Court File and Parties

CITATION: Medad v. Hope, 2016 ONSC 3323 DIVISIONAL COURT FILE NO.: 001/16 DATE: 2016-05-27

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

JOSHUA JAY MEDAD also known as Joshua Stern Plaintiff/Respondent

– and –

HOPE HOUSE YOUTH CHARITIES and JAY BUDD Defendants/Appellants

COUNSEL: Dana Carson, for the Plaintiff/Respondent David Hager, for the Defendants/Appellants

HEARD at Toronto: May 18, 2016

BEFORE: L. A. PATTILLO J.

Reasons for Judgment

Introduction

[1] This is an appeal by Hope House Charities (“Hope House”) from the judgment of Deputy Judge D. Anschell of the Toronto Small Claims Court (the “Deputy Judge”) dated December 14, 2015 allowing the Respondent Joshua Jay Medad’s (“Medad”) claim for breach of contract and awarding Medad damages of $25,000 together with pre and post judgment interest.

[2] The central issue on this appeal is the meaning to be given to the last sentence of paragraph 2 of the memorandum of understanding dated November 15, 2013, entered into between Hope House and Medad (the Agreement”) and dealing with the Agreement’s termination.

[3] For the reasons that follow, I dismiss the appeal. In my view, the Deputy Judge made no palpable and overriding error or extricable legal error in her interpretation of the termination provision in the Agreement. Her interpretation complies with the principles of contract interpretation and is commercially reasonable.

Background

[4] Hope House is a registered charity formed in the summer of 2013 whose mission is to provide a safe place for adolescents looking for support. Its Chief Executive Officer is Jay Budd (“Budd”).

[5] In the fall of 2013, Medad joined Hope House as its Director of Programming. Prior to joining Hope House, Medad, who is also known as Joshua Stern, founded The Josh Project, a charitable organization assisting at-risk and homeless youth.

[6] Following a period of negotiation between Budd and Medad in the fall of 2013, Hope House, The Josh Project and Medad entered into the Agreement which deals with Medad’s involvement with Hope House.

[7] Among other things, the Agreement provides Hope House licensing rights with respect to current and future programming developed by Medad in consideration for a monthly fee of $3,000. In turn, Medad was bound by an exclusivity clause preventing him from developing or becoming a part of another charitable organization.

[8] Paragraph 2 of the Agreement provides:

2. The licensing of the Joshua Stern property is only valid as long as Joshua Stern is in the employ of or hired by Hope House. In the event that either party wish to terminate this agreement, either party must provide at least 1 year of notice to the other side, in order to provide continuity to the TDSB agreement for a full school year.

[9] At the time of the Agreement, Hope House had no agreement with the Toronto District School Board (“TDSB”).

[10] The relationship between Budd and Medad began to deteriorate towards the end of December, 2013, early January 2014. Among other things, they disagreed on the direction of Hope House.

[11] On February 12, 2014, Hope House advised Medad that his relationship with Hope House was terminated. Hope House paid Medad until March 31, 2014, in lieu of notice. Medad took the position that he was entitled to one year’s notice or pay in lieu in accordance with the Agreement. Hope House confirmed the termination in a letter dated February 21, 2014.

The Deputy Judge’s Reasons

[12] In her lengthy reasons for judgment, the Deputy Judge reviewed the evidence in some detail. She held that Hope House did not have just cause to terminate Medad and that, in accordance with the Agreement, Hope House was required to provide one year’s notice to Medad to terminate the Agreement. Accordingly, the Deputy Judge held Medad was entitled to a payment of $34,615 but granted judgment in the amount of $25,000 in accordance with Medad’s waiver of any amount in excess of $25,000.

Standard of Review

[13] A judge’s decision involving the issue of contractual interpretation engages questions of mixed fact and law and attracts deference. It will not be overturned unless there is a palpable and overriding error or an extricable legal error: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 at para. 50; Flintoff v. Crown William Mining Corp. 2016 ONCA 86 (C.A.).

Position of Hope House

[14] Hope House submits that the Deputy Judge erred in her interpretation of the second sentence of paragraph 2 of the Agreement by failing to follow the principles of contract interpretation. Specifically, it submits she failed to give the termination provision its plain and ordinary grammatical meaning by ignoring the last 13 words of paragraph 2; and failed to consider the termination provision in light of the entire Agreement and in light of its purposes and commercial context.

[15] Further, Hope House submits that the Deputy Judge erred in failing to identify a condition precedent to the application of the termination provision. It submits that the termination provision is a condition precedent dependent on the TDSB. As no agreement was ever entered into between Hope House and TDSB, the termination provision is unenforceable and there is no obligation on Hope House to provide one year’s notice to Medad.

