UBS Securities Canada, Inc. v. Sands Brothers Canada, Ltd., 2009 ONCA 328

UBS Securities Canada, Inc. v. Sands Brothers Canada, Ltd.

95 O.R. (3d) 93

Court of Appeal for Ontario,

Gillese, MacFarland and LaForme JJ.A.

April 22, 2009

Contracts -- Formation -- Trial judge correctly finding that parties reached binding and enforceable agreement for purchase and sale of shares of private company in form of oral agreement between one of purchaser's securities traders and principal of vendor -- Trial judge properly relying on evidence that it is customary in securities industry to make binding agreements orally -- Trial judge not erring in finding that written share purchase agreement was not condition of bargain but merely indicated desire as to manner in which existing contract was to be implemented.

Contracts -- Remedies -- Specific performance -- Trial judge correctly ordering specific performance of agreement for purchase and sale of shares of private company -- Shares not readily available on market -- Shares being special value for purchaser as purchaser had plan to accumulate as many shares of company as possible -- Fact that vendor was shell company with no assets in Ontario being relevant consideration in determining adequacy of damages as remedy.

The plaintiff wished to acquire as many shares as possible of Bourse, which at the relevant time was a private company that operated the Montreal Stock Exchange. Under the Bourse by-laws, any sale of Bourse shares required its written approval, and no shareholder could own, directly or indirectly, more than 10 per cent of its shares. The plaintiff claimed that it entered into a binding agreement to purchase Bourse shares from the defendant in the form of an oral agreement between L, one of its securities traders, and S, a director, officer and principal of the defendant. In reliance on that agreement and in order to meet the 10 per cent limit, the plaintiff arranged to sell some Bourse shares to a third party. Before the closing date of the alleged agreement, the Bourse announced that it was listing its shares. S then asserted that no concluded agreement had been reached and that the defendant would not deliver the shares. The plaintiff immediately brought an application for a declaration that the defendant had [page94 ]unconditionally agreed to sell 100,000 Bourse shares to it for CDN$50 per share and for specific performance of the agreement. The trial judge found that an oral agreement had been reached. She found an anticipatory breach of the agreement on the part of the defendant and ordered that the agreement be specifically performed. The defendant appealed.

Held, the appeal should be dismissed.

The trial judge was correct in finding that there was a binding and enforceable agreement between the parties. She properly relied on the uncontradicted evidence of the plaintiff that it is customary in the securities industry to make binding agreements orally and that without that custom, the securities industry could not operate effectively. The trial judge did not implicitly apply a subjective test for whether the parties intended to contract. The trial judge did not err in finding that the parties had concluded the agreement and that the essential terms were the price, quantity of shares and the closing date. Thus, she properly found that a written share purchase agreement was not a condition of the bargain but merely an indication or expression of a desire as to the manner in which the contract already made was to be implemented. The record amply supported the trial judge's findings that there was no agreement between the parties that Bourse approval of the transfer of the shares was a condition to be satisfied in order for a binding agreement to be effective. In any event, even where a third-party consent is a condition of performance of a contract, each party is obliged to perform the contract pending the necessary third-party consent. The defendant could not avoid its bargain by arguing that there was an unfulfilled condition precedent of Bourse approval when Bourse approval was never sought because the defendant refused to tender the shares.

The trial judge did not err in ordering specific performance. The shares in question were unique. During the relevant timeframe (i.e., prior to the public listing of the shares), there was no readily available substitute for the shares. Furthermore, the shares were unique because of the special appeal they had for the plaintiff. Finally, the value and availability of the shares at the time of breach was not certain. It was appropriate for the trial judge to consider the defendant's financial position when deciding the matter of remedy. Whether a defendant is in a position to pay damages is relevant to the issue of the adequacy of damages as a remedy.

APPEAL from the judgments of Pepall J., 2008 19507 (ON SC), [2008] O.J. No. 1676, 45 B.L.R. (4th) 105 (S.C.J.) and [2008] O.J. No. 2309, 2008 28064 (S.C.J.) allowing an action for breach of contract and ordering specific performance.

Cases referred to Asamera Oil Corp. v. Sea Oil and General Corp., 1978 16 (SCC), [1979] 1 S.C.R. 633, [1978] S.C.J. No. 106, 89 D.L.R. (3d) 1, 23 N.R. 181, [1978] 6 W.W.R. 301, 12 A.R. 271, 5 B.L.R. 225, distd Other cases referred to Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 2734 (ON CA), [1991] O.J. No. 495, 79 D.L.R. (4th) 97, 53 O.A.C. 314, 26 A.C.W.S. (3d) 350 (C.A.); Double N Earthmovers Ltd. v. Edmonton (City), [2007] 1 S.C.R. 116, [2007] S.C.J. No. 3, 2007 SCC 3, 275 D.L.R. (4th) 577, 356 N.R. 211, [2007] 3 W.W.R. 1, J.E. 2007-213, 68 Alta. L.R. (4th) 1, 401 A.R. 329, 28 B.L.R. (4th) 169, 58 C.L.R. (3d) 4, 29 M.P.L.R. (4th) 1, 153 A.C.W.S. (3d) 583, EYB 2007-112458, affg [2005] A.J. No. 221, 2005 ABCA 104, [2005] 10 W.W.R. 1, 41 Alta. L.R. (4th) 205, 363 A.R. 201, 6 M.P.L.R. (4th) 25, 138 A.C.W.S. (3d) 271; Dynamic Transport Ltd. v. O.K. Detailing Ltd., 1978 215 (SCC), [1978] 2 S.C.R. 1072, [1978] S.C.J. No. 52, 85 D.L.R. (3d) 19, 20 N.R. 500, 6 Alta. L.R. (2d) 156, 9 A.R. 308, 4 R.P.R. 208, [1978] 2 A.C.W.S. 72; H. (F.) v. McDougall, [2008] 3 S.C.R. 41, [2008] S.C.J. No. 54, 2008 SCC 53, 61 C.R. (6th) 1, 61 C.P.C. (6th) 1, 297 D.L.R. (4th) 193, 83 B.C.L.R. (4th) 1, [2008] 11 W.W.R. 414, 260 B.C.A.C. 74, EYB 2008-148155, J.E. 2008-1864, 60 C.C.L.T. (3d) 1, 380 N.R. 82; [page95 ]Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991; John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003), 2003 52131 (ON CA), 63 O.R. (3d) 304, [2003] O.J. No. 350, 223 D.L.R. (4th) 541, 186 O.A.C. 252, 34 B.L.R. (3d) 12, 10 R.P.R. (4th) 98, 120 A.C.W.S. (3d) 692 (C.A.); Kempling v. Hearthstone Manor Corp., 1996 ABCA 254, [1996] A.J. No. 654, 137 D.L.R. (4th) 12, [1996] 8 W.W.R. 735, 41 Alta. L.R. (3d) 169, 184 A.R. 321, 3 R.P.R. (3d) 291, 64 A.C.W.S. (3d) 881 (C.A.); Klemke Mining Corp. v. Shell Canada Ltd., [2008] A.J. No. 725, 2008 ABCA 257, 71 C.L.R. (3d) 1, 433 A.R. 172, [2008] 9 W.W.R. 203, 93 Alta. L.R. (4th) 225, 168 A.C.W.S. (3d) 303, affg [2007] A.J. No. 301, 2007 ABQB 176, 156 A.C.W.S. (3d) 813, 419 A.R. 1; L. (H.) v. Canada (Attorney General), [2005] 1 S.C.R. 401, [2005] S.C.J. No. 24, 2005 SCC 25, 251 D.L.R. (4th) 604, 333 N.R. 1, [2005] 8 W.W.R. 1, J.E. 2005-845, [2005] R.R.A. 275, 262 Sask. R. 1, 24 Admin. L.R. (4th) 1, 29 C.C.L.T. (3d) 1, 8 C.P.C. (6th) 199, 138 A.C.W.S. (3d) 852; MacDougall v. MacDougall, 2005 44676 (ON CA), [2005] O.J. No. 5171, 262 D.L.R. (4th) 120, 205 O.A.C. 216, 144 A.C.W.S. (3d) 103 (C.A.); McCauley v. McVey, 1979 50 (SCC), [1980] 1 S.C.R. 165, [1979] S.C.J. No. 102, 98 D.L.R. (3d) 577, 27 N.R. 604, 9 R.P.R. 35; Soulos v. Korkontzilas (1997), 1997 346 (SCC), 32 O.R. (3d) 716, [1997] 2 S.C.R. 217, [1997] S.C.J. No. 52, 146 D.L.R. (4th) 214, 212 N.R. 1, J.E. 97-1111, 100 O.A.C. 241, 46 C.B.R. (3d) 1, 17 E.T.R. (2d) 89, 9 R.P.R. (3d) 1, REJB 1997-00862, 71 A.C.W.S. (3d) 194; Turney v. Zhilka, 1959 12 (SCC), [1959] S.C.R. 578, [1959] S.C.J. No. 37, 18 D.L.R. (2d) 447; UBS Securities Canada Inc. v. Sands Brothers Canada Ltd., [2007] O.J. No. 2076, 2007 ONCA 405, 224 O.A.C. 315, 158 A.C.W.S. (3d) 226 [Leave to appeal to S.C.C. refused [2007] S.C.C.A. No. 386]; W.C. Pitfield & Co. v. Jomac Gold Syndicate Ltd., 1938 116 (ON CA), [1938] O.R. 427, [1938] O.J. No. 438, [1938] 3 D.L.R. 158 (C.A.); Wu Estate v. Zurich Life Insurance Co., 2006 16344 (ON CA), [2006] O.J. No. 1939, 268 D.L.R. (4th) 670, 211 O.A.C. 133, 37 C.C.L.I. (4th) 222, 27 C.P.C. (6th) 207, 23 E.T.R. (3d) 205, [2006] I.L.R. I-4504, 148 A.C.W.S. (3d) 394 (C.A.) [Leave to appeal to S.C.C. refused [2006] S.C.C.A. No. 289, 228 O.A.C. 398n] Authorities referred to Sharpe, J.A., Injunctions and Specific Performance, looseleaf, 2nd ed. (Aurora, Ont.: Canada Law Book, 2007) Waddams, S.M., The Law of Contracts, 4th ed. (Aurora, Ont.: Canada Law Book, 1999) Waddams, S.M., The Law of Contracts, 5th ed. (Aurora, Ont.: Canada Law Book, 2005)

