CITATION: Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2007 ONCA 324
DATE: 20070501
DOCKET: C42803
COURT OF APPEAL FOR ONTARIO
WEILER, GOUDGE and CRONK JJ.A.
B E T W E E N :
CONSULATE VENTURES INC.
L. David Roebuck and Patrick J. Cotter, for the appellant
Appellant (Plaintiff)
- and -
AMICO CONTRACTING & ENGINEERING (1992) INC., WINDSOR FACTORY OUTLET MALL LTD., and DOMINIC AMICONE
Myron W. Shulgan, Q.C., for the respondent, Windsor Factory Outlet Mall Ltd.
Respondents (Defendants)
Claudio Martini, for the respondents, Amico Contracting & Engineering (1992) Inc. and Dominic Amicone
Heard: December 4 and 5, 2006
On appeal from the judgment of Justice Ellen M. Macdonald of the Superior Court of Justice dated November 19, 2004, and the costs order of Justice Macdonald dated October 6, 2006, with reasons reported at [2004] O.J. No. 4777.
CRONK J.A.:
I. Introduction
[1] This litigation concerns a dispute between two developer groups regarding an alleged joint venture for three development projects, including a retail outlet mall in a suburb of the City of Windsor. There are two principal issues on appeal: first, whether the parties entered into a binding joint venture agreement (“JVA”), the wrongful termination of which by the respondents, Amico Contracting & Engineering (1992) Inc., Windsor Factory Outlet Mall Ltd., and Dominic Amicone,[^1] would entitle the appellant, Consulate Ventures Inc. (“Consulate”), to damages for breach of contract; and, in the alternative, whether Consulate is entitled to restitutionary relief based on quantum meruit for services rendered in respect of the Windsor outlet mall.
[2] The trial judge held that a binding JVA had not been finalized by the parties, thereby precluding the recovery by Consulate of damages for breach of contract. She also denied Consulate’s quantum meruit claim. Accordingly, she dismissed Consulate’s action and awarded the respondents their costs of the trial, together with prejudgment interest.
[3] For the following reasons, I agree with the trial judge that an enforceable JVA was not concluded by the parties. However, it is also my view that the trial judge erred by dismissing Consulate’s quantum meruit claim. Accordingly, I would allow the appeal and, given the record in this case, direct a new trial on the latter issue.
II. Facts
[4] Although many of the facts relevant to the issues on appeal are not in dispute before this court, the parties are divided on the question of the adequacy of the trial judge’s assessment of the evidence. Accordingly, it is necessary to consider the factual context of the parties’ relationship and certain of the trial judge’s factual findings in some detail.
(1) Preliminary Events
[5] In 1995, Heritage Centre Holdings Inc. (“Heritage”) acquired twenty-two acres of land in LaSalle, Ontario (the “Windsor Property”), which it intended to ‘flip’ to a third party for the development of retail facilities. However, despite its efforts during the next two years, Heritage was unable to sell or lease the Windsor Property.
[6] Consulate, an experienced shopping plaza developer, was introduced to the Windsor Property by a Heritage representative in the summer of 1997 when Consulate’s president, John Sorokolit (“Sorokolit”), visited the site. At that time, Consulate owned forty acres of land in Niagara Falls, Ontario (the “Niagara Property”), which it was proposing to develop as a retail outlet facility. It was also involved in preliminary plans for a resort in Niagara Falls, referred to by the parties as the “Grand Niagara Project”.
[7] Sorokolit was experienced in the development of outlet malls, a relatively new concept in Canada in 1997. When Sorokolit saw the Windsor Property, he thought that it had potential for the establishment of an outlet mall. This led to a series of proposals by Consulate to Heritage in the summer and early fall of 1997 regarding the possible joint development of the Windsor Property as a retail outlet mall. Heritage rejected these proposals.
[8] In mid-September 1997, however, Consulate and Heritage agreed in writing to explore the possibility of jointly developing a manufacturers’ outlet mall on the Windsor Property (the “1997 Agreement”). Under this agreement, the parties agreed that if Consulate obtained sufficient prospective tenant interest in the proposed outlet mall by the end of 1997, the parties would “proceed to formulate a [JVA] on terms which are reasonable and are mutually acceptable to both parties”. The 1997 Agreement further stated that if Heritage was satisfied with the leasing potential of the Windsor Property as a manufacturers’ outlet mall, “both parties shall enter into a [JVA] prior to March 1, 1998”.
[9] Although the 1997 Agreement was superceded by later events, the parties emphasize two of its terms. The first stated that if Heritage cancelled the 1997 Agreement prior to December 31, 1997 due to insufficient tenant interest in the proposed outlet mall, but nonetheless commenced construction of a manufacturers’ outlet mall within two years, Heritage would pay Consulate a consulting fee (a “break fee”) of two million dollars.
[10] The second term concerned the consensual dissolution of the arrangement between the parties. It provided that if the parties mutually agreed to dissolve their relationship by December 31, 1997, “neither party shall be liable to the other for any loss, costs or expenses”. When Heritage executed the 1997 Agreement, its president – the respondent Dominic Amicone (“Amicone”) – added a handwritten note immediately after this dissolution provision, stating that, in addition, Heritage would “no longer be responsible for the costs” – the break fee – outlined in the 1997 Agreement.
[11] At trial, Amicone testified that he intended this note to be a stand-alone term that eliminated any obligation to pay the break fee. Consulate, in turn, maintained that the note applied only if the consensual dissolution provision of the 1997 Agreement was triggered. It also asserted, in any event, that the break fee was relevant to its quantum meruit claim because it afforded important evidence of the parties’ intention that Consulate would be paid for its efforts relating to the proposed Windsor outlet mall.
[12] The 1997 Agreement was short-lived. In October 1997, when Heritage received information from a third party that caused it to question the suitability of the Windsor Property for an outlet mall, it decided to sell the Windsor Property to a Consulate-related company for $2.5 million (approximately $110,000 per acre) (the “Sale Agreement”).
