Court of Appeal for Ontario

Date: January 22, 2018 Docket: C63622

Judges: Feldman, MacPherson and Huscroft JJ.A.

Parties

Between

Darlene Bennett Plaintiff (Appellant)

and

The Estate of Joyce Margaret Bennett, Deceased, Alan Leslie Soles, Bertram Shaun Soles and A. Miron Topsoil Ltd. Defendants (Respondents)

Counsel

William V. Sasso, for the appellant

Christopher Statham, for the respondent A. Miron Topsoil Ltd.

No one appearing for the respondents the Estate of Joyce Margaret Bennett, Deceased, Alan Leslie Soles and Bertram Shaun Soles

Hearing and Appeal

Heard: November 9, 2017

On appeal from: The judgment of Justice Edward J. Koke of the Superior Court of Justice, dated March 21, 2017, with reasons reported at 2017 ONSC 1811.

Subject Matter: Civil – Contract interpretation - right of first refusal - failure to grant specific performance of right of first refusal

Decision

Huscroft J.A.:

OVERVIEW

[1] The Bennett brothers – Dennis, George, Donald, and John – divided a large parcel of land given to them by their father into separate properties, and entered into an agreement establishing a right of first refusal in the event of a sale of any of the properties by any of them. Donald Bennett died in 2006 and is survived by his wife Darlene Bennett. John Bennett died in 2009, and his property was transferred to his wife Joyce and her sons, Bertram Shaun Soles and Alan Leslie Soles.

[2] In 2012, Joyce and her sons proposed to sell their property to Miron Topsoil Ltd. The agreement of purchase and sale acknowledged the right of first refusal agreement and specified that the sale to Miron was "conditional upon George Bennett, Dennis Bennett, and the Estate of Donald Bennett failing to exercise their right of first refusal…." Notice of the offer to Miron was given by the vendor's lawyer to the surviving brothers, Dennis and George, as well as to Darlene Bennett. The notice acknowledged that the property was subject to the first right agreement "in favour of George Bennett, Dennis Bennett and Donald Bennett", and advised the recipients that they had 21 business days in which to exercise their right to acquire the property on the same terms and conditions as Miron's offer.

[3] The two surviving Bennett brothers did not seek to exercise the right, but Darlene Bennett did. She provided notice that she was exercising the right to purchase the property and provided the required deposit.

[4] Both Miron and Darlene Bennett took the position that they were entitled to purchase the property. Neither proposed sale of the property closed. Darlene Bennett brought a motion for summary judgment requesting an order of specific performance granting her the right to purchase the property. Miron responded with its own motion for summary judgment, requesting an order dismissing Darlene Bennett's claim on the basis that she was not entitled to exercise the right of first refusal. The vendors of the property – the Estate of Joyce Bennett, and Allan and Bertram Soles – were prepared to sell to whomever was entitled to purchase the property.

[5] The motion judge found that the right of first refusal agreement was not ambiguous. He found that it clearly limited the right of first refusal to parties to the agreement – a right that did not extend to "family members" of the parties – and that this interpretation was neither unfair nor absurd.

[6] Darlene Bennett could not exercise the right of first refusal because she was not a party to the agreement. The motion judge rejected evidence concerning the parties' intentions in drafting the agreement and concluded that she had no enforceable rights under the contract. Although the parties agreed that Donald Bennett's estate was entitled to exercise the right of first refusal, Darlene Bennett had not brought her claim on behalf of the estate. She based her claim on her status as a family member, and as such she was not entitled to exercise the right. The motion judge granted summary judgment to Miron.

[7] Darlene Bennett appeals. She submits, in essence, that she in fact exercised the right of first refusal on behalf of Donald Bennett's estate.

[8] In her factum on the motion below, Darlene Bennett submitted that Donald Bennett's estate would have had the right of first refusal in respect of the property. However, her ability to act on behalf of Donald's estate was never established in evidence. The focus of the motion was her claim that she was entitled to exercise the right of first refusal on the basis that she was a "family member" under the agreement, and her claim was properly rejected by the motion judge on this basis.

