COURT OF APPEAL FOR ONTARIO
CITATION: Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 201
DATE: 20210401
DOCKET: C67533 and C67557
Gillese, Lauwers and Benotto JJ.A.
DOCKET: C67533
BETWEEN
Fram Elgin Mills 90 Inc.
(formerly Frambordeaux Developments Inc.)
Plaintiff
and
Romandale Farms Limited, Jeffrey Kerbel,
2001251 Ontario Inc. and First Elgin Developments Inc.
Defendants
(Respondent/Appellants)
AND BETWEEN
Fram 405 Construction Ltd. and Bordeaux Homes Inc.
Plaintiffs
and
Romandale Farms Limited, 2001251 Ontario Inc., First Elgin
Developments Inc. and Jeffrey Kerbel
Defendants
(Respondent/Appellants)
AND BETWEEN
Romandale Farms Limited
Plaintiff (Respondent)
and
2001251 Ontario Inc.
Defendant (Appellant)
AND BETWEEN
2001251 Ontario Inc.
Plaintiff (Appellant)
and
Romandale Farms Limited
Defendant (Respondent)
DOCKET: C67557
BETWEEN
Fram Elgin Mills 90 Inc.
(formerly Frambordeaux Developments Inc.)
Plaintiff (Appellant)
and
Romandale Farms Limited, Jeffrey Kerbel,
2001251 Ontario Inc. and First Elgin Developments Inc.
Defendants (Respondent)
AND BETWEEN
Fram 405 Construction Ltd. and
Bordeaux Homes Inc.
Plaintiffs (Appellant)
and
Romandale Farms Limited, 2001251 Ontario Inc.,
First Elgin Developments Inc. and Jeffrey Kerbel
Defendants (Respondent)
AND BETWEEN
Romandale Farms Limited
Plaintiff
and
2001251 Ontario Inc.
Defendant
AND BETWEEN
2001251 Ontario Inc.
Plaintiff
and
Romandale Farms Limited
Defendant
Chris G. Paliare and Tina H. Lie, for the appellants Jeffrey Kerbel, 2001251 Ontario Inc., and First Elgin Developments Inc. (C67533)
Sheila R. Block, Jeremy Opolsky, Sara J. Erskine, and Benjamin Lerer for the appellants Fram Elgin Mills 90 Inc. (formerly Frambordeaux Developments Inc.) and Fram 405 Construction Inc. (C67557)
Sarit E. Batner, Kosta Kalogiros, and Avi Bourassa, for the respondent Romandale Farms Limited (C67533 and C67557)
Heard: September 8 and 9, 2020, by video conference
On appeal from the judgment of Justice Nancy J. Spies, of the Superior Court of Justice, dated September 13, 2019, with reasons reported at 2019 ONSC 5322, and from the costs order, dated April 2, 2020.
Table of Contents
Majority Reasons: 1
I. Overview.. 1
II. THE PARTIES. 6
III. KEY DATES AND AGREEMENTS. 7
IV. The Trial REASONS. 18
V. The Issues ON THE APPEALS. 29
A. Issues Raised by Fram.. 29
B. Issues Raised by Kerbel 30
VI. ROMANDALE ALLEGES THRESHOLD FLAWS. 30
A. The First Alleged Threshold Flaw. 31
B. The Second Alleged Threshold Flaw. 34
VII. analysis of fram’s issues. 35
Issue #1: Did the trial judge err in failing to find that Romandale was estopped, based on estoppel by representation or by convention, from claiming that the Settlement Agreement breached the 2005 August Agreement?........................................................................................................35
A. The Parties’ Positions. 35
B. Estoppel by Representation. 44
(1) Governing Legal Principles ..………………………………………….44
(2) Application of the Law …………………………………………………45
C. Estoppel by Convention. 47
(1) Governing Legal Principles ……………………………………………47
(2) Application of the Law ………………………………………………….49
(a) Assumption Shared and Communicated ……………………..49
(i) The Settlement Agreement and Drafts Leading to It ...51
(ii) Letters between Counsel ……………………………….56
(iii) Pleadings and Evidence at Trial ……………………….57
(b) Reliance ………………………………………………………….58
(c) Detriment ………………………………………………………...64
(d) Romandale’s Overriding Submission on Estoppel by Convention ………………………………………………………67
(e) Conclusion on Estoppel by Convention ………………………71
Issue #2: Did the trial judge err in determining that, by entering into the Settlement Agreement, Kerbel breached the 2005 August Agreement? ….72
VIII. analysis of KERBEL’S issues. 74
Issue #3: Did the trial judge err in concluding that Kerbel repudiated the 2005 August Agreement? ..………………………………………………………. 74
Issue #4: Did the trial judge err in concluding that the 2005 August Agreement was frustrated? ………………………………………………………..75
A. The Parties’ Positions. 75
B. Governing Legal Principles. 79
C. Application of the Law. 80
Issue #5: Did the trial judge err in concluding that the 2005 August Agreement was void for mistake? ………………………………………………..85
A. The Parties’ Positions. 85
B. Governing Legal Principles. 86
C. Application of the Law. 87
Issue #6: Did the trial judge err in finding Kerbel’s claim was limitation-barred? ………………………………………………………...………………………89
A. The Parties’ Positions. 89
B. Governing Legal Principles. 92
C. Application of the Law. 93
Issue #7: Did the trial judge err in concluding that Kerbel was not entitled to specific performance of the 2005 August Agreement? …………………...99
A. The Parties’ Positions. 99
B. Governing Legal Principles. 102
C. Application of the Law. 103
IX. FRAM’S CLAIM FOR DAMAGES. 108
X. The Costs Appeal. 109
XI. A COMMENT ON THE CONCURRING REASONS. 111
XII. Disposition. 111
SCHEDULE “A”: CHRONOLOGY OF EVENTS. 113
Schedule “B”: KEY Contractual Provisions. 127
Key Provisions in the COAs. 127
The 2005 August Agreement 131
The Settlement Agreement 138
Concurring Reasons by Lauwers J.A.: 149
A. OVERVIEW.. 149
B. THE CONTRACTUAL CONTEXT. 149
C. ANALYSIS. 151
(1).. Any Estoppel Ceased to Have Practical Effect When Fram Consented to the Sale of Romandale’s Remaining Interest on August 22, 2018. 151
(2).. Estoppel by Convention Is Not Made Out 153
(3).. Kerbel Did Not Breach the 2005 August Agreement by Entering Into the .................................................... Settlement Agreement with Fram.. 167
(4).. By Entering Into the Settlement Agreement, Kerbel Did Not Repudiate Its Obligations Under the 2005 August Agreement. 181
(5).. Kerbel Is Entitled to Specific Performance of the 2005 August Agreement 183
Gillese J.A.:
[1] These appeals involve competing claims to undeveloped lands in Markham, Ontario. They illustrate the perils associated with a landowner selling interests in the land to more than one party in more than one transaction.
[2] The appeals raise many legal issues, one of which is the little-known equitable doctrine of estoppel by convention. In Canada, this doctrine finds its roots in Ryan v. Moore, 2005 SCC 38, [2005] 2 S.C.R. 53. As you will see, estoppel by convention plays a critical role in the resolution of these appeals.
I. Overview
[3] Romandale Farms Limited (“Romandale”) owned two neighbouring farms in Markham[^1] known as the McGrisken Farm and the Snider Farm (the “Lands”). The Lands comprise approximately 275 acres of undeveloped land in the Elgin Mills Road and Warden Avenue area of Markham.
[4] Initially, Romandale was the sole owner of the Lands. However, in 2003 and 2005, Romandale entered into agreements relating to the Lands, as a result of which much litigation has ensued.
[5] In 2003, Romandale sold an undivided 5% interest in the Lands to Fram.[^2] Romandale and Fram planned to obtain the necessary planning approval for the Lands so that they could be developed for residential use. It was their intention that Fram would build homes on the Lands, sell them, and share the profits with Romandale. Romandale and Fram entered into a number of agreements relating to the Lands, including co-owners agreements (the “COAs”). Under the COAs, subject to limited exceptions, neither party could dispose of its interest in the Lands. The COAs also contained a buy-sell mechanism that was generally available only after secondary planning approval (“SPA”)[^3] had been obtained for the Lands. SPA is required before the Lands can be developed.
[6] In August 2005, Romandale entered into an agreement with Kerbel[^4] (the “2005 August Agreement”) consisting of several transactions respecting properties in Markham. One of the transactions was the sale of Romandale’s 95% interest in the Lands to Kerbel. This was to be achieved in two steps. In the first step, Romandale sold Kerbel 5% of its interest in the Lands.[^5] In the second step, Romandale agreed to sell its remaining interest in the Lands to Kerbel, conditional on either Fram’s consent to the sale or Romandale’s exercise of the buy-sell provisions in the COAs. All of the transactions under the 2005 August Agreement have been completed with the exception of the sale of Romandale’s remaining interest in the Lands to Kerbel.[^6]
[7] Whether Romandale is bound by the 2005 August Agreement – and its obligations respecting the sale of its remaining interest in the Lands – is the driving force behind these appeals.
[8] In 2007, Fram sued Romandale and Kerbel, claiming that the 2005 August Agreement was an impermissible disposition of Romandale’s interest in the Lands under the COAs (the “2007 Action”).
[9] In 2008, Fram and the development manager for the Lands sued Romandale and Kerbel. They alleged that the 2005 August Agreement amounted to a breach of the construction management agreements between Fram and Romandale respecting the Lands (the “2008 Action”).
[10] In 2009, government decisions significantly changed the timelines and development prospects for the Lands. Development of the Snider Farm was delayed until 2021-2031 and of the McGrisken Farm until 2031-2051. In addition, the Snider Farm was newly earmarked for employment use, which would prevent residential development.
[11] The 2007 and 2008 Actions were scheduled for trial in the fall of 2010. In an attempt to settle them before trial, Fram, Kerbel and Romandale attended a judicial mediation in September 2010. At the mediation, the three parties reached an agreement in principle. That agreement included a statement of the parties’ intention that the purchase and sale of Romandale’s remaining interest in the Lands to Kerbel would take place after the Lands obtained SPA (the “Statement”). Romandale later withdrew from the settlement agreement. However, in December 2010, Fram and Kerbel settled the matters between them and entered into a settlement agreement (the “Settlement Agreement”). It is important to note that para. 5 of the Settlement Agreement contains the Statement.
[12] In 2014, Romandale sued Kerbel claiming Kerbel breached the 2005 August Agreement by taking steps to reduce the amount of developable acreage on the Lands (the “2014 Action”).
[13] In 2015, Romandale changed legal counsel. For the first time, it took the position that, because of the Statement in the Settlement Agreement, Kerbel had repudiated the 2005 August Agreement. Romandale also announced that it considered itself no longer bound by the 2005 August Agreement. Accordingly, in 2016, Kerbel sued Romandale to compel it to perform its remaining obligation under the 2005 August Agreement (the “2016 Action”).
[14] The four actions involving the Lands were tried together in the fall of 2018.
[15] By judgment dated September 13, 2019 (the “Judgment”), all four actions were resolved in favour of Romandale. The trial judge’s key determination was that Kerbel repudiated the 2005 August Agreement when it entered into the Settlement Agreement because para. 5 of the Settlement Agreement stated the parties’ intention that the purchase and sale of the Remaining Interest would take place after SPA. The trial judge found that Romandale had accepted the repudiation and concluded that the 2005 August Agreement was at an end. Accordingly, Romandale was excused from performing its remaining obligations under the 2005 August Agreement.
[16] Both Fram and Kerbel (collectively, the “Appellants”) appeal to this court. Their appeals were consolidated. The Appellants ask this court to, among other things, declare that the 2005 August Agreement is valid and enforceable, and make an order for specific performance requiring Romandale to perform its obligations under the 2005 August Agreement.
[17] For the reasons that follow, I would allow the appeals and make the requested order for specific performance.
II. THE PARTIES
[18] There are two sets of appellants in this appeal.
[19] The Fram appellants consist of Fram Elgin Mills 90 Inc. and Fram 405 Construction Ltd. Fram Elgin Mills 90 Inc. is part of a group of companies known as the Fram Building Group. It was incorporated for the purpose of developing the Lands. Before 2010, it was named Frambordeaux Developments Inc. Frank Giannone is the president of Fram Elgin Mills 90 Inc. In deciding the issues in these appeals, it generally does not matter whether the Fram appellants were involved collectively or individually. For ease of reference, I use “Fram” when I refer to one or more of the Fram appellants. However, when the distinction matters, I use the individual party’s name.
[20] The Kerbel appellants consist of 2001251 Ontario Inc., First Elgin Developments Inc., and Jeffrey Kerbel. They are land developers and builders. Mr. Kerbel is the principal of the Kerbel group of companies. Again, for ease of reference, I use “Kerbel” when I refer to one or more of the Kerbel appellants but, when the distinction matters, I use the individual party’s name.
[21] Romandale is a corporation that has long owned properties in the Markham area, including the Lands. Helen Roman-Barber has been the principal of Romandale since 1988. The Roman family owns and operates Romandale. It also owned the Triple R Lands, an adjoining property to the Lands.
III. KEY DATES AND AGREEMENTS
[22] Below you will find a summary of the key dates and most significant agreements. A more detailed chronology of events is contained in Schedule “A” to these reasons. In the analysis of the various issues, I rely on the detailed recitation of facts set out in that chronology. This section and the chronology in Schedule “A” are based on the factual findings in the trial judge’s reasons (the “Reasons”).
[23] In Schedule “B” to these reasons, you will find the text of: the key contractual provisions in the COAs between Romandale and Fram; the 2005 August Agreement; and, the Settlement Agreement.
2003
[24] Romandale sells Fram an undivided 5% interest in the Lands and the parties enter into two identical sets of agreements, one set for each farm property. Each set consisted of three documents: the COA, which sets out the terms and conditions on which Romandale and Fram, as co-owners, hold title to the Lands; the Construction Management Agreement (“CMA”), under which Fram was to construct and sell residential units on the Lands, once the Lands achieved SPA; and the Development Management Agreement (“DMA”), which governed the development process for the Lands. Bordeaux Developments (Ontario) Inc. (“Bordeaux”) was also a party to the DMAs and, under its terms, Bordeaux was appointed the development manager responsible for the development requirements of the Lands.
