DATE: 20051013

DOCKET: C40834

COURT OF APPEAL FOR ONTARIO

SIMMONS, LANG and ROULEAU JJ.A.

B E T W E E N :

The Oshawa Group Limited

Joel Goldenberg and Danielle Joel for the appellant

Appellant

• and -

Mason Homes Limited

Paul J. Pape for the respondent

Respondent

Heard: September 26, 2005

On appeal from the judgment of Stinson, J. of the Superior Court of Justice, dated September 29, 2003.

BY THE COURT:

[1] This is an appeal from the judgment of Stinson J., given after a thirty-three day trial. The trial judge awarded the respondent, Mason Homes Limited, $4,026,660 in damages for its lost opportunity to develop a shopping plaza, a loss that he found was caused by The Oshawa Group Limited’s repudiation of its agreement to be the plaza’s anchor tenant. By cross-appeal, the respondent challenges the trial judge’s 50% reduction of its costs, more specifically, the 50% reduction of its disbursements.

The Trial Decision

[2] The trial judge found that the parties’ agreement regarding the appellant’s tenancy was initially reflected in a December 1989 Letter of Intent. That Letter of Intent provided that the agreement was “subject to contract”; that is, subject to subsequent settlement of the particulars of the lease within a set period of time (45 days). On the factual findings of the trial judge, that set date was extended several times by mutual agreement. It finally expired on June 29, 1990 without settlement of the lease terms.

[3] After the June 1990 expiry date, the parties continued to negotiate the terms for a lease. The trial judge determined that these negotiations were no longer “subject to contract” and that the parties reached a new, final, oral, independent agreement on all the terms of a lease on or about December 11, 1990.

[4] Subsequently, the respondent attempted to vary the terms of the December 1990 agreement in three respects: first, to change the construction date; second, to change the basement retail space; and, third, to amend the construction schedule. The trial judge determined, however, that the parties never reached an agreement to vary the December 1990 agreement.

[5] In April 1991, the appellant repudiated the December 1990 agreement. Given changes in the economy and a competitor’s decision to open a near-by store, the appellant no longer favoured a large flagship store at the respondent’s location. Instead, it would only commit to a significantly smaller store.

[6] As a result of the appellant’s repudiation, the trial judge found that the respondent lost its opportunity to develop the plaza. After applying a 35% deduction for contingencies, the trial judge assessed the respondent’s damages at $4,026,660.

[7] On costs, the trial judge reduced the respondent's partial indemnity costs, including its disbursements, by 50%.

Issues

[8] The appellant appeals on six grounds. First, it alleges, to the prejudice of the appellant, that the trial judge found liability on the basis of a breach of an independent oral contract that was neither pleaded, nor advanced at trial. Second, apart from the question of pleadings, the trial judge made a palpable and overriding error of fact by finding a December 1990 oral contract. Third, the trial judge erred by failing to consider the whole of the evidence, including the respondent’s subsequent conduct, in determining whether the parties had reached a binding agreement in December 1990. Fourth, in view of the respondent’s claim for specific performance, the trial judge erred in concluding that the respondent, after affirming the contract, was relieved from performance of its obligation under that contract. Fifth, the trial judge erred in the date chosen on which to assess damages. Sixth, the trial judge erred in assessing the respondent's damages on the basis of a 75,000 sq. ft. plaza rather than on the basis of the 90,000 sq. ft. plaza originally contemplated by the parties.

1. The Pleading

[9] The appellant argues that the trial judge erred in finding an independent oral agreement on or about December 11, 1990 when the pleadings and evidence had been directed to an agreement arising from the Letter of Intent, and, accordingly, an agreement subject to contract. Once the trial judge concluded that there was no continuing Letter of Intent, the appellant argues that the respondent necessarily could not succeed in its claim. Further, the appellant argues that the respondent pleaded only an agreement in December 1989, or an agreement in February 1991, but not an oral agreement on or about December 11, 1990. Finally, the appellant claims that the respondent’s trial counsel (not Mr. Pape) made clear in his submissions that, in relation to the December 1990 negotiations, he relied on the December 1989 Letter of Intent as the underlying contract “and no other”. The appellant cannot succeed on these arguments for several reasons.

