John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. [Indexed as: John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd.]
63 O.R. (3d) 304
[2003] O.J. No. 350
Docket No. C37129 and M27867
Court of Appeal for Ontario
Weiler, Goudge and Armstrong JJ.A.
February 7, 2003
*Application for leave to appeal to the Supreme Court of Canada dismissed with costs November 6, 2003 (McLachlin C.J.C., Major and Fish JJ.).
Sale of land -- Conditions precedent -- Vendor agreeing to subdivide and sell lands -- Agreement conditional on compliance with Planning Act -- Vendor promising to obtain necessary consent for severance -- Severance made on condition that vendor construct and dedicate road extension -- Vendor terminating agreement on ground that condition unreasonable -- Doctrine of frustration not applying -- Contract term not ambiguous, unreasonable, nor commercially absurd -- Vendor liable for breach of contract.
Sale of land -- Specific performance -- Availability -- Uniqueness -- Specific performance only granted if plaintiff can show that subject property is unique -- Determination of uniqueness to be made at date when an actionable act takes place and wronged party must decide whether to keep agreement alive by seeking specific performance or accept breach and sue for damages.
In July 1999, Magna agreed to sell 4.12 acres of land in the City of Vaughan to John E. Dodge Holdings Ltd. ("Dodge"). For the sale to proceed, it was necessary to obtain severance approval under the Planning Act, R.S.O. 1990, c. P.13. The agreement in para. 14 provided that the agreement was effective only if the Vendor complied with the Planning Act and it stated: "Vendor covenants to proceed diligently at his expense to obtain any necessary consent by completion." Magna was granted severance approval, but the approval was subject to the condition that Magna construct and dedicate a road extension to the City, if required. Magna took the position that because of the imposition of this condition, it was entitled to terminate the agreement. Dodge, however, sued and obtained a judgment of specific performance that required Magna to reapply for the severance approval, which had lapsed. Magna appealed the decree of specific performance but also proceeded with the severance application, including a successful appeal to the Ontario Municipal Board for the removal of the condition that Magna build the road extension. On the appeal to the Ontario Court of Appeal, which also included an appeal as to costs, Magna argued that it had the right to terminate the agreement as a matter of interpretation or based on unreasonableness, frustration, or commercial absurdity. Magna also argued that specific performance was not an appropriate remedy because there were comparable properties available to Dodge in the vicinity.
Held, the appeal should be dismissed.
Paragraph 14 was not ambiguous and contrary to the submission of Magna, the evidence supported the finding that the parties intended para. 14 to apply as written, and the evidence supported the finding that Magna intended to build the road extension at the time it signed the agreement of sale. Dodge, in waiving the conditional clauses in Schedule A to the agreement of purchase and sale, did not waive Magna's obligation under para. 14. Contrary to Magna's submission, Magna's obligations under para. 14 were not limited to acting in good faith and using best efforts to meet its obligation to obtain a severance. What is or is not required of a vendor will depend upon the wording of the agreement and the circumstances under which it was entered into. In this case, the only way for Magna to obtain "any necessary consent" was to undertake to bear the cost of building and dedicating the road extension, if required, or to appeal the imposition of the [page305] conditions if it wished to have the condition removed. There was no need to read a reasonableness requirement into para. 14 because reasonableness was provided for by the process under the Planning Act to appeal the conditions imposed on a severance.
Magna's submissions that it was entitled to terminate the agreement based on reasonableness, frustration, or commercial absurdity were unsound and did not provide a basis for disturbing the trial judgment. Paragraph 14 did not result in commercial absurdity and, as a matter of the standard of appellate review, Magna did not show any palpable and overriding error in relation to the trial judge's findings on the question of reasonableness. Further, the doctrine of frustration was not applicable. The possibility that Magna might to required to build a road extension was a foreseeable event at the time of the signing of the agreement, and the imposition of this as a condition of the severance approval did not create a radical change in Magna's obligation. There was no sufficient supervening event as required for the doctrine of frustration.
Turning to the appeal about the remedy of specific performance, specific performance will be granted only if the plaintiff can demonstrate that the subject property is unique. In order to show that a property is unique, the party seeking specific performance must show that the property has a quality that cannot be readily duplicated elsewhere. This quality should relate to the proposed use of the property and be a quality that makes it particularly suitable for the purpose for which it was intended. The time when a determination is to be made as to whether a property is unique is the date when an actionable act takes place and the wronged party must decide whether to keep the agreement alive by seeking specific performance or accept the breach and sue for damages. Magna did not show that the trial judge misapprehended the evidence or committed any overriding and palpable error in her findings. She did not err in her conclusion that the subject property was unique. Finally, the trial judge's order as to costs should not be disturbed. Accordingly, the appeal should be dismissed.
APPEAL from a judgment of Lax J. (2001), 2001 28012 (ON SC), 56 O.R. (3d) 341, 46 R.P.R. (3d) 239 (S.C.J.) granting a decree of specific performance.
