CITATION: Webster v. Thomson, 2008 ONCA 730
DATE: 20081027
DOCKET: C48381
COURT OF APPEAL FOR ONTARIO
Rosenberg, Borins and Gillese JJ.A.
BETWEEN
George Webster and George Webster as Estate Trustee of the Estate of Eleanor Webster
Appellant
and
David Thomson, Peter Thomson, Marilyn and John A. Tory as Estate Trustee of the Estate of Kenneth R. Thomson, David Thomson, Thomson Works of Art Limited, Lawrence Salander, Salander-O’Reilly Galleries LLC and John Doe
Respondents
Melvyn L. Solmon and Jonathon M. Kappy, for the appellant
James C. Tory and Andrew Gray, for the respondents
September 9, 2008
On appeal from the Order of Justice G.R. Klowak of the Superior Court of Justice dated January 25, 2008, and reported at 2008 19230 (On. S.C.).
Borins J.A.:
I
[1] This is an appeal by George Webster from a summary judgment partially dismissing his claim for damages against the estate of Kenneth R. Thomson, David Thomson and others. The principle issue is whether the motion judge properly exercised her role as a judge hearing a motion under Rule 20 of the Rules of Civil Procedure in finding that there was no genuine issue for trial. As I will explain, she did not. I would, therefore, allow the appeal and order that Mr. Webster’s claim proceed to trial.
II
[2] A painting by the American artist Charles Russell, “Pirates of the Plains”, had been in the Webster family since 1931. Mr. Russell, who died in 1926, is well known for his paintings of the “old” American west. He is regarded as America’s favourite western artist. The painting was very special to Mr. Webster who saw it as a link to his father who passed away in 1958 and who had acquired the painting in 1931. On September 29, 1982, Mr. Webster’s mother sold the painting to Kenneth Thomson (“Mr. Thomson”) without Mr. Webster’s knowledge for $150,000.
[3] Mr. Webster asked Mr. Thomson if he could reacquire the Russell painting. Mr. Thomson proposed that if Mr. Webster sold him a painting by Cornelius Krieghoff that he owned, Mr. Thomson would give Mr. Webster the opportunity to purchase the Russell painting after he died.
[4] This proposal was contained in a letter that Mr. Thomson wrote to Mr. Webster on June 5, 1986. The relevant portions of the letter read as follows:
During my lifetime I would like to enjoy ownership and possession of the [Russell] painting which I really do love and for which I have a very special feeling.
However, David [Thomson] would be happy to go along with my wish that, if you were prepared to sell me the Krieghoff at its current fair market value, then on my passing the following procedure would take place which would give you the opportunity of re-acquiring “Pirates of the Plains” for yourself and your family.
(1) Valuations on the painting would be obtained from two sources, namely Sotheby’s and an internationally recognized commercial gallery to be mutually agreed upon (this should not be difficult as there can be relatively few, such as Kennedy Galleries, that fit into this category and are authorities on American Western Art).
(2) Each of these valuations would be stated as a range, from low to high.
(3) The two lower levels of value would be averaged.
(4) The painting would be offered to you at a price equal to such average of the two lower levels.
(5) This offer would be open for acceptance by you for a period of 90 days after the two valuations are obtained.
It seems to me that this would be an eminently fair way to handle this matter, and it would give you and your family the certain opportunity of re-acquiring the painting in due course – I hope not too soon! [Emphasis added; underlining in original.]
[5] Mr. Webster accepted and agreed to the terms of the agreement in Mr. Thomson’s letter. By a letter dated July 17, 1986, Mr. Thomson and David Thomson (“David”) confirmed the legally binding effect of the agreement in the June 5 letter, and further stated:
The agreement assuring you (or in the unlikely event of my predeceasing you, the Mr. Webster family) of the opportunity to re-acquire “Pirates of the Plains” is clearly outlined in our exchange of letters, copies of which bear the signatures of my son David and myself. These signed documents, taken together, are intended to be legally binding and you and I are both satisfied that this is the case. This letter is simply to reinforce the legal aspects of the signed letters with the moral obligation David and I have undertaken to follow through exactly as we have agreed. You need have no concern. David is as honourable a person as I am. [Emphasis added.]