[25] Of these agreements, the COAs are the most significant for these appeals. The buy-sell provision in s. 5.07 of the COAs permits a co-owner, under certain conditions, to tender on the other an offer to sell its entire interest in the Lands and, at the same time, an offer to buy the other’s entire interest in the Lands on the same terms as the offer to sell. The non-tendering party must choose whether to buy out the tendering party or sell its interest. The buy-sell is available once SPA is obtained for the Lands or the DMAs are terminated.
[26] Section 6.02 of the COAs provides that if an event of default occurs and is continuing, the non-defaulting party has the right to, among other things, bring proceedings for specific performance and/or buy the defaulting party’s interest in the Lands at 95% of fair market value.
[27] Development of the Lands depended on obtaining planning approval, including appropriate amendments to the official plan. These changes are made to the secondary plan, which provides more detailed policies for the development of a specific area. The process of obtaining development approval for specific lands is known as SPA. This is reflected in s. 5.07(a) of the COAs which defines SPA as “an amendment of the official plan of the Town of Markham applicable to the Lands, obtained in accordance with the Planning Act (Ontario)”.
[28] When Romandale and Fram entered into these agreements in 2003, Romandale had not yet started the SPA process.
2004
[29] With Fram’s consent, Romandale borrows $6 million from the Bank of Nova Scotia (“BNS”), secured by a mortgage on the Lands.
2005
[30] With Fram’s consent, Romandale terminates the DMAs with Bordeaux.[^7] The ongoing work to move the Lands through SPA continues through a new agreement between Fram and Romandale to co-manage development of the Lands.
[31] BNS calls its $6 million mortgage. Romandale needs financing to repay the BNS loan by August 30, 2005. It also needs cash to make distributions to the Roman family. The solution is the 2005 August Agreement, which Romandale and Kerbel enter into on August 29, 2005.
[32] In the 2005 August Agreement, Kerbel agrees to pay off the BNS mortgage and extend the same amount as a new loan to Romandale under the same security and Romandale agrees to: (1) sell Kerbel its 95% interest in the Lands for a fixed price of $160,000 per acre; (2) on behalf of the Roman family, sell Kerbel the adjoining Triple R Lands for $175,000 per acre, subject to a purchase price adjustment for non-developable acreage; and (3) grant Kerbel a right of second refusal over other lands, called the Elgin South Property. The sale of Romandale’s interest in the Lands is to occur in two steps:
a. Step 1: an initial sale of 5% of Romandale’s interest in the Lands; and
b. Step 2: the sale of Romandale’s remaining interest in the Lands (“Remaining Interest”), conditional on:
i. Romandale buying out Fram’s interest in the Lands pursuant to the buy-sell provisions in the COAs; or
ii. Fram consenting to the transaction.
[33] I refer to the second step of the sale of Romandale’s interest in the Lands to Kerbel as the “Conditional Provision”.
[34] All the transactions in the 2005 August Agreement have been completed, except the sale of Romandale’s Remaining Interest to Kerbel under the Conditional Provision. Romandale received over $16 million in immediate value from Kerbel under the 2005 August Agreement: $6 million in new mortgage financing; $2,128,000 in cash for its 5% interest in the Lands; and, $8,575,000 for the Triple R Lands.
[35] Paragraph 5 of the 2005 August Agreement empowers Kerbel to cause Romandale to trigger the buy-sell provision in the COAs following SPA being obtained for the Lands. Paragraph 5 also gives Kerbel exclusive control over the development of the Lands.
[36] Ms. Roman-Barber tells Fram she reached an agreement with Kerbel under which she sold the Triple R Lands, assigned the BNS mortgage, and sold a 5% interest in the Lands. She does not disclose that Romandale also committed to sell its entire interest in the Lands through the Conditional Provision.
2007
[37] Despite repeated requests that Romandale provide it with a copy of the 2005 August Agreement, it is only in April 2007 that Fram’s counsel is permitted to read a copy.
[38] Fram starts the 2007 Action against Romandale and Kerbel, alleging that the 2005 August Agreement was a prohibited disposition under the COAs. It also seeks an injunction restraining Romandale from any further sale of its interest in the Lands. Further, it gives notice it will seek to exercise its remedy under the COAs to purchase Romandale’s interest in the Lands at 95% of fair market value.
[39] The injunction is ordered.
2008
[40] Fram and Bordeaux start the 2008 Action against Romandale and Kerbel based on alleged breaches of the CMAs. Under the CMAs, Fram has the right to construct residences on the Lands once SPA is obtained.
[41] Kerbel, as owner of the Triple R Lands, together with neighbouring landowners, form the North Markham Landowners Group (“NMLG”) with the goal of engaging collectively with the relevant authorities about the development of their respective properties.
[42] From 2008 onward, the NMLG retains consultants and commissions studies required for the development process and engages in that process with Markham. NMLG’s development costs have been in the hundred of thousands of dollars. Until 2011, Kerbel reimbursed Romandale for all costs associated with the Lands, including Romandale’s share of the NMLG “cash calls” that were made to fund the NMLG ongoing development activities.
2009
[43] Government decisions change the anticipated development timeline for the Lands. As a result, development of the Snider Farm is delayed until 2021-2031 and of the McGrisken Farm until 2031-2051. In addition, the Snider Farm is proposed for employment use, which would prevent residential development.
[44] At Kerbel’s insistence, Romandale joins the NMLG.
2010
[45] In the hope of resolving the 2007 and 2008 Actions before trial, Romandale, Fram, and Kerbel engage in settlement discussions at a judicial mediation in September 2010. The three parties reach an agreement in principle on the main settlement terms. One of the agreed settlement terms is that the sale of Romandale’s Remaining Interest to Kerbel will occur after the Lands achieve SPA. The following day, counsel for Romandale writes to counsel for Fram and Kerbel and outlines the agreed points of settlement, including that sale of its Remaining Interest will occur when SPA has been obtained for the Lands.
[46] Romandale withdraws from the settlement in October but Fram and Kerbel move forward and enter into the Settlement Agreement in December 2010.
[47] The Settlement Agreement provides that if Romandale does not concur in it and the 2007 and 2008 Actions proceed to trial:
(1) Fram would discontinue its claims against Kerbel, not seek a declaration that the 2005 August Agreement is void, and restrict its claims against Romandale to damages;
(2) Kerbel would provide Fram with an option to purchase a 50% interest in Romandale’s Remaining Interest, on the same terms and conditions as Kerbel might purchase Romandale’s Remaining Interest;
(3) If Fram exercises the option, it and Kerbel would enter into a joint venture agreement to develop the Lands with (effectively) an equal sharing of costs;
(4) Fram does not consent to Romandale’s sale of its Remaining Interest in the Lands to Kerbel; and
(5) Para. 5 of the Settlement Agreement includes the statement of Fram and Kerbel’s intention that “the purchase and sale of Romandale’s Remaining Interest in the Lands pursuant to these Minutes of Settlement will take place after [SPA] for the Lands has been obtained”.
2011
[48] By letter dated January 28, 2011, counsel for Romandale advises Fram and Kerbel that Romandale objects to Kerbel’s land planner telling the NMLG that there was a change in the ownership of the Lands. The letter reiterates that Romandale conditionally sold the Lands to Kerbel under the 2005 August Agreement and “[t]he condition could only be satisfied by either a) secondary plan approval (which has not been achieved); b) or the consent of [Fram] to the transaction”.
[49] Romandale represents the Lands at the NMLG and instructs its planning consultant (and others working for it) to not share information with Kerbel’s planner.
[50] Kerbel’s counsel sends a letter, dated February 17, 2011, to Romandale’s counsel complaining that Ms. Roman-Barber’s conduct is a breach of para. 5 of the 2005 August Agreement in which Romandale ceded control of the development process for the Lands to Kerbel. It demands that Romandale confirm to the NMLG that Kerbel’s planning consultant has the sole authority to represent the Lands and threatens to commence proceedings if Ms. Roman-Barber does not comply with para. 5 of the 2005 August Agreement.
[51] Romandale’s counsel responds by letter, dated February 25, 2011, asserting that its client had “at all times acted in accordance” with the 2005 August Agreement and that it is considering whether the Settlement Agreement was a breach of the 2005 August Agreement.
2013
[52] Meanwhile, Romandale and Kerbel are involved in litigation over the purchase price of the Triple R Lands (the “Triple R Lands Litigation”), one of the transactions in the 2005 August Agreement. In February 2013, Romandale and Kerbel enter into a partial settlement in which they agree that if Kerbel is found to be entitled to a price adjustment, the determination of the non-developable lands is to be done “pursuant to the terms of the [2005 August Agreement] and the Amendment”.[^8]
[53] Romandale leaves the NMLG.
2014
[54] Romandale starts the 2014 Action against Kerbel, alleging that Kerbel fundamentally breached the 2005 August Agreement by taking steps to reduce the amount of developable acreage on the Lands. It seeks a declaration that the 2005 August Agreement is terminated or, alternatively, damages.
[55] This court releases its decision in the Triple R Lands Litigation, finding in favour of Kerbel. It declares that Kerbel is entitled to a purchase price reduction in accordance with the 2005 August Agreement.
2015
[56] Romandale retains new counsel and takes a new position: the buy-sell provisions in the COAs could be performed before SPA because the DMAs with Bordeaux had been terminated in February 2005.
[57] Romandale obtains leave to amend its pleadings in the 2007 Action to allege, for the first time, that Kerbel repudiated the 2005 August Agreement by entering into the Settlement Agreement because it contained para. 5 which provides that the purchase and sale of Romandale’s Remaining Interest in the Lands would occur after SPA. Also for the first time, in its amended pleading, Romandale asserts that it will not perform the 2005 August Agreement in any event.
2016
[58] Kerbel starts the 2016 Action against Romandale, seeking specific performance of the 2005 August Agreement.
2017
[59] Kerbel files a crossclaim in the 2007 Action seeking specific performance of the 2005 August Agreement and an order directing Romandale to comply with its terms.
[60] Romandale files a defence to Kerbel’s crossclaim in the 2007 Action and newly alleges that the 2005 August Agreement offends the rule against perpetuities.
2018
[61] Shortly before the trial of the four actions begins in October 2018, Fram and Kerbel amend the Settlement Agreement to allow the sale of Romandale’s Remaining Interest to close immediately, rather than after SPA, and Fram delivers its consent to that sale.
[62] When the trial begins, SPA has not been obtained for the Lands.
IV. The Trial REASONS
[63] As the trial reasons are over 100 single-spaced pages in length, I will not attempt to summarize them here. Instead, I set out below a summary of the disposition of each of the four actions. Thereafter, I summarize the Reasons on the issues raised in these appeals.
Disposition of the Four Actions
[64] The trial judge concluded that Romandale did not breach the COAs when it entered into the 2005 August Agreement and dismissed the 2007 Action accordingly. In reaching this conclusion, the trial judge held that: (1) the Conditional Provision was not a “Disposition” in breach of s. 5.03 of the COAs; (2) Romandale was not obliged to give Fram notice and a copy of the 2005 August Agreement so, if it did fail to disclose the same (which Romandale disputed), the failure was not a breach of the COAs; and, (3) Romandale did not breach the COAs by ceding control over the development of the Lands to Kerbel under the 2005 August Agreement (Reasons, at paras. 187-91, 204-05).
[65] The trial judge concluded that Romandale’s entry into the 2005 August Agreement did not amount to a breach of the CMAs because Romandale continued to own its Remaining Interest in the Lands and “for all practical purposes” continued to control the development of the Lands in the same way as before (Reasons, at para. 226). Accordingly, she dismissed the 2008 Action.
[66] With respect to the 2014 Action, the trial judge declared that the 2005 August Agreement was “at an end and terminated” and she dismissed Kerbel’s crossclaim seeking damages against Romandale. These orders flowed from the trial judge’s determination that Kerbel repudiated the 2005 August Agreement by entering into the Settlement Agreement (Reasons, at paras. 346, 442).
[67] Having found that Kerbel had repudiated the 2005 August Agreement and that Romandale accepted the repudiation, the trial judge dismissed Kerbel’s 2016 Action for specific performance of the 2005 August Agreement (Reasons, at paras. 346, 442).
Estoppel (Reasons, at paras. 359-72)
[68] At trial, both estoppel by representation and estoppel by convention were argued. The trial judge addressed estoppel by representation in the Reasons. However, she did not address estoppel by convention.
[69] Quoting from para. 29 of Scotsburn Co-operative Services Ltd. v. W.T. Goodwin Ltd., 1985 57 (SCC), [1985] 1 S.C.R. 54, the trial judge set out the following legal principles for estoppel by representation, at para. 359:
…The essence of estoppel is representation by words or conduct which induces detrimental reliance. A more exhaustive definition is offered in Spencer Bower and Turner, The Law Relating to Estoppel by Representation (3rd ed., 1977), at p. 4:
…where one person (“the representor”) has made a representation to another person (“the representee”) in words or by acts or conduct, or (being under a duty to the representee to speak or act) by silence or inaction, with the intention (actual or presumptive), and with the result, of inducing the representee on the faith of such representation to alter his position to his detriment, the representor, in any litigation which may afterwards take place between him and the representee, is estopped, as against the representee, from making, or attempting to establish by evidence, any averment substantially at variance with his former representation, if the representee at the proper time, and in the proper manner, objects thereto. [Emphasis in the Reasons.]
[70] The trial judge described Fram and Kerbel’s position on estoppel as follows. They argued that, prior to the Settlement Agreement and for a number of years following it, Romandale consistently took the position that: (1) the 2005 August Agreement was valid and enforceable; and (2) if Fram did not consent to Romandale’s sale of its Remaining Interest to Kerbel, the buy-sell in the 2005 August Agreement would be performed after SPA. They asserted that Fram relied on Romandale’s position in entering into the Settlement Agreement, thereby compromising its claim to the Lands by 50%, and that Kerbel also compromised its position in reliance on Romandale’s position.
[71] Romandale contended that Fram and Kerbel overstated its positions and stripped them of the context in which they were taken. The trial judge agreed, for the following reasons. In the 2007 Action, Romandale’s primary position was that the 2005 August Agreement did not breach the COAs and, as a result, the 2005 August Agreement was valid. The trial judge acknowledged that Romandale did take the position that the buy-sell in the 2005 August Agreement would be triggered after SPA because the buy-sell in the COAs could only be triggered after SPA. However, she noted that Romandale’s position on the buy-sell in the COAs was mistaken and the parties shared this mistaken understanding until 2015 when Romandale rectified its mistake and amended its pleadings. At that point, Romandale asserted that the 2005 August Agreement was unenforceable because Kerbel repudiated it by entering into the Settlement Agreement. However, the trial judge stated that this assertion did not change Romandale’s primary position: Romandale continued to defend the 2007 Action on the basis that the 2005 August Agreement did not breach the COAs. She said that Romandale did not backtrack from its primary position: it was responding to new factual events that carried legal consequences.