[13] The Sale Agreement was conditional. It afforded Consulate a three month due diligence period within which to satisfy itself that an acceptable tenancy level could be achieved for the proposed outlet mall. This deadline was extended by the parties, ultimately affording Consulate until February 22, 1998 to satisfy or waive the due diligence condition.
[14] Two notable events occurred before the expiry of the due diligence condition. First, almost immediately after the execution of the Sale Agreement, Consulate approached Nike Canada, a major retailer, about the possibility of Nike becoming an anchor tenant in the proposed Windsor outlet mall. According to Sorokolit, Nike expressed interest in this proposal. Sorokolit claimed that he informed Amicone of Nike’s interest, but also explained that because Consulate was involved in a dispute with an outlet mall developer in Niagara Falls, where Nike hoped to build a store, Sorokolit should not be involved directly in further discussions with Nike about the proposed Windsor outlet mall.
[15] At trial, Amicone denied any knowledge that Sorokolit had contacted Nike prior to the expiry of the Sale Agreement. However, Consulate established that after speaking with Sorokolit in mid-January 1998, Amicone spoke with a Nike leasing agent. It is uncontested that, eventually, a letter of intent was received from Nike concerning the lease of premises in the Windsor outlet mall and that a leasing agreement was negotiated with that company.
[16] Second, Amicone told Sorokolit that he had an agreement in principle to buy out the interests of some of Heritage’s minority shareholders for $60,000 per acre – an amount almost fifty per cent less than the agreed per acre price under the Sale Agree-ment. On Sorokolit’s version of events, this disclosure effectively braked any further efforts by Consulate to satisfy the due diligence requirement of the Sale Agreement.
[17] As events unfolded, the Sales Agreement expired without Consulate having waived or satisfied the due diligence condition. As a result, the transaction contemplated under the Sale Agreement never took place.
(2) Alleged JVA
[18] In mid-March 1998, when he visited the Niagara Property, Amicone became interested in and satisfied of the viability of the site’s potential for an outlet mall development. He informed Sorokolit of his interest in the Niagara market.
[19] Also in the spring of 1998, Consulate created the name “Windsor Crossing Premium Outlets” and registered it with the applicable authorities as a business name in Ontario. It appears that Heritage began using this name in respect of the proposed Windsor outlet mall in the spring of 1998. Consulate also registered the term “premium outlets” as a trademark in Canada.
[20] During the next several months, the parties exchanged information about the Windsor and Niagara Properties, as well as the Grand Niagara Project. They also met to discuss the terms of a joint venture concerning all three development projects.
[21] Unbeknownst to Heritage, however, Acktion Corporation (“Acktion”), one of Consulate’s lenders, held a mortgage on the Niagara Property pursuant to a loan and participation agreement. Under the terms of this agreement, absent a waiver by Acktion of its participation rights, Consulate could not transfer an interest in the Niagara Property to a third party without Acktion’s consent as long as Acktion’s loan, in the approximate amount of two million dollars, remained outstanding. Moreover, Consulate was precluded from entering into any joint venture without Acktion’s prior consent.
[22] Notwithstanding the terms of the Acktion agreement, Consulate wrote to Heritage on June 16, 1998 outlining the terms of a proposed joint venture (the “June Letter”). This document is central to the issues on appeal because Consulate relies on it as constituting the alleged JVA between the parties.
[23] The June Letter contemplated the joint development by Consulate and Heritage of the Windsor Property as a manufacturers’ outlet mall to be known as “Windsor Crossing Premium Outlets”, and the Niagara Property as a retail commercial development. It also provided for the acquisition by the proposed joint venturers of an interest in the Grand Niagara Project. In the form provided to Heritage, the material terms of the June Letter included:
(i) Consulate and Heritage (or its nominee, the respondent Amico Contracting & Engineering (1992) Inc. (“Ami-co”)) would form a joint venture, to be known as “Amicon Developments” (“Amicon”);
(ii) Heritage would transfer a fifty per cent interest in the Windsor Property, together with a promissory note in the amount of $1.25 million, to Consulate, “upon for-mation of the Joint Venture”;
(iii) Consulate would transfer a fifty per cent interest in the Niagara Property to Heritage “upon formation of the Joint Venture”;
(iv) the opening of the Windsor outlet mall would be tar-geted for April 1999;
(v) Heritage would be responsible for “architectural and engineering drawings, governmental approvals and construction management”, while Consulate would be responsible for “leasing, marketing and property management”. The services rendered by both companies would be provided “at reasonable market rates which are acceptable to the Joint Venture”;
(vi) the joint venture – Amicon – would obtain the financing to complete the construction of Phase I of the outlet mall on the Windsor Property;
(vii) Amicon would “continue to develop” the Niagara Property as a retail commercial property;
(viii) Amicon would “secure an interest” in the Grand Niagara Project, described in the June Letter as a 250 acre golf and 400 hotel room resort “being developed … in conjunction with Royco Hotels and Resorts of Calgary, Alberta”;
(ix) Amicon would obtain all construction contracts associated with the Grand Niagara Project; and
(x) each of the joint venturers and Amicon would bear prorated shares of the development costs – the “soft costs” – of the Grand Niagara Project, in an amount not to exceed $450,000.
[24] Importantly, para. 8 of the June Letter read:
- Amicon shall be formed upon “Nike” signing a lease or agreement to lease for the [Windsor outlet mall] of no less than 15,000 square feet and both Heritage/Amico and Consulate entering into satisfactory Joint Venture, Manage-ment and Trust Agreements governing the activities of their Joint Venture.
[25] The June Letter, which Sorokolit signed on behalf of Consulate, concluded with this language:
I believe that the above outline fairly reflects our discussions of the past several weeks. If you are in agreement with these terms, or would like to amend, delete or revise same, please do so and sign below in acknowledgement and I will proceed to prepare the draft Joint Venture documents for your review.
[26] The June Letter made no mention of the Acktion mortgage or loan and participa-tion agreement. Nor did Consulate or Sorokolit otherwise disclose these matters to the Heritage Group when proposing the joint venture and the land exchanges envisaged by the June Letter.
