Court File and Parties

CITATION: Demers Holdings Inc. v. London (South) Purchaseco Inc., 2009 ONCA 811

DATE: 20091117

DOCKET: C49837

COURT OF APPEAL FOR ONTARIO

Moldaver, Simmons and MacFarland JJ.A.

BETWEEN:

Demers Holdings Inc.

Applicant (Appellant)

and

London (South) Purchaseco Inc. (c/o Travelodge London South) and Royal Host Hotels GP Inc.

Respondent

Analee J.M. Fernandez and Elizabeth Cormier, for the appellant

Julia Schatz and Andrew McLachlin, for the respondent

Heard and released orally: October 20, 2009

On appeal from the judgment of Justice J. Tausendfreund of the Superior Court of Justice dated December 3, 2008.

ENDORSEMENT

[1] The appellant raises three issues on appeal. First, the appellant submits that the application judge erred in holding that London South Purchaseco Inc. (now Royal Host Hotels GP Inc.) acquired title to the 50-foot commercial sign on the land retained by the vendor when London South purchased the motel property in 1998.

[2] The appellant argues that because the sign was not included in Schedule C to the Agreement of Purchase and Sale and because the parties contemplated entering into a licence agreement with respect to the sign, it was not open to the application judge, in interpreting the Agreement of Purchase and Sale in a commercially reasonable fashion, to hold that the sign was included in the sale as a chattel.

[3] We disagree. The Agreement of Purchase and Sale makes it clear that Schedule C is not meant to be exhaustive. Moreover, the definition of “chattels” in the Agreement of Purchase and Sale includes “signage … off site advertising … and other tangible personal property utilized on a going concern basis, whether or not within the Buildings, belonging to the Vendor and used in the building and the business.”

[4] Further, the vendor in the 1998 transaction and London South both understood that the sign was transferred by the Agreement of Purchase and Sale and that the easement for ingress and egress allowed placement and maintenance of the sign. This evidence was provided by the lawyers for both sides to the transaction. No objection was taken to the admissibility of this evidence either before the application judge or on appeal and it is not contested that the application judge was entitled to consider this evidence in construing the Agreement of Purchase and Sale.

[5] Given the particular context, which involved the purchase of an otherwise landlocked property for $7.1 million and the fact that the sign in issue marked the entrance to the easement providing access to the motel, we are not persuaded that the application judge’s conclusions that the sign was included in the sale was commercially unreasonable.

[6] Moreover, the evidence provided by the lawyers on the 1998 transaction made it clear that the easement for ingress and egress was also intended to permit placement of the sign as well as access to it for maintenance and servicing. In our opinion, the application judge appears to have misapprehended this evidence.

[7] At paragraph 13 of his reasons, the application judge stated, “for reasons that are not clear, the transaction closed without the parties further addressing the contemplated licence agreements”. However, according to the transaction lawyers the licence agreements contemplated by the Agreement of Purchase and Sale were addressed through the transfer of the sign to London South and through the easement agreements that permitted the sign to be placed on the vendor’s property and provided London South with access to it.

[8] In the unique circumstances that prevailed in this case, the transaction lawyers’ evidence makes eminent commercial sense. The sign in issue was an integral part of the motel business and the easement because without it the travelling public would be unaware of the motel or how to get to it. Without the sign, the easement would be of significantly diminished value.

[9] Had the application judge properly appreciated the evidence in this matter he would have concluded that the easements provided a full and complete answer to the issue of London South’s interest in the property.

[10] In light of our conclusion, we find it unnecessary to consider the second and third arguments raised by the appellant concerning proprietary estoppel.

[11] In the result the appeal is dismissed. However, the judgment is varied in accordance with these reasons so that paragraph 3 is varied as set out below and so that it contains a Schedule ‘A’ setting out the legal description of the parties’ lands:

[3] This Court declares and adjudges that the easement in instrument LT524358 registered on title to the properties described in Schedule “A” permits the owner of the Respondents’ Lands as described Schedule “A”, to locate and maintain the Travelodge sign in its present location on part of the Applicant’s Lands, described as Part 4, Plan 33 R-13433 for the City of London.

[12] Costs of the appeal are to the respondent on a partial indemnity scale fixed in the amount of $12,500 inclusive of disbursements and G.S.T.

“M.J. Moldaver J.A.”

“Janet Simmons J.A.”

“J. MacFarland J.A.”