[6] On August 25, 2003, Mr. Thomson sold the Russell painting for U.S. $5.6 million. It was sold by a New York art dealer. The purchaser and the painting’s whereabouts are unknown. Mr. Thomson died on June 12, 2006. Mr. Webster’s endeavours to determine his rights under his contract with Mr. Thomson commenced before Mr. Thomson’s death. After Mr. Thomson died, David did not commence the appraisal procedure outlined in the June 5 letter, nor did he undertake any efforts to value the painting.
III
[7] Even though by the agreement of June 5, 1986, Mr. Thomson gave Mr. Webster an option to purchase the painting on his death, the record disclosed that by 2000 – 2001 he was expressing an interest in selling it. He inquired from two New York art dealers about the painting’s value. In July 2003, Mr. Thomson shipped the painting to New York to one of the dealers, Lawrence Salander, for sale. In August 2003, he contacted Mr. Webster to tell him that the painting was to be sold for U.S. $5.6 million. Mr. Webster declined Mr. Thomson’s offer to purchase the painting for that price.
[8] Mr. Webster served this claim against Kenneth Thomson, David Thomson and others on June 28, 2004. Because Mr. Thomson had sold the painting, an application to determine the rights of the parties under the June 5, 1986 agreement was commenced by Mr. Webster on September 12, 2003. On May 28, 2004, by order of Himel J., the application was converted into this action and pleadings followed. In the action Mr. Webster claimed declaratory and other relief. For the purposes of this appeal, Mr. Webster’s significant claims are for damages for breach of contract of $4 million and punitive damages of $10 million. After Mr. Thomson died, the action was continued against his estate.
[9] On January 10, 2008, the Estate of Kenneth Thomson, David Thomson and Thomson Works of Art Limited commenced their motion for summary judgment for dismissal of Mr. Webster’s claims. Their principle ground for the dismissal of Mr. Webster’s claims reads as follows:
The plaintiff, Webster, did not have the means to acquire the painting in issue (the “Russell Painting”) at an appraised market value upon the death of the late Kenneth R. Thomson (“Thomson”). Webster therefore suffered no loss even if the sale of the Russell Painting prior to Thomason’s death was a breach of the alleged contractual right (which is denied) of Webster’s to acquire the Russell Painting on Thomson’s death at the painting’s appraised market value.
In addition, they claimed there was no genuine issue for trial with respect to Mr. Webster’s claims.
[10] In support of their motion, the respondents relied on the affidavit of David Binet, the executive vice-president and secretary of the Woodbridge Company Limited, the holding company for members of the Thomson family. Because Mr. Webster’s lawyers had not responded to the Thomson lawyers’ query as to whether Mr. Webster had the means to purchase the Russell painting at fair market value if the Thomsons could arrange for him to purchase it, Mr. Binet inferred “that Webster did not have, at the time of Mr. Thomson’s death, and has not had since then the means to acquire the Russell Painting for its market value”. Mr. Webster relied upon an affidavit of October 8, 2003, filed in respect to the earlier application, in which he said:
…Although I believe I would be able to raise the funds to match the American buyer’s offer either through financing or syndication, there is no obligation for my family to do so at this time. I believe the ability to purchase the Painting at this time has nothing to do with the specific promise that Thomson made in the agreement, back in 1986.
Before the motion judge, and in this court, Mr. Webster’s position was that he was able to raise the money, if necessary, to purchase the Russell painting.
IV
[11] It appears that the Thomsons’ motion for summary judgment was granted on the ground that Mr. Webster had not proved damages because he had provided no evidence that he could raise the money to purchase the Russell painting.
[12] With respect to the damage issue and Mr. Webster’s ability to purchase the painting, the motion judge said at paras. 5 – 8:
The evidence with respect to damages is scanty to say the least. Defence has deposed that the painting was essentially purchased for $150,000 and was sold for $5.6 million in 2003, but only $2 million of that amount was paid. Apparently the balance is alleged to be outstanding.