[72] On the issue of reliance, the trial judge said that Fram’s only evidence was a “bald assertion” by Mr. Giannone that he relied on Romandale’s position that the 2005 August Agreement was enforceable. She said this evidence was totally unreliable and could not be accepted.
[73] In any event, the trial judge concluded, any reliance would have been “totally unreasonable” as Romandale objected to the Settlement Agreement before it was entered into. Therefore, Fram and Kerbel proceeded at their own risk.
Repudiation of the 2005 August Agreement (Reasons, at paras. 305–46)
[74] The trial judge stated the legal principles governing repudiation as follows, at para. 305:
The applicable law is not in dispute. A contract may be said to be repudiated when one party acts in a way, by words or conduct, that evinces an intent to no longer be bound by the contract. Only a very substantial breach will amount to a repudiation. As the court stated in Jedfro Investments at para. 21, “having ‘little regard’ for an agreement does not establish that a party is repudiating the agreement”. Repudiation arises where the innocent party is deprived of substantially the whole benefit of its agreement. When faced with repudiation, the innocent party may elect to treat the contract as at an end, relieving the parties from further performance. [Citations omitted.]
[75] She concluded that the Settlement Agreement materially and substantially changed the deal in the 2005 August Agreement for the following reasons. Because Kerbel was no longer at liberty to cause Romandale to trigger the buy-sell before SPA and Fram was no longer at liberty to consent before SPA, the result of the Settlement Agreement was to tie up the Lands until after SPA, then decades away or more, at a fixed price, without paying Romandale for the Lands and while leaving Romandale with all the risks and liabilities. She said this entirely devalued the Conditional Provision, given the time value of money, and that Kerbel shifted all of the risk of the Lands to Romandale by tying up the Lands indefinitely without any compensation to Romandale.
[76] The trial judge also concluded that, by entering into the Settlement Agreement, Kerbel demonstrated an intent not to be bound by the ongoing performance of the 2005 August Agreement. It wanted instead to abide only by its new Settlement Agreement with Fram.
[77] The trial judge determined that Kerbel’s repudiation of the 2005 August Agreement deprived Romandale of substantially the whole benefit of that agreement. In making this determination, the trial judge considered each transaction in the 2005 August Agreement “on its own” and stated that there was no dispute that by the time of the Settlement Agreement, Romandale had not received any of the benefit of the Conditional Provision. She said that all of the transactions in the 2005 August Agreement were either of no benefit to Romandale or of relatively modest benefit when compared to the Conditional Provision. She concluded that performance of the other parts of the 2005 August Agreement could not “represent Romandale receiving substantially the whole of the benefit of that agreement” (at para. 336).
[78] The trial judge found that Romandale had accepted Kerbel’s repudiation. In making this finding, she said: (1) by February 2011, Kerbel knew that Romandale was no longer acting in accordance with the 2005 August Agreement; and (2) in a letter dated February 9, 2011, from counsel for Romandale to counsel for Kerbel, Romandale took the position that Kerbel “had breached” the 2005 August Agreement and it was “considering its rights” (at para. 338).
[79] Having found that Romandale accepted Kerbel’s repudiation, the trial judge concluded that the parties were relieved of their obligations under the Conditional Provision and it was at an end. Consequently, the Conditional Provision was not enforceable against Romandale.
[80] The trial judge also concluded that Kerbel breached its duty of good faith and its fiduciary duty in acting as Romandale’s agent, by fettering its discretion in the Settlement Agreement as to when to cause Romandale to trigger the buy-sell. Further, she was of the view that by entering into the Settlement Agreement, Kerbel breached the “time is of the essence” clause in the 2005 August Agreement and the clause stipulating that the conditions precedent were for the mutual benefit of the parties.
Frustration (Reasons, at paras. 347-49)
[81] In light of the trial judge’s determination on repudiation, it was not necessary that she consider Romandale’s alternative argument that the 2005 August Agreement was rendered unenforceable on account of frustration. However, the trial judge stated, had it been necessary to consider it, she was persuaded that the 2005 August Agreement was frustrated.
[82] Relying on Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para. 53, the trial judge said that frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract” (at para. 348).
[83] The trial judge said it was clear that when the 2005 August Agreement was entered into, both Ms. Roman-Barber and Mr. Kerbel expected that SPA was only years away, not decades away. Unforeseen planning changes resulted in SPA being delayed for decades and the farms being put on different development tracks. In addition, the Snider Farm could be developed only as employment lands, not for residential use. These changes were beyond the control of the parties and rendered the performance of the Conditional Provision radically different from that to which the parties agreed.
Mistake (Reasons, at paras. 350-53)
[84] Romandale argued that if obtaining SPA was a prerequisite to triggering the buy-sell, the Conditional Provision was unenforceable because Kerbel and Romandale were mistaken, when entering into the 2005 August Agreement, as to the time horizon within which SPA could be achieved.
[85] The trial judge accepted this argument and found the Conditional Provision void for mistake. She said the following, at para. 351:
Both Romandale and Kerbel, in making a “time is of the essence” clause, fixing a purchase price of $160,000 per acre, and providing for the conditions precedent for their mutual benefit, without any sunset clause or otherwise set[ting] the closing date, were operating on the mistaken understanding that SPA would occur within a relatively short time period, and certainly not decades after the [2005 August Agreement] was entered into.
[86] Citing Miller Paving Ltd. v. B. Gottardo Construction Ltd., 2007 ONCA 422, 86 O.R. (3d) 161, at para. 23, the trial judge set aside the 2005 August Agreement contract for common mistake as, in all the circumstances, it would be “unconscientious” for a contracting party to avail itself of the legal advantage it had obtained. She agreed with Romandale that it would be unconscionable and commercially absurd to enforce the Conditional Provision or even consider it valid and enforceable since the parties would “never have agreed to its terms, especially the fixed price per acre of the Lands, had they known that the timeline for SPA would change so drastically and … be pushed out decades in the future”.
Kerbel’s Claims were Time-Barred (Reasons, at paras. 400-07)
[87] The trial judge found that even if Kerbel had a claim for specific performance of the 2005 August Agreement, its claim was barred by the expiration of the two-year limitation period under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, (the “Limitations Act”) and the equitable doctrine of laches.
[88] The trial judge found that Kerbel was aware, as of 2011, that Romandale: viewed the Conditional Provision as being at an end; was no longer co-operating with Kerbel to advance the Lands through development as required by the 2005 August Agreement; and, was shutting Kerbel out for its own purposes. She said this conduct clearly revealed that Romandale intended to remain the owner of the Lands and, from its point of view, the Conditional Provision was dead.
[89] Despite being aware of this, Kerbel took no material steps to enforce its rights and acquiesced to the state of affairs for years before asserting a claim for specific performance for the first time in the 2016 Action.
[90] She rejected Kerbel’s claim that it did not know until 2015 that Romandale intended to not perform the Conditional Provision, saying that this was undermined by the clear implications of Romandale’s conduct since 2011.
[91] Kerbel did not seek specific performance of the 2005 August Agreement until it commenced the 2016 Action. That was more than five years after it wrote to Romandale in 2011 asserting that Romandale was breaching the 2005 August Agreement, and threatening to commence litigation to affirm the breach. By 2016, Kerbel was outside the two-year statutory limitation period, had acquiesced to Romandale’s conduct, and had permitted a state of affairs to exist where Romandale spent years investing significant time, effort, and money into the Lands.
Specific Performance (Reasons, at paras. 399, 408-23)
[92] The trial judge held that Kerbel was not entitled to specific performance of the 2005 August Agreement because the Lands were not unique.
[93] The trial judge found the Lands were not unique because Kerbel’s only evidence of uniqueness was “a bald assertion from Mr. Kerbel” and because the expert evidence, including from Kerbel’s expert, contradicted Kerbel’s assertion. The experts called by all three parties used a “direct comparison” approach to provide their opinions on land values. The direct comparison approach determines value based on an analysis of sales of similar properties within a close time period and location. The trial judge concluded that because Fram and Kerbel’s experts were able to use the “direct comparison” approach to value the Lands, “the Lands are not unique”.
[94] Further, the trial judge said, the Lands are not unique because they were “just an investment for Kerbel”, there were suitable substitute properties that Kerbel could purchase, and it was possible to quantify the monetary equivalent of Kerbel’s alleged future losses.
V. The Issues ON THE APPEALS
A. Issues Raised by Fram
[95] Fram says that the trial judge made numerous errors in her lengthy trial decision. To narrow its appeal, Fram focused on two issues. It submits that the trial judge erred in:
failing to find that Romandale was estopped, based on either estoppel by representation or estoppel by convention, from claiming that the Settlement Agreement breached the 2005 August Agreement; and
concluding that, by entering into the Settlement Agreement, Kerbel breached the 2005 August Agreement.
B. Issues Raised by Kerbel
[96] In its appeal, Kerbel raises five issues. It submits that the trial judge erred in concluding that:
it repudiated the 2005 August Agreement by entering into the Settlement Agreement;
the 2005 August Agreement was frustrated;
the 2005 August Agreement was void for mistake;
its claim was limitation barred; and,
it was not entitled to specific performance of the 2005 August Agreement.
VI. ROMANDALE ALLEGES THRESHOLD FLAWS
[97] Before turning to the issues raised on appeal, I will address Romandale’s contention that the appeals suffer from two threshold flaws warranting their dismissal.
[98] First, Romandale submits that Fram’s appeal is improper because it is not an appeal from the dismissal of its 2007 and 2008 Actions but, rather, an attempt to appeal from the 2014 and 2016 Actions, to which Fram was not a party. It says that only a party to a proceeding below can appeal and the fact that multiple actions are ordered to be heard together does not alter the distinct identities of the parties.
[99] Second, Romandale submits that the appeals are improper because they are founded on a new, never pleaded or asserted interpretation of the 2005 August Agreement: that it gave Kerbel an unfettered discretion to cause Romandale to trigger the buy-sell before or after SPA. Romandale contends that this interpretation contradicts the one that Kerbel argued at trial: that the 2005 August Agreement required that it cause Romandale to trigger the buy-sell only after SPA. Romandale concludes on this alleged flaw by noting that, had the Appellants raised this new theory in their pleadings or at trial, the evidence “would have no doubt been different”. Allowing Fram and/or Kerbel to now advance this theory, Romandale says, would be manifestly unfair.
[100] For the following reasons, I do not accept that either alleged threshold flaw justifies dismissing the appeals.
A. The First Alleged Threshold Flaw
[101] In my view, the direction that the four actions be tried together coupled with the way in which the trial was conducted are a full answer to the first alleged flaw.
[102] In his capacity as the case management judge in these proceedings and pursuant to r. 6 of the Rules of Civil Procedure, R.R.O. 1990, reg. 194, Dunphy J. exercised his discretion and directed that the four actions be tried together in a single trial. He also gave directions about matters relating to the conduct of the trial. There can be no doubt about the wisdom of these directions.
[103] Rule 6 provides that where two or more proceedings are pending in the court, an order may be made that they be tried together if it appears to the court that the proceedings have a common question of law or fact, the relief claimed in them arises out of the same transaction or series of transactions, or “for any other reason”. An order under r. 6 is discretionary.
[104] The purpose behind r. 6 is to avoid a multiplicity of proceedings and thereby prevent inconsistent dispositions, protect scarce judicial resources, and save expense to the parties. It also safeguards against a tactical decision to subject a party or parties to more than one action and, therefore, promotes fairness: see Wood v. Farr Ford Ltd., 2008 53848 (Ont. S.C.), at para. 23; Mohamed Imran Hanif v. Ontario College of Pharmacists, Her Majesty the Queen in Right of Ontario and AGO, 2013 ONSC 6991, 315 O.A.C. 368 (Div. Ct.), at para. 18.
[105] It is readily apparent that the preconditions to the application of r. 6 were met. The four actions had common questions of law and fact. And, the relief claimed in the actions arose out of one or more of the transactions relating to the Lands. As the trial judge noted, at para. 23 of the Reasons, the direction that the four actions be tried together was made because the actions “involve all of the current disputes between these three protagonists with respect to their interests in the Lands”.
[106] Further, the direction that the actions be tried together fulfilled the purpose which underlies r. 6. A single trial avoided a multiplicity of proceedings among the parties, prevented inconsistent dispositions relating to the Lands, protected scarce judicial resources, and saved the parties expense. In my view, it also does away with Romandale’s contention that Fram was a party only to its actions and not to the proceeding below. The four actions were tried together and a single judgment was rendered in respect of those actions. The fact that the Judgment sets out the relief granted in respect of each action separately does not alter the fact that Fram was a party to the proceeding below and, thus, has the right to appeal from the Judgment.
[107] Furthermore, Romandale’s position on the first alleged threshold flaw flies in the face of the way in which these actions proceeded at trial. Although the actions were not formally consolidated, the trial of the actions was effectively consolidated, with the evidence being used on all issues and argument permitted on all issues by all parties.
[108] At trial, Fram was permitted to lead evidence and make argument on the same issues it now raises on appeal. The Reasons show that both Fram and Kerbel argued the issues raised in the appeals; the trial judge repeatedly refers to Fram’s position on the issues and she often refers to Fram’s and Kerbel’s positions interchangeably. Had Romandale wished to take issue with Fram making argument and adducing evidence on the issues at trial, it was incumbent on Romandale to object at trial, which would have given Fram the opportunity to request to be added as a party. Having stayed silent at trial, Romandale cannot now take the position that Fram does not have standing on this appeal to raise and argue the issues it is pursuing.
[109] Finally, I note that Romandale did not question the propriety of Fram’s appeal before the case management judge of this court who issued the order consolidating the appeals. It does not now lie in Romandale’s mouth to suggest that Fram is not entitled to pursue its appeal.
[110] For these reasons, Fram’s appeal is not improper.