Cases referred to 1252668 Ontario Inc. v. Wyndham Street Investments Inc. (1999), 27 R.P.R. (3d) 58, [1999] O.J. No. 3188 (Quicklaw) (S.C.J.); 904060 Ontario Ltd. v. 529566 Ontario Ltd., [1999] O.J. No. 355 (Quicklaw), 89 O.T.C. 112 (Gen. Div.); Albert v. Spiegel (1993), 17 C.P.C. (3d) 90 (Ont. C.A.); Asamera Oil Corp. Ltd. v. Sea Oil & General Corp., 1978 16 (SCC), [1979] 1 S.C.R. 633, 89 D.L.R. (3d) 1, 23 N.R. 181, [1978] 6 W.W.R. 301, 5 B.L.R. 225 (sub nom. Baud Corp., N.V. v. Brook); Dynamic Transport Ltd. v. O.K. Detailing Ltd., 1978 215 (SCC), [1978] 2 S.C.R. 1072, 85 D.L.R. (3d) 19, 6 Alta. L.R. (2d) 156, 4 R.P.R. 208, 9 A.R. 308, 20 N.R. 500; Greenforco Holding Corp. v. Yonge-Merton Developments Ltd., [1999] O.J. No. 3232 (Quicklaw) (S.C.J.); Housen v. Nikolaisen, 2002 SCC 33, 219 Sask. R. 1, 211 D.L.R. (4th) 577, 286 N.R. 1, 272 W.A.C. 1, [2002] 7 W.W.R. 1, 30 M.P.L.R. (3d) 1, 10 C.C.L.T. (3d) 157; Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, 55 O.R. (3d) 312n, 204 D.L.R. (4th) 513, 277 N.R. 1, 17 B.L.R. (3d) 161, 10 C.L.R. (3d) 1; Orangeville Raceway (Ontario) Inc. v. Frieberg (1988), 34 C.P.C. (2d) 75 (Ont. H.C.J.); Semelhago v. Paramadevan, 1996 209 (SCC), [1996] 2 S.C.R. 415, 28 O.R. (3d) 639n, 136 D.L.R. (4th) 1, 197 N.R. 379, 3 R.P.R. (3d) 1; Wroth v. Tyler, [1974] Ch. 30, [1973] All E.R. 897, [1973] 2 W.L.R. 405, 117 Sol. Jo. 90, 25 P. & C.R. 138; Zhilka v. Turney, 1959 12 (SCC), [1959] S.C.R. 578, 18 D.L.R. (2d) 447 Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(2) Planning Act, R.S.O. 1990, c. P.13 [page306] Authorities referred to Perell, P.M."The Ambiguity Exception to the Parol Evidence Rule" (2001) 36 Can. Bus. L.J. 21
David M. Brown, Christopher J. Cosgriffe and Eli Lederman, for respondent. Dennis M. O'Leary and Jeffrey S. Percival, for appellant.
The judgment of the court was delivered by
WEILER J. A.: --
NATURE OF APPEAL
[1] The primary issue on this appeal is the interpretation of para. 14 in the real estate brokers' standard Agreement of Purchase and Sale. Paragraph 14 reads:
Planning Act: This Agreement shall be effective to create an interest in the property only if Vendor complies with the subdivision control provisions of the Planning Act by completion and Vendor covenants to proceed diligently at his expense to obtain any necessary consent by completion.
[2] Further issues are whether the trial judge erred in concluding that 805062 Ontario Ltd. (hereinafter referred to as Magna) did not have the right to terminate the Agreement of Purchase and Sale on the basis of the doctrine of frustration and whether she erred in ordering specific performance of the Agreement. In connection with these issues, Magna challenges certain factual findings made by the trial judge. There is also an appeal as to costs.
[3] The standard of review of a judge's factual findings and inferences drawn from the facts is palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, 211 D.L.R. (4th) 577. Questions of mixed fact and law involving the application of a legal standard to a set of facts are generally also subject to a standard of palpable and overriding error. If, however, it is clear that the trial judge made some extricable error in principle with respect to the characterization of the standard or its application, the error may amount to an error of law, and a standard of correctness will apply.
FACTS
[4] The decision of Lax J. is reported at (2001), 2001 28012 (ON SC), 56 O.R. (3d) 341, 46 R.P.R. (3d) 239 (S.C.J.). As a result, it is only necessary to [page307] give a summary of the facts sufficient to understand the issues in this appeal.
[5] In July 1999, Magna agreed to sell 4.12 acres of serviced undeveloped land in the City of Vaughan (the "City") near Canada's Wonderland to the respondent, John E. Dodge Holdings Ltd. ("Dodge"), a hotel builder and manager. The Agreement, including para. 14 reproduced above, was contained on the real estate bureau's standard commercial form of Agreement of Purchase and Sale.
[6] For the transaction to proceed in accordance with the Planning Act, R.S.O. 1990, c. P.13, severance approval was required from the City. Magna applied for and obtained the severance subject to certain conditions, the principal one being that Magna "extend Caldari Road at his expense to the north limits of his property, if required, to the satisfaction of the Engineering Department" and dedicate this land to the City, if required. Neither Magna nor Dodge had any need for the road extension, and building it would have been solely for the benefit of the property to the north.