[27] Heritage did not sign the June Letter immediately. However, Amicone kept Sorokolit informed of progress on issues concerning the development of the Windsor Property throughout the spring and summer of 1998. He provided Sorokolit with copies of relevant documentation, including construction drawings for Phase I of the outlet mall, brochures of the proposed development, and a draft lease agreement that had been forwarded to Nike for review. The trial judge accepted Amicone’s evidence that these actions were undertaken because he was “interested in pursuing a joint venture rela-tionship” with Consulate.
[28] Sorokolit and Amicone met in mid-July to discuss the joint venture. In several follow-up letters to Heritage, Consulate pressed for completion of the joint venture arrangements.
[29] In September 1998, Consulate informed Acktion of the proposed “land swap” with Heritage concerning the Windsor and Niagara Properties and sought Acktion’s consent to the transfer to Heritage of an interest in the Niagara Property, or the waiver by Acktion of its participation rights. Alternatively, Consulate proposed that Acktion might wish “to participate in both projects”. Acktion’s security interest in the Niagara Property and its loan and participation agreement with Consulate had still not been disclosed to the Heritage Group.
[30] Acktion rejected Consulate’s various proposals, ultimately taking the position that it would relinquish its participation rights only upon payment of its outstanding loan to Consulate. At trial, Sorokolit maintained that Consulate had access to funds sufficient to retire its obligations to Acktion, such that Consulate could complete the land transfers contemplated by the June Letter. The trial judge, however, expressly rejected this evidence.
[31] Apart from the undisclosed issues concerning Acktion, the trial judge also found that Consulate knew when it signed the June Letter that a rezoning application in respect of the Niagara Property had been refused, as had Consulate’s application for leave to appeal from that refusal. As a result, Consulate had written to Acktion on June 16, 1998 – the same day that it forwarded the June Letter to Heritage – informing Acktion that the development of the Niagara Property “must be placed ‘on hold’ indefinitely until such time as [Consulate could] devise an alternate development scheme”. It does not appear that Consulate told the Heritage Group of these impediments to the development of the Niagara Property.
[32] A critical meeting between Sorokolit and Amicone took place on November 14, 1998, when they reviewed the progress of the development of the Windsor outlet mall, including various construction financing proposals for that project. Importantly, Heritage also signed the June Letter. However, para. 8 of that letter, set out in para. 24 of these reasons, was first crossed out and its deletion was initialled by the parties, along with other handwritten changes.[^2]
[33] Sorokolit’s father, William Sorokolit Sr., was present at the November 14 meeting. It was his unchallenged evidence at trial that, prior to the deletion of para. 8, the parties discussed the absence of any need for the further documentation mentioned in that paragraph. He also stated that he offered to pay fifty per cent of any cash requirement for the development of the Windsor outlet mall and to provide any personal guarantees required by the joint venture’s lenders as a condition of construction financing. Finally, he said that after the June Letter was signed by Heritage, the parties shook hands and he remarked that his son and Amicone would be good joint venture partners. His son’s testimony at trial was to the same effect.
(3) Subsequent Events
[34] By the time Heritage signed the June Letter, the parties had been engaged in discussions regarding a JVA for many months, focusing initially on the development of the Windsor outlet mall and, subsequently, on the development of the Windsor and Niagara Properties, and the Grand Niagara Project.
[35] Other significant events had also occurred, or were in progress. Sorokolit was actively pursuing major tenants for the Windsor outlet mall, including Adidas, Escada and Nike, the latter of which was expected to deliver a leasing commitment in the near future. As well, Sorokolit had delivered to Amicone drawings for signage at the Windsor outlet mall, and photographs and other documents concerning outlet malls in the United States to assist in formulating the design concept for the Windsor mall. He had also reviewed and advised Heritage on such matters as the site plans, elevation drawings, blueprints, construction specifications, and design and configuration renderings for the Windsor outlet mall.
[36] Consulate relies on these activities, and on the conduct of the parties after Heritage signed the June Letter, as evidence that the parties agreed to a binding JVA on November 14, 1998. In particular, it says that, in accordance with its obligations under the June Letter and at the request of or with the concurrence and encouragement of the Heritage Group, it furnished services to the Heritage Group during the period from mid-November 1998 to June 22, 1999 to advance the development of the Windsor outlet mall in furtherance of what it understood was a subsisting JVA.
[37] These services by Consulate included reviewing completed construction drawings and a revised site plan for the Windsor outlet mall; hiring, at its own expense, an experienced leasing agent to assist in securing suitable retail tenants; continued efforts to obtain prospective retail tenants; obtaining a firm leasing commitment from Adidas; and the exploration and proposal of tax-efficient alternatives to the land exchanges outlined in the June Letter. I will return to the relevance of some of these facts in my discussion of the legal issues.
[38] On June 23, 1999 – one day before Phase I of the Windsor outlet mall was scheduled to open – Heritage’s solicitors wrote to Consulate, taking the position that the June Letter constituted merely an agreement to agree or a letter of intent, and denying any agreement between the parties to proceed with a joint venture.
[39] In their letter, Heritage’s solicitors also stated, “Further, as a result of the delay and the fact that Consulate does not control the [Niagara Property] described in the [June Letter], our client is unwilling to proceed with any joint venture with you.” These assertions were based, in part, on an inaccurate title search of the Niagara Property, which suggested that Consulate did not own part of that site. At trial, however, Consulate established that it did own the entirety of the Niagara Property.
[40] Approximately three months later, Consulate sued the Heritage Group, seeking damages for breach of contract, breach of fiduciary duty, breach of duty of confidence, and breach of the duty to bargain in good faith. It also sought an accounting and disgorgement of profits concerning the Windsor outlet mall, and damages or restitutionary relief based on quantum meruit, plus ancillary relief.
[41] The Heritage Group defended the action on several grounds, including on the basis that a complete JVA had never been entered into by the parties. In the alternative, they pleaded that if a JVA existed in June 1999, it had been properly rescinded by Heritage.