As Mr. Thomson died in 2006, one can infer and assume that in the absence of any contrary evidence, the painting had a value of at least $2 million dollars on his death.
Plaintiff has put forward no evidence to support that he was ready, willing, and able to exercise the option to purchase the painting at that or any other price; rather he maintains someone, presumably not he, has to first establish a price in [sic] the method set out in the agreement.
With respect to the plaintiff’s ability to pay, he simply states he could have financed or syndicated the purchase. Insofar as raising funds in that fashion depends on third parties being prepared to advance those funds, no supporting evidence has been led in that regard. [Emphasis added.]
[13] After some observations in which she seemed to consider Mr. Webster’s claim as one for loss of opportunity, the motion judge continued at paras. 10, 14-15 and 19:
I have considered whether or not this matter should be directed to go to trial on the issue of whether there was a reasonable probability that plaintiff was able to purchase the painting, however, assuming the plaintiff has put his best foot forward, the lack of evidence in that regard precludes such finding.
In the end, the onus is on the plaintiff to prove his damages and on the material before me, assuming it would be the evidence at trial, he has failed to do so and there is no triable issue raised in that regard.
He has not shown he has lost anything (the purchase option) that he could or would have performed, or raised a triable issue in that regard.
In the end, breach of contract has been admitted, no damages proved, and it is open to the court to make a nominal award. The quantum of that nominal amount is directed to go to trial along with any issue with respect to punitive damages. Passing mention was made of whether or not they can be claimed in the event of nominal damages only, and I direct that the issue of entitlement in fact or law and quantum with respect to punitive damages also go to trial. [Emphasis added.]
V
[14] Like any other case in which the court has granted summary judgment dismissing a plaintiff’s claim, the issue is whether the motion judge erred in finding that there was no genuine issue for trial. A broader issue is whether the motion judge exceeded her role in the hearing of a Rule 20 motion and took on the mantle of a trial judge in deciding that Mr. Webster’s action could not succeed because he did not prove that he had the means to purchase the painting for $2 million.
[15] This is not a complex case. Mr. Webster’s position is that Mr. Thomson’s death triggered his contractual right to an option to acquire the Russell painting at its market value. This is admitted for the purpose of their motion by the respondents, who further admit that Mr. Thomson had breached the contract about three years before he died by selling the painting to an unknown purchaser through a New York art dealer. This leaves for trial the determination of the fair market value of the painting by the procedure in the June 5, 1986 agreement. Unless the Thomsons were to reacquire the painting before trial, the ninety days that Mr. Webster would have had under the agreement to exercise his option is irrelevant. Therefore, the only remaining issue would be the amount of Mr. Webster’s damages. The amount of damages is not a proper consideration on a Rule 20 motion to dismiss a claim based on a breach of contract. There was no need, as the motion judge thought, for Mr. Webster to prove his damages at this stage of the proceeding.
[16] In my view, the motion judge assumed the role of a trial judge. Even though the valuation procedure had not been carried out, she decided that to prevent the summary disposition of his action Mr. Webster had to demonstrate that he had the means to purchase the painting. She also believed Mr. Webster had an obligation to present evidence of the painting’s market value. She appears to have assumed a minimum value of $2 million on Mr. Thomson’s death in 2006, based on the first, and only, instalment that the purchaser paid for it in 2003. This, in my view, was not proper evidence of the valuation of a work of art. In any event, the contract contained the procedure for the valuation of the painting. Moreover, much of this was pure speculation as the respondents provided no evidence of the painting’s value on the death of Mr. Thomson, or of the respondent’s likelihood of being able to reacquire the painting from its unknown purchaser to enable Mr. Webster to exercise his option.