[9] I would dismiss the appeal for the reasons that follow.

THE RIGHT OF FIRST REFUSAL

[10] The right of first refusal agreement made by the Bennett brothers provides, in relevant part, as follows:

IN CONSIDERATION of the sum of ONE DOLLAR ($1.00) now paid by each party to the other, the receipt whereof is by each party acknowledged, each party grants unto the other parties a first right of refusal to acquire ownership of that party's real estate herein identified upon the terms and conditions herein.

[11] Article II (c) of the agreement provides:

If a selling party receives a bona fide offer to purchase his lands or part of his lands described in the appendix hereto which he is willing to accept, then the selling party shall give written notice of the offer to each of the other parties by presenting them with a photocopy of such offer. The other parties shall have a right during the next twenty-one (21) business days after receiving such notice, by written notice to the selling party to elect to purchase the lands offered to be sold for the same price and on identical terms as contained in the offer presented to them. [Emphasis in original.]

[12] The agreement also provides that a party may transfer his lands to a "family member" – defined under the agreement as "a son, daughter or spouse, or any combination of them of any party" – without observing the requirements of Article II, but any such transferee would become bound by the provisions of the agreement. The agreement was to operate for 23 years.

THE POSITIONS OF THE PARTIES

[13] The appellant submits that the motion judge erred in deciding the claim outside the boundaries of the pleadings and in concluding that there was no genuine contractual issue to be decided on the motion. The parties agreed that Donald Bennett's estate was entitled to exercise the right of first refusal, and neither the vendors nor the respondent disputed that the appellant was entitled to exercise the right on behalf of the estate. The appellant points to the fact that the vendor's offer inviting the exercise of the right was made directly to her and the surviving parties to the agreement.

[14] In essence, the appellant contends that the vendor's extension of the offer to purchase the land to her – her inclusion among the parties with a right of first refusal – establishes her right to accept it. There was no genuine contract interpretation issue to be determined, but in any event the motion judge erred in failing to interpret the contract in accordance with the intentions of the parties drafting it, and in precluding the appellant from exercising the right of first refusal on the basis of the privity of contract doctrine.

[15] The respondent submits that the appellant's entitlement to exercise the right of first refusal was put in issue by the pleadings and does not accept that the appellant was entitled to act on behalf of the estate. The respondent submits that there was no basis in the evidence to establish the appellant's authority to act for the estate and notes that the appellant specifically refused to provide proof of her capacity to do so when given an opportunity.

DISCUSSION

[16] It is clear from the motion judge's decision that he was alive to the distinction between the appellant's claims to exercise the right of first refusal on behalf of the estate, on one hand, and as a "family member" under the agreement, on the other hand. He set out the appellant's position on the motion as follows:

The schedule attached to the agreement of purchase and sale to Miron which accompanied the November 16, 2012 Notice of Sale from Mr. Hardy refers to the right of the "estate of Donald Bennett" to purchase the property. The parties agree that Donald's "estate" is entitled to exercise this right. However, Darlene does not make her claim on behalf of the "estate" of her late husband. Instead, she bases her claim that she has a right to purchase the property on the fact that she is a "family member", as defined in the first right agreement. [Emphasis added.]

[17] The motion judge then summarized the appellant's submission concerning her entitlement to exercise the right as a "family member":

The preamble and paragraphs 11. (a) and 11. (c) of the first right agreement purports to grant the right of first refusal to "the other parties" or to "the remaining parties". Darlene submits that these paragraphs should be construed in such a way that this right is not restricted to the four brothers who signed the first right agreement but should be construed broadly to include "family members" as defined in the first right agreement. Since she was the spouse of Donald she falls within the definition of a "family member" and is therefore also entitled to exercise this right of first refusal.