[42] As I have indicated, the trial judge concluded that the parties did not form a binding JVA and that “the relationship between [the] parties and the manner in which they conducted themselves does not come close to creating the legal situation that flows from a binding [JVA]”. She also held that the parties did not expect to be paid “for their efforts to bring the joint venture relationship to fruition”. Accordingly, she dismissed Consulate’s action, and subsequently awarded costs to the Heritage Group.
III. Issues
[43] The issues on appeal are:
(1) Did the trial judge err by concluding that no binding JVA was entered into by the parties?
(2) Did the trial judge err by rejecting Consulate’s quantum meruit claim?
IV. Analysis
(1) Contract Claim
[44] Consulate makes four principal submissions in support of its challenge to the trial judge’s holding that the June Letter did not constitute a binding JVA. First, it says that the trial judge misdirected herself as to the applicable test for determining the intention of the parties regarding the June Letter. Second, it submits that the trial judge erred in several respects in her evaluation of the evidence. Third, it argues that the trial judge erred by concluding that the June Letter omitted terms necessary for the creation of a binding JVA. Finally, it maintains that the trial judge’s reasons are inadequate and conclusory.
(a) Applicable Legal Test Regarding
the Parties’ Intention
[45] At para. 2 of her reasons, the trial judge stated:
The parties agree that a [JVA] is a relational contract and not a transactional one. Accordingly, the intentions of the parties becomes critical in answering the following question: Did they think that the [June Letter] was a completed agreement or did they think that something more was to be done to complete the contract?
[46] Later in her reasons, the trial judge accepted Amicone’s evidence that when he signed the June Letter, he thought that he was signing a letter of intent, to be followed by further negotiation.
[47] Consulate argues that these passages reveal that the trial judge improperly focused on subjective, rather than objective, factors in determining the intention of the parties, thereby misdirecting herself as to the applicable legal test for determining the effect of the June Letter.
[48] I disagree. Although it is true that the trial judge referred early in her reasons to the parties’ subjective beliefs concerning the effect of the June Letter, in her subsequent analysis of the relevant law she said at para. 42: “The issue to be decided is whether the execution of a formal contract is a prerequisite for an enforceable contract or whether it is merely a step in carrying out an already enforceable contract.” Then, at paras. 43 and 44 of her reasons, the trial judge expressly noted that the intention of the parties concerning the June Letter was to be viewed objectively, based on the parties’ words or conduct. She applied this principle to the facts as she found them, concluding at para. 45, “Viewed objectively, the words and actions of both parties … suggest that they intended their agreement to be a step in the negotiations as opposed to a binding contract.” [Emphasis added.]
[49] In the end, the trial judge recognized and applied an objective test to her evaluation of the parties’ intention about forming a binding JVA. This ground of appeal therefore fails.
(b) Trial Judge’s Evaluation of the Evidence
[50] Consulate argues that the trial judge erred in her evaluation of the evidence: (i) by ignoring evidence of the deletion of para. 8 from the June Letter, of the Sorokolits concerning the events surrounding Heritage’s signing of the June Letter, and of the parties’ conduct thereafter; and (ii) by taking into account irrelevant considerations. I would reject these arguments.
(i) The ‘ignored’ evidence
[51] Consulate argues that the deletion of para. 8 of the June Letter was a signal event that confirmed the parties’ intention to be bound by the joint venture provided for under that letter, without the necessity of further negotiations or additional documentation. This is supported, Consulate submits, by William Sorokolit Sr.’s evidence of the events surrounding Heritage’s execution of the June Letter – including the discussions between the parties when the document was signed – and by the parties’ conduct thereafter. The trial judge, Consulate says, ignored this critical evidence when she held at para. 45 of her reasons that: “Viewed objectively, the words and actions of both parties in this case suggest that they intended their agreement to be a step in the negotiations as opposed to a binding contract.”
[52] In my opinion, however, the trial judge’s reasons indicate that she was cognizant of the relevant evidence of the parties’ intention and that she applied the proper legal principles to that evidence. I say this for the following reasons.
[53] First, the trial judge’s reasons indicate that she lent her mind, as she was obliged to do, to the language of the June Letter. For example, at para 45 of her reasons she wrote, “Neither party acted on the agreement as though it was final and binding, and the wording in the [June Letter] contemplates further negotiation.” [Emphasis added.]
[54] I see no error in this finding. Even after the deletion of para. 8, numerous paragraphs in the June Letter suggest that it relates to a prospective undertaking. In its introductory paragraph, the June Letter states that Consulate “would be interested to proceed as a Joint Venture”.[^3] In paras. 2 and 3 of the June Letter, reciprocal land exchanges were called for, “upon formation of the Joint Venture”. Finally, in the concluding paragraph of the document, Sorokolit indicated that, upon Heritage signing the June Letter, he would “proceed to prepare the draft Joint Venture documents for your review”. The wording of this concluding paragraph indicates that further documentation
was required even if amendments were made to the June Letter prior to its execution by Heritage.
[55] Second, as I have said, the trial judge expressly accepted Amicone’s evidence that, by striking para. 8, he intended only to delete the condition pertaining to obtaining an executed lease (or agreement to lease) from Nike, and not the companion condition that required the completion of a formal JVA and associated documentation as a prerequisite to the creation of the joint venture. By accepting this evidence, the trial judge implicitly addressed the events of November 14, 1998 surrounding the signing of the June Letter, including the removal of para. 8.
[56] Third, the trial judge clearly understood the importance of the June Letter to Consulate’s case. As she observed at para. 18 of her reasons, the June Letter was “pivotal to the theory of Consulate’s case”.
[57] There is no doubt that the letter to which the trial judge referred in her reasons was the version of the June Letter with para. 8 deleted. Indeed, this version was attached as Schedule “A” to the trial judge’s reasons.
[58] In this context, and given the significance attached by Consulate to the removal of para. 8 from the June Letter, I cannot agree that the trial judge ignored that key amend-ment to the version of the June Letter that was ultimately signed by both parties.