B. The Second Alleged Threshold Flaw
[111] Romandale’s second alleged threshold flaw is based on the new interpretation of the 2005 August Agreement it says that Fram and/or Kerbel advance on appeal. In my analysis of Issue #1, below, I explain that because of estoppel by convention, Romandale is barred from asserting that the buy-sell provisions in the COAs and the 2005 August Agreement could be utilized pre-SPA. The trial judge interpreted the 2005 August Agreement on the basis that the buy-sell provision could be utilized pre-SPA (Reasons, para. 291). That is, she interpreted it in a way that is impermissible because of the operation of estoppel by convention. Consequently, her interpretation of the 2005 August Agreement cannot stand and it is unnecessary to decide Issue #2. The allegedly new interpretation was made in the context of Issue #2. As it is unnecessary to decide Issue #2, it is also unnecessary to decide whether the Appellants committed the second threshold flaw as Romandale alleges.
[112] Thus, the second alleged threshold flaw does not warrant the dismissal of these appeals.
VII. analysis of fram’s issues
Issue #1: Did the trial judge err in failing to find that Romandale was estopped, based on estoppel by representation or by convention, from claiming that the Settlement Agreement breached the 2005 August Agreement?
A. The Parties’ Positions
Fram
[113] Fram contends that, before 2015, Romandale repeatedly made two representations: (1) under the COAs, the buy-sell could not be exercised until after SPA; and (2) under the 2005 August Agreement, Kerbel could not cause Romandale to trigger the buy-sell in the COAs until after SPA (the “Representations”). It says that Romandale made the Representations and statements consistent with them in: its pleadings; Ms. Roman-Barber’s affidavits; its solicitors’ letters, both before and after the Settlement Agreement; and, Ms. Roman-Barber’s discovery evidence. Fram submits that the Representations formed the basis of a shared common understanding among the parties, and para. 5 was incorporated into the Settlement Agreement in reliance on the Representations and with Romandale’s full knowledge. It will be recalled that para. 5 of the Settlement Agreement states the parties’ intention that the purchase and sale of the Remaining Interest would take place after SPA.
[114] Fram argues that estoppel by representation and estoppel by convention both operate to bar Romandale from reversing its position and claiming that para. 5 of the Settlement Agreement is a breach of the 2005 August Agreement. It contends that the trial judge made a palpable and overriding error in refusing to apply estoppel on the basis that Fram and Kerbel had not relied on the Representations or, if they did, that their reliance was unreasonable.
[115] In terms of reliance, Fram says that the trial judge erred in dismissing its and Kerbel’s evidence that they relied on the Representations on the basis the evidence was simply “bald assertions”. Fram argues there is nothing “bald” about the change in course of action it and Kerbel took in entering into the Settlement Agreement. It contends that as a result of the Settlement Agreement, it gave up seeking specific performance of its contractual remedies and limited its damages claim against Romandale to 50% of the Lands, while Kerbel gave up 50% of its rights under the 2005 August Agreement. They did so based on the common understanding – perpetuated by Romandale and its lawyers – that post-SPA closing was consistent with the COAs and the 2005 August Agreement.
[116] Further, Fram contends, there was nothing unreasonable about it and Kerbel’s reliance on Romandale’s Representations. Those Representations were made in a litigation context – through pleadings, affidavits, solicitors’ letters, and examination testimony. The very purpose of the Representations was to allow the courts and other parties to rely on them for notice and the truth of their contents. For example, when Ms. Roman-Barber swore her affidavit in 2007, she intended the court to rely on it in the injunction proceeding. The court did exactly that: Forestell J. accepted Ms. Roman-Barber’s evidence that the “original intent of the [2005 August Agreement] was that the sale to [Kerbel] of the remaining interest of Romandale in the Lands would not occur until some time after SPA”. If the court was entitled to rely on Romandale’s representation of its position Fram argues it was surely reasonable for Fram and Kerbel to do the same.
[117] Fram says the trial judge erred in concluding that reliance was “totally unreasonable” in light of Romandale’s objection to the Settlement Agreement, because Romandale’s objection was not based on the timing of the buy-sell.
[118] In terms of detriment, Fram submits that it would be unjust and unfair to permit Romandale to resile from the mutual assumptions or Representations. In 2010, Kerbel and it entered into the Settlement Agreement with the assistance of a judicial mediation and, at that time, all three parties agreed that the 2005 August Agreement would close post-SPA. Five years later in 2015, knowing the state of the Settlement Agreement, Romandale “upended the playing field” and changed its position to make an uncontroversial term in 2010 (i.e. para. 5) an allegedly repudiatory breach of the 2005 August Agreement. This, Fram contends, is unfair because it threatens to take away Fram and Kerbel’s entire economic interest in the 2005 August Agreement.
Kerbel
[119] On these appeals, Kerbel repeats and relies on Fram’s submissions on estoppel. However, because the trial judge did not deal with estoppel by convention, it falls to this court to decide that matter de novo. Consequently, I will set out a summary of Kerbel’s trial position on that issue.
[120] At trial, Kerbel argued that estoppel by convention applied to bar Romandale from contending that, because of para. 5 in the Settlement Agreement, Kerbel breached the 2005 August Agreement by entering into the Settlement Agreement. It referred to the principles governing estoppel by convention, as set out in Ryan v. Moore, and argued that those principles squarely applied.
[121] Kerbel identified the following as its shared understanding with Romandale when they entered into the 2005 August Agreement: because the sale of Romandale’s Remaining Interest would close after SPA, the 2005 August Agreement did not breach the COAs between Romandale and Fram (the “Shared Understanding”). Romandale repeatedly expressed the Shared Understanding after the 2005 August Agreement was entered into. This includes in the fall of 2010, during which time all three parties – Romandale, Fram and Kerbel – participated in the judicial mediation that took place in respect of the 2007 and 2008 Actions. Kerbel argued that was evidence that all three parties held and operated under the Shared Understanding.
[122] Kerbel also pointed to the fact that even after Romandale resiled from the Settlement Agreement, it knew that Fram and Kerbel were continuing to discuss settlement on the basis of the Shared Understanding. It was only months after the Settlement Agreement was executed that Romandale, for the first time, took the position that by entering into the Settlement Agreement, Kerbel breached the 2005 August Agreement. Kerbel argued that Romandale was obliged to warn it, before the Settlement Agreement was executed, that it intended to change its position on the Shared Understanding.
[123] Kerbel also contended that it would suffer detriment if Romandale were allowed to resile from the Shared Assumption. It had already given Romandale over $16 million in value under the 2005 August Agreement and, through the Settlement Agreement, it compromised its rights under that agreement. If Romandale were allowed to resile from the Shared Assumptions, Kerbel would lose the opportunity to close its purchase of the Remaining Interest under the 2005 August Agreement and develop the Lands.
Romandale
[124] Romandale says that Fram’s submissions on estoppel are premised on an erroneous oversimplification of the equitable doctrine of convention. It contends that, even if there was a shared assumption that the buy-sell could not be triggered under the 2005 August Agreement until after SPA, there was no transaction or dealing between Romandale and either Fram or Kerbel for which this shared assumption formed the basis. In making this argument, Romandale relies on para. 4 of Ryan v. Moore, in which the Supreme Court of Canada states:
Estoppel by convention operates where the parties have agreed that certain facts are deemed to be true and to form the basis of the transaction into which they are about to enter. If they have acted upon the agreed assumption, then, as regards that transaction, each is estopped against the other from questioning the truth of the statement of facts so assumed if it would be unjust to allow one to go back on it. [Citations omitted; emphasis as added by Romandale.]
[125] Thus, Romandale argues, neither Fram nor Kerbel can use estoppel by convention against Romandale to protect the Settlement Agreement. Because the Settlement Agreement was entered into between Fram and Kerbel only, estoppel by convention “may apply as between them but not [to] Romandale”.
[126] As well, Romandale submits that Fram’s argument on estoppel starts with a misstatement about the nature and character of its position prior to the Settlement Agreement. It says that it made no representation upon which Fram or Kerbel could rely, nor did the parties have a shared assumption for the purposes of estoppel.
[127] Its position in the 2007 Action was that the 2005 August Agreement was not a breach of the COAs. It says that the timing of the triggering of the buy-sell was irrelevant to whether Romandale had breached the COAs. To the extent Romandale asserted that the buy-sell in the 2005 August Agreement would be triggered after SPA, “this was just another way of Romandale asserting that the buy-sell under the [2005 August Agreement] could only be triggered when it was triggerable under s. 5.07 of the COAs, coupled with the mistake the parties and counsel had made about s. 5.07”. Given that the mistake was of no consequence to the matters in dispute in the 2007 Action, it went unnoticed, was not something the parties deliberated on, joined issue on, or turned their minds to. It did not form the basis of any of their dealings nor were they all of the mind that it would govern their future affairs.
[128] Romandale also argues that the trial judge did not err in concluding that Fram and Kerbel had not established reliance. It says that the trial judge correctly gave no weight to either Mr. Giannone’s self-serving assertion of reliance in his affidavit evidence or to the recital in the Settlement Agreement. It contends that the evidence made clear that Fram and Kerbel were not relying on Romandale at all but, rather, crafted the Settlement Agreement to carry out a scheme in which they would immediately assume control over the development of the Lands for their benefit while putting off their purchase of the Lands for at least decades.
[129] Furthermore, Romandale says, the trial judge did not err in finding that any reliance by Fram and Kebel was unreasonable. Just because a statement is made in the course of litigation does not mean it can automatically be relied on for the purposes of estoppel. It depends on the circumstances. Fram and Kerbel cannot have reasonably relied on Romandale’s assertions regarding the timing of the buy-sell in the 2005 August Agreement because that issue was not in dispute in the litigation prior to the Settlement Agreement being entered into.
[130] Romandale also points to its objection to the Settlement Agreement, arguing that it does not matter whether its objection was based on para. 5 of that agreement. Its objection put Fram and Kerbel on notice that it would object to any settlement between them. Thus, they proceeded at their own risk.
[131] Romandale also says that, given their position on these appeals, Fram and Kerbel could not have reasonably relied on a shared assumption that the buy-sell could only be triggered after SPA when entering into the Settlement Agreement. Their position on appeal is that Kerbel had an unfettered discretion to trigger the buy-sell in the 2005 August Agreement either before or after SPA. Thus, Romandale contends, they cannot be heard to say it was reasonable for them to rely on a clearly wrong and now abandoned interpretation.
[132] Romandale also says Fram has not established that it would be unjust to allow it to correct its mistake or that Fram and Kerbel suffered any detriment. It cannot be unjust for a party to correct a mistake that is patently obvious on the express words of the contracts, to which all parties had access. Furthermore, Fram and Kerbel’s entry into the Settlement Agreement was a deliberate and inequitable scheme to tie up and control the Lands to Romandale’s exclusion while putting off their purchase for decades.
[133] Moreover, Romandale submits that neither Fram nor Kerbel suffered any relevant detriment in entering into the Settlement Agreement. To the extent Fram suffered detriment by giving up 50% of its claim against Romandale, that detriment is moot because Fram’s claims in the 2007 and 2008 Actions were dismissed and are not being appealed. And, Kerbel presented no evidence of detriment. Romandale says that granting Fram an option to buy 50% of the Lands is not detriment: Kerbel granted the option in exchange for Fram giving up its claims against Kerbel. It was Kerbel’s choice to assign some litigation risk to being sued by Fram and to mitigate that risk by striking a deal with Fram. That Fram ultimately lost and Kerbel “paid” for nothing is irrelevant.
B. Estoppel by Representation
(1) Governing Legal Principles
[134] In Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co., 1970 3 (SCC), [1970] S.C.R. 932, at pp. 939-40, the Supreme Court stated that the essential factors giving rise to estoppel by representation are:
(1) a representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made;
(2) an act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made; and
(3) detriment to such person as a consequence of the act or omission.
[135] More recently in Ryan v. Moore, at para. 5, the Supreme Court referred to its much earlier decision in Page v. Austin (1884), 1884 6 (SCC), 10 S.C.R. 132, at para. 164, to describe the doctrine of estoppel by representation as follows:
Estoppel by representation requires a positive representation made by the party whom it is sought to bind, with the intention that it shall be acted on by the party with whom he or she is dealing, the latter having so acted upon it as to make it inequitable that the party making the representation should be permitted to dispute its truth, or do anything inconsistent with it.
(2) Application of the Law
[136] I agree with the trial judge that Fram and Kerbel fail in their claim of estoppel by representation. However, I do so for different reasons than those of the trial judge.
[137] It will be recalled that, at trial, Fram and Kerbel argued that they entered into the Settlement Agreement in reliance on Romandale’s representation that the 2005 August Agreement was valid and that the buy-sell provision in it was to be performed or completed after SPA. The trial judge concluded that estoppel by representation was not made out because Fram and Kerbel had not proven that they relied on the representation and, if they had, their reliance was unreasonable. That is, the trial judge concluded that Fram and Kerbel failed to prove the second essential factor giving rise to estoppel by representation.
[138] In my view, however, Fram and Kerbel fail on the first essential factor giving rise to estoppel by representation.
[139] Canadian Superior Oil Ltd. describes the first essential factor as a representation “intended to induce a course of conduct” on the part of the person to whom the representation was made. In Ryan v. Moore, this factor is expressed as the requirement that a positive representation be made “with the intention that it shall be acted on” by the party to whom the representation is made. On the facts, Romandale did not make a representation with the intention that Fram and Kerbel should act on it.
[140] In the fall of 2010, Fram, Kerbel, and Romandale were attempting to settle the 2007 and 2008 Actions. After reaching a settlement agreement in principle, the parties continued to negotiate the terms of the settlement. During that process, Fram and Kerbel were made aware that Romandale continued to maintain its position that the 2005 August Agreement was valid and the buy-sell provisions in it and in the COAs could not be utilized until SPA had been achieved for the Lands.
[141] However, knowledge of Romandale’s position and the fact its position remained unchanged from the time that it entered into the 2005 August Agreement until December 2010, when Fram and Kerbel entered into the Settlement Agreement, is not tantamount to Romandale representing that it would not change its position going forward.
[142] Further and in any event, Fram and Kerbel’s knowledge of Romandale’s position does not meet the requirement in the first essential element that Romandale made a representation of its position with the intention of inducing Fram and Kerbel to enter into the Settlement Agreement or otherwise act on it.
[143] Consequently, Fram and Kerbel failed to prove the first essential factor giving rise to estoppel by representation. For these reasons, I agree with the trial judge that estoppel by representation was not made out.