[10] First, while the respondent did plead that agreements were reached in 1989 and 1991, it also pleaded that "[f]urther negotiations ensued with respect to the settlement of the lease and the lease form was settled on or about December 11, 1990" (Amended Amended Amended Amended Statement of Claim, para. 8). In addition, paragraph 17 of the amended claim refers to “the lease agreement as agreed at December 11, 1990”. From these paragraphs, as well as paragraphs 24 and 25 of the amended claim, it was reasonable for the trial judge to conclude that the pleading raised the issue of the existence and breach of an agreement to lease between the parties, reached on or about December 11, 1990.

[11] Second, the negotiations over the terms of a lease were the central focus of considerable evidence called at trial, as well as in the parties’ openings and submissions at trial. The reasons of the trial judge, both for judgment and in the later motion to amend the Statement of Claim, clearly reflect that the parties were alert to the question of whether a binding agreement was reached on or about December 11, 1990.

[12] Whether the December agreement was pursuant to the Letter of Intent or an independent agreement depended on the trial judge’s application of the law to his factual findings. In our view, he was entitled to conclude that this agreement was independent of the Letter of Intent. Neither the manner of the respondent’s pleading nor the conduct of the trial prejudiced the appellant. The appellant was alert to the issue of a December 1990 agreement and called evidence to meet that case.

[13] The centrality of the December 1990 agreement at the trial is also apparent from the trial judge’s reasons where he cited the appellant’s theory that the Letter of Intent lapsed and that, thereafter, the argument was “directed to the negotiation of a new binding agreement, a goal that was never attained.” (Reasons, para. 114). In effect, the appellant raised the very issue that it now claims took it by surprise.

[14] Third, the trial judge was entitled to his finding that in December 1990, the parties were not dealing with each other “subject to contract,” an argument that he specifically considered in paras. 208-212 of his reasons. Indeed, the trial judge concluded that the new December 1990 agreement included the complete text of a lease. Viewed in this context, the words “subject to contract” in the original Letter of Intent had no application to and were irrelevant to the subsequent agreement.

[15] Fourth, we see the facts pleaded as supporting the trial judge’s factual finding that the lease was settled in December 1990. From that finding, the trial judge was entitled to apply the law to determine that the settled lease amounted to an enforceable agreement, and to find a breach of that agreement.

2. The Evidence

[16] We reject the appellant's argument that the trial judge failed to consider the evidence as a whole and erred in finding an oral agreement made on or about December 11, 1990. In careful and detailed reasons, the trial judge explained why he accepted certain evidence, why he rejected other evidence, and why he drew certain inferences. The trial judge's factual findings were supported by the evidence and the appellant has failed to persuade us of any palpable or overriding error in those findings.

3. The Post-Agreement Conduct

[17] The appellant argues that the trial judge was obliged to consider the conduct of the parties post-December 1990 to see whether the parties had reached an agreement on that date. In this case, the appellant argues, the parties’ subsequent conduct in pursuing negotiations post-December 1990, and the respondent’s conduct in continuing negotiations with Sobeys as a potential anchor tenant, were clear evidence that the parties had not concluded an agreement in December 1990.

[18] In our view, however, the trial judge was alive to the post-December 1990 conduct. He determined that the subsequent negotiations did not support a finding that there was no December 1990 agreement. Rather, he determined that those negotiations represented a desire by the respondent to vary the terms of the December 1990 contract.

[19] In our view, the evidence about Sobeys was not potentially significant to the trial judge’s findings of fact. That evidence did not establish that the respondent was in negotiations with Sobeys at the time. A reading of the trial judge’s reasons indicates that he was alive to the parties’ positions, but he simply did not consider that post-contract conduct to be significant. While it may have been preferable if the trial judge had directly addressed this and other evidence relating to post-December 1990 conduct, we are not persuaded that the trial judge fell into reversible error on this issue.