[59] It is true, as Consulate emphasized during oral argument before this court, that the trial judge did not explicitly mention the evidence of the deletion of para. 8, or the Sorokolits’ testimony about the discussions between the parties when Heritage signed the June Letter, in her reasons. Given the reliance placed on this evidence by Consulate to demonstrate the alleged existence of an enforceable JVA, it would have been preferable had the trial judge addressed this evidence directly in her reasons.
[60] Nevertheless, in my opinion, properly read, the trial judge’s reasons reveal that she concluded on the record as a whole that the evidence of the events of November 14, 1998 fell short of establishing the creation of a binding JVA between the parties. This finding is supportable on the evidence and not open to appellate review.
[61] In addition to those parts of the trial judge’s reasons to which I have already referred, this conclusion is bolstered by other passages of her reasons. For example, at para. 35, the trial judge revisited the issue of the completeness of the June Letter. She indicated:
By the time the parties had signed the letter on November 14, 1998, Mr. Amicone was proceeding with the site work in Windsor. By January 1999, construction had begun. All of this was being paid for from Mr. Amicone’s resources. I accept Mr. Amicone’s evidence that he fully expected that Consulate’s share of these expenses would be addressed in the continued negotiations that would lead to a final and binding [JVA]. [Emphasis added.]
[62] Fourth, to the extent that the June Letter can be seen as ambiguous regarding the parties’ intention, the parties’ post-November 14, 1998 conduct is relevant. Although the trial judge did not refer extensively in her reasons to the parties’ conduct after Heritage signed the June Letter, contrary to Consulate’s submission, read as a whole, her reasons demonstrate that she was clearly alive to the dealings between them and to events after November 14, 1998 regarding the Niagara Property and the Grand Niagara Project. While I might have approached the analysis of this ‘conduct’ evidence differently, I see no error by the trial judge in her treatment of this evidence warranting appellate intervention.
[63] In particular, the trial judge’s findings that “neither party acted on the agreement as though it was final and binding” and that the parties’ conduct “[did] not come close to creating the legal situation that flows from a binding [JVA]” were available on the evidence.
[64] On numerous occasions both before and after Heritage signed the June Letter, Consulate referred in correspondence with Heritage to the need to “formalize” their relationship and to “finalize” the contemplated joint venture by way of the execution of joint venture and other agreements.
[65] Consulate points out that in a letter dated February 1, 1999 to Heritage, Consulate expressly referred to the Amicon joint venture and indicated that it was proceeding to fulfill its leasing obligations under the June Letter. Consulate submits that this express reference to a subsisting JVA is a clear expression of Consulate’s understanding of the effect of the June Letter.
[66] But Consulate also wrote to Heritage on February 19, 1999 referring to the need “to complete our formal documentation pursuant to our Letter of Intent dated November 14, 1998, to formulate the Amicon Joint Venture”. [Emphasis added.] Several subsequent letters from Consulate to Heritage again urged the completion of further documentation to finalize the joint venture.
[67] This correspondence indicates that, notwithstanding the deletion of the condition in para. 8 of the June Letter requiring additional documentation, Consulate itself regarded the requirement of further documentation as continuing. This is completely inconsistent with the suggestion advanced by Consulate that the bargain between the parties was concluded on November 14, 1998.
[68] Nor do I think that the language of Consulate’s correspondence with Heritage can be explained away on the basis that Sorokolit, the signatory to the letters, lacked legal training. The trial judge found that Sorokolit was an experienced and sophisticated businessman. He was no stranger to commercial transactions. Thus, the wording of Consulate’s numerous letters to Heritage cannot be dismissed as simply careless or inadvertent.
[69] In addition, and significantly, the parties’ conduct regarding the progress of the Windsor outlet mall did not suggest that they were conducting themselves as joint venturers in respect of that development. The record indicates that both before and after Heritage’s execution of the June Letter, all decisions and arrangements about the development of the Windsor outlet mall were made exclusively by the Heritage group. The trial judge held that Heritage alone developed the Windsor outlet mall, both prior to and after the June Letter.
[70] In particular, prior to November 1998, the Heritage Group had hired an architect and planners, entered into negotiations with municipal authorities regarding zoning, purchased the interests of Heritage’s minority shareholders, and designated senior staff to work exclusively on the Windsor outlet mall project. Consulate had no involvement in or responsibility for any of these activities.
[71] This did not change with Heritage’s execution of the June Letter. On the findings of the trial judge, notwithstanding various offers of assistance by the Sorokolits on or after November 14, 1998, the Heritage Group undertook the necessary construction and bank financing for the development of the Windsor outlet mall, again with no involvement or assumption of risk by Consulate. It did so in the face of an express provision in the June Letter that the joint venture – Amicon – would obtain the financing required to complete Phase I of the Windsor outlet mall. This clearly indicates that Heritage was not acting after November 14, 1998 in furtherance of what it understood was a binding JVA.
[72] Moreover, the burden of these financial arrangements, the debt thereby created, and the associated security required were borne solely by Heritage. Notwithstanding the division of responsibilities described in the June Letter, this is inconsistent with the claim that the parties acted in concert to “proceed to develop” the Windsor outlet mall, as called for by the June Letter.
(ii) The “irrelevant” considerations
[73] I would also reject Consulate’s assertion that the trial judge erred by considering or over-emphasizing the evidence of the Acktion loan, the evolving nature of the Grand Niagara Project, and Consulate’s ability to “close” the land transfers provided for under the June Letter, when evaluating the effect of the June Letter.
[74] The trial judge held that the description of the Grand Niagara Project in the June Letter was inaccurate and misleading because, among other matters, it erroneously suggested that Royco Hotels and Resorts of Calgary was committed to the project when it was not. She also found that the changes to the proposed Grand Niagara Project after November 1998 were “extreme”, that Amicone could “barely get through one proposal when he would receive a memo advising of further changes”, and that the proposal for the Grand Niagara Project was “in a constant state of flux”, evolving into a proposal “that was well beyond anything that … Amicone and his companies were comfortable with”.
[75] In respect of Acktion’s interest in the Niagara Property, based on Consulate’s dealings with Acktion in June 1998 and the fact of Acktion’s outstanding loan, the trial judge held that “Sorokolit knew that Consulate was not in a position to complete the land swap and indeed was never in a position to close on the land swap”. The trial judge also held that the proposed “land swap” was a fundamental underpinning to the proposed joint venture.