Tom Curry and Anne Posno, for appellant. John Fabello and Emily Head, for respondent.

The judgment of the court was delivered by

[1] GILLESE J.A.: -- When have parties entered into a binding agreement for the purchase and sale of shares? Ought specific [page96 ]performance to be ordered for an anticipatory breach of such an agreement? This appeal addresses those questions. Background

[2] The following summary draws heavily from the reasons of the trial judge, Pepall J.

[3] UBS Securities Canada, Inc. ("UBS") is the Canadian operation of a global network of securities dealers and brokers. It has a history of investing in securities exchanges around the world.

[4] In 2000, UBS acquired shares of the Bourse de Montréal Inc. ("Bourse") for its own account. At that time, Bourse was the private Quebec company that operated the Montreal Stock Exchange.

[5] In 2005, UBS decided that it wanted to increase its holdings of Bourse shares. The task of acquiring additional shares was given to Asheef Lalani, a portfolio manager with approximately four years of experience in the securities field.

[6] Sands Brothers Canada, Ltd. ("Sands Canada") owned 100,000 Bourse shares (the "Shares"). It acquired the Shares in May 2000 when it purchased an investment dealer, J. Pasztor & Associates Inc. Sands Canada was incorporated in Ontario in 1985, but has not carried on business in Canada since 2002.

[7] Steven Sands ("Mr. Sands") is a director, officer and principal of Sands Canada. He lives in New York City and is acknowledged to be a sophisticated businessman. He has over 25 years' experience in the securities industry. He and his brother operate a number of businesses in the investment field.

[8] Because Bourse was a private company, its shares were not traded on a stock exchange. Sales of its shares were controlled by various rules set out in the Bourse by-laws (the "By-laws"). Under the By-laws, only registered broker-dealers or Bourse employees could own its shares. In addition, any sale of Bourse shares required its written approval, which was to be granted only upon a review of application materials. Further, no shareholder could own, directly or indirectly, more than 10 per cent of its shares (the "10 per cent limit"). If a shareholder exceeded the 10 per cent limit, it faced adverse consequences, including that Bourse was prohibited from (i) accepting any further subscriptions for shares by that shareholder; (ii) issuing any further shares to that shareholder; (iii) registering the transfer of shares to that shareholder; and (iv) allowing that shareholder to vote any of its shares. [page97 ]

[9] Under the By-laws, a shareholder who exceeded the 10 per cent limit could be forced to divest itself of the excess shares.

[10] After some research, Mr. Lalani learned that Sands Canada owned the Shares and that Sands Canada was represented by Laidlaw & Co. Ltd. ("Laidlaw"). In late October 2005, Mr. Lalani contacted Mr. Hugh Regan at Laidlaw to express UBS's interest in acquiring the Shares. He was told that the Shares were not for sale. Mr. Regan advised Mr. Sands of the contact.

[11] On November 14, 2006, Mr. Lalani called Mr. Regan again to ask whether the Shares were available for purchase. Mr. Regan told him that Sands Canada owned the Shares and directed Mr. Lalani to speak to Mr. Sands.

[12] Mr. Lalani's telephone calls were timed by UBS's telephone logs, but his words were not recorded because he was trading for the house. Each call that Mr. Lalani made to Mr. Sands followed this pattern: Mr. Lalani would call a receptionist at Laidlaw and the receptionist would then transfer the call from Mr. Lalani to Mr. Sands's office.

[13] That same day (November 14, 2006), Mr. Lalani called Mr. Sands and spoke with him. In this conversation, Mr. Sands confirmed that he controlled Sands Canada, had the authority to sell the Shares and indicated that he might be interested in so doing. Mr. Lalani said that based on recent transactions reported in the press, UBS would pay $50 per share for the Shares. Mr. Sands speculated on why the Shares might have appreciated so much and asked Mr. Lalani to send him some research. Mr. Sands also asked Mr. Lalani to document the bid in an e-mail. He gave Mr. Lalani his e-mail address and asked that he correspond with him through that.

[14] At this time, Mr. Lalani had access only to publicly traded information about Bourse. The same information would have been readily available to Sands Canada.

[15] Mr. Lalani followed up with an e-mail that day (November 14, 2006), in which he confirmed UBS's indication of interest in purchasing the Shares at CDN$50 per share. The e-mail went on to say: "If you are interested in this price level then we can discuss the steps we need to take to move forward, if possible." He also sent some information on Canadian economic trends.