[17] In Lang v. Kligerman, 1998 4866 (ON C.A.) at para. 9, this court succinctly set out the onus resting on the parties on a motion for summary judgment:
The authorities are clear that the onus is on the moving party to establish that there is no genuine issue for trial with respect to a claim or defence. There is no onus on the responding party. However, where the evidence presented by the moving party prima facie establishes that there is no genuine issue for trial, and the moving party is entitled to summary judgment as a matter of law, to preclude the granting of summary judgment the responding party assumes the evidentiary burden of presenting evidence which is capable of supporting the position advanced by the responding party in its pleading. On the basis of this evidence, when considered with all the evidence before the motions judge, it will then be for the motions judge to determine whether the evidentiary record raises a genuine issue for trial.
[18] In this case, based on the materials filed by the respondents, it cannot be said that there were no genuine issues for trial or that they were entitled to summary judgment as a matter of law. The legal issue presented by the respondents, as I understand it, was this: If a defendant breaches a contract providing an option to purchase property at what amounts to a fixed price by making it impossible for the plaintiff to exercise the option, in order to succeed must the plaintiff show that he would have had the means to exercise the option? The motion judge found at para. 10 that Mr. Webster could not succeed in his claim against the respondents unless “there was a reasonable probability that [he] was able to purchase the painting”. She said he provided no evidence that he could finance the purchase. It was wrong for the motion judge to say that Mr. Webster had provided no evidence that he could purchase the painting; he said he believed he could raise the funds. Mr. Webster was not required, as the motion judge thought, to produce evidence from prospective lenders. Moreover, his statement that he could raise the funds was uncontradicted. Even if the motion judge was correct as a matter of law, it would be unreasonable to expect Mr. Webster to provide evidence that he could raise an unknown sum to exercise the option. Moreover, as the respondents assigned no value to the painting, there was no way Mr. Webster could establish that he had the means to buy it, even if he was legally required to do so. In any event, the respondents provided no evidence that Mr. Webster could not raise the phantom funds.
[19] It is a fundamental principle that a person cannot benefit from his or her breach of contract. In this case, Mr. Thomson breached an enforceable contract. He could not perform the contract as a result of its breach. In my view, Mr. Thomson cannot benefit from this breach. Yet he clearly does so based on the motion judge’s findings. This is a further reason why her judgment must be set aside.
[20] The respondents provided two cases which they say support the motion judge’s conclusion that Mr. Webster could not succeed in his claim against the Thomsons as “there was no reasonable probability that [he] was able to purchase the painting”. In my view, both cases are factually quite different from the present case and thus cannot be said to be determinative of the issues.
[21] In Kinkel v. Hyman, 1939 7 (SCC), [1939] S.C.R. 364, the issue was whether the defendant had made it impossible for the plaintiff to exercise an option to purchase a number of shares arising from a rather complex commercial agreement by failing to call a shareholders meeting to ratify a share transfer. There was no issue about whether the plaintiff had the means to exercise the option. The issue in the case was whether the breach of the option agreement gave rise to nominal or substantial damages. The Supreme Court of Canada held that because the evidence showed that it was extremely doubtful that the ratification would be approved by a majority of the shareholders, the plaintiff was entitled to nominal damages. The issue in Kinkel was, therefore, different from the issue in this case.
[22] In Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1993), 1993 3431 (ON CA), 12 O.R. (3d) 675, (C.A.) the issue also did not concern the plaintiff’s financial ability to exercise an option. The issue, as in Kinkel, was whether the plaintiff was entitled to nominal or substantial damages on the basis of the plaintiff’s loss of a chance of obtaining a benefit had the contract in issue been performed.
VI
[23] Viewed slightly differently, what the respondents are saying is that to avoid summary judgment dismissing his claim, Mr. Webster was required to show that he was ready, willing and able to perform the contract by purchasing the Russell painting. This ignores the first step that Mr. Webster must take before he reaches this position – to show that he had an enforceable option. The respondents, whose entire position throughout has been to extricate themselves from a bad situation, would therefore probably say that Mr. Webster would have to show that he was ready, willing and able to exercise the option.