[76] Consulate does not contest these factual findings. Instead, it maintains, in effect, that they are irrelevant to the issue whether the June Letter constituted a binding JVA and, as stated in its factum filed on this appeal, that the consideration of these issues deflected attention away “from the appellant’s detailed case of ‘conduct’ and of services requested and performed”.
[77] I disagree. The mutual obligations contained in the June Letter were predicated on the parties being positioned both to undertake and to perform their respective commit-ments under that letter. Evidence establishing that, from the outset, Consulate was not in a position to undertake these commitments was highly relevant to the question of whether the June Letter had the effect of creating a binding joint venture.
[78] In this respect, I disagree with Consulate’s submission that the June Letter may be analogized to an agreement of purchase and sale for the transfer of mortgaged land. Under the latter type of agreement, no question arises at the time of contract formation concerning the vendor’s ability to sell the land – all that is required is the discharge of the mortgage on closing in order to deliver clear title to the land sold. By contrast, in this case, when the June Letter was signed, Consulate was not in a position to develop the Niagara Property at all. Nor was it in a position to do so at any point prior to the commencement of this litigation. Moreover, its agreement with Acktion prohibited any form of joint venture concerning the Niagara Property without Acktion’s consent, which was never given. Nor could the Grand Niagara Project proceed in the fashion described in the June Letter – Royco Hotels and Resorts of Calgary was not committed to the project.
[79] The facts surrounding the proposed developments of the Niagara Property and the Grand Niagara Project, therefore, were proper considerations. It was not open to Consulate, in my view, to insist upon the enforcement of those parts of the June Letter pertaining to the Windsor outlet mall when it was not positioned to proceed with the development of the Niagara Property or the Grand Niagara Project. To hold otherwise would permit Consulate to bifurcate the June Letter into separate joint ventures regarding each development project. This would violate both the plain language of the June Letter and the fundamental nature of the joint venture contemplated by it.
[80] I conclude, therefore, that a review of the trial judge’s reasons does not disclose any error in her evaluation of the evidence warranting appellate intervention. The trial judge’s factual findings regarding the language of the June Letter and the intention of the parties, as manifested by their words and conduct, were supported by the evidence.
(c) Omissions from the June Letter
[81] A document that omits essential terms, or that contains vague or incomplete material terms, will not constitute an enforceable contract. See for example, Bahamaconsult Ltd. v. Kellogg Salada Canada Ltd. (1976), 1976 554 (ON CA), 15 O.R. (2d) 276 (C.A.) at 277 leave to appeal to the S.C.C. refused, [1976] 2 S.C.R. vii; Canada Square Corp. v. VS Services Ltd. (1981), 1981 1893 (ON CA), 34 O.R. (2d) 250 (C.A.) at 261.
[82] However, I do not accept Consulate’s submission that the trial judge erred by holding that the June Letter lacked terms essential to the formation of an enforceable JVA. The trial judge put it this way at paras. 38 and 39:
The most obvious omissions are the value to be attributed to the [Windsor Property], the value to be attributed to the Niagara [Property] and how [Heritage] would be compen-sated for the development of [the Windsor Property.]
Aside from the omissions outlined above, the parties never addressed what would occur if there was a default by either party to the [JVA].
[83] Consulate acknowledged before this court that the June Letter contains a “bundle of obligations”. I agree. The bargain contemplated by the parties concerned three development projects, each of which formed an integral part of the proposed joint venture. The June Letter contains no language suggesting that these projects were severable, such that Consulate could enforce a joint venture concerning the Windsor Property while also being relieved of its obligations in respect of the remaining develop-ment projects.
[84] Indeed, the trial judge concluded, and Sorokolit acknowledged at trial, that a major incentive for Heritage to sign the June Letter was the prospect that the joint venturers would obtain the construction contracts associated with the Grand Niagara Project, as specified in the June Letter. As Sorokolit pointed out in his testimony, this provision of the June Letter was inserted at the insistence of Amicone. This, together with the reciprocal land exchanges called for under the June Letter, compels the conclusion that the foundation for the proposed joint venture was the mutual advantages to the parties to be realized under all three development projects.
[85] When the June Letter is viewed in this fashion, I agree with the trial judge that it contains significant omissions concerning the proposed ‘deal’ between the parties. The trial judge identified three omissions that she regarded as material (the value of the Windsor Property; the value of the Niagara Property; and the method by which Heritage would be compensated for the development of the Windsor Property). She described these as the “most obvious omissions”. Thus, the trial judge did not purport to exhaustively list the critical omissions from the June Letter.
[86] In my view, there are several key omissions in the June Letter. First, it makes no provision for the nature of the development on the Niagara Property or, in contrast to its provisions concerning the Windsor Property, for the respective responsibilities of the parties in relation to that development. Nor does it mention the encumbrances on that site or how they were to be discharged. Also, in the main, the June Letter is silent on the respective responsibilities of the parties concerning the Grand Niagara Project, including on the matter of the funding for the acquisition of interest contemplated for that development.
[87] On the view that I take of the commercial undertaking envisaged by the June Letter, these omissions, by themselves, render the June Letter unenforceable as a JVA. These are not merely technical or administrative matters. Rather, in my opinion, they are necessary components of the overall development undertaking provided for under the June Letter. Without specific agreement on these issues, the obligations assumed by the parties in respect of these two projects were unclear and uncertain. Simply stated, the terms of the parties’ bargain concerning two-thirds of the undertaking contemplated by the June Letter were never finalized.
[88] In these circumstances, it is unnecessary to address Consulate’s submission that the “missing” terms identified by the trial judge were either not required by law or were addressed in the June Letter. It suffices to indicate that terms essential to the formation of a binding JVA in respect of the development undertaking as a whole were omitted from the June Letter.