[16] It is standard practice in the securities industry for parties to perform their own due diligence prior to entering into agreements to trade. November 21, 2006

[17] On November 21, 2006, Mr. Lalani placed five calls to Mr. Sands. He spoke with him on two occasions. [page98 ]

[18] The first call in which the two actually spoke took place at 13:50 and lasted two minutes and 12 seconds. The trial judge found that the following took place during this call. Mr. Lalani asked Mr. Sands whether he had decided to accept the offer and Mr. Sands responded that he was interested but wanted to settle the transaction in 2007 for tax reasons. Mr. Lalani told Mr. Sands that his proposal was acceptable and they agreed to settle the transaction on January 3, 2007. Mr. Sands asked if he should contact Credit Suisse for another bid or another institution for an independent valuation and Mr. Lalani told Mr. Sands that he should do what he felt was necessary. Mr. Sands said that he wanted to get out of the transaction before settlement if a material event affecting the value of the shares was announced before settlement. Mr. Lalani had not seen a "material event out" clause before so he said that he would speak with his superior.

[19] Mr. Lalani spoke to his supervisor, Mr. Finemore, about the material event out clause. Mr. Finemore told him that, consistent with UBS's practice, it would not give Sands Canada such a clause. Mr. Lalani reported this to Mr. Sands in the second phone conversation they had on November 21, 2006. This second conversation took place at 14:02 and lasted for six minutes and six seconds. The trial judge found that during this call, Mr. Lalani asked Mr. Sands if they had a deal at $50 per share for 100,000 shares settling on January 3, 2007, even though UBS would not offer a material event out clause and Mr. Sands indicated that they had a deal and UBS should "draw up the papers". Mr. Lalani told Mr. Sands that in reliance on the agreement, UBS would be entering into an agreement with a third party to dispose of the Bourse shares that exceeded the 10 per cent limit (the "Third Party Sale"). According to Mr. Lalani, Mr. Sands said that he understood.

[20] Between the end of this conversation at 14:08 and 14:29, Mr. Lalani reported to Mr. Finemore on the arrangements he had made with Mr. Sands. Mr. Finemore asked Mr. Lalani to confirm that he had completed a transaction to purchase the Shares.

[21] At 14:29, Mr. Lalani sent an e-mail to Mr. Sands, with a copy to Irene Winel, UBS's chief compliance officer. The e-mail reads as follows [2008 19507 (ON SC), [2008] O.J. No. 1676, 45 B.L.R. (4th) 105 (S.C.J.), at para. 16]:

Please confirm that Sands Brothers Canada / Laidlaw & Company has agreed to sell 100K shares of the Montreal Exchange for C$50 per share to UBS with settlement on January 3, 2007. Please find attached the documents required to be completed by the seller in order to facilitate the sale of [page99 ]the Montreal Exchange shares. Our point person for completing the transaction is Irene Winel (416-814-1445). She will draw up the share purchase agreement that will incorporate the agreed terms.

[22] The documents attached to the e-mail set out the Bourse requirements for a transfer of shares. Among other things, the documents indicated that the seller had to provide the share certificates and board of directors' resolutions. Ms. Winel testified that before this e-mail was sent, Mr. Lalani told her that he had made a deal.

[23] After sending the e-mail message, Mr. Lalani made three attempts to reach Mr. Sands by telephone, without success. The purpose of his calls was to obtain confirmation of the agreement. November 22, 2006

[24] On November 22, 2006, Mr. Lalani called Mr. Sands three times. The first two telephone calls lasted 66 and 18 seconds respectively. In neither did Mr. Lalani speak to Mr. Sands. The third call, at 14:30, lasted 48 seconds. The trial judge accepted Mr. Lalani's evidence that during this call, Mr. Sands acknowledged and accepted the terms of the agreement, discussed the possibility of settling the transaction in U.S. funds once Mr. Sands confirmed that matter with his partners, and suggested that their respective legal counsel would get in touch to take care of the closing.

[25] Mr. Sands testified that Mr. Lalani agreed to send him a draft shareholder's agreement for his review and that it was premature to discuss completing an agreement or the terms. The trial judge did not accept this evidence, stating that she preferred the evidence of Mr. Lalani.

[26] At 14:51, Mr. Lalani sent Mr. Finemore an e-mail which stated [2008 19507 (ON SC), [2008] O.J. No. 1676, 45 B.L.R. (4th) 105 (S.C.J.), at para. 19]:

Spoke to Steven Sands -- confirmed that we have a deal. His legal is working through the appropriate documentation. He may choose to lock in a USD price. I said this will be no problem as we can always hedge currency on our side if we wish.

[27] In reliance on the agreement and to meet the 10 per cent limit, UBS arranged to sell 41,000 Bourse shares to a third party, Greenfair, for a price of $56 per share. UBS had a longstanding, important relationship with Greenfair. The agreement between UBS and Greenfair was oral and conditional on the closing of the Sands Canada transaction. It was to close on the same day as the Sands Canada transaction. [page100] November 23, 2006

[28] Late on November 23, 2006, Mr. Lalani sent an e-mail to Mr. Sands confirming the agreement. The e-mail reads as follows [2008 19507 (ON SC), [2008] O.J. No. 1676, 45 B.L.R. (4th) 105 (S.C.J.), at para. 21]:

As we finalized yesterday, UBS has agreed to purchase 100K shares of the Montreal Exchange from Sands Canada / Laidlaw & Company for C$50 per share. I understand that you have provided the list of documents required by the MX to your lawyers to prepare. In order to accelerate the process, please feel free to provide the best person for Irene Winel to contact in order to help draft the share purchase agreement. Irene has been involved in the process several times and may be useful if your team run's [sic] into any roadblocks. November 27 to December 11, 2006

[29] On November 27, 2006, Mr. Sands called Mr. Lalani and asked him to identify the best person at UBS to complete the transaction. Mr. Lalani referred Mr. Sands to the previous e- mails he had sent in which he provided Ms. Winel's contact information.

[30] On November 29, 2006, Sands Canada's U.S. attorney sent Ms. Winel an e-mail saying [2008 19507 (ON SC), [2008] O.J. No. 1676, 45 B.L.R. (4th) 105 (S.C.J.), at para. 23]:

Steven Sands has asked me to help with the sale of shares of Montreal Bourse stock owned by Sands Brothers Canada, Ltd. He has given me the list of requirements of the Montreal Bourse for share transfer. I understand you will be handling this transaction for UBS and will prepare a share purchase agreement.

Will you kindly contact me so we can start the process of documenting and completing this sale.

[31] The two solicitors discussed various aspects of the trade, including the date for settlement, number of shares that would be sold and the issuer. Ms. Winel told Ms. Henderson that she would send her the UBS standard form agreement for private share transfers. Ms. Henderson indicated that she wanted to get on with the transaction. Ms. Winel agreed.

[32] The following day, Ms. Winel sent the draft share purchase agreement, as promised, under cover of the following e-mail message [2008 19507 (ON SC), [2008] O.J. No. 1676, 45 B.L.R. (4th) 105 (S.C.J.), at para. 24]:

Further to our telephone conversation, I attach for your review and comment our draft share purchase agreement. Can you please confirm that Sands is a Canadian resident for tax purposes, otherwise we would have potential withholding tax issues. [page101]

[33] The draft share purchase agreement was stated to be "dated as of November ____, 2006" with the closing date described as "on or before January ___, 2007". The seller was described as Sands Brothers Canada, Ltd. and the purchaser as UBS.

[34] On December 1, 2006, Bourse announced that it was listing its shares and that the listing was expected to occur in March or April 2007. Bourse shareholders, including UBS and Sands Canada, were sent the press release on November 30, 2006.

