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Developer ordered to pay $13 million over cancelled contracts

A Richmond condo development that was then known as ALFA is shown in July 2019, when the developers cancelled pre-sale contracts. The developers have now been ordered to pay more than $13 million to those purchasers. (Doug Kerr/CBC - image credit)
A Richmond condo development that was then known as ALFA is shown in July 2019, when the developers cancelled pre-sale contracts. The developers have now been ordered to pay more than $13 million to those purchasers. (Doug Kerr/CBC - image credit)

A B.C. Supreme Court judge has ordered a Richmond developer to pay almost $13.1 million for cancelling deals with more than 30 would-be condo buyers before selling the units to other people for higher prices.

In a decision posted Monday, Justice Kevin Loo found Anderson Square Holdings Ltd. was not entitled to terminate contracts with nearly three dozen customers in July 2019 under the terms of pre-sale agreements for units in a residential development project.

Loo also found that the directors of the company — former Richmond city council candidate Sunny Ho and Jeremy Liang — "acted dishonestly" in claiming a lack of financing had rendered the project impossible, but he stopped short at holding them financially liable.

The decision is the latest chapter in a saga that emerged in summer 2019 when outraged pre-sale purchasers of a project then known as ALFA went public after learning the developer was cancelling their contracts, blaming delayed construction and an external lawsuit.

Purchasers were told they could get their deposits back with interest, but more than 30 filed a lawsuit instead. And by early 2021, they watched as the project— now re-branded as PRIMA — was completed and their units were sold to new buyers.

Doug Kerr/CBC
Doug Kerr/CBC

Loo's ruling highlights the personalities on both sides of the battle.

Liang was a student at the University of B.C. when he was appointed director of Anderson Square. The judge called Liang the "face" of his family's investment in Canada.

"The evidence shows that Mr. Ho had, through Mr. Liang, sought a business relationship with the Liang family, and in particular with Mr. Liang's father, who was a successful and wealthy businessman in China." Loo said.

"Further, Mr. Liang was studying business and hoped to have a career in real estate development, and it appears that his father took this opportunity to provide his son with some experience in that field."

Loo said Ho's evidence on a number of key points in the litigation "raised doubts about his reliability and credibility."

He also noted an "unusual situation" during the court proceedings in which the son of one of the suing pre-sale purchasers impersonated his father — posing as his dad for opposing counsel, the court reporter and his own lawyer.

"This conduct was unacceptable and an affront to the court's process," the judge said.

Financial difficulties

According to Loo's decision, the developers signed a contract with a construction company in 2017 to build the project for $37.8 million.

But by December of the following year, the construction company had filed suit for $4.6 million.

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YouTube

The backdrop of financial difficulties fuelled the developer's claims they were unable to obtain the finances needed to complete the project as planned by a drop-dead date in the contract.

The question at the heart of the lawsuit was whether two particular clauses in the fine print gave the developer a legitimate right to pull the plug.

The first clause stated that the agreement would be terminated as of Sept. 30, 2019 unless all parties agreed to extend that date if the delay was due to circumstances beyond the control of the developer.

The second stated that "if a major outside event in the determination of the vendor renders it impossible or not reasonably feasible or economical for the vendor to perform its obligations" then the contract could be terminated.

'One of the most major reasons'

Ho claimed the construction company responsible for completing the building had threatened to withdraw from the project and to increase its price — making the project financially untenable.

"He stated that this was 'one of the most major reasons' for Anderson Square's decision to issue the termination notices," Loo wrote.

By contrast, the purchasers claimed the decision to end their contracts "was motivated by the fact that the prices for the units had risen dramatically between the time [they] first purchased their units in 2015 or 2016 and the issuance of the termination notices in July 2019."

After a detailed analysis, Loo concluded Anderson Square was not entitled to cancel the contracts under either one of the clauses. He said there was no evidence to suggest the construction company had actually threatened to withdraw.

"Mr. Ho and Mr. Liang also testified about how construction costs were rising prior to July 2019," Loo wrote.

"However, neither was able to explain how, in the context of a fixed price contract with Scott Construction, the increase in construction costs made the performance of the contracts impossible, infeasible or uneconomical."

The judge said Liang and Ho "knew that the reasons they gave in the termination notices ... were false or misleading, or that they were reckless as to whether this was so" — but said the purchasers had not proven "unjust enrichment" by the pair.

Loo calculated the damages by taking the difference between the purchase prices they agreed to and the value of the presale unit in August 2021.