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Lawsuit against North Van developer comes down to the definition of 'must'

Does ‘must’ mean ‘must?’” That was the question posed by Justice David Crerar at the outset of a ruling released last week.
The Evolv 35 townhouse strata project on East Third Street in the North Vancouver was the subject of a legal dispute. | Google Earth

A legal dispute between a North Vancouver townhouse developer and two sets of buyers who backed out of a deal over construction delays has put the definition of the word “must” on trial.

At issue in the civil suit was whether the buyers should get their deposits back.

“Does ‘must’ mean ‘must?’” Justice David Crerar posed at the outset of his ruling released last week.

In the fall of 2017, both Blair Michael Peters and Sandra and Peter McDonald agreed to purchase units in the Evolv 35 townhouse strata project on East Third Street in the Moodyville area, according to the written ruling, but construction fell behind schedule.

The day before the promised outside completion date set by the developer, East 3rd Street North Vancouver Limited Partnership, the purchasers’ lawyer wrote to the developer’s lawyer and trustee, stating his clients would terminate their agreements and demand the return of their deposits if their units' occupancy permits hadn’t been granted by the deadline.

Through their lawyer, the developer responded that the occupancy permits would be in place by the deal's closing date of June 29, 2020. The developer's lawyer/trustee sent an information package and an interim certificate of occupancy that day.

On July 23, the developer, through a litigation lawyer, advised the purchasers that it accepted their repudiation of the purchase agreements, and asserted that they had forfeited their deposits. The purchasers demanded their deposits back, arguing the trustee should not have released the funds to the developer, given the ongoing dispute. Instead, the money should have been deposited with the courts, they argued, adding that the trustee breached his fiduciary duties.

The Real Estate Development Marketing Act states that trustees “must release the deposit to the developer” when certain conditions have been met, but the purchasers argued “must” should not be read literally, as it could be abused by developers who produce blatantly false certifications on lots the trustee knows to be vacant.

Crerar rejected that logic. Under B.C.’s Interpretation Act, “must” is to be construed as imperative, he noted.

“Without ambiguity, hypothetical absurdities cannot contort the plain language of the statute,” Crerar wrote, adding that developers who violate the act are subject to criminal, civil, and regulatory punishments.

Under the legislation, developers who provide false certifications are liable for a fine of up to $1.25 million for a first offence, and individual developers may also face jail time, the judge noted.

Crerar conceded it may have been prudent for the trustee to apply to have the deposits sent to the courts, but he found there was no legal obligation for him to do so.

“With respect to the legislation and the purchase agreements, just as ‘must’ means ‘must,’ ‘may’ means ‘may,’ he wrote.

Lastly, the complainants argued the trustee shouldn’t have blindly accepted the developer’s certifications, but Crerar found it would be untenable to require trustees to investigate the validity and veracity of the developer's documentation.

“These exercises would be difficult and inefficient, even where the trustee is a law firm. They would be more profoundly difficult and inefficient with other trustees,” he wrote.

The ruling did not specify the value of the purchasers’ deposits.

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