C. Estoppel by Convention
(1) Governing Legal Principles
[144] At para. 59 of Ryan v. Moore, the Supreme Court states that the following criteria form the basis of the doctrine of estoppel by convention:
(1) The parties’ dealings must have been based on a shared assumption of fact or law: estoppel requires manifest representation by statement or conduct creating a mutual assumption. Nevertheless, estoppel can arise out of silence (impliedly). [Emphasis in original.]
(2) A party must have conducted itself, i.e. acted, in reliance on such shared assumption, its actions resulting in a change of its legal position.
(3) It must also be unjust or unfair to allow one of the parties to resile or depart from the common assumption. The party seeking to establish estoppel therefore has to prove that detriment will be suffered if the other party is allowed to resile from the assumption since there has been a change from the presumed position.
[145] On the first criterion – which the Court refers to as “Assumption Shared and Communicated” – the Court provides the following additional guidance, at paras. 61-62:
The crucial requirement for estoppel by convention, which distinguishes it from the other types of estoppel, is that at the material time both parties must be of “a like mind”. The court must determine what state of affairs the parties have accepted, and decide whether there is sufficient certainty and clarity in the terms of the convention to give rise to any enforceable equity.
While it may not be necessary that the assumption by the party raising estoppel be created or encouraged by the estopped party, it must be shared in the sense that each is aware of the assumption of the other. Mutual assent is what distinguishes the estoppel by convention from other types of estoppel. … Thus, it is not enough that each of the two parties acts on an assumption not communicated to the other. Further, the estopped party must have, at the very least, communicated to the other that he or she is indeed sharing the other party’s (ex hypothesi) mistaken assumption. [Citations omitted.]
[146] The court also offers further guidance on the second and third criteria, namely, reliance and detriment. It notes that the requirement of detrimental reliance lies at the heart of true estoppel and that detrimental reliance encompasses two distinct, but interrelated concepts: reliance and detriment: at paras. 68-69.
[147] Reliance requires a finding that the party seeking to establish the estoppel changed its course of conduct by acting, or abstaining from acting, in reliance upon the assumption, thereby altering its legal position: at para. 69.
[148] In terms of detriment, the Court offers this guidance, at para. 73 of Ryan v. Moore. Once the party seeking to establish estoppel shows that it acted on a shared assumption, it must prove detriment. For the plea to succeed, it must be unjust or unfair to allow a party to resile from the common assumption. A change from the presumed legal position will facilitate the establishment of detriment “because there is an element of injustice inherent within the concept of the shared assumption – one party has acted unjustly in allowing the belief or expectation to ‘cross the line’ and arise in the other’s mind”: at para. 73, citing Sean Wilken, Wilken and Villiers: The Law of Waiver, Variation and Estoppel, 2nd ed. (Oxford: Oxford University Press, 2002), at p. 228.
(2) Application of the Law
[149] Unlike estoppel by representation, I must approach the issue of estoppel by convention on a de novo basis. I do so because, while the parties expressly raised and argued the issue of estoppel by convention at trial, the trial judge did not address it.
[150] I will address each of the three criteria that form the basis of estoppel by convention: (a) assumption shared and communicated; (b) reliance; and (c) detriment.
(a) Assumption Shared and Communicated
[151] The first criterion for estoppel by convention requires that the parties’ dealings were based on a shared assumption of fact or law: Ryan v. Moore, at para. 59. Thus, I must determine what state of affairs the parties accepted and decide whether there was sufficient certainty and clarity in the shared assumptions to give rise “to an enforceable equity”: Ryan v. Moore, at para. 61.
[152] I deal first with whether the alleged shared assumptions are sufficiently certain and clear.
[153] In the fall of 2010, when Fram, Kerbel, and Romandale were trying to settle the 2007 and 2008 Actions, the parties based their dealings on two assumptions: (1) the buy-sell provision in the COAs could not be triggered until after SPA had been achieved for the Lands;[^9] and (2) under the 2005 August Agreement, Kerbel could not cause Romandale to trigger the buy-sell under the COAs until after SPA[^10] (the “Shared Assumptions”). There is no ambiguity or lack of clarity about the Shared Assumptions: they have sufficient certainty and clarity to satisfy that requirement in the first criterion of estoppel by convention.[^11]
[154] It is worth recalling at this point that I did not find statements to the same effect as the Shared Assumptions to amount to representations within the meaning of estoppel by representation. That is because a common or shared assumption, as that term is used in estoppel by convention, is not the same thing as a representation. As the Supreme Court explained, at para. 62 of Ryan v. Moore, an assumption need not be created or encouraged by the estopped party: it must simply be shared, in the sense that each party is aware that the assumption is held by the other(s). As the Supreme Court stated, “Mutual assent is what distinguishes the estoppel by convention from other types of estoppel”.
[155] Having found the Shared Assumptions were sufficiently certain and clear, I must now determine whether the parties were of “a like mind”. In making this determination, I must consider whether the three parties: (1) held the Shared Assumptions at the material times; (2) communicated to the others that they held the Shared Assumptions; and (3) based their dealings on them: Ryan v. Moore, at paras. 61-62. In my view, the following documents establish these three matters. Thus, the first criterion for estoppel by convention is met.
(i) The Settlement Agreement and Drafts Leading to It
[156] The final Settlement Agreement is clear evidence that Fram and Kerbel held the Shared Assumptions, communicated that to one another, and based their dealings on them. This is evident from the first, second, and sixth preambles, and para. 5 of the Settlement Agreement:
The first preamble recites that Fram and Romandale are co-owners of the Lands and parties to the COAs and, under the COAs, each has a buy-sell right in respect of the other’s interest but that right “may only be exercised after [SPA] has been obtained for the Lands”.
The second preamble recites that Romandale and Kerbel are parties to the 2005 August Agreement under which Romandale agreed to sell to Kerbel its Remaining Interest “at such time as Romandale could exercise its buy-sell rights under the Buy-Sell Provisions of the [COAs]”.
The sixth preamble recites that Fram and Kerbel “have agreed to settlement so that the right of [Kerbel] to acquire Romandale’s Remaining Interest in the Lands pursuant to the [2005 August Agreement] may be exercised 60 days after [SPA] for the Lands is obtained”.
Paragraph 5 provides that “[i]t is the intention of [Fram and Kerbel] that the purchase and sale of Romandale’s Remaining Interest in the Lands pursuant to these Minutes of Settlement will take place after [SPA] for the Lands has been obtained”.
[157] Though Romandale was not a party to the final Settlement Agreement, its conduct in the fall of 2010 up to and including when Fram and Kerbel executed the Settlement Agreement demonstrates that it too held the Shared Assumptions, communicated that to Fram and Kerbel, and based its dealings with them on the Shared Assumptions.
[158] It will be recalled that in September of 2010, the three parties came to an agreement in principle at the judicial mediation. Based on the agreement in principle, counsel for Fram prepared “very preliminary” draft minutes of settlement and sent the draft to counsel for Romandale under cover of a letter dated September 8, 2010. The preliminary draft was short; it consisted of four preambles and seven paragraphs. The fourth preamble and para. 6 of that draft reflect the Shared Assumptions.
- The fourth preamble reads as follows:
WHEREAS the parties have agreed to settlement so that the right of [Kerbel] to acquire Romandale’s Remaining Interest in the Lands pursuant to the [2005 August Agreement] shall be exercised 60 days after [SPA] for the Lands is obtained …
- Paragraph 6 provides:
[Fram] does not by this agreement consent to the transaction referred to in paragraph 2 of the [2005 August Agreement]. Romandale hereby acknowledges that this settlement agreement does not constitute [Fram’s consent] … and that it is the intention of the parties that the purchase and sale of Romandale’s entire Remaining Interest in the Lands pursuant to these Minutes of Settlement will take place 60 days after [SPA] for the Lands has been obtained.
[159] After the preliminary draft was circulated, counsel for the three parties continued to exchange draft settlement agreements and discuss other possible provisions that might be included.
[160] In a letter dated September 24, 2010, counsel for Romandale wrote to counsel for Kerbel and Fram and set out the areas on which the parties were in agreement, including “[t]hat the sale of each parcel will take place when that particular parcel achieves Secondary Planning Approval”.
[161] Under cover of a letter dated September 29, 2010, counsel for Fram sent Romandale’s counsel (with a copy to Kerbel’s counsel) a proposed final draft. The letter stated that if the draft was acceptable, the “draft stamp” would be removed and it would be circulated for signature. The proposed final draft settlement agreement contained essentially the same fourth preamble as that in the preliminary draft (set out above) and, of a total of seven paragraphs, three reflect the Shared Assumptions.
Paragraph 1 provided that “the injunction ordered by Forestell J. July 26, 2007 shall continue in respect of each of the two parcels comprising the Lands … until 60 days after [SPA] has been granted in respect of that particular parcel of the Lands”.
Paragraph 4 provided that “Fram Kerbel and Romandale shall complete the sale of the entire Remaining Interest of Romandale in the Lands on the terms described in paragraph 2 of the [2005 August Agreement], 60 days after [SPA] has been obtained for each of the two parcels comprising the Lands”.
Paragraph 7 provided that “[t]he parties hereby acknowledge that in making these minutes of settlement, it is their common intention that the purchase and sale of the Romandale’s Remaining Interest in the Lands pursuant to these Minutes of Settlement shall take place in respect of each of the two parcels of the Lands after [SPA] for each parcel has been obtained, and that the closing of the purchase and sale for each parcel shall take place 60 days after [SPA] for that particular parcel of the Lands has been obtained. [Emphasis added.]
[162] In response, by letter dated September 30, 2010, counsel for Romandale provided comments on the draft and asked that the final settlement agreement include, among other things, a provision explicitly requiring the parties to do nothing to hinder or delay the obtaining of SPA for the Lands. He wrote, “As we were specifically advised at the mediation that this would not be a problem, the wording should be inserted in the Minutes”. As well, counsel for Romandale asked that a “drop-dead” date for the contemplated sale of the Lands be inserted in case the Lands never achieved SPA:
At present, there exists the possibility that one or both parcels may not receive [SPA]. Such a failure to address that point may call into question the validity of the agreements or at least pose a practical problem for the parties if [SPA] is not achieved (at least in our lifetimes) for either of the parcels.
[163] The parties continued to communicate about the draft settlement agreement for some weeks. In October 2010, Romandale began taking issue with the draft agreements, which I discuss in more detail below. Ultimately, in a letter dated November 12, 2010, Fram’s counsel wrote to Romandale’s counsel (with a copy to Kerbel’s counsel), stating that it appeared Romandale was resiling from the settlement agreement so steps would be taken to reschedule the trial of the 2007 and 2008 Actions. Fram’s counsel enclosed a copy of the draft settlement agreement that Fram and Kerbel intended to enter into. The enclosed agreement was substantially the same as the final Settlement Agreement, including the provisions that reflected the Shared Assumptions.
[164] Never once during the judicial mediation or in the period that followed leading up to the Settlement Agreement – despite the many communications among counsel which reflected the Shared Assumptions – did Romandale ever object to the Shared Assumptions or the terms in the drafts that reflected them. On the contrary, during that period, Romandale expressly affirmed the parties’ shared understanding that the sale and purchase of Romandale’s Remaining Interest would occur after SPA – as, for example, in its counsel’s letters of September 24 and September 30, 2010, described above.
[165] In my view, what transpired among the three parties during this period alone satisfies the requirements of the first criterion for estoppel by convention. The following documents reinforce this conclusion.
(ii) Letters between Counsel
[166] In a letter dated September 22, 2009, Romandale’s corporate counsel wrote to Kerbel’s counsel to address the matter of participation in the NMLG. He stated that, under the 2005 August Agreement, Kerbel was to act as Romandale’s agent and attorney “for the purposes of taking the steps necessary to proceed to [SPA] and thereby trigger the buy-sell rights under the [COAs]”. This is communication by Romandale to Kerbel of its belief in the Shared Assumptions.
[167] Romandale also communicated its belief in the Shared Assumptions to Fram. By letter dated January 28, 2011, counsel for Romandale wrote to counsel for Fram stating:
[Romandale] was and is the registered owner of 90% of the [Lands]. It conditionally sold those lands to [Kerbel] by way of an agreement dated August 2005. The condition could only be satisfied by either a) secondary plan approval (which has not been achieved); b) or the consent of [Fram] to the transaction.
[168] This letter was sent more than a month after Fram and Kerbel entered into the Settlement Agreement. It demonstrates that Romandale continued to believe the Shared Assumptions even after the Settlement Agreement was executed.
(iii) Pleadings and Evidence at Trial
[169] The pleadings and evidence at trial further demonstrate that all three parties held the Shared Assumptions in the relevant time period. In addition, they show that each party made manifest representations of its belief in the Shared Assumptions and communicated that to the other parties.
[170] At trial, Fram and Kerbel’s positions rested on the Shared Assumptions. Their pleadings – including Fram’s Fresh as Amended Reply and Kerbel’s Statement of Defence and Crossclaim in the 2007 Action – reflect their shared belief that SPA was required before the buy-sell provision in the COAs and the 2005 August Agreement could be triggered.
[171] Romandale’s Statement of Defence in the 2007 Action (before it was amended in 2015), its Statement of Defence in the 2008 Action, and its Notice of Motion to stay the 2007 Action all explicitly stated that the buy-sell provision in the 2005 August Agreement could not be triggered until after SPA was obtained for the Lands.
[172] Furthermore, Ms. Roman-Barber’s affidavits sworn July 11, 2007, and August 23, 2007, and her discovery evidence in February 2009 communicated – to Fram, Kerbel, and beyond – her (and therefore, Romandale’s) belief that the sale of the Remaining Interest under the 2005 August Agreement was conditional on SPA being obtained for the Lands.
(b) Reliance
[173] Having established that the first criterion for estoppel by convention is met, I must now determine whether Fram and Kerbel acted in reliance on the Shared Assumptions. For the purpose of estoppel by convention, reliance requires a finding that the party seeking to establish estoppel changed its course of conduct by acting (or abstaining from acting) in reliance on the shared assumption, thereby altering its legal position: Ryan v. Moore, at para. 69.
[174] In my view, Fram and Kerbel satisfy the reliance criterion. Paragraph 5 of the Settlement Agreement is based on the Shared Assumptions. Fram and Kerbel entered into the Settlement Agreement in reliance on the Shared Assumptions. As a result of having entered into the Settlement Agreement, their respective legal positions under the COAs and the 2005 August Agreement were altered. An overview of the alteration to their legal positions that resulted from having entered into the Settlement Agreement is as follows.