[7] Magna attempted to get the Committee of Adjustment (the "Committee") to remove the condition relating to the building of the road extension but was unsuccessful in this regard. Initially, Magna said it would appeal the decision of the Committee to the Ontario Municipal Board ("OMB"), but on the last day for appealing, May 11, 2000, it decided not to appeal. Instead, Magna took the position that it was entitled to terminate the Agreement. A letter was sent to Dodge stating in part"[a]s it is not now possible to complete the transaction contemplated by the Agreement of Purchase and Sale in accordance with its terms and conditions, we hereby terminate the Agreement of Purchase and Sale . . .".
[8] Dodge commenced an action seeking an order for specific performance of the Agreement and obtained a judgment in its favour from Lax J. on October 10, 2001. Under the Planning Act, where an approval authority such as the Committee of Adjustment has imposed conditions to a severance, the consent to sever is not final until all conditions have been satisfied and, if the conditions are not satisfied within one year, the application is deemed refused. As severance approval for the property had expired, the judgment of Lax J. required Magna to reapply to the Committee to seek severance approval, appeal to the OMB any unacceptable conditions imposed by the Committee and, subject to the OMB's decision, comply with all severance conditions.
[9] Magna appealed the judgment of Lax J. and brought a motion for a stay before Charron J.A. on October 22, 2001. [page308] Charron J.A. ordered Magna to prepare and file an application for severance approval with the Committee and if unacceptable conditions were once again imposed, to proceed with an appeal to the OMB. The remainder of the judgment was stayed.
[10] Shortly thereafter, Magna submitted an application for severance to the City of Vaughan. In the second application, Magna requested severance of 3.7 acres as opposed to property described in the Agreement as "having a frontage of 400 feet more or less by a depth of 500 feet more or less and legally described as totalling 4.12 acres, designated as Parts 2 and 3 on Plan 65R-11385". Dodge was of the opinion this second application was not in accordance with the Agreement of Purchase and Sale. On November 23, 2001, Lax J. ordered Magna to amend its application to conform to the March 2000 consent application for severance that had been filed. Magna also appealed the November 23 order and brought a motion to stay the Order of Lax J. pending the outcome of that appeal. A stay of the November 23, 2001 order was denied and Magna amended its application as directed by Lax J. The appeals were consolidated. On the hearing of this appeal Magna abandoned its appeal respecting the November 23 order.
[11] Fresh evidence was filed at the outset of this appeal. The fresh evidence indicates that in response to the severance application, the Committee of Adjustment imposed the same conditions, including that Magna build the road and dedicate the land covered by the road to the City, if required. Magna appealed the conditions to the OMB. The OMB deleted the conditions. Instead, the OMB required Magna to grant a utility corridor easement over a narrower strip of land located in part on Magna's land and in part on the land Dodge was purchasing. As a result, Magna does not have to build the road and will retain title to the land subject to an easement.
ANALYSIS
- The Interpretation of Clause 14 and Whether Magna had the Right to Terminate the Agreement Having Regard to the Conditions of Severance Imposed by the City.
[12] The trial judge correctly noted that the starting point for interpreting a contract must be the words of the Agreement. The words should be given their ordinary meaning, and the factual matrix in which the Agreement was negotiated should be taken into account. This was a commercial document and the meaning to be accorded to it should be consistent with good business sense and avoid commercial absurdity. [page309]
[13] Magna's first submission is that the evidence as to the state of mind of the parties when the Agreement was signed does not support the finding of Lax J. that the parties intended Magna to carry all the risk, burden and uncertainty associated with obtaining a severance. To interpret the clause in this manner, submits Magna, creates an obligation that was never contemplated by the vendors and purchasers who used this standard form of agreement. Despite the clear wording of para. 14, Magna submits the parties did not intend that Magna should be required to comply with any condition of severance imposed by the Committee, such as building a road and dedicating the land to the municipality. Magna states that it only intended to access the property by means of a private drive and that it was only intending to build services to the property line, River Rock Gate and the Caldari Road stub. When more than this was required, it made best efforts in good faith to get the extra requirements removed. Magna submits that is all it was required to do. It was not required to go to unreasonable and unintended lengths to meet its obligations under the Agreement.
What was the intention of the parties at the time the Agreement was signed?
[14] Contrary to Magna's submission, however, the evidence supports the finding of Lax J. that the parties did in fact intend para. 14 to apply as written. As she noted, both parties to the transaction were sophisticated and experienced in business transactions and real estate development in particular. Magna had every opportunity to amend the standard Planning Act provision but did not do so. Allen Eagleson Jr., an experienced lawyer who worked for Magna, reviewed the Agreement. He suggested a number of changes from Dodge's first offer that were accepted and incorporated into the offer to purchase that was eventually accepted, but nothing was suggested in regard to para. 14. Mr. Czernohorsky, a senior officer at Magna, and Mr. Colburn, the general counsel to Magna responsible for its entire legal department, also reviewed the document and made a number of amendments to the pre-printed form as well as to the Schedule attached to it, all of which were accepted by Dodge. Again the Planning Act provision was not changed.
