Suitability for Summary Trial Where Credibility Is Key

The Dispute

Four companies had bought a group of development properties, financed by a bank loan, and the loan was coming due before development had started. One of the four began looking at selling its share. An investor offered to buy half of that company’s shares for a six-figure sum, which would have given him a stake in the development and put money toward the loan. The share transfer never happened, and the investor went to court over the stake he says he was promised.

The Parties’ Positions

The investor maintained the parties formed a binding oral agreement in 2020, under which he would buy half the corporate partner’s shares for a fixed sum and take a stake in the joint venture. He relied on a letter the partner’s solicitor sent to the lender, recording that the company was prepared to accept his offer, and on an apology a guarantor of the venture later sent him. He accepted that steps remained outstanding after formation, and explained that he had not signed the lender’s paperwork because the first version contained errors and a corrected version was to follow.

The corporate partner and its director denied any agreement had been formed, saying the negotiations never passed the stage of an agreement to agree, with no meeting of the minds on terms of sufficient certainty. They identified four conditions they said had to be satisfied before the offer could be accepted. Those were consent from every other partner, which the joint venture agreement required before any disposal of an interest, and a further extension of the loan. They added the lender’s authorization of the sale, which required the investor to guarantee the existing loan, and a signed share purchase agreement. They said none of the four was met, and that the investor’s silence over several months, while the partners were under pressure from the loan deadline, was inconsistent with the conduct of a person who had a contract.

The Court’s Decision

The Supreme Court of British Columbia dismissed the defendants’ application for summary trial. The court could not find the facts necessary to decide whether a binding oral agreement existed, because the two principals’ affidavits conflicted directly on the terms, the conditions, and why the revised lender paperwork was never sent. Little contemporaneous documentation addressed those points, and none of the supporting affiants on either side was disinterested. The court held it would also be unjust to decide the claim summarily, since that would deprive the parties of the chance to test credibility on the central issue.

The court declined to award the investor his costs as the successful respondent, finding that his choice not to file further affidavits or evidence of damages had contributed to its inability to find the facts. Each party bore its own costs, and the claim must be scheduled for a full trial.

Key Lessons for Investors and Joint Venture Partners

• Record the terms of a share purchase in writing, however well the parties know one another. Where the conversations that settle the deal happen by telephone with no contemporaneous note, neither side can later show a court what was agreed, and the dispute turns on whose account a judge prefers.
• Set out in writing which conditions must be satisfied before an offer is capable of acceptance, and which are steps to be completed afterwards. The parties here disagreed on whether consent from the other partners, a lender’s authorization and a signed share purchase agreement were preconditions to a contract or later formalities.
• Send the corrected document promptly where a first version is withdrawn for errors. The unsigned lender paperwork became the point on which each side’s account of the other’s conduct rested, and why it went unsigned remained in dispute.
• Put evidence of loss before the court on a summary trial application, whichever side filed it. A respondent who succeeds in resisting the application may still be denied its costs where gaps in its own evidence contributed to the court’s inability to decide.

The outcome turned on the state of the evidence before the court on this application, and the reasons expressly made no final findings of fact. A similar application may be decided differently.

ATAC LAW acts for investors, shareholders and corporate partners in share purchase and joint venture disputes, including the civil and commercial litigation they lead to.

This matter was conducted by Dan H. Griffith, a partner at ATAC LAW, who acted for the plaintiff on the summary trial application.