[35] Ms. Winel heard nothing further from Ms. Henderson so she sent a follow-up e-mail on December 4, 2006, asking if she had any comments on the draft agreement. Ms. Henderson replied that Roger Bendelac was handling the matter. Mr. Bendelac advised Ms. Winel that he was out of town but would provide Sands Canada's comments on the draft agreement on December 12, 2006.

[36] On December 7, 2006, Mr. Sands called Mr. Lalani and complained that he had not heard from Mr. Lalani following the announcement of the listing. They disagreed about whether they had a binding agreement for the sale of the Shares.

[37] On December 11, 2006, UBS wrote to Sands Canada demanding that it fulfill its obligations. It quoted the price, number of shares and settlement date.

[38] Mr. Sands sent an e-mail to UBS in which he set out his version of the events and asserted that no concluded agreement had been reached, as many matters had been left unaddressed.

[39] On December 11, 2006, Mr. Martin Sands called Mr. Lalani and advised that Sands Canada would not deliver the Shares. The legal proceedings

[40] UBS immediately commenced legal proceedings. It brought an application, returnable on December 14, 2006, in which it sought a declaration that Sands Canada had unconditionally agreed to sell 100,000 Bourse common shares to it for CDN$50 per share, for settlement on January 3, 2007. It also asked the court to order specific performance of the agreement.

[41] A trial took place on December 20 and 21, 2006. The trial judge found in favour of Sands Canada. However, on May 29, 2007, this court set aside the judgment and remitted the matter for a new trial [[2007] O.J. No. 2076, 2007 ONCA 405]. An application for leave to appeal to the Supreme Court of Canada was dismissed on November 29, 2007 [[2007] S.C.C.A. No. 386]].

[42] The second trial took place before Pepall J. (the "trial judge") on April 23, 24 and 25, 2008 [2008 19507 (ON SC), [2008] O.J. No. 1676, 45 B.L.R. (4th) 105 (S.C.J.)]. [page102] It proceeded on the same basis as the first, namely, that the witnesses' affidavits would constitute their examinations in chief. The witnesses were Mr. Lalani and Ms. Winel for UBS, and Mr. Sands for Sands Canada. At the commencement of trial, the parties agreed that the notice of application and the affidavits constituted the pleadings.

[43] The trial judge gave thorough, thoughtful reasons for judgment. She found that an oral agreement was made between the parties and reiterated in the telephone call on November 22, 2006, at which time Mr. Lalani confirmed that Mr. Sands, on behalf of Sands Canada, agreed to sell the Shares to UBS for CDN$50 per share, with settlement to take place on January 3, 2007 (the "Agreement"). She found that in reliance on the Agreement, the parties proceeded to draft closing documents and UBS entered into the Third Party Sale. She also found an anticipatory breach of the Agreement on the part of Sands Canada and ordered that the Agreement be specifically performed.

[44] On May 1, 2008, the Bourse merged with the Toronto Stock Exchange. As a result of the merger, Sands Canada became entitled to 136,187 TSX shares and $4,876,995.33 in cash. It received the shares and cash on May 2, 2008.

[45] In a supplementary order dated May 14, 2008, the trial judge made detailed orders on how to implement the order for specific performance of the Agreement. She ordered Sands Canada to transfer to UBS 136,187 common shares of the TSX and to pay to UBS the sum of $4,876,995.33. UBS was ordered to deliver to Sands Canada the $5 million purchase price under the Agreement, plus pre-judgment interest. In addition, Sands Canada was ordered to pay to UBS the amount it had received by way of dividends on the shares from January 3, 2007 to April 30, 2008, inclusive of pre-judgment interest.

[46] Sands Canada appeals. It submits that the trial judge made both factual and legal errors in concluding that a binding agreement had been made and that she erred in law in ordering specific performance. The Trial Decision

[47] As has been mentioned, the trial judge gave thorough, thoughtful reasons for decision. After setting out the facts in detail, she reviewed certain basic principles of contract formation. Those principles can be summarized as follows. For a contract to exist, there must be a meeting of minds, commonly referred to as consensus ad idem. The test as to whether there has been a meeting of the minds is an objective one -- would an [page103] objective, reasonable bystander conclude that, in all the circumstances, the parties intended to contract? As intention alone is insufficient to create an enforceable agreement, it is necessary that the essential terms of the agreement are also sufficiently certain. However, an agreement is not incomplete simply because it calls for the execution of further documents.

[48] The trial judge applied the law and found that a reasonable person would conclude that the parties intended to contract to effect a trade whereby Sands Canada would sell the Shares to UBS for CDN$50 per share, to settle on January 3, 2007. Her reasons for reaching that conclusion are contained in paras. 45 through 50 of the decision, the key aspects of which read as follows [at paras. 45-47]:

Firstly, both parties were sophisticated securities industry participants. Mr. Sands had been in the industry for 28 years. While Mr. Lalani had only worked at a securities trading desk for three years, during that time he had been involved in hundreds of trades. It is customary in the securities industry, in both proprietary trading and trading as an agent for third parties, to consummate trades by verbal agreement. This trade involved a proprietary trade and consistent with the custom, the parties intended to make a trade.

Secondly, I did not find Mr. Sands to be credible. Where his evidence and that of Mr. Lalani conflict, I prefer Mr. Lalani's evidence to that of Mr. Sands. His affidavit which constituted his evidence in chief was conveniently lacking in particulars even though it was sworn shortly after the events in issue. In his cross-examination, he seemed to have little recall of many of the events and there were instances where his evidence before me initially differed from that given at the first trial. . . .

I am also satisfied that an agreement was reached between the parties and was reiterated when Mr. Lalani and Mr. Sands spoke by telephone on November 22, 2006 at which time Mr. Lalani confirmed that Mr. Sands had agreed to sell 100,000 shares of the Bourse for $50 per share to settle on January 3, 2007. I do not accept that there was no offer or acceptance or that the length of the various conversations would preclude such discussions.

There was also reliance on the agreement made. The parties proceeded to draft documents for closing and at no time did Sands Canada take issue with the terms of the agreement reached or raise the material event out clause. In reliance on the agreement, UBSSC contracted with a third party. Mr. Sands was told on November 21, 2006 that in reliance, UBSSC would be entering into a third party agreement because of the Bourse's 10 per cent holding limit.

[49] The trial judge then considered whether the essential terms of the agreement could be determined with a reasonable degree of certainty. She concluded that they could. In para. 54 of the reasons, she explains:

Having accepted Mr. Lalani's evidence over that of Mr. Sands', I am satisfied that the parties were ad idem on the parties, the purchase price, the absence of any material event out clause, and the date of closing. I do not [page104] view the place of closing and the representations and warranties to be essential terms as between the two parties to the agreement. In this regard, I note the evidence on the custom and practice in the securities industry to the effect that the essential terms in a share purchase agreement are the number of shares, the price and the closing date. As to whether currency of payment was in Canadian or US funds, Mr. Sands inquired as to the currency and Mr. Lalani responded that this was not a problem. There was agreement on currency -- it just had not been specified. In my view, the lack of specification was not material. The purchase price had been determined and it was C$50 per share with settlement to take place on January 3, 2007.

[50] The trial judge viewed the 10 per cent limit on Bourse shares as an "issue of mechanics" in the sense that the Bourse approval requirements were simply a mechanism to facilitate the transfer of its shares.

