Court of Appeal for Ontario

Date: 2017-01-25

Docket: C62333 & C62334

Judges: Simmons, Brown and Roberts JJ.A.

Between

2260695 Ontario Inc., 2260698 Ontario Inc. and 2260700 Ontario Inc. Applicants/Respondents by Counter-Application (Respondents)

and

Invecom Associates Limited Respondent/Counter-Applicant (Appellant)

Counsel

Benjamin Salsberg, for the appellant

Martin Sclisizzi, for the respondents

Heard: January 17, 2017

On Appeal

On appeal from the order of Justice Thomas R. Lederer of the Superior Court of Justice, dated May 26, 2016, with reasons reported at 2016 ONSC 3327.

Endorsement

Overview

[1] Following the oral hearing, we dismissed this appeal for reasons to follow. These are our reasons.

[2] The appellant, Invecom Associates Limited ("Invecom"), appeals the applications judge's decision that it forfeited a $400,000 deposit placed under an agreement of purchase and sale made January 10, 2014 (the "Agreement") with the respondents, 2260695 Ontario Inc., 2260698 Ontario Inc. and 2260700 Ontario Inc. (collectively the "Vendors"), to acquire three properties in Waterloo, Ontario.

[3] Section 4.1 of the Agreement contained several conditions of closing in favour of Invecom. It set 5:00 p.m. on a specified Condition Date as the time by which Invecom could waive the conditions "by written notice to the Vendors." Specifically, s. 4.1 stated, in part:

The obligation of the Purchaser to complete the Transaction is subject to the following conditions (it being understood that each of these conditions is for the benefit of the Purchaser and may be waived in whole or in part by the Purchaser by written notice to the Vendors on or before the applicable date for the satisfaction of such condition)

[4] Section 4.3 provided, in part:

4.3. If by the applicable times or dates referred to in Section 4.1 the Purchaser has not given notice to the Vendors that such conditions have not been satisfied or waived, such conditions will be deemed to have been satisfied and waived and the parties hereto hereby covenant and agree to complete the Closing pursuant to the terms and conditions of this Agreement. [Emphasis added].

[5] An amendment to the Agreement extended the Condition Date for waiving the conditions to 5:00 p.m. on April 15, 2014.

[6] Around 2 p.m. on April 15, 2014, Invecom sent the Vendors' real estate agent an Amending and Extending Agreement that proposed to extend the Condition Date until April 30, 2014 (the "Draft Extension Agreement"). The agent promptly transmitted the document to the Vendors.

[7] Towards midnight of that day, the agent informed Invecom the Vendors would not give "a straight extension". Invecom then took the position that if the Vendors would not agree to an extension, the deal was at an end. As a result, Invecom did not close the transaction.

[8] The Vendors took the position they were entitled to retain the deposit, relying on Section 2.2 of the Agreement, which stated: "If the Transaction contemplated by this Agreement is not completed as a result of the Purchaser's default, then the Deposit and all accrued interest thereon will be forfeited to the Vendors as liquidated damages and in full and complete satisfaction of any Claims that the Vendors may have against the Purchaser as a result of such default…"

[9] The Vendors applied for declarations Invecom had breached the Agreement and they were entitled to retain the deposit. Invecom commenced its own application, seeking declarations it had lawfully terminated the Agreement and was entitled to the deposit.

[10] The applications judge granted the Vendors' application, declared Invecom was in default of the Agreement, and declared the deposit and all accrued interest forfeited to the Vendors. The applications judge dismissed Invecom's application.

Analysis

[11] Invecom advances two grounds of appeal.

[12] The first submission concerns the applications judge's findings with respect to the Draft Extension Agreement. After reviewing the terms of the Agreement and the events of April 15, 2014, the applications judge stated, at para. 14:

The conditions are clear and unambiguous. The notice was to indicate that the conditions were not waived or satisfied. It was to be delivered or transmitted to the individual designated for the purpose by the time the agreement specified. This is not what the proposed Amending and Extending Agreement did. It was an offer. It confronted the vendors with a choice, accept the offer or risk the possibility that notice indicating the conditions were not being waived and were not satisfied would follow and, by the terms of the contract, end the agreement. If the vendors did not respond, the need for a decision returned to the purchaser. It could amend its offer and provide some additional benefit to the vendors in exchange for the extension in the hope that this amended proposal would be accepted … Once 5:00 p.m. approached, the decision the purchaser was required to make changed: send the notice as required by the agreement or accept the conditions and prepare to close the purchase.

[13] Invecom submits the applications judge erred in reaching this conclusion. It argues the Draft Extension Agreement served "dual purposes": (i) as written notice to the Vendor under ss. 4.1 and 4.3 of the Agreement that the conditions in its favour had not been satisfied or waived; and (ii) as an offer to avoid the termination of the Agreement by extending the Condition Date and Closing Date. Consequently, the applications judge erred in failing to find the Draft Extension Agreement constituted the written notice ss. 4.1 and 4.3 required and, instead, erroneously characterized the Draft Extension Agreement simply as an "offer".

[14] We do not accept this submission.

[15] A deferential standard of review applies to the applications judge's conclusion as to whether the Draft Extension Agreement constituted a "written notice" under ss. 4.1 and 4.3 of the Agreement. This court ought not to intervene absent palpable and overriding error.

[16] The applications judge's finding that the Draft Extension Agreement amounted to an offer to extend was fully supported by the evidence. We see no reversible error. Neither the Draft Extension Agreement nor its accompanying transmittal email contained any language suggesting Invecom intended the document to serve as written notice under ss. 4.1 and 4.3 that the conditions had not been satisfied or waived. As the document's recitals stated, it constituted a request by Invecom for extensions of the Condition Date and the Closing Date.

[17] As its second ground of appeal, Invecom submits the applications judge erred in failing to find the Vendors breached their good faith obligations described in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494. They argue such a breach arose from the Vendors' failure to respond to the Draft Extension Agreement until after 5:00 p.m. on April 15, 2014.

[18] The applications judge examined this argument in the context of the Agreement's language and the parties' specific conduct. He concluded, correctly in our view, the Agreement placed on Invecom the obligation to act as the time for waiving the conditions in its favour ran out: para. 19. We see no error in his conclusion that "[t]here is no failure of good faith and nothing dishonest in leaving it to the purchasers to look after their own interests when the terms of the agreement are known to all." As Invecom's counsel fairly acknowledged, these were sophisticated parties who entered into a sophisticated agreement with the assistance of counsel.

[19] Accordingly, we see no basis to interfere with the applications judge's conclusion, at para. 20, that:

[P]roper notice advising that the conditions had not been satisfied and were not being waived was not given. The conditions were deemed to be satisfied or waived. The purchasers were obliged to complete the contract. They are in default. The deposit of $400,000 is forfeited to the vendors.

[20] The appeals are dismissed.

[21] In accordance with the agreement of counsel at the hearing that the successful party would be entitled to costs of the appeal in the amount of $9,000.00, inclusive of all applicable taxes and disbursements, the respondents are entitled to their costs in that amount.

Janet Simmons J.A.

David Brown J.A.

L.B. Roberts J.A.