[15] Justice Lax found that Magna intended to build an extension to Caldari Road at the time the Agreement of Purchase and Sale was signed. Some of the evidence to which Lax J. referred respecting Magna's intention at the time it entered into the Agreement with Dodge includes the following: [page310]
-- Magna applied to the City to amend its zoning by-law in 1998 to allow it to build a speed stamp plant. At that time the plans filed by Magna proposed internal road access to the plant by building an extension of Caldari Road. Its calculations of land available for building purposes also contemplated the building of the road.
-- In May, Mr. Hossack, the general manager of another Magna subsidiary who negotiated the terms of the Agreement with Dodge, sought corporate approval to proceed with the negotiation and sale to Dodge. He wrote "We are selling this land serviced. To do this we must construct a cul-de- sac and complete all other services on the site along the road."
-- Magna obtained two quotes to build the road extension.
-- Representatives of Dodge saw the location of the proposed cul-de-sac at the northern boundary of the property as indicated by surveyors' stakes.
-- In June 1999, the City's planning staff confirmed that if the road lands were dedicated, Magna could sever its land without an application to the Committee of Adjustment. Dodge was prepared to pay one-half the cost of building the road if the City required the road to be built.
-- Two weeks after the Agreement of Purchase and Sale, the configuration of the proposed speed stamp plant changed. By turning the direction of the building around, Magna no longer required access to the plant internally across its land via Caldari Road and could access the plant from an existing road.
[16] There is ample evidence to support the finding of Lax J. that when Magna entered into the Agreement of Purchase and Sale, it was not commercially unreasonable for it to assume the burden of building the extension because that is precisely what it had intended to do at that time. It was not intending to build services only to the Caldari Road stub.
Did Dodge waive its right to compliance with paragraph 14?
[17] Paragraph 25 of the Agreement of Purchase and Sale states that to the extent there is conflict or ambiguity between the pre-printed portion of the Agreement (which contains para. 14) and the added clauses in Schedule A attached to the Agreement, the added clauses supersede the pre-printed sections. [page311] Clause (e), which forms part of Schedule A and is attached to the Agreement of Purchase and Sale reads as follows:
All servicing to the Property lot line, including the roads serving the property shall have been completed.
[18] The appellant submits that there is an obvious conflict between para. 14 and the waiver of Schedule A, clause (e). As a condition of severance, the Committee of Adjustment imposed on Magna the obligation to build a road "if required". Clause (e) required Magna to complete any roads serving the property by closing. When Dodge insisted on performance of the Agreement, it waived all conditions in the offer and paid the final portion of the deposit. Magna's position is that the effect of the waiver was to release Magna from the condition requiring the road serving the property to be built because clause (e) was waived. Though para. 14 requires Magna to comply with the Committee's subdivision control provisions, it claims the waiver of clause (3) takes precedence under the wording of para. 25.
[19] The waiver of clause (e) by Dodge, however, affected only the conditions in the Agreement as between Dodge and Magna. That waiver could not affect any requirements imposed by the Committee on Magna, as the Committee was not a party to the Agreement. Furthermore, in order for para. 25 to apply, there must be a conflict between para. 14 and clause (e). This is not the case. The Agreement of Purchase and Sale did not contain a closing date. Thus, once the application for severance was made and any conditions within it are complied with, any roads servicing the property would be completed by the date the parties would agree to close. Paragraph 25 would not apply because there would be no conflict. The waiver therefore affected only clause (e) and did not limit Magna's obligations under para. 14.
Is paragraph 14 ambiguous?
[20] Magna further submits that there is ambiguity as to the extent of Magna's obligations under para. 14, and that in such a situation the doctrine of contra proferentem applies. That is, if there is ambiguity in the Agreement that cannot be resolved by other rules of construction, then the language of the contract will be construed against the party that drafted the ambiguous provision: P.M. Perell"The Ambiguity Exception to the Parol Evidence Rule" (2001) 36 Can. Bus. L.J. 21 at p. 29.
[21] Paragraph 14 clearly imposes on the vendor an obligation to obtain "any necessary consent". I have already indicated that there is no conflict between para. 14 and Schedule A, clause (e). Consequently, para. 14 is not ambiguous. [page312]
What is the extent of Magna's obligation under paragraph 14?
[22] Magna's next submission is that the extent of its obligation in law pursuant to para. 14 is to act in good faith and to use best efforts to meet its obligation to obtain a severance. It submits that it fulfilled this requirement.