[51] The trial judge referred again to the fact that the evidence demonstrated that it was customary in the securities industry to consummate trades by verbal agreement and without such a custom, the industry could not operate effectively. She concluded, in para. 58:

In my view the parties entered into a binding enforceable contract in which Sands Canada agreed to sell 100,000 shares of the Bourse for $50 per share with a closing date of January 3, 2007. Both parties committed themselves to the essential and material terms of the agreement and both reasonably expected to be bound to the terms they agreed to. Having concluded that the deal he made was not sufficiently advantageous, Mr. Sands reneged on the agreement. With not a shred of evidence to support his position, he alleged that UBSSC had insider information and then tried to concoct a version of events in an effort to avoid his bargain. In my view, Sands Canada should be held to the agreement reached. UBSSC asserted that Sands Canada was in anticipatory breach of its agreement with UBSSC. No issue was taken with that position and I accept UBSSC's submission in that regard.

[52] The trial judge then considered the appropriate remedy. She noted that Bourse was set to merge with the Toronto Stock Exchange and that Sands Canada had not carried on business in Canada since 2002. Further, its only asset was the Shares, and the share certificates were held in New York City. She recited UBS's concerns about Sands Canada's ability to meet any financial commitments flowing from these legal proceedings.

[53] The trial judge articulated the legal principles that inform the exercise of discretion in ordering specific performance of a contract for the sale of shares. She saw the present case as similar to W.C. Pitfield & Co. v. Jomac Gold Syndicate Ltd., 1938 116 (ON CA), [1938] O.R. 427, [1938] O.J. No. 438 (C.A.), in that UBS had pursued its claim for specific performance with "extraordinary dispatch" and entered into the Third Party Sale in reliance on the Agreement. In light of the "special circumstances" of the case and the [at para. 66] "substantial and legitimate interest represented by [page105] an order for specific performance", she concluded that "there is a fair, real and substantial justification for granting" an order for specific performance of the Agreement.

[54] The trial judge distinguished the facts in the present case from those in Asamera Oil Corp. v. Sea Oil and General Corp., 1978 16 (SCC), [1979] 1 S.C.R. 633, [1978] S.C.J. No. 106. In Asamera, the litigation had been in the courts for 18 years, whereas UBS had moved quickly. Further, UBS was not speculating at Sands Canada's expense. In addition, the shares in question were not publicly traded until March 2007. Before then, they traded on the grey market and valuation problems were likely to arise if an assessment of damages was required. Furthermore, the Third Party Sale, although conditional, was a binding agreement with implications for UBS's reputation. The Issues

[55] Sands Canada asks this court to decide whether the trial judge erred in (1) holding that the parties entered into a binding agreement; (2) failing to treat the requirement of Bourse approval as a true condition precedent; and (3) ordering specific performance.

[56] Before considering these issues, it is necessary to consider the standard of review. The Standard of Review

[57] The standard of review in civil matters is clear. On questions of law, the standard of review is correctness. Findings of fact, on the other hand, are not to be reversed, absent palpable and overriding error. Palpable errors include findings that are clearly wrong, unreasonable or unsupported by the evidence: see Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, at para. 10, and L. (H.) v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401, [2005] S.C.J. No. 24, at para. 110.

[58] Sands Canada maintains that a standard of correctness applies to all three issues as each, it is contended, is a question of law.

[59] UBS, on the other hand, maintains that the issues are questions of fact or of mixed fact and law. UBS submits that for Sands Canada to succeed on any issue, it must demonstrate that the trial judge made a palpable and overriding error, with an [page106] especially high level of deference to be afforded to the trial judge's findings of credibility.

[60] As I will explain, the alleged errors made by the trial judge on the first issue relate primarily to findings of fact and inferences drawn from the facts. Consequently, the standard of review in relation to those alleged errors is that of palpable and overriding error.

[61] The second issue raises a question of contractual interpretation. However, the alleged error relates primarily to the trial judge's findings of fact and her consideration of the evidence as a whole. Thus, the question is one of fact or, at its highest for the appellant, one of mixed fact and law. The standard of review for questions of mixed fact and law is palpable and overriding error unless the error is "extricable" in that it can be attributed to an error in principle: MacDougall v. MacDougall, 2005 44676 (ON CA), [2005] O.J. No. 5171, 262 D.L.R. (4th) 120 (C.A.), at paras. 30-33, and Double N Earthmovers Ltd. v. Edmonton (City), 2005 ABCA 104, [2005] A.J. No. 221, 363 A.R. 201 (C.A.), at paras. 16-17, affd 2007 SCC 3, [2007] 1 S.C.R. 116, [2007] S.C.J. No. 3.

[62] The third ground of appeal is based on the trial judge's exercise of discretion in ordering specific performance. The exercise of her discretion ought not to be interfered with unless it is based on an erroneous principle: see Soulos v. Korkontzilas (1997), 1997 346 (SCC), 32 O.R. (3d) 716, [1997] 2 S.C.R. 217, [1997] S.C.J. No. 52, at para. 54, per Sopinka J., dissenting, but not on this point. Was There a Binding Agreement between the Parties?

[63] Sands Canada submits that the trial judge made numerous factual and legal errors in concluding that the parties had entered into a binding agreement. For the reasons that follow, I would reject this submission in whole. Misapprehension of evidence

[64] Effectively, Sands Canada argues that the trial judge misapprehended the evidence on two points. First, it submits that the trial judge was incorrect in her finding that Mr. Lalani's e-mail to Mr. Sands on November 21, 2006 preceded Mr. Lalani's conversation with Mr. Finemore that same day. Sands Canada argues that this error is significant because UBS took the position that the Agreement arose from the second conversation on November 21, 2006, at 14:02. In Sands Canada's submission, the fact that Mr. Finemore wanted confirmation in writing from UBS indicated that UBS did not think there was a binding agreement at that time. Second, Sands Canada submits that the trial judge erred in finding that Mr. Lalani said that he was told [page107] by Mr. Sands that they had a deal during the 14:02 call when that was not his evidence.

[65] I would reject both arguments. The trial judge did not say that Mr. Lalani's e-mail preceded the conversation with Mr. Finemore. She simply stated [at para. 17] that on November 21, 2006, "Mr. Lalani reported on the matter to Mr. Finemore who asked him to be doubly sure there was a transaction." Contrary to Sands Canada's submission, the fact that Mr. Finemore wanted confirmation of the Agreement is not inconsistent with the Agreement having been concluded at that time. A confirmation is exactly that -- confirmation or assurance that a prior agreement had been reached.

[66] Second, the trial judge did not misapprehend Mr. Lalani's evidence regarding the 14:02 call. The trial judge did not say that Mr. Lalani's evidence was that Mr. Sands told him that the parties had a deal on November 21, 2006. Rather, she accepted Mr. Lalani's evidence that Mr. Sands "indicated" that they had a deal, a conclusion which was consistent with what she found to be Mr. Sands's unequivocal instruction to Mr. Lalani, during that call, to "draw up the papers". Other alleged factual errors

