Court of Appeal for Ontario
Citation: Corbana Holdings Inc v. RP Graphics Group Limited, 2010 ONCA 51
Date: 2010-01-22
Docket: C49805
Between:
Corbana Holdings Inc.
Plaintiff (Respondent)
and
RP Graphics Group Limited
Defendant (Appellant)
Before: Sharpe, Blair JJ.A. and Pardu J. (ad hoc)
Counsel:
Ian Godfrey and Jayashree Goswami, for the appellant
David Harris, for the respondent
Heard & released orally: January 15, 2010
On appeal from the judgment of Justice Thomas R. Lederer of the Superior Court of Justice dated December 2, 2008.
ENDORSEMENT
[1] The respondent claimed damages for breach of an Exclusive Selling Agreement (the “Agreement”) whereby the appellant had given the respondent the exclusive right to negotiate the sale of the appellant’s business. The respondent procured a Letter of Intent from a prospective purchaser but the appellant, as was its right, did not agree to the proposed terms. Thirteen days prior to the expiry of the period prescribed in the Agreement, the appellant decided it did not wish to sell the business and withdrew it from sale.
[2] The provisions in the Agreement that must be considered are Articles 3 and 4 [“CLIENT” is the appellant vendor and “CONSULTANT” is the respondent agent]:
- CLIENT irrevocably instructs closing lawyer to pay commissions at closing as directed by CONSULTANT prior to disbursing funds to CLIENT. Client agrees to pay CONSULTANT and CONSULTANT agrees to accept a percentage of the final selling price (the “Transaction Fee”) in accordance with the following schedule:
a) 10 % on the first $2 million; plus 5.0% on the next $1 million; plus 3% on the remaining balance.
- In the event the transaction contemplated herein does not close, the CONSULTANT is entitled to the Transaction Fee in the following circumstances:
• During the Sole and Exclusive Period or any extension thereof CLIENT sells, leases, trades or otherwise disposes of all or any part of the Business or its capital shares of a corporation regardless of whether or not the CONSULTANT was involved in or responsible for such disposition, or CLIENT enters into a contract of sale independent of CONSULTANTS’S assistance, accepts a deposit, or records a notice of intention to sell or advertise the Business for sale independently of the CONSULTANT’S action, or CLIENT withdraws the Business from sale, or purports to terminate this Agreement, or
• CLIENT fails or refuses to complete a sale, lease, trade, or other disposition of all or any part of the Business after entering into a written agreement to do so, or
• Prior to two (2) years following the Sole and Exclusive Period, CLIENT, sells leases trade or otherwise disposes of all or any part of the Business (or any other business owned by CLIENT) to any person, firm, or entity referred to the Business by CONSULTANT or who became aware of the Business through the efforts of CONSULTANT during the Sole and Exclusive Period, or employs merges with or otherwise forms a relationship with any person, firm or entity referred to the Business by CONSULTANT, or who became aware of the Business through the efforts of CONSULTANT, or
• CLIENT wilfully misrepresents facts, financial information or supporting documentation related to the Business, which adversely affects the ability to cause a disposition of the Business. [Emphasis added]
[3] The respondent made no claim for compensation on a quantum merit basis. The trial judge awarded damages for breach of contract, based upon the percentage formula for a “Transaction Fee” prescribed by Article 3, as applied to the proposed purchase price in the Letter of Intent that the appellant had rejected. That amount was modestly discounted to arrive at a total of $350,000, an amount that the respondent had said it was prepared to accept.
[4] In our view, the respondent’s only entitlement to compensation under the Agreement is limited by the terms providing for the payment of a “Transaction Fee”. Read as a whole, the Agreement limits that entitlement to circumstances where there is a “transaction”, that is, an accepted agreement of purchase and sale that provides for a “final selling price”, against which the fee can be measured. Such an agreement is the “transaction contemplated” upon which the payment of a fee under Article 4 is premised. We agree with the appellant that as there was no such agreement or “transaction”, there is no compensation payable.
[5] In our view, there can be no right to any payment under Article 4, bullet point 1, based upon the appellant’s withdrawal of the business from sale, unless the provision governing the consultant’s entitlement to the fee in the opening words of Article 4 has been satisfied. As that essential condition was not satisfied, there is no fee owing and no damages were suffered by the respondent.
[6] Finally, we note that the respondent proved no damages apart from the claim based upon the transaction fee.
[7] Accordingly, the appeal is allowed, the judgment is set aside and the action is dismissed. Costs to the appellant for both the trial and the appeal fixed at $40,000, inclusive of GST and disbursements.
“Robert J. Sharpe J.A.”
“R.A. Blair J.A.”
“G. Pardu J. (ad hoc)”