[23] In support of this submission that para. 14 only obliges a vendor to make best efforts to obtain a severance, Magna relies on Dynamic Transport Ltd. v. O.K. Detailing Ltd., 1978 215 (SCC), [1978] 2 S.C.R. 1072, 85 D.L.R. (3d) 19, at p. 1084 S.C.R. In that case both parties were aware that subdivision approval pursuant to the Planning Act was required, but the agreement was silent as to whether the vendor or the purchaser would obtain this approval. The Supreme Court held that the parties could hardly have promised to obtain planning permission for severance as planning permission is out of the control of the parties and is a condition precedent to the fulfillment of the agreement: see Zhilka v. Turney, 1959 12 (SCC), [1959] S.C.R. 578, 18 D.L.R. (2d) 447. In appropriate circumstances, however, the court would imply a promise by one of the parties to bring about the event constituting the condition. In a purchase and sale situation, the person proposing to carry out a subdivision of land is the vendor. The Supreme Court therefore implied a promise on the part of the vendor "to act in good faith and to take all reasonable steps to complete the sale".
[24] This, of course, begs the question as to what is encompassed by "all reasonable steps". The court did not specifically say what was to happen in the event that, as a condition of obtaining severance, conditions were imposed to which the vendor took exception. In discussing the ambit of reasonableness, however, the court referred to the decision of Megarry J. in Wroth v. Tyler, [1974] Ch. 30, [1973] All E.R. 897, at p. 50 Ch. to the effect that a vendor will usually not be required to embark upon difficult or uncertain litigation in order to secure the requisite consent. Relying on this, Magna says that it should not have been obliged to appeal the decision of the Committee to the OMB.
[25] What is or is not required of a vendor will depend on the wording of the agreement and the circumstances under which it was entered into. In this case para. 14 specifically imposes an obligation on the vendor to "proceed diligently at his expense to obtain any necessary consent" (emphasis added). The dictionary definition of diligence as contained in Webster's Encyclopedic Unabridged Dictionary of the English Language is "constant and earnest effort to accomplish what is undertaken". One of the synonyms given for diligence is perseverance. [page313]
[26] In Orangeville Raceway (Ontario) Inc. v. Frieberg (1988), 34 C.P.C. (2d) 75 (Ont. H.C.J.) at p. 88, Henry J. considered a similar clause in an agreement of purchase and sale that expressly placed on the defendant the obligation to obtain a consent to severance. He held that in accordance with the guidance of the Supreme Court in Dynamic Transport, there was an implied agreement that the vendor would bear the cost of complying with a condition imposed for severance. In this case the only way for Magna to obtain "any necessary consent" was to undertake to bear the cost of building and dedicate the extension of the road, if required, or to appeal the imposition of the conditions if it wished to have the conditions removed.
[27] The statutory scheme provided by the Planning Act does not end with the decision by the Committee. If the vendor is of the opinion that the imposition of a condition by the Committee is unreasonable, or otherwise not well-founded, it has the right to appeal to the Ontario Municipal Board and a further right to have this decision reviewed by the Divisional Court. There is no need to read a requirement into para. 14 that any condition imposed by the Committee must be "reasonable" because reasonableness is provided for through the existing process under the Planning Act and related legislation that functions as a complete code. Hence, it is appropriate that the process under the Planning Act be the arbiter of the reasonable conditions for a severance, not the vendor. The vendor cannot take advantage of its failure to invoke the remedies available to it to terminate the Agreement.
[28] In deciding the extent of the vendor's obligation under para. 14, the sole consideration cannot be the fact that the particular circumstances under which the Agreement of Purchase and Sale was entered into have changed so that the imposition of the conditions of severance have become more onerous. Requiring compliance with the law is not unreasonable. Paragraph 14 creates a clear obligation on Magna's part to comply with the conditions of severance. Magna, however, submits it is still entitled to terminate the Agreement on three distinct grounds.
Does Magna have the right to terminate the Agreement based on unreasonableness, frustration or commercial absurdity?
[29] The Caldari Road extension was not required by Magna to access the speed stamp plant nor by Dodge to access the hotel it proposed to build. Magna submits that the Committee of Adjustment's requirement that Magna build an extension of Caldari Road "if required" was therefore "unreasonable" and entitled it to [page314] terminate the Agreement. Magna also submits that the fresh evidence filed on this appeal indicating that the condition was deleted by the OMB supports its contention that imposition of the condition to build the extension was unreasonable.
[30] The effect of Magna's submission is that what is reasonable will depend on the circumstances, including circumstances that arise after the Agreement of Purchase and Sale has been signed. Justice Lax, on the other hand, found that the condition was not unreasonable in light of the factual matrix at the time the Agreement was signed. She was implicitly using the time of the signing of the Agreement as the reference point. Despite this, she went on to consider the reasonableness of the condition in light of the changed circumstances.
[31] Justice Lax further found that making Magna build the road "if required" meant that Magna did not have to build it until the owner of the lands to the north, which contained a woodlot, developed his property and requested an extension of Caldari Road. She also referred to evidence indicating that when the need for access arose, it was the City's expectation that the costs of the road extension would be shared or borne by the benefiting landowner. In the meantime, Magna would be required to service the property and to post a letter of credit for future paving, curbs and lighting. The costs involved were therefore significantly less than the $600,000 the vendor projected it would cost to build the extension of the road. Even assuming Magna had to bear the cost of building the extension, it would still make a profit on the sale. Thus, Lax J. held the imposition of the condition was not unreasonable.
