COURT OF APPEAL FOR ONTARIO

CITATION: Alkin Corporation v. 3D Imaging Partners Inc., 2020 ONCA 441

DATE: 20200703

DOCKET: C67847

Rouleau, Hoy and Hourigan JJ.A.

BETWEEN

Alkin Corporation

Plaintiff (Appellant)

and

3D Imaging Partners Inc.

Defendant (Respondent)

John B. Brennan and Jacob R. W. Damstra, for the appellant

Jack Masterman, for the respondent

Heard and released orally: June 29, 2020 by videoconference

On appeal from the judgment of Justice Thomas A. Heeney of the Superior Court of Justice dated December 3, 2019.

REASONS FOR DECISION

[1] The appellant appeals from the summary judgment of the Superior Court of Justice dismissing its motion to enforce an agreement with the respondent for the purchase of shares. The principal of the appellant corporation, Robert Siskind, entered into discussions with the principal of the respondent corporation, Lionel Lenkinski, to sell the appellant’s 125,000 shares in the respondent corporation.

[2] The parties negotiated a $100,000 purchase price for those shares. The respondent sent an unexecuted share purchase agreement (the “SPA”) to the appellant. The appellant executed and returned the draft SPA but the respondent never executed it.

[3] On the motion, the parties disagreed as to whether the purchase was contingent on the completion of a pending investment deal involving the respondent and an outside investor. In addition, the respondent maintained that no legally enforceable contract was created as it had not executed the formal contract.

[4] For its part, the appellant argued that an agreement had been reached and the purchase of the shares was not contingent on the completion of the pending investment deal. The agreement was binding and ought to be in force despite the respondent’s failure to execute the SPA.

[5] The motion judge found that the SPA was not binding. The SPA contained an “Enurement” provision, which provided that the SPA would only become effective when executed by both parties. In an affidavit, the appellant’s representative who negotiated the sale of the shares, Mr. Siskind, confirmed that the written SPA as drafted by the respondent fully and accurately outlined the terms upon which the appellant’s shares were to be purchased. Relying on this court’s holding in Bawitko Investments Ltd. v. Kernels Popcorn Ltd., the motion judge determined that the parties clearly intended that their legal obligation be deferred until a formal contract was executed: (1991) 1991 CanLII 2734 (ON CA), 79 D.L.R. (4th) 97 (Ont. C.A.), at pp. 103-4. Since the respondent never executed the SPA, the SPA was therefore not binding.

[6] Having concluded that the parties had not entered into a binding agreement, the motion judge found it to be irrelevant whether the respondent had advised the appellant that the SPA was conditional on the investment deal going through.

[7] On appeal, the appellant argues that the motion judge erred in failing to consider whether an enforceable oral agreement for the purchase of the shares existed separate and apart from the SPA. The appellant further argues that the motion judge’s decision to rely on the “Enurement” clause in the SPA, requiring execution by both parties, as providing a base for not enforcing the oral contract undermines the principle of good faith outlined in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494.

[8] We disagree.

[9] As this court explained in Bawitko, where the understanding or intention of the parties is that their obligations are to be deferred until a formal contract has been approved and executed, any preliminary agreement as to the terms of the contract is not enforceable.

[10] The motion judge’s finding that the clear intention of the parties was “that their obligations are to be deferred until a formal contract has been approved and executed” is fatal. This finding of fact is fully supported by the terms of the SPA executed by the appellant and the appellant’s admission that the SPA contained the terms agreed upon for the purchase of the shares. In our view, there is no basis for the suggestion that the motion judge failed to consider the entire context or ignored relevant evidence. The fact that other interpretations of the appellant’s evidence were available does not constitute palpable end overriding error.

[11] We also reject the suggestion that the motion judge’s decision undermines the doctrine that parties must perform their contractual obligations honestly and reasonably. As the motion judge correctly found, the parties did not have the requisite intention to contract. As a result, there simply existed no contractual obligations to perform.

[12] The appeal is therefore dismissed.

[13] Costs to the respondent are fixed in the amount of $5,500 inclusive of disbursements and applicable taxes.

“Paul Rouleau J.A.”

“Alexandra Hoy J.A.”

“C.W. Hourigan J.A.”