[67] Sands Canada submits that the trial judge committed a number of other factual errors in concluding that the parties reached a binding agreement. Its arguments may be summarized as follows: (1) Failure to consider the 10 per cent limit -- the trial judge noted that under the By-laws, a shareholder who exceeds the 10 per cent limit can be forced to divest itself of shares in excess of the 10 per cent threshold. However, it is submitted that she failed to consider that to the knowledge of UBS, in addition to requiring a divesture, the By-laws prohibited the acquisition of more than 10 per cent of the shares either legally or beneficially. (2) No negotiation as to price -- the trial judge did not reconcile the lack of negotiation over the price to be paid for the Shares despite Mr. Lalani's admission that he had authority to pay more than $50 per share and his testimony that, at the relevant time, the value of Bourse shares was estimated to be in the range of $76. Given Mr. Sands's experience and background, Sands Canada argues that it makes no sense that Mr. Sands would not negotiate the price, especially when UBS would not agree to a material event out clause. [page108] (3) The material event out clause -- the trial judge believed that the request for this clause was made but that it was dropped, for no consideration, in a matter of a few minutes. She made this finding despite the fact that in the same conversation, Mr. Sands said he did not wish to be embarrassed before his partner if there was a listing or merger. This, it is contended, makes no sense and is inconsistent with the trial judge's finding that Mr. Sands was sophisticated in securities matters. (4) Credibility -- in rejecting Mr. Sands's evidence, the trial judge made a blanket statement that she preferred Mr. Lalani's evidence wherever it conflicted with that of Mr. Sands. She specifically accepted Mr. Lalani's evidence that he did not offer Mr. Sands alternative language when UBS rejected the material event out clause. Sands Canada claims it was not reasonable for the trial judge to have accepted Mr. Lalani's evidence on this point. Mr. Lalani claimed he confirmed the terms of the Agreement, including the lack of a material event out clause, the issue of currency and the drafting of an agreement in 48 seconds, including the time necessary to place the call through Laidlaw. Having regard to the length of all the calls where words were exchanged between the two, Sands Canada says this would have been "impossible". (5) No trade ticket -- the trial judge did not reconcile Mr. Lalani's failure to book the purchase of the Shares with his compliance department. If he had completed a transaction and acquired the Shares, it is claimed, he would have had to show the Shares as an asset and reserve the funds to pay for them. Moreover, the transaction was not recorded by a ticket or other means. (6) Third Party Sale -- the trial judge failed to consider Mr. Lalani's acknowledgement that his affidavit of December 12, 2006, dealing with the Third Party Sale, was inaccurate. In cross-examination, Mr. Lalani admitted that the Third Party Sale was conditional on UBS completing the transaction with Sands Canada. The Third Party Sale could have been completed by selling some of the nearly 800,000 Bourse shares in UBS's portfolio. UBS's representation that it would suffer irreparable harm if it did not complete the Sands Canada purchase was not accurate. Time was not of the essence in the Third Party Sale and UBS had already hedged against the possibility that it might not complete the Sands Canada purchase. [page109]

[68] I do not accept that the trial judge made any of the alleged errors.

[69] The first argument is, with respect, simply incorrect. Contrary to Sands Canada's submission, the trial judge did consider that the By-laws prohibited the acquisition of more than 10 per cent of the Bourse shares. At para. 8 of her reasons, the trial judge noted: "[t]he Bourse's by-laws require that no entity hold more than 10 per cent of the Bourse's issued and outstanding common shares". She later referred to the 10 per cent limit several times in her reasons in the discussion of the Third Party Sale, the purpose of which was to ensure that UBS complied with the 10 per cent limit.

[70] Second, the fact that the trial judge did not expressly refer to the absence of negotiation of the price to be paid for the Shares does not mean that she committed a palpable and overriding error in finding that the parties had concluded an agreement for CDN$50 per share. A trial judge is not obliged to accept all of the evidence before her or to advert to every possible argument or defence. What is essential is that there is evidence to support the findings that she does make. There was considerable evidence to support the trial judge's conclusion that the parties struck an oral agreement in November 2006 at a price of CDN$50 per share. That conclusion was based, in large part, on the trial judge's credibility findings.

[71] The trial judge accepted Mr. Lalani's evidence that the parties had concluded an oral agreement and disbelieved Mr. Sands's evidence that the parties were negotiating and moving towards the conclusion of a written agreement with a material event out clause. She offered cogent reasons for her credibility findings: see, especially, para. 46 of her reasons, set out above. In the end, she accepted Mr. Lalani's version of events and found that Mr. Sands adduced evidence, which was "conveniently lacking in particulars" and was an effort to [at para. 58] "concoct a version of events in an effort to avoid his bargain". There is no reason to interfere with those determinations, especially in light of the Supreme Court's admonition that the task of "[a]ssessing credibility is clearly in the bailiwick of the trial judge" and that "heightened deference must be accorded to the trial judge on matters of credibility": H. (F.) v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41, [2008] S.C.J. No. 54, 297 D.L.R. (4th) 193, at para. 72.

[72] The trial judge's credibility findings provide an answer to Sands Canada's third and fourth arguments. Based on those findings, the trial judge was entitled to infer that Mr. Sands decided against insisting on a material event out clause and that [page110] the parties were ad idem on the lack of such a clause. Contrary to Sands Canada's submission, that inference is not inconsistent with the trial judge's finding that Mr. Sands was sophisticated in securities matters. A sophisticated businessperson, such as Mr. Sands, may have simply assessed the risk of insisting on a clause which the purchaser was not willing to give and determined that it was not worth jeopardizing a desired transaction.

[73] In my view, nothing turns on the fact that the telephone calls were completed in a short time. As the trial judge found, the transaction was not complicated and the parties were sophisticated. In this context, it is reasonable to conclude, as the trial judge did, that the Agreement took a relatively short amount of conversation time to be consummated.

[74] Fifth, it was Mr. Lalani's evidence that a trade ticket was not required. For the reasons already given, the trial judge was entitled to accept that evidence.

[75] Sixth, the trial judge took into account that the Third Party Sale was conditional on the Agreement between UBS and Sands Canada. She did not view this as being inconsistent with a binding Agreement having been concluded. The Third Party Sale was made conditional on settlement, not because the Agreement had not been completed, but for the practical reason that the source of the shares sold under the Third Party Sale was to be the shares obtained from Sands Canada rather than UBS's own inventory. The fact that UBS could theoretically have completed the Third Party Sale by selling shares from its own inventory does not detract from the trial judge's conclusion that the parties had reached a binding agreement in November 2006. Indeed, to conclude otherwise would have been inconsistent with the evidence of UBS's strategy to acquire as many Bourse shares as was legally possible. Alleged legal errors

[76] Sands Canada submits that the trial judge made a number of legal errors in finding the requisite intention to contract.

[77] First, it submits that the trial judge erred in using evidence that it is customary in the securities industry to consummate trades by verbal agreement as objective evidence of an intention to contract. Sands Canada contends that it is not possible to draw that conclusion because the Shares did not trade on an exchange and a written agreement was a necessary condition of the agreement to trade.

[78] I would reject this argument. The trial judge properly relied on the uncontradicted evidence of UBS that it is customary in the securities industry to make binding agreements orally [page111] and that without this custom, the securities industry could not operate effectively. That evidence formed a necessary part of the context of the parties' communications and was relevant to determining whether the parties had concluded the Agreement in November 2006 or whether they had merely reached an agreement to agree.

[79] Based in part on this evidence, the trial judge found that the parties had concluded the Agreement and that the essential terms were the price, quantity of shares and the closing date. Thus, the trial judge found that a written share purchase agreement was not a "condition of the bargain" but merely "an indication or expression of a desire as to the manner in which the contract already made will be implemented": Klemke Mining Corp. v. Shell Canada Ltd., [2007] A.J. No. 301, 2007 ABQB 176, at para. 183, affd 2008 ABCA 257, [2008] A.J. No. 725, 433 A.R. 172 (C.A.); see, also, Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 2734 (ON CA), [1991] O.J. No. 495, 79 D.L.R. (4th) 97 (C.A.), at pp. 103-104 D.L.R. I see no error in that conclusion.

