COURT OF APPEAL FOR ONTARIO
2013 ONCA 509
DATE: 20130808
DOCKET: C55893
MacFarland, Watt and Epstein JJ.A.
BETWEEN
1724684 Ontario Limited and 2234223 Ontario Inc.
Applicant/Appellant
and
Leafwood Investment Inc. and Goldman, Spring Kitchler & Sanders LLP
Respondent/Respondent
Leafwood Investments Inc.
Appellant/Respondent
and
1724684 Ontario Limited and 2234223 Ontario Inc.,
Shahin Talaei, aka Sean Talaei, and Ahad Jafarpour, aka Jeff Jafarpour
Respondent/Appellant
Joseph Markin, for the appellant
D.R. Rothwell, for the respondents Leafwood Investment Inc.
Heard: June 24, 2013
On appeal from the judgment of Justice E. P. Belobaba of the Superior Court of Justice, dated July 18, 2012.
ENDORSEMENT
[1] The appellant (purchaser) and respondent (vendor) entered into an agreement of purchase and sale for certain lands located in Whitby, Ontario and for a quantity of structural steel. This agreement was subsequently amended (the “Amending Agreement”). The land are described in the agreement as “draft plan approved under draft plan of subdivision: for a residential housing development that included a strip plaza. The respondent (vendor), had already purchased structural steel for the strip plaza, and, as part of the Amending Agreement, required this steel to also be purchased by the appellant (purchaser).
[2] On the date scheduled for closing, the land transaction was completed, but the structural steel component was not as the Amending Agreement provided that the structural steel component of the deal be verified and verification had not taken place. The portion of the verification term and the disputed issue between the parties reads:
The Vendor shall use its best reasonable efforts to obtain an inspection of the fabricated steel by the Vendor and Purchaser jointly prior to closing date, and to assist the Purchaser in satisfying itself that the fabricated steel as per the Vendor’s purchase order and shop drawings for structural steel for Buildings A2, B1 to B6, C to D and E on structural drawings prepared by VGA Consultants is available for delivery to the site upon payment of the storage and transportation costs set out above (the “Purchaser’s Steel Requirements”) and that all monies owing to the steel company for steel fabrication only have been paid, in accordance with minutes of settlement between the Vendor and Skyhawk Steel. The Purchaser covenants to act reasonably and in good faith to satisfy itself as soon as possible as to compliance with the Purchaser’s Steel Requirements.
[3] As verification had not taken place at the time of closing, the portion of the purchase money relating to the structural steel was place in trust, in accordance with paragraph 8 of the Amending Agreement.
[4] Two issues interfered with the verification necessary to close the structural steel part of the transaction. One was whether the open web steel joists specified for the project were part of the “structural steel” that was the subject of the Amending Agreement. The purchaser took the position that the open web steel joists were part of the Amending Agreement, while the vendor took the position that they were not. The second was whether the purchaser made reasonable efforts to verify that the structural steel met its requirements.
[5] There is no dispute between the parties that the open web steel joists were not available and could not be supplied by the vendor.
[6] The trial judge concluded that the open web steel joists were not part of the structural steel that was the subject of the Amending Agreement. This conclusion was based on paragraph 6 of the original agreement of purchase and sale. The trial judge also held that the purchaser had not acted reasonably and in good faith to verify that the steel met its requirements. He therefore ordered that the money held in trust be provided to be vendor.
[7] The purchaser submits that the trial judge erred in holding in favour of the vendor with respect to both issues.
[8] We find it necessary to deal only with the first issue.
[9] Paragraph 6 of the original agreement of purchase and sale (that remained the same in the Amending Agreement) provides:
The Vendor shall use its best reasonable efforts to obtain an inspection of the fabricated steel by the Vendor and Purchaser jointly prior to the closing date and to assist the Purchaser in satisfying itself that the fabricated steel as per the Vendor’s purchase order and shop drawings for structural steel for Buildings A2, B1-B6, C and D to E on structural drawings prepared by VGA Consultants is available for delivery to the site upon payment of storage and transportation costs ... and that all monies owing to the steel company for steel fabrication only have been paid, in accordance with the Minutes of Settlement between the Vendor and Skyhawk Steel. (Emphasis added.)
[10] In our view the documents that must be considered in interpreting the meaning of the parties’ bargain are the Amending Agreement itself and the documents referenced in it that describe the structural steel. These additional referenced documents are the vendor’s purchase order and shop drawings for structural steel prepared by the project’s architects, VGA Consultants. VGA retained Lor Eng Construction Services Inc. for the structural design.
[11] The purchase order from the vendor to Skyhawk provides in part:
Please Supply the Following Goods subject to the Conditions Specified Below
1 1.00 Supply and Install Structural Steel for Building A2, B1-B6, C, D and E
Work under this contract to include but not limited to the supply of labour, material and equipment for complete scope for structural steel and open web steel joists for Buildings A2, B1-B6, C, D and E;
Supply and installation of structural steel, open web steel joists etc.
[12] Further, the structural drawings identified as GN-1 bear a heading for open web steel joists and specify their technical structural requirements. As well, the drawing identified as S-3 notes the presence of open web steel joists in several locations.
[13] In our view, the trial judge erred in basing his interpretation of the Amending Agreement on documents that were extraneous to it in circumstances where it was unnecessary to do so.
[14] The Amending Agreement specified that it was the structural steel identified in the purchase order and that document specified open web steel joists. Similarly the structural drawings refer to open web steel joists.
[15] In our view, properly interpreted, using the language of the Amending Agreement and the documents specifically referenced in it, the open web steel joists were part of the structural steel that the purchaser contracted to buy and the vendor contracted to sell.
[16] As previously indicated, the parties agree that the open web steel joists were not made available to the purchaser. The vendor therefore breached the Amending Agreement and on this basis, the money held in trust should be returned to the purchaser.
[17] It follows, therefore, that the appeal must be allowed on this basis alone and there is no need to deal with the second issue raised.
[18] The appeal is therefore allowed and the judgment is set aside. The funds held in trust by Messrs. Golden, Spring, Kitchler and Sanders LLP, plus accrued interest are to be returned to the purchaser.
[19] The purchaser also seeks the costs of the trial.
[20] The trial judge awarded no costs on the basis that success had been divided. This division arose from the fact that at trial the vendor had argued that the application should be dismissed as the parties had settled the matter. The trial judge found that there had been no settlement. On the basis of the vendor’s loss on this point and the purchaser’s loss regarding which party had breached the Amending Agreement, the trial judge held that success was divided and concluded there should be no order as to costs.
[21] No issue was taken in this court with the trial judge’s finding that there had been no settlement.
[22] However, the purchaser has been successful in this court. In the usual circumstances, where an appeal is allowed and the judgment below is set aside, the costs order made is also set aside. We see no reason why that should not be the case here.
[23] In their costs outline in relation to the trial costs, the purchaser sought $59,321.00 on a partial indemnity scale while the vendor sought the sum of $53,796.74, both figures inclusive of disbursements and HST.
[24] We order the costs of the trial to the purchaser fixed in the amount of $50,000.00 and of the appeal to the purchaser, fixed in the amount of $15,000. Both amounts are inclusive of disbursements and HST.
“J. MacFarland J.A.”
“David Watt J.A.”
“Gloria Epstein J.A.”