[175] Before entering into the Settlement Agreement, Fram’s legal position in respect of the Lands was governed by the COAs between it and Romandale. In the 2007 Action, it claimed that Romandale had breached the prohibition against Disposition in the COAs by entering into the 2005 August Agreement. If Fram succeeded in its claim, Fram was entitled to, among other things: a declaration that the offending agreement (i.e., the 2005 August Agreement) was void under s. 5.03 of the COAs; bring proceedings for specific performance under s. 6.02(b) of the COAs; and purchase Romandale’s interest in the Lands at 95% of their fair market value under s. 6.02(d) of the COAs. As a result of entering into the Settlement Agreement, Fram gave up those rights: pursuant to s. 1 of the Settlement Agreement, Fram agreed that it would not seek a declaration that the 2005 August Agreement was void and that it would limit its damages claims against Romandale to 50% of the Lands.
[176] Before entering into the Settlement Agreement, Kerbel’s legal position in respect of the Lands was governed by the 2005 August Agreement between it and Romandale. The Conditional Provision in that agreement gave Kerbel the opportunity to acquire 100% ownership of the Lands. After entering into the Settlement Agreement, that changed. Pursuant to para. 2 of the Settlement Agreement, if Kerbel acquired ownership of the Lands, Kerbel was obliged – at Fram’s option – to allow Fram to acquire a 50% undivided interest in the Lands on the same terms and conditions as Kerbel had acquired the Remaining Interest from Romandale.
[177] Thus, it can be seen, Fram and Kerbel’s legal positions were altered as a result of relying on the Shared Assumptions.
[178] I do not view my determination that Fram and Kerbel meet the reliance criterion for estoppel by convention as running afoul of the trial judge’s determination of no reliance on the part of Fram and Kerbel or, if there was reliance, it was unreasonable. That is because the trial judge made her reliance determination based on the legal principles governing estoppel by representation whereas I decided reliance in accordance with the legal principles governing estoppel by convention. The two legal frameworks are different, the test for reliance in each is different, and, therefore, the determination of reliance under each may be different without being inconsistent.
[179] However, if, as Romandale urges, the trial judge’s determination on reliance is a finding of fact for which deference must be shown, I would set it aside on the basis that it is the result of palpable and overriding error.
[180] On the evidence set out above, it is clear that Fram and Kerbel relied on the Shared Assumptions in entering into the Settlement Agreement. A plain reading of the Settlement Agreement alone shows that. A contrary finding – namely, that Fram and Kerbel did not rely on the Shared Assumptions in entering into the Settlement Agreement – is simply not available on the evidence. Thus, such a finding would be the result of palpable and overriding error.
[181] The trial judge also made a palpable and overriding error in determining that, if there was reliance, it was unreasonable. In making this determination, the trial judge accepted that Romandale put Fram and Kerbel on notice that it objected to any settlement agreement between them in respect of the Lands without its consent: Reasons, at para. 129. Romandale says that it objected “clearly and unequivocally” to the Settlement Agreement “including Fram and Kerbel deferring the closing of the 2005 August Agreement by decades rather than carrying it out immediately in 2010, as Romandale expressly asked them to do”. In support of this argument, it relies on its letter to Fram, dated October 25, 2010.
[182] I do not agree. The relevant portions of Romandale’s letter of October 25, 2010, are as follows:
More importantly, your correspondence only confirms our client’s belief that the relationship contemplated by the proposed Minutes of Settlement cannot work. Simply put, the benefit of the August 2005 Agreement cannot be assigned in whole or in part to your client without our client’s consent. In order to give that consent, not only would real estate counsel have to draft extensive documentation, but there remain at present simply some points to which our client cannot agree, in particular, the registration of the injunction against title to the lands for which Romandale continues to hold legal title; and arbitration over a process which Romandale has effectively controlled without objection from any party for 5 years now.
To avoid these problems, your client, together with Mr. Kerbel, can formulate an offer to purchase our client’s interest in the lands immediately. Failing that, we should appear before Justice Moore and request a trial date to adjudicate all issues. If you and [counsel for Kerbel] believe that a settlement of the August 2005 Agreement can be effected without the consent of the 90% land holder, then that issue will likely also form the subject matter of the trial. [Emphasis added.]
[183] Nothing in this letter suggests that Romandale objected to the Settlement Agreement because of para. 5. That is, there is nothing in the letter to indicate that Romandale objected to the expressed intention in para. 5 that the purchase and sale of the Remaining Interest was to take place after SPA. Instead, the letter shows that Romandale resiled from the Settlement Agreement over matters such as registration of the injunction on title to the Lands and arbitration.
[184] Further, Romandale’s call to Fram and Kerbel to “formulate an offer to purchase [Romandale’s] interest in the lands immediately” does not indicate that Romandale believed the buy-sell provisions in the COAs and the 2005 August Agreement could be triggered at any time, pre or post-SPA. The parties all knew Fram could consent to the sale of Romandale’s Remaining Interest before SPA and, with that consent, the purchase and sale of Romandale’s Remaining Interest could proceed immediately. Romandale’s call to Fram and Kerbel to make an immediate purchase is merely a request that the parties proceed with the sale under Fram’s consent. It says nothing about Romandale’s assumptions regarding the buy-sell provisions.
[185] Until 2015, Romandale never retracted its communications on the Shared Assumptions and never purported to. In fact, as I describe above, Romandale confirmed in writing its belief in the Shared Assumptions in a letter in January 2011 – after Fram and Kerbel executed the Settlement Agreement – when it again made manifest that the sale of its Remaining Interest under the 2005 August Agreement could not take place until after SPA or with Fram’s consent.
[186] As Romandale did not communicate to Fram and Kerbel that it no longer held the Shared Assumptions until 2015, in the circumstances of this case, it was not unreasonable for Fram and Kerbel to rely on the Shared Assumptions when they entered into the Settlement Agreement in 2010. As Fram points out, the court relied on Romandale’s assertions to the same effect in the injunction proceeding. In light of that, it can scarcely be said to be unreasonable that Fram and Kerbel also relied on them.
(c) Detriment
[187] The third criterion for establishing estoppel by convention is detriment. As the parties seeking to establish estoppel by convention, Fram and Kerbel must prove that if Romandale were allowed to resile from the Shared Assumptions, they would suffer detriment since there had been a change from their presumed legal positions: Ryan v. Moore, at paras. 59, 69. To succeed in proving detriment, Fram and Kerbel must show that it would be unjust or unfair to allow Romandale to resile from the Shared Assumptions: Ryan v. Moore, at paras. 59, 73 and 74. A change from their presumed legal positions will facilitate the establishment of detriment: Ryan v. Moore, at para. 73.
[188] As I have explained, Fram and Kerbel entered into the Settlement Agreement in reliance on the Shared Assumptions and thereby altered their legal positions under the COAs and the 2005 August Agreement respectively. While the change in their legal positions facilitates the establishment of detriment, it remains their burden to show that it would be unjust or unfair to allow Romandale to resile from the Shared Assumptions: Ryan v. Moore, at para. 74. One need only consider what transpired at the trial below and the resulting Judgment to find they satisfy that burden.
[189] Paragraph 5 of the Settlement Agreement reflects the parties’ Shared Assumptions that the purchase and sale of Romandale’s Remaining Interest would take place after SPA had been obtained. The trial judge accepted Romandale’s submission that para. 5 was a breach of the 2005 August Agreement on Kerbel’s part. In so doing, the trial judge permitted Romandale to resile from the Shared Assumptions. Having determined that Kerbel was in breach, the trial judge declared the 2005 August Agreement at an end and excused Romandale from performance of its obligations under that agreement. Thus, it can be seen, if Romandale had not been permitted to resile from the Shared Assumptions, Kerbel would not have been found to have been in breach of the 2005 August Agreement and it would not have lost the right to compel Romandale to fulfill its obligations under that agreement. In the circumstances of this case, it was unjust and unfair to Kerbel that Romandale was permitted to resile from the Shared Assumptions.
[190] It was also unfair and unjust to Fram. In accordance with the Settlement Agreement, Fram discontinued its claims against Kerbel in the 2007 and 2008 Actions and gave up significant claims against Romandale under the COAs. However, the quid pro quo under the Settlement Agreement was that Fram would have the opportunity to acquire 50% ownership of the Lands once Kerbel bought Romandale’s Remaining Interest. Because Romandale was permitted to resile from the Shared Assumptions and was consequently excused from performance under the 2005 August Agreement, Romandale was no longer obliged to sell its Remaining Interest to Kerbel. Thus, Fram gave up its claims for nothing.
[191] Accordingly, in my view, it would be unjust and unfair to allow Romandale to resile from the Shared Assumptions. In reaching this conclusion, I reject Romandale’s submission to the contrary.
[192] Romandale makes two arguments in support of its submission that it would be neither unjust nor unfair to allow it to resile. First, it argues that it cannot be unjust or unfair that it be allowed to correct the mistaken Shared Assumptions because the mistake as to the timing of the buy-sell provisions was “patently obvious” on the express words of the contracts to which all parties had access. Second, it argues that Fram and Kerbel’s entry into the Settlement Agreement “was a deliberate and inequitable scheme to tie up and control the Lands (to Romandale’s exclusion) while putting off their purchase for at least decades”.
[193] Respectfully, Romandale’s first argument misunderstands the detriment criterion in the doctrine of estoppel by convention. Detriment is not about the correctness of the Shared Assumptions or how obviously incorrect they might have been. Detriment is a question of whether it would be unjust or unfair to allow Romandale to resile from the Shared Assumptions – regardless of whether the Shared Assumptions were correct or were patently incorrect.
[194] Romandale’s second argument is that if it was not permitted to resile, Fram and Kerbel would get away with their “deliberate and inequitable scheme” to tie up the Lands for decades without having to pay for them. This argument does not withstand scrutiny. Before trial, Fram gave its consent to Kerbel’s purchase of Romandale’s Remaining Interest. Accordingly, had Romandale wished, it could have completed the sale of its Remaining Interest to Kerbel right then. In short, by the time of trial, there was no threat that, as a result of the Settlement Agreement, the Lands would be tied up for decades without Romandale being paid for its Remaining Interest in them.
[195] At all material times during its dealings with Fram and Kerbel, Romandale manifestly represented to Fram and Kerbel that it held the Shared Assumptions. Fram and Kerbel then relied on the Shared Assumptions and entered into the Settlement Agreement. As a result of that, Fram and Kerbel’s legal positions were altered. In the circumstances, it would be unjust and unfair to permit Romandale to resile from the Shared Assumptions. Consequently, Fram and Kerbel have met their burden on the detriment criterion.
(d) Romandale’s Overriding Submission on Estoppel by Convention
[196] Before finally determining whether estoppel by convention applies, I must address Romandale’s overriding submission that Fram and Kerbel cannot avail themselves of the doctrine because there was no contract between it and either Fram or Kerbel based on the Shared Assumptions – only Fram and Kerbel were parties to the Settlement Agreement.
[197] It will be recalled that Romandale relies on para. 4 of Ryan v. Moore for this submission. For ease of reference, I set out para. 4 again, below.
Estoppel by convention operates where the parties have agreed that certain facts are deemed to be true and to form the basis of the transaction into which they are about to enter. If they have acted upon the agreed assumption, then, as regards that transaction, each is estopped against the other from questioning the truth of the statement of facts so assumed if it would be unjust to allow one to go back on it. [Citations omitted; emphasis as added by Romandale.]
[198] I accept that the language in para. 4 of Ryan v. Moore may be seen as suggestive of a contractual relationship among the parties. However, the facts of Ryan v. Moore show that the doctrine of estoppel by convention is not limited to such situations.
[199] Ryan v. Moore concerned a three-vehicle accident that took place in 1997. Peter Ryan (the “Plaintiff”) and Rex Gilbert Moore were two of the drivers involved in the accident. Soon after the accident happened, the Plaintiff began corresponding with the adjuster assigned by Mr. Moore’s insurer.
[200] Mr. Moore died in 1998 from causes unrelated to the accident. Letters of Administration were granted to his administratrix in February 1999.
[201] The Plaintiff started a personal injury action against Mr. Moore in October 1999. That claim was within the two-year limitation period in the Limitations Act, S.N.L. 1995, c. L-16.1.
[202] The insurer learned of Mr. Moore’s death in May 2000; the Plaintiff learned of it in September 2000. In November 2000, the insurer refused to settle the Plaintiff’s claim on the basis it was outside the limitation period in the Survival of Actions Act, R.S.N.L. 1990, s. S-32, which imposes a six-month limitation period from the granting of Letters of Administration. The insurer then applied to have the action struck as being out of time. The trial judge dismissed the application.
[203] An appeal and cross-appeal were taken to the Newfoundland Court of Appeal. A majority of the Court of Appeal held that estoppel by convention barred the insurer and Mr. Moore’s estate from pleading that Mr. Moore died in 1998 or that Letters of Administration were granted in February 1999. Thus, they could not invoke the shorter limitation period in the Survival of Actions Act.
[204] The insurer and Mr. Moore’s estate appealed to the Supreme Court. The Supreme Court allowed the appeal and struck the Plaintiff’s statement of claim because it had been brought outside the six-month period prescribed by the Survival of Actions Act.
[205] The Supreme Court held that the doctrine of estoppel by convention had not been made out. It found that none of the letters exchanged by the Plaintiff and the insurer with respect to the Plaintiff’s personal injury claim proved the existence of a common assumption. The mere fact that communications occurred between the parties did not establish that they assumed that Mr. Moore was alive. And, the fact the parties were conferring without regard to the limitation period did not establish a shared assumption that the limitation period defence would not be relied on. There was never any discussion by the Plaintiff of the limitation period.
[206] Thus, while the Supreme Court in Ryan v. Moore refers to the Plaintiff, the insurer, and Mr. Moore’s estate as “parties”, they were not parties to a contract. Despite that, the Supreme Court considered whether the doctrine of estoppel by convention operated. In fact, estoppel by convention was the central legal point on which the appeal hinged. Further, when the Supreme Court concluded that the doctrine was inapplicable, it made no mention of the absence of a contract among the parties. Rather, the Court found the doctrine to be inapplicable because the correspondence among the parties did not prove the existence of a shared assumption among the parties. It found that such things as the subject line in the correspondence, which read “Your Insured: Rex Moore”, lacked sufficient clarity and certainty to demonstrate a common belief that he was alive. It further found that even if one could conclude that there was a common assumption, the Plaintiff had never communicated that he shared it.
