DATE: 20030605
DOCKET: C38073
COURT OF APPEAL FOR ONTARIO
McMURTRY C.J.O., WEILER AND MacPHERSON JJ.A.
B E T W E E N:
J. E. R. HARRISON ESTATES LIMITED, JAMES McAPLINE HARRISON, EVELYN BERNICE HARRISON AND JAMES RICHARD HARRISON
C. Scott Ritchie, Q.C. and Janet Allinson for the appellants
Plaintiffs (Respondents)
- and -
1205458 ONTARIO LTD. (IN TRUST), ACCU II DEVELOPMENT CORPORATION, RIVERWOOD GOLF & COUNTRY CLUB INC., AND RIVERWOOD HILL FARMS INC.
W. Peter Murray for the respondents
Defendants (Appellants)
- and -
ELIZABETH MARY HUBBER, LORNE ALFRED HUBBER AND BLAIR HUBBER
Plaintiffs (Respondents)
- and -
1205458 ONTARIO LTD. (IN TRUST), ACCU II DEVELOPMENT CORPORATION AND RIVERWOOD GOLF & COUNTRY CLUB INC.
Defendants (Appellants)
HEARD: May 14, 2003
On appeal from the judgment of Justice T. D. Marshall of the Superior Court of Justice dated March 19, 2002.
BY THE COURT:
OVERVIEW
[1] The appellants were defendants in two actions that were joined at trial because the issues were identical in both actions. In his decision, the Honourable Mr. Justice T. D. Marshall denied the appellants’ claim for specific performance and ordered that the Agreements of Purchase and Sale between the respondents as vendors and the appellants as purchasers be declared null and void. The trial judge also ordered that the deposits paid by the appellants be forfeited.
FACTS
[2] The respondents are two families owning adjoining farmlands fronting on Highway 54 near Caledonia, Ontario fronting on the Grand River. The appellants’ numbered company entered into three separate Agreements of Purchase and Sale with the respondents in August 1998 to purchase portions of their respective properties. It was understood by all parties that the purchasers intended to develop a golf course on the purchased lands.
[3] The Agreements of Purchase and Sale contemplated the severance of the lands to be purchased with the respondents retaining the portions of their lands containing their residences and several estate lots.
[4] The Agreements of Purchase and Sale were subject to conditions related to the purchaser obtaining purchase agreements with all of the respondent vendors, a draft approval for the development of an 18 hole golf course and severance approvals for the abutting estate lots on the lands that were to be retained.
[5] The Agreements of Purchase and Sale also contained the following provision:
The conditions contained herein are for the benefit of the Purchaser and may be waived by it in its sole discretion prior to the end of the Conditional Periods.
[6] The conditions were fulfilled within the conditional periods with the exception of the condition relating to severance approvals for the estate lots on the lands to be retained by the respondents. The estate lots condition was waived by the appellants pursuant to the condition referred to in the last paragraph.
[7] The respondents refused to complete their respective transactions. The respondent Lorne Hubber stated that he would not close until approvals for the estate lots severances were obtained or a similar security was provided to ensure the estate lots in the future. The respondent James Harrison refused to close on the ground that it was not the vendors’ responsibility to pay for the severance applications for the estate lots.
[8] On May 31, 1999, the respondents through their solicitor advised the solicitor for the appellant in writing that the obligation of the respondent Hubber to close was conditional upon the creation of the estate lots prior to closing and that no applications for severance had been made by the appellants. A further letter from the Hubber family solicitor dated June 4, 1999 to the solicitor for the appellants confirmed once again that the conditions regarding the estate lots could not be waived and suggested that until the matter was resolved there was no reason for the appellant to incur the expense of preparing “reference plans”.
[9] It was also the responsibility of the appellants as purchasers to obtain the written approval of the Grand River Conservation Authority for the severance of the respondent Elizabeth Hubber’s land. The appellant purchasers falsely represented that a letter of approval had been obtained when it had not.