[32] Again, there is evidence to support her conclusion, which should therefore be left undisturbed. If Magna had not changed the configuration of the speed stamp plant, it would have needed the extension to access its plant and would have built the road sooner rather than later. While Magna submits it might have built a private road so that it did not have to dedicate the land covered by the road to the City, this fact alone did not make the conditions unreasonable. The main driver behind Magna's position that the conditions were unreasonable was the simple fact that Magna changed its plans and did not want to build any road at all. In the circumstances, this unilateral change in plans, which made it more onerous for Magna to comply with the conditions, ought not to affect Magna's obligations. The fact that the OMB allowed Magna's appeal does not necessarily mean that the conditions were unreasonable. It only means that a less restrictive or onerous alternative would, in the circumstances, satisfy planning principles. Magna has not shown any palpable and [page315] overriding error in relation to the findings of Lax J. on the question of reasonableness.
[33] I now turn to the question of whether the doctrine of frustration was applicable. In Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, 204 D.L.R. (4th) 513, Binnie J., on behalf of the court, discussed the doctrine of frustration and its application. The facts of the case are as follows. In response to a call for tenders by the Oakville-Trafalgar Memorial Hospital ("OTMH"), Ellis-Don submitted a bid to become prime contractor. In doing so it incorporated the bid of Naylor Group, a subcontractor, for the electrical work. When Ellis-Don approached Naylor to bid on the project, Naylor volunteered the information that its workers were not affiliated with the International Brotherhood of Electrical Workers ("IBEW"). Ellis-Don had been in a sporadic continuing argument as to whether IBEW workers had exclusive bargaining rights for electrical workers on its projects. The dispute came before the Ontario Labour Relations Board ("OLRB") in 1990 and the ruling was still under reserve in January 1991. Ellis-Don was aware, as Naylor was not, of the details of the IBEW grievance and the effect any adverse ruling would have on it. The OLRB released its decision in February 1992, stating that Ellis-Don was obliged to hire only IBEW affiliated workers on its projects. On May 6, 1992, Ellis-Don, which had submitted the lowest tender because it "carried" Naylor's bid for the electrical work, was awarded the prime contract for the hospital extension. The prime contract contained a clause under which Ellis-Don undertook to hire Naylor. Ellis-Don offered to hire Naylor if Naylor would use IBEW workers but, since Naylor already had a union, it declined. A week later Ellis-Don wrote to Naylor to say that, because of the OLRB decision, it was unable to enter into a subcontract agreement with it. It subsequently awarded the electrical subcontract to an IBEW subcontractor. When Naylor sued Ellis-Don, one of the defences advanced by Ellis-Don was that its undertaking to use Naylor for the electrical work had been frustrated by the OLRB decision. Binnie J. rejected this argument. He stated at paras. 53-56 of his reasons:
Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes "a thing radically different from that which was undertaken by the contract": Peter Kiewit Sons' Co. v. Eakins Construction Ltd., 1960 37 (SCC), [1960] S.C.R. 361, per Judson J., at p. 368, quoting Davis Contractors Ltd. v. Fareham Urban District Council, [1956] A.C. 696 (H.L.), at p. 729.
Earlier cases of "frustration" proceeded on an "implied term" theory. The court was to ask itself a hypothetical question: if the contracting parties, as [page316] reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end? The implied term theory is now largely rejected because of its reliance on fiction and imputation.
More recent case law, including Peter Kiewit, adopts a more candid approach. The court is asked to intervene, not to enforce some fictional intention imputed to the parties, but to relieve the parties of their bargain because a supervening event (the OLRB decision) has occurred without the fault of either party. For instance, in the present case, the supervening event would have had to alter the nature of the appellant's obligation to contract with the respondent to such an extent that to compel performance despite the new and changed circumstances would be to order the appellant to do something radically different from what the parties agreed to under the tendering contract: Hydro-Québec v. Churchill Falls (Labrador) Corp., 1988 37 (SCC), [1988] 1 S.C.R. 1087; McDermid v. Food- Vale Stores (1972) Ltd. (1980), 1980 1076 (AB QB), 14 Alta. L.R. (2d) 300 (Q.B.); O'Connell v. Harkema Express Lines Ltd. (1982), 1982 3198 (ON SC), 141 D.L.R. (3d) 291 (Ont. Co. Ct.), at p. 304; Petrogas Processing Ltd. v. Westcoast Transmission Co. (1988), 1988 3462 (AB QB), 59 Alta. L.R. (2d) 118 (Q.B.); Victoria Wood Development Corp. v. Ondrey (1978), 1978 1447 (ON CA), 92 D.L.R. (3d) 229 (Ont. C.A.), at p. 242; and G.H.L. Fridman, The Law of Contract in Canada (4th ed. 1999), at pp. 677-78.
While the second approach ("a radical change in the obligation") is to be preferred and is now the established test, the appellant's argument would fail under either view. There has been no "supervening event" in the sense required by either approach to the doctrine of frustration and in fact the OLRB ruling against the appellant was a foreseeable outcome.
