Court of Appeal for Ontario

Citation: 2018 ONCA 957 Date: 2018-11-28 Docket: C64977

Judges: Strathy C.J.O., Benotto and Roberts JJ.A.

Parties

Between

Kingridge (Bronte) Inc. Applicant (Appellant)

and

1401114 Ontario Inc. and QEW-Bronte Developments Inc. Respondents (Respondents in Appeal)

Counsel

Christopher I.R. Morrison and Joel Cormier, for the Appellant

Michael R. Kestenberg and Aaron Hershtal, for the Respondents

Hearing and Appeal

Heard: November 23, 2018

On appeal from the order of Justice Jennifer Woollcombe of the Superior Court of Justice dated January 17, 2018.

Reasons for Decision

[1] The appellant appeals from the dismissal of its application to obtain payment out of court of the sum of $600,000.

[2] The appellant purchased two parcels of land ("the lands") from the respondents with a vendor take-back mortgage held by the respondents. The parties' amended agreement of purchase and sale and the vendor take-back mortgage terms provided that if the official plan was not amended to change the zoning designation of a portion of the lands to "Business Commercial" prior to the mortgage's maturity date, which the parties agreed, as stated in the mortgage, would be June 17, 2018, the principal amount owing under the mortgage would be reduced by $600,000. The standard charge terms of the mortgage also stipulated that if the lands were sold without the consent of the respondents, the principal owing under the mortgage, with accrued interest, plus a bonus equal to three months' interest, would immediately become due and payable at the sole discretion of the respondents.

[3] On February 3, 2017, the appellant sold the property without the respondents' consent. When the appellant sought a discharge of the mortgage, the respondents demanded payment of all amounts owing under the mortgage, including the three months' interest bonus. The appellant refused to pay the interest bonus, arguing that the $600,000 reduction applied because the zoning had not yet been amended. The appellant paid the amount of $600,000 into court. The appellant and the respondents sought payment of these monies.

[4] The application judge rejected the appellant's principal argument that its sale of the lands accelerated the date by which the property designation under the official plan had to change. Had the appellant wanted such a term, he could have negotiated its inclusion into the parties' agreements. The appellant was represented on the purchase and the mortgage by experienced counsel. The plain language of the mortgage did not provide for that interpretation and clearly stipulated that the date by which the amendment had to take place was June 17, 2018. The appellant sold the lands without the respondents' consent prior to June 17, 2018. This triggered the clear obligation to pay all monies owing under the mortgage and the three-month interest bonus.

[5] In the court below, the parties agreed on the applicability of the principles of contractual interpretation set out in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.

[6] On appeal, the appellant essentially repeats the same submissions that were rejected by the application judge. The appellant also advances on appeal the newly framed argument that the application judge's order erroneously serves to nullify the express term of the parties' agreement of purchase and sale and mortgage that the purchase price would be reduced by $600,000 if the rezoning did not occur before June 17, 2018. It is common ground that there was no rezoning by that date, therefore, the appellant is entitled to the price reduction, notwithstanding that it sold the lands in February 2017.

[7] We are not persuaded by these submissions.

[8] Aside from the fact that this argument was never made in this form to the application judge, the appellant's application itself precludes such a position. There is no mention of a separate, free-standing right to a reduction of the purchase price nor is there a request that the court find that such a right exists. Rather, in the grounds for the application, it is clearly stated that the parties reached a compromise of the appellant's request for a $600,000 reduction in the purchase price by agreeing that "a $600,000 reduction in the principal of the VTB would be applied if the portion of the lands in question currently designated Office Employment is not amended to designate such lands as Business Commercial, prior to June 17, 2018".

[9] We are also of the view that the appellant's newly framed interpretation of the parties' agreements makes no commercial sense. Without an express term providing that the price reduction would survive the appellant's sale of the lands prior to June 17, 2018, it is not reasonable to infer that the parties would intend to have any outstanding obligations under their agreements following the appellant's sale of the lands.

[10] The appellant has identified neither a palpable and overriding error in the application judge's meticulous assessment of the factual matrix of the agreement nor an extricable legal error in her interpretation of the agreement. Her interpretation of the parties' purchase and mortgage agreements is reasonable and subject to deference by this court.

[11] Accordingly, the appeal is dismissed. As agreed, the respondents are entitled to their costs in the amount of $20,000, inclusive of disbursements and taxes.

"G.R. Strathy C.J.O."

"M.L. Benotto J.A."

"L.B. Roberts J.A."