[20] As was said in Waxman v. Waxman (2004), 186 O.A.C. 201 at para. 344, where the trial judge’s reasons demonstrate “a strong command of the trial record and a careful analysis of evidence leading to detailed findings of fact, it will be difficult for an appellant to suggest that the mere failure to refer to a specific piece of evidence demonstrates a failure to consider that evidence.”

4. Specific Performance

[21] In view of the respondent’s claim for specific performance, the appellant argues that the trial judge was obliged to dismiss the respondent’s claim because the respondent had not proceeded with construction of the plaza by the date agreed upon. The trial judge, however, found that the respondent was no longer able to construct the plaza as a result of the appellant’s repudiation. This was a finding supported by the evidence. In these circumstances, the trial judge was entitled to assess damages on the respondent’s alternative claim for damages. See S. M. Waddams, The Law of Contracts, 5th ed. (Toronto: Canada Law Book, 2005) at para 626.

5. Date of Damages Assessment

[22] In our view, the trial judge properly exercised his discretion in considering information available at the date of trial to assess damages. While generally damages are assessed without reference to events occurring after the date of breach, exceptions have been recognized to arrive at a fair assessment of damages. See Laurentide Motels v. Beauport City, [1989] 1 S.C.R. 705 at 829. The trial judge gave cogent reasons for exercising his discretion to use available relevant information in the assessment of damages. We see no reason to interfere with that exercise of discretion.

6. Damages

[23] As found by the trial judge, the agreement reached by the parties presumed a 90,000 sq. ft. plaza (Site Plan 2). Even though the trial judge specifically found there was no agreement to build at 75,000 sq. ft. (Site Plan 3), he assessed damages on the basis of Site Plan 3.

[24] In addition to the difference in size, Site Plan 3 changed the location of the appellant’s store within the plaza. Further, while phasing of construction over two years was part of the Site Plan 2 proposal, Site Plan 3 involved no phasing of construction. The appellant submits that these differences precluded a proper assessment of damages.

[25] We see no error in the approach taken by the trial judge. The expert testimony of both parties used Site Plan 3 as the template for the calculation of damages. The trial judge was obliged to use the evidence presented to attempt to arrive at a reasonable assessment of damages.

[26] Here the appellant has not explained how the difference in the location of the store would affect the damage calculation. The trial judge adverted specifically to the difference in size and concluded that using the smaller plaza as a model for the damage calculation would not be unfair. While both the size and phasing of the plaza could be factors affecting damages, in the absence of evidence showing that both the size and phasing of the plaza were differences that impacted on the calculation of damages, it was open to the trial judge to use the evidence relating to Site Plan 3 as a basis for calculating the damages for the breach of the agreement to build Site Plan 2.

Costs

[27] The respondent does not take issue with the trial judge's decision to reduce its costs by 50% by reason of its breaches of production and disclosure obligations and its delay. It does, however, take issue with the 50% reduction of its disbursements. While the respondent concedes that the trial judge had a discretion to reduce disbursements, it argues that the trial judge did not do so judicially. In our view, just as it was open to the trial judge to deny costs altogether, it was within his discretion to reduce both costs and disbursements for the reasons he gave: to reflect the respondent’s failures with respect to production of documents and to reflect the respondent’s failures in proceeding to trial in a timely manner. We see no reason to interfere with that discretion.

Result

[28] In the result, we dismiss the appeal and cross-appeal.

Costs

[29] The parties were in agreement that the costs of the appeal and cross-appeal should be fixed in the amount of $50,000, inclusive of GST and disbursements. While we recognize that this appeal required the review of 33 days of trial evidence, we are of the view that $50,000 is excessive. Accordingly, we fix costs to the successful respondent, after adjusting for the unsuccessful cross-appeal, in the amount of $40,000, inclusive of GST and disbursements.

RELEASED: October 13, 2005

“J.M. Simmons J.A.”

“I agree S.E. Lang J.A.”

“I agree P.S. Rouleau J.A.”