Court and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220513 DOCKET: C69081

Huscroft, Thorburn and George JJ.A.

BETWEEN

WED Investments Limited Plaintiffs/Respondents

and

Showcase Woodycrest Inc. and 2442459 Ontario Inc. Defendants/Appellants

Counsel: Mark A. Klaiman, for the appellants, Showcase Woodycrest Inc. and 2442459 Ontario Inc. Stephen Schwartz and Darren Marr, for the respondent, WED Investments Limited.

Heard: May 6, 2022

On appeal from the judgment of Justice Paul Schabas of the Superior Court of Justice, dated January 19, 2021.

Reasons for Decision

Overview and Relief Sought

[1] The appellant Showcase Woodycrest Inc. (“Showcase”) is the owner of a property at 3775 Brock Street North in Whitby (the “Brock Street property”). The appellant, 2442459 Ontario Inc. (“244”) is the owner of another property at 201 Hopkins Street in Whitby. Elliot Kirshenbaum is the sole owner of Showcase and one of several owners of 244.

[2] The respondent, WED Investments Limited (“WED”), is a residential development company and a subsidiary of Kaitlin Group of Companies, a builder of homes, townhouses, and condominiums.

[3] On June 30, 2016, WED offered to purchase both the Brock Street and Hopkins Street properties from Showcase and 224. Each offer was sent by email and included the asking price and deposit proposed.

[4] On August 5, 2016, Showcase entered into a standard-form Ontario Real Estate Association Agreement of Purchase and Sale with WED for the sale of the Brock Street property (the “Agreement”). The purchase price was $4,400,000.00. The Agreement contained a “development condition” which permitted WED time to conduct due diligence. After extensions, the diligence period was set to end on October 17, 2016. On October 17, WED gave written notice of its waiver of the development condition and decision to proceed with the Agreement, by email only.

[5] The only issue on this appeal is whether the delivery of the written notice to waive and proceed by email satisfied the notice requirement in the Agreement.

[6] The trial judge found that it did.

[7] The appellant argues that the intention to waive had to be hand-delivered and that because it was sent by email, it did not satisfy the terms of the Agreement, such that the Agreement to sell the property to WED was revoked.

[8] For the reasons that follow, we disagree. The appeal is therefore dismissed.

Factual Background

The Terms of the Agreement

[9] Paragraph 3 of the standard form Agreement provides that any notices “shall be in writing” and “delivered personally or hand delivered to the Address for Service provided in the Acknowledgement below, or where a facsimile number or email address is provided herein, when transmitted electronically to that facsimile number or email address, respectively”. Showcase did not provide an email address. The only address listed in the Acknowledgement is Showcase’s municipal address.

[10] The Agreement is accompanied by a Schedule A, the terms of which were negotiated by the parties. Unlike paragraph 3 of the Agreement, Schedule A specifically provides that,

The parties hereto agree that this Agreement of Purchase and Sale and any Amendments thereto may be transmitted through the use of electronic mail and that a true copy will be delivered to the Buyer and the Seller following acceptance of said Agreement.

[11] Mr. Walker, one of WED’s representatives, testified at trial that he inserted the above clause in Schedule A because email is “how communications now take place”. He further testified that there was no email address listed for Showcase because:

We, we had already been communicating by email and I just assumed that [Showcase’s representative] didn't insert anything because he, he knew I had it and we'd been communicating that way right from the start.

[12] Paragraph 26 of the Agreement provides that:

If there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy…

[13] The trial judge found that if there is a conflict between paragraph 3 of the Agreement and Schedule A, Schedule A governs, such that the communication may be sent by email.

Waiver of the Due Diligence Condition

[14] The Agreement provides in Schedule A that WED “shall have the right by delivery of written notice to the Seller prior to the expiry of the development condition to waive the development condition and to proceed with this agreement”.

[15] WED was given 45 days to conduct its due diligence to satisfy itself of the “economic feasibility and marketability of the potential development of the subject lands”, failing which the Agreement was null and void. Written notice was also required to change the closing date.

[16] The time to provide notice of waiver of the due diligence condition was extended to October 17, 2016 on consent.

[17] On October 13, 2016 at 1:05 p.m., Mr. Kirshenbaum, owner of Showcase, sent an email to WED confirming that the “deadline of the due diligence period” was “this coming Monday October 17.”

[18] On October 17, 2016, WED delivered the notice of waiver by email only.

[19] Showcase admits that its owner, Mr. Kirshenbaum, saw the waiver on October 20, 2016 (after he returned from holidays) but did not tell WED the waiver was of no force and effect on the grounds that it was sent by email.

[20] WED’s representative said WED would have closed on the Brock Property as it was “a no brainer of a deal”.

