruled that defendants Salmon Arm Shopping Centres Limited, Calloway Reit (Salmon Arm) Inc. and a numbered company, 568295 B.C. Ltd., with president Joseph Amato of Vaughan, Ont. – all affiliated with SmartCentres, must pay $2 million to the plaintiff, another numbered company, 0759594 B.C. Ltd., that lists Mike Fowler out of Richmond as president.

The ‘594’ company – the seller – launched the lawsuit in April 2010. The seller argued that the purchaser agreed to buy the seven parcels involved for $16.7 million. Two million dollars of that payment was deferred, pending rezoning and subdivision approval. If the purchaser couldn’t get city approvals before November 2009, the purchaser would pay the seller the remaining $2 million by Nov. 15 of that year. The seller had reserved the right to buy back a portion of the lands for residential development.

Because no rezoning and subdivision occurred by Oct. 15, 2009 and the purchasers did not pay the $2 million by the Nov. 15, 2009 deadline, the plaintiff/seller sued for the two million, plus interest and costs.

The defendants, meanwhile, launched a counter claim for $3.3 million for breach of contractual representations which, they argued, resulted in a significant portion of the lands being unsuitable for development. The defendants stated that the amount owed them for the breach far exceeds the unpaid balance of the purchase price.

Although the defendants/purchasers argued that they were not obligated to pay the full price because “warranties and representations made in the purchase agreement are untrue,” the judge disagreed.

To summarize a lengthy document, Justice Savage divided SmartCentres’ arguments regarding the seller  into three categories: topography misrepresentation, zoning misrepresentation and citizens’ opposition misrepresentation.

Regarding topography, the purchasers had stated that a representative of the seller sent an email on Aug. 14, 2006 stating “the Phase II Environmental confirmed that there are no environmental areas of concern on the lands and the geotechnical report confirmed that we will not require pre-loading on the commercial lands, both of which are of course great news for us.”

However, court documents continued, the topography of the northern half of the purchased lands was not, in fact, suitable for development.

Regarding zoning, the purchaser points to parts of the information document provided in 2006 by the seller.

In particular, this statement: “The City of Salmon Arm was instrumental in having the lands excluded from the ALR and in preliminary meetings with the Salmon Arm Planning Department, Can-Corp has received full support and approval in principle with having the lands rezoned for commercial/residential use. Based on the steady growth the city is encouraging the expansion of commercial development. The city specifically believes that the subject site is ideally suited for commercial development as is evident from its full public support to (sic) of the application to have the lands excluded from the ALR.”

Regarding citizen opposition, SmartCentres argued that CASSSA, the Committee for a Strong and Sustainable Salmon Arm, was in “virulent opposition” to its rezoning application, so “significant public opposition to the project is a material fact that should have been disclosed” at the time of the purchase agreement.

The judge, however, ruled that the evidence did not show the seller knew of the various limitations alleged, nor did the seller withhold relevant information from the purchaser.

Regarding topography, the purchasers referred to limitations on development under the Riparian Areas Regulation, which weren’t pointed out by the seller.

The judge stated that it took SmartCentres’ own experts six RAR assessments before they determined requirements to the satisfaction of the Ministry of Environment.

“That belies the ease with which SmartCentres says the deduction can be made.”

Regarding public opposition, the judge accepted the seller’s evidence that he was unaware of community opposition at the time in question. SmartCentres argued that whether or not the seller knew, the fact that such a group existed puts the seller in breach of the warranties within the purchase agreement.

The judge stated that such a warranty, where a seller must disclose all facts, even those outside its knowledge, would be an “extraordinary matter…”

He also stated: “Had the bargain included warranties as broad as those claimed, why were these alleged warranties not raised by SmartCentres? The first time it is raised is Nov. 17, 2009, immediately after SmartCentres has apparently defaulted on payment under the purchase agreement.”

As well as ordering the defendants to pay the $2 million owed, Justice Savage dismissed the defendants’ counter claims.

Salmon Arm Observer