[24] In the case of a contract for the purchase and sale of goods, where the covenants of the parties are concurrent, neither party can recover against the other without proving that he or she either has performed his or her obligations, or is ready and willing to so perform: Sherkin v. Winchell (1982), 1982 2130 (ON CA), 37 O.R. (2d) 97 (C.A.). However, where a buyer, before the breach of a contract for the sale of goods, repudiates it, and that repudiation is accepted and acted on by the seller, the seller is relieved from the performance of all conditions precedent, including the condition of being ready and willing at the date of repudiation to deliver the goods: British and Beningtons, Ltd. v. North Western Cachar Tea Co., Ltd., [1923] A.C. 48 (H. L.). This would also apply where a seller repudiates a contract. However, Professor Fridman is of the view that in England and Canada, in the context not of a concurrent or anterior obligation but of a repudiation prior to the time at which performance is due, the issue of whether the complaining party must establish that he was ready, willing and able to perform his own obligations, not withstanding the repudiation of the contract, is unresolved: G.H.L. Fridman, The Law of Contract in Canada (Toronto: Thomson Canada Limited, 2006) at pp. 550-551.
[25] I have located one case that deals with option agreements. It was an action for specific performance of an option agreement. In Boxer v. Norvan Properties Ltd. (1986), 1986 1269 (BC SC), 33 D.L.R. (4th) 150 (B.C.S.C.), the plaintiffs notified the defendant he was exercising an option that he had acquired to purchase 50,000 shares of a particular company. In an action to enforce the option, the defendant’s position was that more was required to exercise an option than notice. The defendant contended that the plaintiff was also required to tender the purchase price. The trial judge disagreed and held that the plaintiffs had properly exercised the option. At p. 153, he said:
The next question is whether the option was properly exercised so as to turn it into a binding contract without the tender of purchase price for the shares. I have not had referred to me any cases dealing with the purchase of chattels which require formal tender of the money at the time of exercising the option. The cases dealing with real estate options and tender with respect to them, in my view, are not helpful when dealing with chattels. If tender is normally made, the circumstances of each case must be looked at to see whether it is reasonable that it be made.
The trial judge concluded that in the circumstances of the case, it would have been fruitless to tender any money until the court determined that the option was exercisable. He held that should the defendant not complete the sale, the case should come back before him for an order for specific performance or to assess damages.
[26] An appeal to the British Columbia Court of Appeal was dismissed: (1988), 1988 3050 (BC CA), 52 D.L.R. (4th) 667. The above issue was not before the court. On the only issue before it, the court decided that the option had been exercised within a reasonable time.
[27] As I understand Boxer, it stands for the principle that whether payment must be tendered in order to exercise an option will depend on whether it would be reasonable to do so in the circumstances of each case. Applying this principle to this case, it would clearly be unreasonable for Mr. Webster to be expected to tender the purchase price of the painting because the price was not known. This is because there had been no compliance with the valuation procedure in the June 5, 1986 agreement that required, upon Mr. Thomson’s death, that two valuations of the Russell painting be obtained. Moreover, the defendants, as I have said, should not be able to take advantage of Mr. Thomson’s breach of the contract.
VII
[28] I would allow the appeal on the grounds that the motion judge misunderstood her proper role in hearing a motion under Rule 20 and that she failed to recognize at least the following genuine issues for trial:
(i) the proper option price for the painting;
(ii) whether it was necessary for Mr. Webster to show that he had the means to purchase the painting; and
(iii) whether Mr. Thomson was under a duty to act in good faith to take all reasonable steps to preserve the painting for sale on his death. See Dynamic Transport Ltd. v. O.K. Detailing Ltd., 1978 215 (SCC), [1978] 2 S.C.R. 1072; Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, 1995 87 (SCC), [1995] 2 S.C.R. 187.
[29] I would, therefore, allow the appeal, set aside the judgment dismissing Mr. Webster’s action and order that the motion for summary judgment be dismissed and that the case proceed to trial. Mr. Webster is entitled to the costs of the motion and the appeal which I fix, respectively, at $10,000 and $14,500, both inclusive of disbursements and GST.
RELEASED: October 27, 2008 (“S.B.”
“S. Borins J.A.”
“I agree M. Rosenberg J.A.”
“I agree E.E. Gillese J.A.”