[21] On October 20, 2016, WED sent an email containing the two amending agreements, executed by WED, as attachments. Showcase failed to sign either amendment.

[22] In October and November of 2016, there were additional email communications between the parties in respect of the Hopkins Property.

[23] On November 17, 2016, Showcase informed WED that it was terminating the Brock Street Agreement. WED commenced an action against Showcase arising from the failure to close the Agreement.

Analysis and Conclusion

[24] We see no error in the trial judge’s determination that WED complied with the terms of the Agreement and Schedule A by delivering its notice of waiver to Showcase by email.

[25] The trial judge noted the importance of looking at the Agreement as a whole, the genesis of the transaction, the background, the context, and the market in which the parties are operating: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47.

[26] He noted that paragraph 26 of the Agreement provides that a provision added to the agreement governs to the extent it conflicts with or causes a discrepancy with any provision of the standard pre-set portion.

[27] He held that,

[65] In my view, there is a “conflict or discrepancy” between Schedule A and the pre-printed standard form. The due diligence condition and notice of waiver are found in Schedule A, which contains many terms and conditions that were negotiated by the parties, including provisions addressing notice.

[66] The paragraph in Schedule A dealing with the waiver says that there must be “delivery of written notice to the Seller .” It does not say how that written notice is to be delivered, but the requirement that the notice be “to the Seller” is different than the notice provision in paragraph 3 of the pre-printed portion of the APS, and therefore the Schedule should prevail. [Emphasis in original.]

[28] The trial judge applied the reasoning of this court in McKee v. Montemarano, 2009 ONCA 359, 251 O.A.C. 156. He noted that in both cases, there was a conflict between standard form wording requiring delivery of notices to a specific address, and a due diligence condition in a schedule that required waiver to be delivered to the Seller. In McKee, this court found that a specific notice provision was intended to prevail over a contradictory standard form notice provision, since it would have been unnecessary to include had the parties intended it to be overridden by the standard form provision. Moreover, in both cases, in all matters of substance, the parties dealt with one another directly. In McKee, as in this case, Schedule A governed the delivery of the waiver notice based on the language of the specific provision in Schedule A and the surrounding circumstances.

[29] The trial judge concluded that: i. The negotiated, specific provision in Schedule A that communications could be made by email prevails over the more general provision in the standard form Agreement requiring personal delivery; ii. The surrounding circumstances, including that the parties specifically included a clause in Schedule A providing for the use of email, supports an intention to communicate by email on all issues and a practice of so doing; and iii. Counsel for the appellant admits that he received the waiver by email.

[30] The trial judge concluded that it would be inconsistent with the practical common sense approach described in Sattva to read the contract as disallowing email communication, in light of the surrounding circumstances. His conclusion reveals no palpable or overriding error and is entitled to deference.

[31] He also considered the appellant’s argument that a notice should not be treated as an amendment to an agreement because a notice is unilateral and does not involve the consent of both parties. However, he concluded that where both parties are sophisticated and there is a past practice of sending all communications by email, and the circumstances of the agreement involve collaboration and cooperation, “that difference is not significant, and in my view it is unduly technical and contrary to the parties’ expectations to suddenly hold one party to a strict reading of the APS on one particular communication.”

[32] The trial judge also correctly distinguished High Tower Homes Corporation v. Stevens, 2014 ONCA 911, 123 O.R. (3d) 81. In High Tower, unlike in this case, there was no “clear practice” of the parties “communicating by email on all issues.” Moreover, as noted by the trial judge at paragraphs 79 to 80 of his judgment, unlike in this case:

[79] High Tower Homes dealt with two parties of somewhat unequal bargaining power in which the purchaser had not disclosed changes it had made to an agreement, and then sought to take advantage of those changes by giving notice of the waiving of a condition by fax. In this case, however, the parties were on an equal footing that included collaborating with one another on the development proposal, and there was a clear practice of communicating by email on all issues. As Walker testified, and which the communications corroborate, it was clear that Kirshenbaum’s preferred method of communication was by email. As Walker said, the fact that Kirshenbaum had not put his email address under paragraph 3 of the APS did not trouble him as he had Kirshenbaum’s email address and they were acting openly and in good faith with one another.

[80] Further, unlike High Tower Homes (at para. 49), the APS did contain separate provisions calling for “delivery of notice in writing to the Seller” and for transmission of documents by email.

[33] In sum, we see no error in the trial judge’s conclusion that Showcase wrongfully terminated the Agreement, as WED waived the conditions of purchase by email in accordance with the Agreement, and at that point Showcase was bound to proceed with the sale.

[34] For these reasons, the appeal is dismissed.

[35] On the consent of both parties, costs of the appeal to the respondent in the amount of $15,000 all inclusive.

“Grant Huscroft J.A.”

“J.A. Thorburn J.A.”

“J. George J.A.”