[18] I will consider these two possible claims in turn.

(1) Darlene Bennett's purported entitlement as estate trustee

[19] The appellant may well have been able to establish an entitlement to exercise the right of first refusal on behalf of the estate, but she did not do so. Her entitlement to exercise the right of first refusal was put in issue by the respondent in its statement of defence and counterclaim dated February 7, 2014. The respondent disputed that the appellant had validly exercised the right of first refusal, and specifically requested documentary evidence to support her purported authority to act on behalf of the estate in a letter dated August 5, 2014. The appellant did not provide such evidence.

[20] The respondent brought a motion for an order requiring the appellant to produce a further and better affidavit of documents. This was opposed by the appellant, and when that motion was heard a different motion judge declined to rule on the issue, leaving it to be dealt with by the court in Parry Sound, where the action had been transferred (from Windsor).

[21] The appellant baldly asserts her entitlement to act on behalf of the estate in a footnote in her appeal factum, stating:

If the issue of the Appellant's status to act on behalf of Donald's Estate had been put in issue, the Appellant was appointed sole Estate Trustee and was sole beneficiary under Donald's last will and testament. The Appellant's certificate of appointment of Estate Trustee with a will is dated August 21, 2006.

[22] The appellant did not bring a fresh evidence application in this court in an attempt to establish her entitlement to act on behalf of the estate, either at the time of Donald Bennett's death or at the time of the prospective purchase, several years later. Counsel for the appellant simply asserted in oral argument that evidence as to her ability to act for the estate could easily be adduced.

[23] The appellant had many opportunities to establish the facts on which she seeks to rely but chose not to do so. As a result, there was no evidence before the motion judge – and no evidence before this court on appeal – concerning the appellant's ability to exercise the right of first refusal on behalf of the estate. The vendor's simple act of extending the offer to the appellant did not establish her legal entitlement to accept it on behalf of the estate, as the appellant asserts, nor did the respondent's statement that the appellant "purported" to exercise the right of first refusal constitute an admission that she had done so in accordance with the agreement.

[24] The motion judge was asked to determine the appellant's entitlement on the basis that she was a "family member". He cannot be faulted for having done so.

(2) Darlene Bennett's entitlement as a "family member"

[25] The motion judge's interpretation of the agreement is entitled to deference. First, it was open to the motion judge to find that the agreement was not ambiguous. On its face, the right of first refusal is limited to parties to the agreement.

[26] The motion judge found that the evidence of the parties' intention relied on by the appellant had little or no probative value and ran afoul of the parol evidence rule in any event. However, even assuming that the evidence of the lawyers involved in preparation of the agreement was not parol evidence, taken at its highest it does no more than establish that the appellant and the lawyers who drafted the agreement "clearly understood that the estate of a deceased Bennett brother would be entitled to exercise the First Right in the event of a death of that contracting party." The problem for the appellant, as noted above, is that she failed to establish her ability to act on behalf of Donald Bennett's estate.

[27] The motion judge also did not err in his analysis of the privity of contract doctrine. The doctrine applies only where the contract in question confers the relevant benefit on a third party. The motion judge's finding that the agreement did not confer a right of first refusal on anyone but the parties to the agreement is determinative of this analysis. In the absence of a benefit conferred on a third party, recent caselaw ameliorating the strictures of the privity doctrine and allowing third parties to enforce contractual provisions for their benefit – see e.g. London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299, and Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108 – is irrelevant and cannot assist the appellant.

[28] I see no legal error in the motion judge's analysis, nor did he make any palpable and overriding error that would allow this court to intervene.

CONCLUSION

[29] I would dismiss the appeal.

[30] The respondent is entitled to its costs on the appeal, fixed in the amount of $10,000 inclusive of disbursements and HST.

Released: January 22, 2018 ("K.F.")

"Grant Huscroft J.A."

"I agree. K. Feldman J.A."

"I agree. J.C. MacPherson J.A."