[80] Second, Sands Canada contends that the trial judge's analysis is flawed because she equated the rejection of a material event out clause with the conclusion of the Agreement.

[81] Contrary to Sands Canada's contention, the trial judge did not conflate these two things. Rather, she found [at para. 54] that the parties had concluded an oral agreement and were "ad idem on the parties, the purchase price, the absence of any material event out clause, and the date of closing". The trial judge offered cogent reasons for accepting Mr. Lalani's evidence and rejecting the alternative version of events put forward by Mr. Sands. Those credibility assessments are entitled to considerable deference on appeal.

[82] Third, Sands Canada contends that the trial judge erred by taking a subjective approach to the issue of whether the parties had reached an agreement. It argues that the trial judge erred in referring to Mr. Lalani's evidence regarding the 14:02 call on November 21, 2006, which, in her view, indicated that the parties had made a deal. Sands Canada contends that what Mr. Lalani thought was irrelevant to whether there was a binding agreement.

[83] Sands Canada submits that the objective evidence indicated that the parties did not reach a binding agreement. After Mr. Lalani concluded the second conversation with Mr. Sands on November 22, 2006, he sent an e-mail to Mr. Finemore indicating that he had spoken "to Mr. Sands and confirmed we have a deal". The trial judge considered this to be evidence she could rely on to show an intention to contract. Sands Canada contends [page112] that there are two problems with that conclusion, however. First, it is not evidence that proves Sands Canada's intention. Second, if it shows anything, it is consistent with Mr. Sands's evidence that UBS had offered a price for the shares and that Sands Canada's [at para. 19] "legal is working through the appropriate documentation".

[84] Sands Canada argues that Mr. Lalani's electronic message to Mr. Sands the next day, November 23, 2006, was meant to confirm the sale but is worded, in effect, like his prior offers to purchase. It is framed from UBS's perspective as a buyer and can be contrasted with Mr. Lalani's note of November 21, 2006, in which he sought confirmation that Sands Canada had "agreed to sell". Mr. Sands did not confirm the sale. Sands Canada argues that the implications of this contradiction undermine Mr. Lalani's credibility and UBS's contention that it had a concluded agreement with Sands Canada in November 2006.

[85] Sands Canada also points to other factors which, in its submission, show that the parties had not reached an agreement from an objective point of view. For example, it points to the draft purchase and sale agreement which contained significant terms that had not been discussed by the parties, including an "entire agreement" clause.

[86] It is clear that the trial judge did not err in the statement of the objective test for whether the parties intended to contract. The trial judge was alive to the fact that the test for consensus ad idem is objective. At para. 40 of the reasons, she recites the objective test and then applies it before reaching her conclusion.

[87] Nor did the trial judge implicitly apply a subjective test. She did not consider Mr. Lalani's evidence regarding the 14:02 call in isolation. Rather, she considered the totality of the evidence before concluding that the objective test had been met and that the parties had agreed to a contract on the essential terms in November 2006.

[88] In my view, nothing that has been argued undermines the trial judge's conclusion that an objective reasonable bystander would have concluded that the parties reached an agreement in November 2006. To the contrary. Mr. Lalani's e-mail to Mr. Sands on November 23, 2006 is not framed as an offer to purchase but as confirmation of the Agreement. In that e-mail, Mr. Lalani stated that, as finalized on November 22, 2006, "UBS has agreed to purchase 100K shares of the Montreal Exchange from Sands Canada/Laidlaw & Company" (emphasis added). I fail to see a distinction between a confirmation that UBS had agreed to purchase the Shares from Sands Canada and a confirmation that Sands Canada has agreed to sell the Shares to UBS. [page113]

[89] With respect to the terms in the written draft agreement, again, the trial judge's findings regarding the essential terms of the transaction were supported by the evidence of the securities industry custom that such agreements are customarily oral and that the essential terms of such agreements are the price, quantity and closing date. It was further buttressed by her credibility determinations. Given her conclusion that the parties had concluded an oral agreement, the "entire agreement clause" in the draft purchase and sale agreement was non-essential. Was Bourse Approval a Condition Precedent?

[90] A true condition precedent is one that is agreed to by the parties and is about a "future uncertain event, the happening of which depends entirely on the will of a third party": see Turney v. Zhilka, 1959 12 (SCC), [1959] S.C.R. 578, [1959] S.C.J. No. 37, at p. 583 S.C.R. When determining whether a contractual term is a "true condition precedent", the intentions of the parties must be considered. It is a question of construction whether the obligations of a contract are absolute and immediately binding or are contingent on an external event: Wu Estate v. Zurich Life Insurance Co., 2006 16344 (ON CA), [2006] O.J. No. 1939, 268 D.L.R. (4th) 670 (C.A.), at para. 22, leave to appeal to S.C.C. refused [2006] S.C.C.A. No. 289, 228 O.A.C. 398n, citing Kempling v. Hearthstone Manor Corp., 1996 ABCA 254, [1996] A.J. No. 654, 184 A.R. 321 (C.A.), at para. 32.

[91] On the findings of the trial judge, there was no agreement between the parties that Bourse approval of the transfer of the Shares was a condition to be satisfied in order for a binding agreement to be effective. On the contrary, the trial judge found that the agreement reached by the parties was "unconditional". The record amply supports this finding.

[92] Sands Canada and UBS were both aware of the Bourse's role in the transfer of shares and of the Third Party Agreement. There is nothing in the record to suggest that either party made Bourse approval a condition precedent to the Agreement. Indeed, the evidence is to the contrary. UBS's conduct indicates that it assumed any risk associated with a failure to obtain Bourse approval.

[93] Part of Sands Canada's argument on this issue is that the trial judge erred by confusing the 10 per cent limit with the need for Bourse approval. While she discusses both in para. 55 of her reasons, I see no such confusion. The first two sentences of that paragraph speak to the 10 per cent limit. However, in the balance of the paragraph, she clearly deals with the matter of Bourse approval. She begins by quoting from S.M. Waddams, The Law of Contracts, 4th ed. (Aurora, Ont.: Canada Law Book, 1999), at p. 42. [page114] In the current edition, [See Note 1 below] Professor Waddams points out that where the consent of a third party is necessary, it may be a condition precedent to an agreement. However, he goes on to note that "[m]ore commonly", it is justifiable to assume that the approval constituted a condition, not of the agreement but of its performance. The trial judge concluded that the Bourse approval requirements were but a mechanism to facilitate the transfer of shares -- that is, that they were an aspect of performance of the Agreement and not a condition to its existence. On the record, there is no justification for interfering with that determination.

[94] In any event, Sands Canada cannot rely on the lack of Bourse approval to avoid performing under the Agreement. Even where a third party consent is a condition of performance of a contract, each party is obliged to perform the contract pending the necessary third party consent. Sands Canada cannot avoid its bargain by arguing that there was an unfulfilled condition precedent of Bourse approval when Bourse approval was never sought because Sands Canada refused to tender the Shares or provide the required trade execution information to the Bourse. That is, Sands Canada cannot rely on its own failures to take the necessary steps to obtain Bourse approval to deny the enforceability of the Agreement: see Dynamic Transport Ltd. v. O.K. Detailing Ltd., 1978 215 (SCC), [1978] 2 S.C.R. 1072, [1978] S.C.J. No. 52, at pp. 1082-84 S.C.R., and McCauley v. McVey, 1979 50 (SCC), [1980] 1 S.C.R. 165, [1979] S.C.J. No. 102, at p. 169 S.C.R.

