Court of Appeal for Ontario

2016 ONCA 203 Date: 20160310 Docket: C60954

Epstein, Pepall and Hourigan JJ.A.

Between

International Property Group Inc. Plaintiff (Respondent)

and

2262814 Ontario Ltd., 1577020 Ontario Ltd., 1577021 Ontario Ltd., 1577010 Ontario Ltd. and Claude Bitton Defendants (Appellants)

Counsel: Douglas Bourassa, for the appellants Harvin D. Pitch, for the respondent

Heard and released orally: March 3, 2016

On appeal from the judgment of Justice Grant R. Dow of the Superior Court of Justice, dated August 4, 2015.

ENDORSEMENT

[1] By agreement of purchase and sale dated May 15, 2014, the appellants agreed to sell certain properties to the respondent. The purchase price was $36,000,000, and included a $2,000,000 deposit. Part of the purchase price was to be covered by the respondent’s assumption of the two existing mortgages on the properties. The agreement contained a clause (“Rider #1”) that required the respondent to proceed in good faith and with due diligence to make application to the existing mortgagees for approval to assume the two mortgages. If the respondent fulfilled this obligation, it was entitled to determine, in its sole discretion, whether the terms the mortgagees offered were acceptable.

[2] The respondent did not agree to the conditions imposed by one of the two mortgagees (“CTC”) and repudiated the agreement. The appellants refused to return the deposit.

[3] The parties agreed to have their disagreement over the deposit settled by way of summary judgment. The motion judge found for the respondent. The appellants appeal on the basis that the motion judge committed errors of law in interpreting the agreement, specifically Rider #1.

[4] The appellants identify three such errors.

[5] First, the appellants submit that the motion judge erred in failing to interpret Rider #1 in the context of the factual matrix and the surrounding circumstances – specifically the circumstances that gave rise to the wording of Rider #1. The appellants argue that although the motion judge described the history of Rider # 1 in his recitation of the facts, he did not take this history into account in interpreting the clause.

[6] We do not accept this submission. The surrounding circumstances upon which the appellants rely relate to the parties’ negotiations and subjective intent. Such evidence is not relevant to the interpretation of the agreement. We also note that the entire agreement clause in the agreement of purchase and sale precludes consideration of this evidence.

[7] The appellants also contend that the motion judge erred in failing to interpret Rider #1 as a whole. They say that he failed to understand that interpreting the clause as he did would render meaningless the words “in [the respondent’s] sole and absolute discretion”. This wording imposed on the respondent a precondition to the exercise of discretion to accept or reject the terms offered by the mortgagee. The appellants submit that there was no dispute that the respondent did not make an application to the CTC and did not provide documents, as requested.

[8] We do not agree with this argument. It is clear that the motion judge considered the language of Rider #1 as a whole. He referred to the respondent’s obligation to apply to the mortgagees to assume the mortgages and to the discretion the clause gave to the respondent. We see no palpable and overriding error.

[9] Finally, the appellants contend that the motion judge erred in failing to interpret the word “application” in accordance with its ordinary meaning – in interpreting the word as requiring something short of a formal written application. The appellants submit that the wording of Rider # 1 is clear. The respondent was required to make an application to each mortgagee and it did not do so.

[10] Again, we do not agree. It is clear that the motion judge was of the view that the respondent acted in good faith and that the evidence supported a finding that a formal application would be an exercise in futility. This finding was open to him to make. In so doing, the motion judge considered Mr. Marchant’s evidence as a whole, including evidence inconsistent with his position.

[11] According to Sattva Capital v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50 and 52, contractual interpretation involves issues of mixed fact and law and courts should be cautious in identifying extricable questions of law in such interpretative disputes. We see no error here and see no reason to interfere with the motion judge’s interpretation of the agreement.

[12] The appeal is therefore dismissed. The respondent is entitled to its costs fixed in the agreed-upon amount of $20,000, inclusive of disbursements and applicable taxes.

“Gloria Epstein J.A.”

“S.E. Pepall J.A.”

“C.W. Hourigan J.A.”