[10] Peter Bezemer was the principal of the appellant corporation. He had made a similar offer for the purchase of the respondent lands through a numbered company in 1997 but after “researching” Mr. Bezemer’s background, the respondent Harrison family told the real estate agent, Ron Hewitt, that they did not want to deal with Mr. Bezemer. Mr. Hewitt was in practical terms the real estate agent for both vendors and purchasers. Mr. Bezemer secured Mr. Hewitt’s agreement with respect to the 1998 agreement which is the subject matter of this appeal that Hewitt not disclose that he, Bezemer, was involved in any way in the transactions.
DECISION OF TRIAL JUDGE
[11] The trial judge found as a fact that the severance approvals for the estate lots which were to be retained by the respondents were a fundamental condition of the agreements between the respondents and the appellants.
[12] The trial judge also found that the clause in the Agreements referred to above that entitled the purchasers to waive the conditions on the basis that the conditions were stated to be for the benefit of the purchasers in effect made no commercial sense as the creation of the estate lots could only benefit the respondent vendors and in his view the waiver condition did not represent the true intention of the parties. He found the three Agreements of Purchase and Sale “patently ambiguous”.
[13] In the view of the trial judge, the waiver right of the appellants would render meaningless the fundamental condition that the appellants obtain severance approval for the estate lots, on behalf of the respondent vendors, prior to closing.
[14] The trial judge decided that in view of the “ambiguity”, the agreement should be interpreted to give effect to the true intention of the parties which was that the severance approvals were to be obtained prior to closing. As this did not occur, the agreements were unenforceable by the appellants.
[15] The trial judge also found on the evidence that there was an expectation and an obligation on the appellants to pay the fees for all of the severances. While the severances were delivered to the Land Division Committee, they were not paid for and the severance applications were allowed to lapse.
[16] While the trial judge found that the agreements were null and void, he ordered the forfeiture of the deposits as he held that the respondent vendors were ready to complete the transactions in accordance with what he held to be the terms of the agreement and that the defaults of the appellant purchasers made the completion of the agreements not possible on those terms.
ANALYSIS
[17] It would appear from the evidence and the arguments advanced by counsel on behalf of the appellants and respondents that the parties understood that the severance applications were to be a “two stage” process. A “two stage” process was adopted because the approvals for the severances of the estate lots to be retained by the respondents would be more likely if the severance for the golf club had been approved. In our view, a fundamental ambiguity related also to the issue as to whether or not the “two stage” process should take place before the closing of the transactions.
[18] The trial judge by implication found that the “two stage” process was to take place before the closing if the true intention of the parties was to be respected. We can find no palpable or overriding error in the conclusion that he reached and the appeal is therefore dismissed with respect to the appellants’ entitlement to specific performance of the agreements.
[19] The appellants also submit that if the finding of the trial judge is to be upheld with respect to his declarations that the agreements are null and void, then the respondents should be required to return the deposits.
[20] It is our opinion that by failing to proceed with having the estate lots severed, the purchaser appellants failed to keep their bargain. (Dynamic Transport Ltd. v. O.K. Detailing Ltd. (1978) 1978 215 (SCC), 2 S.C.R. 1072). While the agreement provides for its termination and the return of the deposit, on notice, if the purchasers are unable to obtain the approvals, they did not avail themselves of this provision. Instead, they insisted that the agreements were binding, but refused to pursue the severance of the estate lots. As a matter of law, where the purchaser fails to perform the contract, and the contract does not otherwise provide for the return of the deposit, the deposit is forfeit (DePalma v. Runnymede Iron & Steel Co., 1949 73 (ON CA), [1950] O.R. 1 (C.A.)).
CONCLUSION
[21] The appeals are dismissed. The respondents may make written submissions with respect to costs within ten days and the appellants shall reply to the submissions within seven days of the receipt hereof.
“R. Roy McMurtry C.J.O.”
“K. M. Weiler J.A.”
“J. C. MacPherson J.A.”
RELEASED: June 5, 2003 “RRM”