Legal Blog

Exercise of Discretion – Agreement of Purchase and Sale

Hacquard Wolfe Trust v. Richmond Holdings Ltd. 2017 BCSC

An agreement of purchase and sale was conditional upon the purchaser being “completely satisfied in its sole and absolute discretion” with an environmental report. The purchaser ultimately decided that it was not satisfied and that, accordingly, the transaction was dead. The judge relied on the Ontario Court of Appeal’s decisions in Greenberg v. Meffert, and Marshall v. Bernard Place Corp. and the British Columbia Court of Appeal decision in Mark 7 Development Ltd. He noted that there were 3 classes of discretionary conditions precedent: (1) those so imprecise or so entirely dependent on the purchaser’s subjective state of mind that the contract was simply unenforceable; (2) those that are clear, precise and objective; and (3) those that were partly subjective and partly objective, but still subject to an implied term of reasonable conduct. The judge held that the clause in this case was partly objective and partly subjective. The environmental condition was capable of being assessed under objective measurements and then the purchaser was obliged to assess those measurements subjectively, but rationally and in good faith. Accordingly, the condition was not so vague or subjective to make the agreement unenforceable. Further, in this case, the court held that there was no evidence to support the reasons that the purchaser gave to reject the report. The judge refused the purchaser’s motion for summary judgment and held that the matter had to go to trial.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.