(d) Adequacy of the Trial Judge’s Reasons
[89] Finally, Consulate complains that the trial judge’s reasons concerning the alleged JVA fall short of the applicable standard for sufficiency of reasons. See for example, R. v. Braich (2002), 2002 SCC 27, 162 C.C.C. (3d) 324 (S.C.C.); R. v. Sheppard (2002), 2002 SCC 26, 162 C.C.C. (3d) 298 (S.C.C.).
[90] Again, I disagree. This is not a case where the trial judge did not give any meaningful reasons. As I have said, the complaint is with the adequacy of the reasons. But there is no doubt in this case as to what the trial judge decided and how she reached her decision. While the trial judge’s evaluation of the evidence regarding the intention of the parties could have been elucidated more fully, and with greater prominence, read in their entirety the trial judge’s reasons reveal her reasoning process and the evidence accepted by her, and permit meaningful appellate review. No more was required.
(e) Conclusion
[91] Accordingly, I would reject Consulate’s challenge to the trial judge’s dismissal of its contract claim.
(2) Quantum Meruit Claim
[92] I reach a different conclusion, however, concerning Consulate’s quantum meruit claim.
[93] Consulate argues that the trial judge erred in her analysis of this claim by applying the wrong legal test and by failing to consider the extensive evidence relied upon by Consulate to establish its quantum meruit claim. I agree with these submissions.
[94] The trial judge stated at para. 41 of her reasons:
I keep in mind that claims based on quantum meruit have an underlying presumption of an entitlement to be compensated. In other words, I must find a contractual relationship. I cannot make such a finding. [Emphasis added.]
[95] With respect, this misstates the test for establishing entitlement to restitutionary relief based on quantum meruit. Such a claim is not dependant on the existence of a valid contract. Rather, it is a discrete cause of action, separate and apart from claims grounded in contract or tort, which contemplates a remedy for unjust enrichment or unjust benefit: see Beatrice C. Deglman v. The Guaranty Trust Company of Canada (Administrator of the Estate of Laura Constantineau Brunet, Deceased), 1954 2 (SCC), [1954] S.C.R. 725 at 734-35.
[96] The trial judge also stated at para. 41:
At its highest, the evidence is that Mr. Sorokolit was providing advice and suggestions hoping that Consulate would get into a binding [JVA]. The evidence does not support a conclusion that services were provided with the mutual expectation that if Consulate did not get into a [JVA], Mr. Sorokolit would be paid in any event. [Emphasis added.]
[97] To these statements, the trial judge added in a footnote:
For this reason, I reject a compromise and alternative position suggested by [counsel for Heritage] in closing submissions. There was one of two outcomes in this case once the parties decided [to] proceed to trial. The suggestion that I award nominal damages to Consulate for its role in procuring the [Adidas] lease and for the estimated number of hours spent by Mr. Sorokolit working on the Windsor [Property] is, to my mind, inherently illogical in law where the assertion is that there was no binding contract. These matter[s] were never discussed by the parties. However, if the parties choose a compromise position, it is not too late for them to do so. I add that I was not provided with any evidence of the number of hours spent on Windsor by Mr. Sorokolit.
[98] There are two difficulties with these comments. First, the authorities make clear that services provided in reliance on “some underlying measure of agreement” and at the request, or with the acquiescence, of the beneficiary of the services are compensable, although a valid enforceable contract between the parties may not exist. Services provided in these circumstances are not viewed as having been given gratuitously, based on speculation. G.H.L. Fridman, in his leading text Restitution, 2d ed. (Toronto: Carswell, 1992), put it this way at 301-02:
The decided cases reveal a sharp contrast between situations in which what the plaintiff did was done at the defendant’s request or with the knowledge and acquiescence of the defendant and those in which the plaintiff acted in his own supposed interests. In the latter instances, the plaintiff may have believed that ultimately he would profit from some contract that he hoped or expected would emerge from what was done. In the event, however, no such contract materialised. The plaintiff’s behaviour could be characterised as being tantamount to speculation. Such cases differ from those in which there is some underlying measure of agreement, although not sufficient to constitute a valid, enforceable contract, in virtue of which the plaintiff performs the work or provides the services that are at issue. There must be established some express, or sometimes implied, request to do the work or some encouragement on the part of the defendant of the plaintiff that may be said to have misled the plaintiff into the belief that a contract would result. At the same time, what the plaintiff does must be a reasonable and foreseeable response to the behaviour of the defendant. Furthermore, the consequence of what the plaintiff has done would seem to be that the defendant obtains a benefit of some kind. In other words, the defendant must be enriched by the plaintiff’s acts. [Footnotes omitted and emphasis added.]
[99] Thus, where the claim for restitutionary relief is based on quantum meruit, as in this case, an explicit mutual agreement to compensate for services rendered is not a prerequisite to recovery. It suffices if the services in question were furnished at the request, or with the encouragement or acquiescence, of the opposing party in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provision of the services. See Fridman, supra, at pp. 290-92; Nicholson v. St. Denis (1975), 1975 393 (ON CA), 57 D.L.R. (3d) 699 (Ont. C.A.), leave to appeal to S.C.C. refused, [1975] 1 S.C.R. x.
[100] The Heritage Group resists Consulate’s quantum meruit claim on the basis that the services in question – the provision of which the Heritage Group essentially conceded in its factum on this appeal – were furnished “between colleagues” without the imposition of restrictions by Consulate, or for the purpose of “working towards a joint venture”.[^4]
[101] But there was considerable evidence at trial that Consulate’s services concerning the Windsor outlet mall were provided either at the request of, or with the encouragement or acquiescence of, Heritage and Amicone, in anticipation or in light of the arrangements reflected in the June Letter. The record is clear that at least some of these services, which pertained to the design, marketing and leasing of the Windsor outlet mall, advanced the development of the Windsor Property. In that important sense, in my view, they benefited the interests of the Heritage Group.