[16] Finally, Hope House submits that in the absence of an enforceable termination provision, the Deputy Judge erred in failing to find that the notice period in respect of the termination of Medad’s employment should be based on the common law presumption of reasonable notice. In that regard, Hope House submits, given Medad’s brief period of employment, his young age and relatively low level of remuneration, two weeks would be reasonable notice.

Analysis

[17] Contractual interpretation involves a practical, common-sense approach not dominated by technical rules of construction. What is important is to determine the intent of the parties as discerned from the ordinary and grammatical meaning of the words themselves and the contract as a whole. Further, while consideration of the surrounding circumstances is also a consideration, it must not be allowed to overwhelm the words of the agreement itself: Sattva, at paras. 47 and 57 – 58.

[18] Although the Deputy Judge did not set out the principles of contract interpretation, I am satisfied from reviewing her reasons that she was alert to them and followed them. The plain meaning of the words both on their own and within the entire Agreement speak of one year’s notice if either party terminates the Agreement.

[19] Hope House submits that there is an apparent ambiguity between paragraphs 2 and 8 of the Agreement. Paragraph 2 speaks of one year’s notice whereas paragraph 8, which speaks of termination, provides for no notice. Paragraph 8 provides that Budd and Medad are both members of the management team and “if either is terminated, the other will terminate retroactive to said termination..”. In my view, there is no ambiguity between the paragraphs. They are dealing with different issues. Paragraph 2 of the Agreement deals with its termination. Paragraph 8 deals with the reciprocal termination in the event that either Budd or Medad are terminated by Hope House. In such event, the reciprocal termination will be dealt with in accordance with the respective party’s agreement with Hope House.

[20] Further, an interpretation of paragraph 2 that requires one year’s notice of termination is in my view also commercially reasonable having regard to both the Agreement as a whole and the surrounding circumstances. Medad, who had his own charitable organization, was giving that up to join forces with Hope House. His obligation to Hope House was exclusive (Agreement paragraph 5). In such circumstances, it is reasonable that Medad required sufficient notice of termination to protect his interests.

[21] At trial, Hope House submitted that based on the wording of paragraph 2, the agreement with TDSB was a pre-condition to trigger the one year notice provision. In rejecting that argument, the Deputy Judge stated:

The language with respect to the notice period is inelegant and awkward. The potential of a TDSB agreement is provided as a reason for the one year long notice period, but it is not a condition necessary to trigger the one year notice period. My interpretation of Clause 2 is that either party must provide at least 1 year of notice to the other side in the event that either party wishes to terminate the Agreement. The reason for this notice period is irrelevant.

[22] Hope House submits that the Deputy Judge erred in failing to find that the reference to the TDSB agreement in paragraph 2 of the Agreement was a condition precedent to the requirement of one year’s notice.

[23] I agree with the Deputy Judge. The wording of the second sentence of paragraph 2 of the Agreement is inelegant and awkward. Nevertheless, the last 13 words of the sentence do not, by their plain wording, create a condition precedent such that there must be an agreement with TDSB for the one year notice period to apply. As the Deputy Judge found, the reference to the TDSB agreement is at most a reason for the notice but not a condition of it.

[24] Hope House relies on Turney v. Zhilka, 1959 12 (SCC), [1959] S.C.R. 578 (S.C.C.) which dealt with a true condition precedent. The Court noted that a true condition precedent was an external condition upon which the existence of the obligation depends. Until the event occurs, there is no right of performance on either side. In my view, the principle in Turney v. Zhilka is not applicable. Not only does the plain wording of paragraph 2 not create a condition dependent on the TDSB but the parties performed under the Agreement until Hope House unilaterally terminated it in February 2014.

[25] Nor, having regard to the entire Agreement and the circumstances surrounding it was it the intention of the parties to make the one year notice provision conditional on a TDSB agreement. The evidence is Budd and Medad never discussed what would happen if there was not agreement with the TDSB. Further, it was Budd alone who negotiated with the TDSB.

[26] Finally, I consider that an interpretation of paragraph 2 that results in the termination provision to be conditional on an agreement with TDSB to be contrary to the commercial context of the Agreement as noted above.

[27] In light of my decision that the Deputy Judge was correct in her interpretation of the Agreement, it is not necessary to deal with Hope House’s submissions concerning reasonable notice.

Conclusion

[28] Hope House’s appeal is therefore dismissed.

[29] Medad is entitled to his costs of the appeal. As agreed by the parties, costs fixed at $5,000 in total.

L. A. Pattillo J.

Released: May 27, 2016