[34] Here, the parties made provision in the contract for what was to happen. Magna undertook to obtain a severance at its expense. The possibility that Magna might be required to build an extension of Caldari Road was a foreseeable event at the time that it entered into the Agreement with Dodge. Hence, the decision of the Committee did not create a radical change in Magna's obligation. There was no sufficient supervening event as required for the application of the doctrine of frustration.
[35] In response to Magna's argument that the Committee of Adjustment's requirement to extend Caldari Road resulted in a commercial absurdity, Lax J. held at para. 43 of her reasons:
It seems to me that the commercial absurdity here is not the purchaser's interpretation of the vendor's obligation under the Planning Act provision. It is one thing to imply a good faith obligation on a vendor to use best efforts when the agreement is silent [as in Dynamic Transport, supra]. The vendor's covenant here is express and unqualified. [Magna] assumed the risks of obtaining compliance with the Planning Act. These risks included the cost of dedicating and constructing the road. There is nothing commercially absurd about requiring the vendor to pay for this, as this is the agreement that the parties made. This is particularly so where the vendor not only contemplated for some time that it will be required to do this, but was prepared to do this at the time the Agreement of Purchase and Sale was signed. That the vendor later changed its mind can in no way affect its covenant. [page317]
[36] For the reasons given by Lax J. in the paragraph above, I agree that para. 14 did not result in commercial absurdity. It is therefore apparent that para. 14 clearly imposes an obligation on Magna to comply with the Committee's requirements. Magna has no right to terminate the Agreement based on either unreasonableness, the doctrine of frustration, or commercial absurdity.
- The Remedy of Specific Performance and the Requirement that the Property be Unique.
[37] Given that Magna had no right to terminate the Agreement, Dodge submits that the appropriate relief is specific performance of the Agreement as awarded by Lax J. Magna, however, submits that specific performance of the Agreement is not an appropriate remedy in light of its claim that there were a number of comparable properties available to Dodge in the vicinity.
[38] In Semelhago v. Paramadevan, 1996 209 (SCC), [1996] 2 S.C.R. 415, 136 D.L.R. (4th) 1 at para. 22, Sopinka J. observed that specific performance will only be granted if the plaintiff can demonstrate that the subject property is unique in the sense that"its substitute would not be readily available". Although Sopinka J. did not elaborate further on this definition, in 1252668 Ontario Inc. v. Wyndham Street Investments Inc., [1999] O.J. No. 3188 (Quicklaw), 27 R.P.R. (3d) 58 (S.C.J.) at para. 23, Justice Lamek stated that he
[does] not consider that the plaintiff has to demonstrate that the Premises are unique in a strict dictionary sense that they are entirely different from any other piece of property. It is enough, in my view, for the plaintiff to demonstrate that the Premises have a quality that makes them especially suitable for the proposed use and that they cannot be reasonably duplicated elsewhere.
[39] I agree that in order to establish that a property is unique the person seeking the remedy of specific performance must show that the property in question has a quality that cannot be readily duplicated elsewhere. This quality should relate to the proposed use of the property and be a quality that makes it particularly suitable for the purpose for which it was intended. See also the comments of Low J. in 904060 Ontario Ltd. v. 529566 Ontario Ltd., [1999] O.J. No. 355 (Quicklaw), 89 O.T.C. 112 (Gen. Div.) at para. 14.
[40] The time when a determination is to be made as to whether a property is unique is the date when an actionable act takes place and the wronged party must decide whether to keep the agreement alive by seeking specific performance or accept the breach and sue for damages: Greenforco Holding Corp. v. Yonge-Merton Developments Ltd., [1999] O.J. No. 3232 (Quicklaw) (S.C.J.) at [page318] para. 76. It may also be that in certain cases the date chosen for determining the issue of whether specific performance is appropriate is a later date but the date will not, in any event, occur before the breach has taken place.
[41] In oral submissions Magna submits that this date is March 6, 2000. On that date, Magna sent Dodge a fax which stated in part:
To date, the attempts to eliminate the construction and dedication of Caldari Road have been unsuccessful. In light of the foregoing, this should cause no surprise. However, it may cause a concern to the Purchaser because if the City continues to insist on the construction and dedication of the Additional Road as a condition of severance, Magna is not prepared to accept such a condition. This is why we have formally advised you of our concern that the transaction may be in jeopardy, as we are not prepared to accept such a condition, . . .
There are many comparable sites in the immediate vicinity of the subject property available for sale at this time, and we invite you to explore this as a means for avoiding any losses you may incur by reason of the City's delay or a failure to grant the severance required under the Planning Act.
