Case information

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Property – Real property – Land registration – Caveats – Contracts – Agreement of purchase and sale – Interpretation – Conditions subsequent – Should the doctrine of contractual frustration apply to agreements that transfer interests in land and, if so, what legal test should be applied thereto – What is the appropriate test applicable to summary pre-trial determinations as to encumbrances registered on title to land.

The respondent acquired lands from the applicants. The purchase was conditional on the lands being subdivided, as they were into three lots. The respondent intended to use the lands to build a shop, office and yard. The purchase agreement required the respondent to comply with architectural controls attached as a schedule; submit copies of its plans for the applicants’ approval prior to commencing construction; and have “substantially completed the structural foundation(s) upon the Lands in accordance with the approved plans within twenty four (24) months”. The applicants retained an option to repurchase the lands if substantial completion of the structural foundation was not achieved within the required period, and filed a caveat on title to protect that option. No architectural controls were attached as a schedule to the agreement. The respondent did not submit plans for a building or prepare structural foundations. The respondent later sold two of the lots, and the applicants discharged their caveat from title to those lots. When the respondent brought an application to remove the caveat from the third lot, the applicants challenged the application and later tried to exercise their option to purchase.

A Master of the Alberta Court of Queen’s Bench allowed the application, finding that the agreement did not contain an obligation on the respondent to construct a building. Since the irrevocable option to repurchase only arose if the respondent started but did not complete construction within the specified period, the conditions subsequent triggering the right to repurchase did not materialize. On appeal, a Judge of the Alberta Court of Queen’s Bench held that the interpretation of the Master was correct. Even if there had been an obligation on the respondent to build, the contract as originally agreed upon had become impossible to enforce and was therefore frustrated. The Alberta Court of Appeal dismissed the appeal.