[207] Accordingly, the applicability of the doctrine of estoppel by convention does not depend on the parties having entered into a contract with one another. Rather, as the Supreme Court states in para. 59 of Ryan v. Moore, the question is whether the “parties’ dealings” were based on a shared assumption of fact or law. In this case, while Romandale was not a party to the Settlement Agreement, it was actively involved in the negotiations leading up to that agreement. As I explain above, during that period, the parties’ correspondence (among other things) clearly demonstrate that their “dealings” were based on the Shared Assumptions.
(e) Conclusion on Estoppel by Convention
[208] In the judicial mediation in September 2010, Fram, Kerbel, and Romandale communicated to one another their common belief in the Shared Assumptions. They reached a settlement agreement in principle which reflected those assumptions. The Shared Assumptions were manifest in the preliminary draft settlement agreement and all the drafts that followed through to the final Settlement Agreement. Romandale participated in ongoing negotiations of the Settlement Agreement and received copies of all the drafts, even after it resiled from that agreement. Never once during that process did Romandale dispute the validity of the Shared Assumptions. Rather, at several points it expressly reiterated the Shared Assumptions in communications it sent to Fram and Kerbel.
[209] When Fram and Kerbel entered into the Settlement Agreement, they relied on their unqualified understanding that all three parties and their counsel held the Shared Assumptions. As a result of having entered into the Settlement Agreement, their legal positions were altered. Allowing Romandale to resile from the Shared Assumptions years after the Settlement Agreement was concluded would cause detriment to both Fram and Kerbel.
[210] As Fram and Kerbel satisfied the three criteria that form the basis for doctrine of estoppel by convention, Romandale was estopped from resiling from the Shared Assumptions and the trial below should have been conducted accordingly.
Issue #2: Did the trial judge err in determining that, by entering into the Settlement Agreement, Kerbel breached the 2005 August Agreement?
[211] After Romandale terminated the DMAs with Bordeaux in early 2005, Bordeaux responded with an action against Romandale and Fram, alleging the termination was invalid and of no force and effect. The litigation was ongoing in August 2005 when Romandale and Kerbel entered into the 2005 August Agreement. The trial judge interpreted the 2005 August Agreement as permitting Kerbel to delay triggering the buy-sell provisions until after SPA only if the Bordeaux litigation dragged on (emphasis added) (the “Interpretation”). Based on the Interpretation, the trial judge concluded that Kerbel repudiated the 2005 August Agreement by entering into the Settlement Agreement because, as a result of para. 5 of the Settlement Agreement, the purchase and sale of the Remaining Interest could not take place until after SPA.
[212] Fram argues that the trial judge’s Interpretation is erroneous. It contends that she made four extricable errors of law in reaching the Interpretation: (1) failure to give the text of the 2005 August Agreement primacy; (2) accepting impermissible subjective evidence as factual matrix evidence; (3) misinterpreting the “time is of the essence” clause in the 2005 August Agreement; and (4) failing to look at commercial reasonableness at the time of contract execution and from the viewpoint of both parties.
[213] In light of my conclusion on the doctrine of estoppel by convention, Romandale is barred from asserting that the buy-sell provisions in either the COAs or the 2005 August Agreement could be exercised before SPA. Because the trial judge’s Interpretation permits for the buy-sell provision in the 2005 August Agreement to be exercised before SPA, the Interpretation is contrary to the Shared Assumptions and cannot stand. Consequently, I need not address the errors in contractual interpretation that Fram contends the trial judge made.
[214] While I need not address the alleged errors in contractual interpretation, nothing in these reasons is to be taken as approving the trial judge’s interpretation of the 2005 August Agreement or her application of the principles of contractual interpretation.
VIII. analysis of KERBEL’S issues
Issue #3: Did the trial judge err in concluding that Kerbel repudiated the 2005 August Agreement?
[215] In addition to finding that Kerbel breached the 2005 August Agreement by entering into the Settlement Agreement with Fram, the trial judge also found that, by entering into the Settlement Agreement, Kerbel failed to act in good faith, breached the fiduciary duty she found Kerbel owed Romandale, breached the “time is of the essence” clause in the 2005 August Agreement, and repudiated the 2005 August Agreement. As I have explained, estoppel by convention operates to bar Romandale from attacking the validity of para. 5 of the Settlement Agreement. As para. 5 of the Settlement Agreement was the basis on which the trial judge concluded that Kerbel repudiated the 2005 August Agreement, that conclusion must fall. Accordingly, it is not necessary to address the issues (and related sub-issues) that Kerbel raises respecting the trial judge’s conclusion that by entering into the Settlement Agreement, Kerbel repudiated the 2005 August Agreement.
[216] However, nothing in these reasons is to be taken as approving the trial judge’s determination that Kerbel repudiated the 2005 August Agreement by entering into the Settlement Agreement, her application of the principles governing repudiation, her finding that Kerbel owed a fiduciary duty to Romandale and breached it, her finding that Kerbel breached its contractual duty of good faith, or her analysis and conclusion that, as a result of the Settlement Agreement, Romandale was deprived of substantially the whole benefit of the 2005 August Agreement.
Issue #4: Did the trial judge err in concluding that the 2005 August Agreement was frustrated?
A. The Parties’ Positions
Kerbel
[217] Kerbel’s overarching position on appeal rests on this foundational legal proposition: the general rule is that it is not the function of the court to rewrite a contract for the parties nor is it the court’s role to relieve one of the parties against the consequences of an improvident contract: Pacific National Investments Ltd. v. Victoria (City of), 2004 SCC 75, [2004] 3 S.C.R. 575, at para. 31. Kerbel says that the trial judge violated this general rule and, after determining that enforcement of the 2005 August Agreement was not in Romandale’s interests, allowed that conclusion to drive her reasoning. However, Kerbel says, the question for the trial judge was not whether the 2005 August Agreement turned out to be a good deal for Romandale but, rather, whether the defences Romandale asserted to the enforcement of the 2005 August Agreement were tenable in law and fact.
[218] In terms of frustration specifically, Kerbel submits that the trial judge erred when she concluded, at para. 349 of the Reasons, that the 2005 August Agreement was frustrated because “unforeseen planning changes resulted in SPA not only being delayed for decades but also putting the two farms on different development tracks”. Kerbel says that the doctrine of frustration does not apply for two reasons.
[219] First, it notes that frustration applies when a supervening event alters the nature of the parties’ obligations to such an extent that to compel performance would require a party to do something “radically different” than what they had agreed to under their contract. It says that the change in the development timeline for the Lands did not fundamentally alter what the parties contracted for under the 2005 August Agreement. The parties had agreed that Romandale would sell and Kerbel would buy its Remaining Interest in the Lands. The thing the parties bargained for has not changed – only the timing of the closing of the transaction has.
[220] Second, Kerbel says that a contract is not frustrated if the supervening event was contemplated by the parties at the time of contracting and was provided for, or deliberately chosen not to be provided for, in the contract. It argues that to the parties’ knowledge, the planning and development process is fluid, unpredictable, and outside the parties’ control. There was never any certainty as to the development timeline for the Lands and the fact that governmental decisions altered the timetable was within the parties’ contemplation. They point to this court’s decision in the Triple R Lands Litigation, in which that precise point is made: First Elgin Mills Developments Inc. v. Romandale Farms Limited, 2014 ONCA 576, 324 O.A.C. 153, at para. 32.
[221] Further, Kerbel argues, contrary to the trial judge’s finding, the parties’ agreement to a fixed purchase price in this context does not lead to a “commercial absurdity”. The parties deliberately chose to enter into an agreement for a fixed purchase price of the Remaining Interest that was significantly above market value. In doing so, Romandale assumed the risk of what a delay in closing would entail.
Fram
[222] Fram adopts Kerbel’s position on all issues it raises on appeal. To avoid repetition, on the balance of the issues, I will not reiterate Fram’s position.
Romandale
[223] Romandale submits that Kerbel has not demonstrated any palpable and overriding errors in the trial judge’s finding that the 2005 August Agreement was frustrated when unforeseen planning changes delayed SPA for decades and put the Lands on different development tracks. It makes two key arguments in support of this submission.
[224] First, it says that Kerbel is wrong that the change in the development timeline did not fundamentally change the nature of the contract because it simply delayed closing. The trial judge found that a short closing horizon was part of the “pith and substance” of the contract and, in any event, that SPA was at most years away, not decades. A delay of decades is “radically different” than what the parties agreed to. Further, Romandale says Kerbel failed to address the trial judge’s finding on frustration based on the farms being placed on different development tracks.
[225] As well, Romandale says Kerbel is wrong that legislative changes cannot frustrate a contract. Relying on Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 1975 726 (ON CA), 61 D.L.R. (3d) 385 (Ont. C.A.) and Focal Properties Ltd. v. George Wimpey (Canada) Ltd. (1975), 1975 49 (ON CA), 73 D.L.R. (3d) 387 (Ont. C.A.), it says that changes in law or policy will frustrate a contract and relieve the parties of performance where the “common venture” is frustrated. The trial judge found that the parties’ “common venture” of providing for the most expedient sale of the Lands, without breaching the COAs, was no longer attainable.
[226] Romandale says that proof of a delayed timeline for development and separate development tracks for the farms resulted in radically different circumstances than those contemplated in the 2005 August Agreement. It argues this is apparent from the terms of the that agreement: it was silent on how to close if the Lands achieved SPA at different times; the farms were treated as a single property; there were no terms on how to treat the farms individually; and, it made no commercial sense when closing was decades in the future. This, Romandale argues, would result in an irreconcilable divergence of interests when the express terms of the 2005 August Agreement provide it is conditional for the benefit of both parties.
[227] Second, Romandale says that Kerbel is wrong that the parties contemplated the planning changes when entering into the 2005 August Agreement or deliberately did not provide for such changes. It argues that Kerbel’s reference to this court’s 2014 decision regarding the Triple R Lands is misleading. Even if the parties were aware that the process of developing the Lands was fluid, unpredictable, and would take time, this does not mean they contemplated SPA being deferred for decades and that the Lands would be put on separate development tracks.
[228] Romandale contends that the trial judge’s factual findings are important – that when the 2005 August Agreement was made, the parties expected the Lands would achieve SPA by 2010 or soon thereafter and not decades later or with the farms on separate development tracks. It says these are “radical” changes in the planning law and process and Kerbel has not challenged them.
B. Governing Legal Principles
[229] A contract is frustrated when – without the fault of either party – a supervening event alters the nature of a party’s obligations under the contract “to such an extent that to compel performance despite the new and changed circumstances would be to order [the party] to do something radically different from what the parties agreed to under [their] contract”: Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, at para. 55; Perkins v. Sheikhtavi, 2019 ONCA 925, 16 R.P.R. (6th) 42, at para. 15.
[230] However, a contract is not frustrated if the supervening event results from a voluntary act of one of the parties or if the parties contemplated the supervening event at the time of contracting and provided for, or deliberately chose not to provide for, the event in the contract: Perkins, at para. 16; Capital Quality Homes, at p. 626.
[231] The party claiming frustration bears the burden of proving the constituent elements necessary to establish frustration: Perkins, at para. 17.
C. Application of the Law
[232] The trial judge concluded that the 2005 August Agreement was frustrated because unforeseen planning changes resulted in SPA being delayed by decades and put the Snider and McGrisken Farms on different development tracks. She said these matters rendered performance of the Conditional Provision “radically different from that which the parties agreed to”: at para. 349. In my view, the trial judge erred in law in so concluding: the planning changes do not amount to a “supervening event”, as that term is used in the doctrine of frustration.
[233] As previously noted, at para. 55 of Naylor Group, the Supreme Court stated that a contract is frustrated when – without the fault of either party – a supervening event alters the nature of a party’s obligations under the contract to such an extent that to compel performance would be to order the party to do something “radically different” from that to which it had agreed under the contract. Neither the change to the timing of the development of the Lands nor the fact that the development paths of the two farms now diverge render Romandale’s obligations under the 2005 August Agreement radically different from that to which it agreed. Therefore, the planning changes are not a supervening event and the agreement is not frustrated.
[234] This conclusion follows inescapably from a consideration of the 2005 August Agreement as a whole, including the Conditional Provision. When Romandale and Kerbel entered into the 2005 August Agreement, all of their obligations under it were to be performed in short order with one exception: their obligations under the Conditional Provision. Those obligations were clearly spelled out: Romandale was to sell its Remaining Interest in the Lands to Kerbel at a price of $160,000 per acre: (1) with Fram’s consent to the transaction or (2) through Romandale’s exercise of the buy-sell provision in the COAs, after the Lands achieved SPA. The parties specified the two methods by which the transaction could be completed – rather than simply setting a date for its completion – because they wanted to ensure that the 2005 August Agreement did not run afoul of Romandale’s pre-existing legal obligations to Fram under the COAs.
[235] While the planning changes altered the timing horizon for the development of the Lands and the development paths of the Snider and McGrisken Farms, those changes did not radically alter what the parties had agreed to under the 2005 August Agreement. In fact, the planning changes did not alter the parties’ obligations under the Conditional Provision in any way. What changed were the parties’ expectations about when SPA would be obtained for the Lands. Romandale remained obliged to sell its Remaining Interest to Kerbel, either by obtaining Fram’s consent to the transaction or by using the buy-sell provisions in the COAs, once SPA for the Lands was achieved. And Kerbel remained obliged to pay Romandale $160,000 per acre for the Remaining Interest. The fact that the expected timing for SPA changed did not alter those obligations – and nothing in the 2005 August Agreement suggests otherwise. For example, there is no “drop-dead date” provision in the agreement. With due respect to the trial judge, the boiler-plate statement at para. 7(c) of the 2005 August Agreement that “time is of the essence” cannot be construed to mean that a “short closing horizon” was part of the “pith and substance” of the contract. Further and in any event, if Romandale was troubled by the prospect of a lengthy delay in closing based on SPA, it could have sought Fram’s consent to the transaction. On the record, Romandale took no steps in that regard, despite having expressly undertaken in the Conditional Provision “to use reasonable best efforts to obtain” Fram’s consent.
[236] Because the parties’ obligations under the Conditional Provision are not altered by the planning changes, it cannot be said that compelling performance of the 2005 August Agreement would be to order Romandale to do something “radically different” from that to which it agreed. In short, in the circumstances of this case, the planning changes do not amount to a supervening event.