[42] Magna submits that following receipt of this letter Dodge was obliged to consider alternatives as part of its duty to mitigate its losses and that Dodge refused to do so. Dodge was only obliged to consider alternatives if it was not entitled to specific performance: see Asamera Oil Corp. Ltd. v. Sea Oil & General Corp., 1978 16 (SCC), [1979] 1 S.C.R. 633, 89 D.L.R. (3d) 1, at p. 668 S.C.R. Magna also submits that the date of this letter is the date of the actionable wrong. However, on April 28, 2000 Magna faxed a letter to Dodge indicating that it was appealing the decision of the Committee of Adjustment to the OMB. In light of this, the letter of March 6, 2000 cannot be taken as notice by Magna that the Agreement was terminated. The date of the actionable wrong was May 11, 2000, when Magna notified Dodge it would not appeal the decision of the Committee of Adjustment to the OMB but was terminating the Agreement instead.
[43] The question then becomes whether the property was unique on the date of the actionable wrong. Magna contends that the trial judge erred in finding that the property was unique. It submits that other comparable commercial properties were available and, in particular, a property owned by a group of persons including Mr. Sorbara (the "Sorbara property") and another at the Vaughan Mills Mall. At the date of the actionable wrong, May 11, 2000, the Sorbara property had been sold. The trial judge found that although the comparables from Magna's expert permitted a hotel to be built, none of them were in as close proximity to Canada's Wonderland or the Vaughan Mills Centre, a planned [page319] $250 million retail mall to be located directly west of the site. At para. 69 of her reasons she found:
The Magna site offers superior access, visibility, traffic patterns and location to each of the other sites that were under consideration. It also has a C7 commercial zoning designation that is more favourable for ancillary uses such as banquet halls and eating establishments. This was significant for Dodge as the hotel concept it was considering at the time of the contract and later pursued was for a Hilton Garden Inn. This concept does not require full restaurant facilities in the hotel. The ability to have an unrestricted, independent dining facility on the land to accommodate hotel guests, but also to serve patrons in the area, was another distinguishing feature of this site. None of the other sites offered this combination of attractive features at a comparable price.
[44] The appellant has not shown that the trial judge misapprehended the evidence or committed any overriding and palpable error in her findings. The trial judge did not err in her conclusion that this particular piece of commercial real estate was unique.
[45] Finally, Magna also submits that a court cannot simply give Dodge the remedy that it seeks, namely an order for specific performance of the Agreement, because the court will have to go further than ordering a transfer of the property in issue from Magna to Dodge. Clause (j) of Schedule A to the Agreement contains a restrictive covenant. It states:
The Purchaser consents to the Vendor including a restrictive covenant in the transfer deed or separate document whereby the Purchaser on its own behalf and on behalf of future occupiers and owners of the Property will not object to the use of the Vendor's property adjacent to the Property for the purposes of an industrial paint and plastics and/or manufacturing business.
[46] Magna submits that the parties will be unable to agree on the terms of the restrictive covenant and the court will undoubtedly have to intervene again. Such an intervention, it submits, is more akin to contract redrafting than judicial supervision. I do not agree. Clause (j) does not say that the parties will negotiate a restrictive covenant, but instead contains the language of the restrictive covenant within it. The existence of clause (j) does not make the remedy of specific performance impractical or unfair.
DISPOSITION
[47] For the reasons I have given, I would dismiss the appeal from the order of Lax J.
COSTS
[48] Magna appeals the costs orders of Lax J. No appeal lies from the costs order respecting the November 23 motion to [page320] enforce the judgment. That was an interlocutory order and leave was not obtained to appeal the award of costs in respect of that motion. The Court of Appeal has no jurisdiction to grant such leave: Albert v. Spiegel (1993), 17 C.P.C. (3d) 90 (Ont. C.A.). Consequently, the appeal respecting the costs of the motion cannot be heard with the appeal respecting costs of the action. Section 6(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which allows the Court of Appeal to determine an appeal that lies to the Divisional Court if an appeal in the same proceeding is taken to the Court of Appeal, has no application unless leave has been obtained.
[49] In determining the costs respecting the action before her, Lax J. ordered deadlines for costs submissions to be filed. Magna made detailed submissions that costs were to be referred for assessment on a party and party basis. It submits that the trial judge erred in holding that her judgment was more favourable to Dodge than Dodge's offer to settle, which was based on specific performance of the Agreement. Magna submits that Lax J. erred in awarding costs as she did because, as a result of the OMB decision, its offer of $250,000 in damages is closer to the result. In addition, Magna submits that Dodge's offer did not specifically say anything about incorporating the restrictive covenant.
[50] I would not disturb the trial judge's award of costs. In my opinion it was open to her to conclude that her judgment awarded Dodge a more favourable result than the offer. Although the offer does not specifically say that the property was to be conveyed according to the terms of the Agreement, including the restrictive covenant, the trial judge said that that was not in dispute and I would defer to her on this point. The decision of the OMB does not change the result respecting the costs awarded at trial. It was open to the trial judge to make the finding she did respecting Magna's conduct as being reprehensible and that of a bully. The award of costs also represents a sanction for this conduct. I would therefore dismiss the appeal from the award of costs of the action.
[51] With respect to the costs of this appeal including those before Charron J.A. reserved to this court, I would award costs on a partial indemnity scale fixed at $20,000 to the respondent.
Order accordingly.