[102] The services furnished by Consulate, without compensation, included:
(i) the provision to Heritage, at Amicone’s request, of the business name “Windsor Crossing Premium Outlets”, which was adopted and used by Heritage;
(ii) the supply to Heritage of draft signage drawings for the Windsor outlet mall;
(iii) the provision of advice, photographs and other docu-ments regarding the design of the Windsor outlet mall;
(iv) advice, at Amicone’s express request, concerning the draft site plan, blueprints and construction specifi-cations for the Windsor outlet mall;
(v) detailed information and advice, again at Amicone’s express request, on the contents and production of a leasing brochure;
(vi) the provision of a leasing plan and precedent marketing plans;
(vii) extensive efforts to secure suitable tenants for the Windsor outlet mall, including introductions to and discussions with Escada, Holt Renfrew, Adidas, Nike and others, ultimately resulting in letters of intent or completed leasing agreements with, at least, Escada, Adidas and Nike;
(viii) advice, also at Amicone’s request, regarding the terms of the proposed leasing agreement with Nike; and
(ix) to the knowledge of Amicone, the hiring of a leasing consultant, at Consulate’s sole expense, to secure tenant commitments.
[103] The value of these varied services, in my opinion, cannot be discounted – essentially to zero – on the premise that they reflect a free exchange of information “between colleagues”. Consulate had no relationship with the Heritage Group prior to the summer of 1997. Thereafter, for a period of about two years, it became closely involved in discussions and activities with the Heritage Group regarding the development of the Windsor Property. In so doing, it is arguable that Consulate provided at least some proprietary information or other assets to the Heritage Group (for example, the registered business name for the outlet mall and Sorokolit’s photographs and other documents regarding the proposed design of the mall). Consulate also incurred expenses (for example, the retainer of a leasing consultant) that furthered the progress of the Windsor outlet mall.
[104] Moreover, some of Consulate’s efforts bore fruit: the business name it created was used as the name for the Windsor outlet mall; its design suggestions admittedly inspired and appear to have been ultimately reflected in the design of the mall; and, importantly, its work generated several letters of intent and, eventually, some leasing agreements with high-end retail tenants for the mall.
[105] Consulate’s claim for restitutionary relief is a claim for compensation for the fair value of the services provided by it to advance the development of the Windsor outlet mall. This is consistent with the terms of the June Letter, which provided that the parties would be compensated for their respective services concerning the Windsor outlet mall “at reasonable market rates which are acceptable to the Joint Venture”.
[106] It is also consistent with the earlier inclusion in the 1997 Agreement of a two million dollar break fee in favour of Consulate, should Heritage develop an outlet mall prior to December 1999. The trial judge concluded that the inclusion of the break fee provision in the 1997 Agreement was intended to “test” what Sorokolit viewed as Heritage and Amicone’s lack of business experience and sophistication, and that this provision was “wisely removed”. Nonetheless, although the 1997 Agreement was eventually overtaken by other events, the break fee is still one indicator, among others, of the course of dealings between the parties, the overall context in which Consulate performed its services in relation to the Windsor outlet mall, and an expectation by Consulate that it would be compensated for its services.
[107] I note, as well, that Heritage appears to have conceded in final argument at trial that at least limited compensation should have been awarded to Consulate for services rendered in respect of the Windsor outlet mall. See footnote 12 of the trial judge’s reasons, quoted above at para. 97. The effect of the trial judge’s decision is to ignore this concession.
[108] In all these circumstances, I am satisfied that the foundation for restitutionary relief based on quantum meruit was made out by Consulate at trial. That the June Letter does not constitute a binding JVA does not diminish the fact that the Heritage Group continued to accept services from Consulate regarding the Windsor outlet mall, without compensation, after November 14, 1998. Some of these services were expressly requested by Amicone or Heritage. Others were provided with the encouragement or acquiescence of the Heritage Group. At no point after Heritage signed the June Letter until June 22, 1999 did the Heritage Group assert that Heritage did not understand, or that it rejected, the June Letter.
[109] Consulate led no evidence at trial about the value of its services to the Heritage Group or the time spent on the services provided. Rather, it led expert evidence about usual fee arrangements in the industry for consultants who contract to provide services. The trial judge made no assessment of this expert evidence, nor any findings about the value of the services actually furnished by Consulate. In these circumstances, a new trial is required to determine the nature, extent and value of the services provided by Consulate concerning the Windsor Property. I note that although the Heritage Group argues that no recovery is available against Amicone in his personal capacity or Amico, as distinct from Heritage, it will be for the trial judge at the new trial to determine which of the respondents is liable for such services.
[110] Finally, although Consulate requested this court to direct the basis upon which the new trial should proceed, I would decline to exercise this court’s discretion in the fashion urged. We have not received submissions from the parties on the procedural directions sought by Consulate. In any event, I do not regard it as appropriate to restrict the trial judge’s discretion on such matters. In my view, the trial management and procedural issues raised by Consulate, if not otherwise agreed on by the parties, are for the trial judge to determine on motion at the new trial.
V. Disposition
[111] I would allow the appeal and direct a new trial in accordance with these reasons. Consulate is entitled to its costs of this appeal on a partial indemnity basis, fixed in the total amount of $50,000, inclusive of disbursements and GST. The trial judge’s costs award is set aside. Consulate shall deliver brief written submissions on the costs of the trial to the Registrar of this court within twenty days from the release of these reasons.
The Heritage Group shall deliver brief responding submissions to the Registrar within twenty days thereafter.
RELEASED:
“MAY -1 2007” “E.A. Cronk J.A.”
“KMW” “I agree K.M. Weiler J.A.”
“I agree S.T. Goudge J.A.”
[^1]: Windsor Factory Outlet Mall Ltd. was previously known as Heritage Centre Holdings Inc. I refer to the respondents collectively as the “Heritage Group” in these reasons.
[^2]: All subsequent references in these reasons to the June Letter refer to the amended version of this document, as signed by Heritage on November 14, 1998.
[^3]: Notably, Consulate used virtually identical language in an earlier letter to Heritage dated October 31, 1997, which Sorokolit described in his testimony as a “letter of interest” that created no legal obligations.
[^4]: No argument was advanced before this court that Consulate was disentitled by the ‘clean hands’ doctrine from recovering on the equitable basis of quantum meruit: See Dunlop v. Major, [1998] O.J. No. 2553 (C.A.).