[95] Accordingly, I would dismiss this ground of appeal. Did the Trial Judge Err in Ordering Specific Performance?

[96] There is no dispute about the applicable legal principles. When fashioning a remedy for a breach of contract, the object is to place the injured party in the position that he or she would have been had the contract been performed. Typically, damages are ordered. However, where damages are inadequate to compensate an injured party for its losses, specific performance may be ordered. Accordingly, specific performance may be ordered where the subject matter of a bargain is unique or irreplaceable because, in those circumstances, damages may be inadequate. The remedy for an anticipatory breach of contract is discretionary. The exercise of discretion requires an assessment of the parties' conduct and the factual context. [page115]

[97] Sands Canada submits that the trial judge erred in ordering specific performance of the Agreement. Its arguments can be summarized as follows. First, it says that there was nothing unique about the Shares which would warrant an order for specific performance. Thus, it submits, the trial judge erred in distinguishing Asamera based on her assumption that there was no market for the Shares. Nor was there evidence to suggest that UBS could not prove damages or that damages would be inadequate. Second, it contends that the trial judge was improperly influenced by two factual matters: the fact that Sands Canada had no assets in Ontario and a finding that UBS's reputation would suffer if it failed to complete the Third Party Sale. Third, it argues that the initial error in ordering specific performance was compounded by maintaining that order after the Shares no longer existed following their conversion into TSX shares and cash. This, Sands Canada submits, resulted in a windfall for UBS, particularly as it relieved UBS of its obligation to comply with the 10 per cent limit and of its duty to mitigate.

[98] For the reasons that follow, I do not agree. The order for specific performance was an exercise of discretion by the trial judge. As she applied the correct legal principles and had due regard to the relevant factual considerations, I see no basis on which to interfere with that exercise of discretion. Adequacy of damages

[99] Specific performance may be ordered in connection with the shares of a private company because, as in the present case, such shares may not be readily available on the market and valuation can be difficult. Contracts for the sale of publicly traded shares are also candidates for specific performance in circumstances such as those of the present case where the vendor is subject to an injunction restraining it from selling the shares, the purchaser has diligently pursued its claim for specific performance from the outset, and the plaintiff has entered into additional contracts for the resale of some of the shares: see W.C. Pitfield, at pp. 457-58 O.R.

[100] The uniqueness of the property that is the subject of the contract is one, non-determinative factor in deciding the appropriateness of specific performance. The underlying principle is that if the property is unique, it should be delivered up because damages would not put the party in the position they would have been in but for the breach. The trial judge considered this factor and concluded that the Shares were unique. During the relevant timeframe (i.e., prior to the public listing of the shares in March 2007), there was no readily available [page116] substitute for the Shares. In this regard, it is important to note that the time to assess the uniqueness of the property is the date of the anticipatory breach, not the date of trial or judgment: John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003), 2003 52131 (ON CA), 63 O.R. (3d) 304, [2003] O.J. No. 350 (C.A.), at paras. 40 and 43. Furthermore, the Shares were unique because of the special value they had for UBS. In that regard, it will be recalled, UBS had a plan to accumulate as many Bourse shares as possible. Finally, the value and availability of the Shares at the time of breach was not certain.

[101] I see no error in the distinctions drawn by the trial judge between the facts of the present case and those in Asamera. Sands Canada's financial position

[102] The trial judge found, on uncontradicted evidence, that Sands Canada is a shell company with no assets in Ontario. It has not carried on business in Canada since 2002 and the Shares, its only asset, were held in New York City.

[103] I see no error in the trial judge having considered Sands Canada's financial position when deciding the matter of remedy. Whether a defendant is in a position to pay damages and, thus, whether the plaintiff is likely to recover them, is relevant to the issue of the adequacy of damages. As Sharpe J.A. states in Injunctions and Specific Performance, looseleaf, 2nd ed. (Aurora, Ont.: Canada Law Book, 2007), at para. 7.260:

If the defendant is unable to pay a damages award, then however accurate the assessment of the plaintiff's loss may have been, the remedy of damages can hardly be described as adequate.

[104] Similarly, I see no reason to question the trial judge's consideration of the reputational aspects of a failure by UBS to conclude the Third Party Sale. She recognized that the Third Party Sale was conditional. On the record, that was no bar to her finding that UBS's reputation would have been harmed had the Agreement not been honored and UBS thereby become unable to perform the Third Party Sale as contemplated. No windfall

[105] By ordering specific performance, UBS was placed in the position that it would have been had the Agreement been performed. As I have already explained, the trial judge was fully justified in concluding that damages were inadequate in the circumstances of this case. Consequently, I do not view UBS as having received a windfall, despite what has occurred as a result of the merger of Bourse and the Toronto Stock Exchange. The [page117] fact that UBS is no longer constrained by the 10 per cent limit does not mean the Third Party Sale is not enforceable. However, the enforceability of the Third Party Sale agreement is a matter between UBS and the third party, not UBS and Sands Canada.

[106] The case law provides a full answer to the argument that UBS was unfairly benefited as it had no duty to mitigate. In Asamera, Estey J. explained that in circumstances where there is a prompt claim for specific performance and a fair, real and substantial justification for the claim, the plaintiff may not be required to acquire replacement property. At pp. 667-68 S.C.R. of Asamera, he stated:

On principle it is clear that a plaintiff may not merely by instituting proceedings in which a request is made for specific performance and/or damages, thereby shield himself and block the court from taking into account the accumulation of losses which the plaintiff by acting with reasonable promptness in processing his claim could have avoided. Similarly, the bare institution of judicial process in circumstances where a reasonable response by the injured plaintiff would include mitigative replacement of property, will not entitle the plaintiff to the relief which would be achieved by such replacement purchase and prompt prosecution of the claim. Before a plaintiff can rely on a claim to specific performance so as to insulate himself from the consequences of failing to procure alternate property in mitigation of his losses, some fair, real, and substantial justification for his claim to performance must be found. (Emphasis added) He continued, at pp. 668-69 S.C.R.:

[I]n the case of anticipatory breach, there is a substantial and legitimate interest in looking to performance of a contractual obligation. So a plaintiff who has agreed to purchase a particular piece of real estate, or a block of shares which represent control of a company, or has entered into performance of his own obligations and where to discontinue performance might aggravate his losses, might well have sustained the position that the issuance of a writ for specific performance would hold in abeyance the obligation to avoid or reduce losses by acquisition of replacement property. Yet, even in these cases, the action for performance must be instituted and carried on with due diligence. This is but another application of the ordinary rule of mitigation which insists that the injured party act reasonably in all of the circumstances. Where those circumstances reveal a substantial and legitimate interest in seeking performance as opposed to damages, then a plaintiff will be able to justify his inaction . . . (Emphasis added)

[107] The trial judge relied on this passage and found that UBS was entitled to specific performance. On the record, there is no reason to interfere with that determination. UBS elected to seek specific performance in the face of Sands Canada's anticipatory breach. Its application to enforce the Agreement was brought with "extraordinary dispatch". As has already been mentioned, a block of 100,000 Bourse shares was not readily [page118] available at the date the contract was breached. The trial judge found, in the circumstances, that there was a fair, real and substantial justification to a claim for specific performance. Disposition

[108] Accordingly, I would dismiss the appeal with costs to UBS fixed at $22,000, inclusive of disbursements and GST.

Appeal dismissed.

Notes

Note 1: S.M. Waddams, The Law of Contracts, 5th ed. (Aurora, Ont.: Canada Law Book, 2005), at p. 40.