[237] Further, even if the planning changes were to amount to a supervening event, the 2005 August Agreement is not frustrated because the supervening event was within Romandale and Kerbel’s contemplation when they entered into the agreement and they did not provide for it: Perkins, at para. 16. Of this there can be no doubt, given this court’s findings in First Elgin Mills.
[238] It will be recalled that First Elgin Mills dealt with the transaction in the 2005 August Agreement in which Kerbel purchased the Triple R Lands from Romandale (acting on behalf of the Roman family). The purchase price for the Triple R Lands was calculated on the basis that the land was all developable. However, the land was not all developable so Kerbel sought an adjustment to the purchase price in accordance with the terms of the 2005 August Agreement. Romandale resisted, saying that the purchase price adjustment clause had expired. The matter was litigated. This court ultimately found in favour of Kerbel. At paras. 31-32 of First Elgin Mills, Lauwers J.A. writing for the court, stated:
The process of moving raw land through the land development process, is complex, time consuming, and expensive. The outcome is frequently uncertain. …
The parties to this litigation are sophisticated and experienced land developers and were legally represented throughout the proceedings. The principals’ affidavits show that, when they entered into the [2005 August Agreement], they were aware that the process of developing the [Lands] would be fluid and the outcome somewhat unpredictable, and that it would take time – perhaps years – to finalize the [Lands’] development potential. There were provincial, regional, and local requirements to be met, any of which could affect the [Lands’] development potential ...
[239] Thus, it can be seen, this court found that Romandale and Kerbel were aware of the vagaries of the planning process when they entered into the 2005 August Agreement. That is, the possibility of planning changes was within the parties’ contemplation when they entered into the 2005 August Agreement. Despite that, they made no provision for such a possibility – as, for example, through the insertion of a “drop-dead” provision. Therefore, even if the planning changes were a supervening event, the 2005 August Agreement is not frustrated.
[240] I conclude on this issue by noting that, while Romandale is correct that legislative changes can frustrate a contract, this applies when the legislation destroys the very foundation of the agreement: Capital Quality Homes, at para. 29. As I have explained, that is not this case.
Issue #5: Did the trial judge err in concluding that the 2005 August Agreement was void for mistake?
A. The Parties’ Positions
Kerbel
[241] Kerbel submits that the trial judge erred in law in finding that the 2005 August Agreement was void for mistake because the parties were operating on the mistaken understanding that SPA would occur “within a relatively short time period”, not decades after the agreement was entered into.
[242] It argues that the doctrine of common mistake requires the plaintiff to show that, as a result of the common mistake, the subject matter of the contract became something essentially different from what it was believed to be. Moreover, on the theory that the mistake destroys the consensual nature of the bargain, the mistake must have existed at the time that the contract was made. However, Kerbel says, there was no mistake in this case. Both parties considered SPA to be years away when they executed the 2005 August Agreement. The fact that an assumption turns out to be incorrect, as a result of subsequent events, does not affect the consensus at the time the contract was made.
[243] In any event, Kerbel says, the change to the development timeline did not fundamentally change the subject matter of the contract.
Romandale
[244] Romandale submits that Kerbel has not articulated a basis for disturbing the trial judge’s conclusions on mistake. It says that Kerbel is referring to the common law doctrine of mistake in its submissions to this court whereas the trial judge relied on the equitable doctrine of mistake.
[245] Romandale contends that the trial judge found that the parties were mistaken as to the time horizon for achieving SPA and that change in the development timeline did fundamentally alter the subject matter of the contract.
B. Governing Legal Principles
[246] At common law, a contract will be void for mistake when the parties were under a common mistake that changes the subject matter of the contract into something essentially different from what the parties believed it to be: Miller Paving Ltd. v. B. Gottardo Construction Ltd., 2007 ONCA 422, 86 O.R. (3d) 161, at paras. 22, 30. The mistake must have existed at the time the contract was made: Zeitel v. Ellscheid (1991), 1991 7162 (ON CA), 85 D.L.R. (4th) 654 (Ont. C.A.), at para. 44, aff’d 1994 82 (SCC), [1994] 2 S.C.R. 142.
[247] In equity, the court may relieve for common mistake when it would be “unconscientious”, in all the circumstances, to allow a contracting party to avail itself of the legal advantage it had obtained and granting relief can be done without injustice to third parties. The contract is liable to be set aside if the parties were under a common misapprehension as to the facts or their respective rights, provided the mistake was fundamental and the party seeking to set aside the contract was not at fault: Miller Paving, at para. 23.
C. Application of the Law
[248] In my view it matters not whether the trial judge decided this issue based on the common law or equitable principles governing mistake. Mistake is not made out under either.
[249] At common law, the court’s jurisdiction to set aside a contract for mistake arises when the parties are under a common mistake that changes the subject matter of the contract into something “essentially different” from what the parties believed it to be: Miller Paving, at para. 30. As I explain above on the issue of frustration, that is not this case. The parties’ obligations were clearly spelled out in the 2005 August Agreement: Romandale was to sell its Remaining Interest to Kerbel at a price of $160,000 per acre, either with Fram’s consent or through Romandale’s exercise of its buy-sell rights under the COAs. The planning changes made to the development of the Lands did not alter those obligations. The parties were aware of the vagaries of the planning process when they entered into the 2005 August Agreement. They knew that the process of developing the Lands was fluid and the outcome unpredictable. The fact that events did not play out according to the parties’ initial time estimates does not somehow elevate those estimates into a common mistake such as to vitiate their consent to the deal in the 2005 August Agreement. As the subject matter of the 2005 August Agreement remained essentially the same as what the parties believed it to be when they entered into the agreement, mistake is not made out at common law.
[250] In equity, the court may set aside a contract for common mistake when it would be “unconscientious”, in all the circumstances, to allow a contracting party to avail itself of the legal advantage it obtained, provided it can be done without injustice to third parties. I address the issues of unjustness and unfairness above, in my discussion of estoppel by convention. I will not repeat myself. The considerations set out in that analysis show why, even if Kerbel could be seen to have obtained a legal advantage because of the changes in the planning process, it is not “unconscientious” to enforce the 2005 August Agreement. In any event, there was no fundamental mistake upon which to base common mistake in equity.
[251] I conclude on the equitable doctrine of common mistake by observing that the court is to take into consideration “all of the circumstances” when deciding whether it would be unconscientious to enforce the contract. The circumstances at the time of trial included the fact that Fram had provided its consent to the transaction in the Conditional Provision. Consequently, the transaction could have closed immediately. The trial judge did not take that into consideration. This is evident from her conclusion that enforcing the 2005 August Agreement would be unconscionable because the transaction had been put off “for decades”. In the face of Fram’s consent, the transaction could have closed immediately. Thus, it was a palpable and overriding error to find that the transaction had been put off for decades. Moreover, in my view, the trial judge erred in law in failing to take into account the relevant consideration of Fram’s consent when determining whether it would be unconscionable to enforce the 2005 August Agreement. For these reasons, Romandale failed to make out the requirements for common mistake in equity and the trial judge erred in finding otherwise.
Issue #6: Did the trial judge err in finding Kerbel’s claim was limitation-barred?
A. The Parties’ Positions
Kerbel
[252] Kerbel submits that the trial judge made palpable and overriding errors of fact and law in finding that its claim was limitation-barred. It makes three arguments in support of this submission.
[253] First, until 2015, Romandale alleged that the 2005 August Agreement was terminated by Kerbel’s breach in reducing the net developable acreage of the Lands; it sought damages in the alternative. It was only in 2015 that Romandale claimed it would not comply with the 2005 August Agreement in any event, and Kerbel started the 2016 Action shortly thereafter.
[254] Second, the trial judge’s finding that Kerbel discovered its claim in 2011 ignores Master Graham’s ruling on December 21, 2012.[^12] In that ruling, Master Graham dismissed Romandale’s motion for leave to amend its pleadings to allege that Kerbel had breached the 2005 August Agreement by entering into the Settlement Agreement. Kerbel says it was entitled to rely on the ruling and that the trial judge’s reasoning leads to an anomalous and unreasonable result. In order to bring its action in time, Kerbel would have had to commence an action by 2013 for a declaration that the Settlement Agreement did not breach the 2005 August Agreement but, in 2012, Master Graham had already reached that conclusion.
[255] Third, even if Kerbel was aware in 2011 that Romandale viewed the 2005 August Agreement to be at an end, the trial judge erred in law in finding that the limitation period began to run as of that date. At its highest, Romandale’s statement to Kerbel that it was not going to comply with the 2005 August Agreement amounted to an anticipatory breach of contract, not an actual breach of contract. An anticipatory breach does not terminate or discharge the contract. Where the innocent party does not accept the anticipated breach and continues to treat the contract as subsisting, it does not “discover” its claim for the purposes of the Limitations Act – and the limitation period does not begin to run – until the breach has occurred and the innocent party has suffered some damage. In this case, Kerbel made it clear that it did not accept Romandale’s anticipatory breach of the 2005 August Agreement and considered the agreement to continue in effect. Therefore, the limitation period did not begin to run as of 2011.
Romandale
[256] Romandale says that Kerbel’s submission that it had no reason to commence an action until 2015 is contradicted by the evidence, as is Kerbel’s assertion that it did not accept Romandale’s “anticipated repudiation” and continued to treat the agreement as subsisting. As the trial judge found, by 2011 Romandale was no longer acting in accordance with the 2005 August Agreement. Under para. 5 of that agreement, Romandale was obliged to cede control over development to Kerbel but it was not complying with that obligation. Kerbel’s counsel sent a letter in February 2011 asserting that Romandale was breaching the agreement and its conduct was actionable. Romandale did not comply even after that letter. The manner in which Romandale was breaching the 2005 August Agreement demonstrated that it did not ever intend to sell the Lands to Kerbel. The conduct was not ambiguous: Kerbel was on notice that if it wanted specific performance it could not sit on its rights.
[257] Furthermore, Romandale argues, Kerbel was not entitled to rely on the decisions of Master Graham and Kiteley J. in the pleadings motion to prevent the running of the limitation period. Those decisions did not reach a conclusion on the merits of the impact of the Settlement Agreement on the 2005 August Agreement. All that was decided was that Romandale’s proposed amendment was not tenable in law.
B. Governing Legal Principles
[258] An anticipatory breach of contract occurs when one party to a contract, by express language or conduct, or as a matter of implication from what it has said or done, repudiates its contractual obligations before they fall due: Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733, 118 O.R. (3d) 321, at para. 22, citing G.H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011), at p. 585.
[259] An anticipatory breach does not, in itself, terminate the contract. Once the offending party shows its intention not to be bound by the contract, the innocent party has a choice. The innocent party may accept the breach and elect to sue immediately for damages, in which case the innocent party must “clearly and unequivocally” accept the repudiation to terminate the contract. Alternatively, the innocent party may choose to treat the contract as subsisting, continue to press for performance, and bring the action only when the promised performance fails to materialize. However, by choosing the latter option, the innocent party is bound to accept performance if the repudiating party decides to carry out its obligations: Ali, at para. 24.
[260] Section 4 of the Limitations Act provides that “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.” Section 5(1)(a) sets out the factors for determining when a party discovers a claim. However, where the innocent party does not accept the repudiation of the contract, the limitation period does not begin to run until the breach actually occurs: Ali, at paras. 26-27.
C. Application of the Law
[261] The trial judge found that the two-year limitation period governing Kerbel’s claim for specific performance began running in February 2011 because, by that time, Romandale’s conduct showed that it “intended to remain the owner of the Lands” and “from its point of view, the “Conditional [Provision] was dead” (Reasons, at para. 403). That is, the trial judge concluded that Romandale had repudiated the 2005 August Agreement by February 2011 and Kerbel knew that. Consequently, the trial judge held that the 2016 Action was brought out of time. In my view, the trial judge made a palpable and overriding error in finding that the two-year limitation period began running in 2011. To explain why, we must review the situation between Romandale and Kerbel in February 2011 and the trial judge’s findings on their conduct at that time.
[262] Under para. 5 of the 2005 August Agreement, Romandale gave Kerbel “exclusive control” over the development process for the Lands. Nonetheless, by 2011, Ms. Roman-Barber (and, at her direction, those working for her) was actively attempting to shut Kerbel out of the development planning process. In a letter dated February 17, 2011 (“Kerbel’s February 2011 Letter”), from Kerbel’s counsel to Romandale’s counsel, Kerbel complained about Romandale’s conduct, stated it was a breach of the 2005 August Agreement, demanded that Romandale confirm to the NMLG that Kerbel’s planning consultant had the sole authority to represent the Lands, and threatened to commence proceedings if Ms. Roman-Barber did not comply with the terms of para. 5 of the 2005 August Agreement.
[263] By letter dated February 25, 2011, Romandale’s counsel responded to Kerbel’s February 2011 Letter (the “Responding Letter”). In the Responding Letter, counsel for Romandale denied that Ms. Roman-Barber had breached the 2005 August Agreement and asserted that his client had, at all times, complied with the terms of that agreement. The Responding Letter also stated that Romandale was considering whether Kerbel’s “purported settlement with [Fram] is in breach of the [2005 August] Agreement”.
[264] At para. 146 of the Reasons, the trial judge summarized what transpired between Kerbel and Romandale in the relevant time period (i.e. December 2010 to February 2011). Her summary includes references to Kerbel’s February 2011 Letter and the Responding Letter. Paragraph 146 ends with the trial judge’s conclusion that the evidence was clear “that Romandale continued to exclude Kerbel from participation in the development of the Lands and Kerbel took no action as threatened in its letter of February 17, 2011” (the “First Finding”).
[265] Based on a consideration of precisely the same conduct as that which she considered in making the First Finding, the trial judge found, at para. 403 of the Reasons, that Kerbel was aware that Romandale “intended to remain the owner of the Lands and that from its point of view the Conditional [Provision] was dead” (the “Second Finding”).
[266] The two findings are very different. The First Finding is specific and limited: in February 2011, Romandale was excluding Kerbel from participation in the development of the Lands. The Second Finding is that Romandale’s conduct put Kerbel on notice that Romandale had repudiated the Conditional Provision by acting as if it “was dead”.
[267] Thus, the question becomes: are the two findings reconcilable? They are not, either on the facts or the law.
[268] Factually, the Second Finding cannot stand in light of Romandale’s Responding Letter. In that letter, Romandale’s counsel denied that his client was in breach of the 2005 August Agreement and also stated that Romandale was considering whether the Settlement Agreement was a breach of the 2005 August Agreement. Clearly, the Responding Letter contains no express repudiation of its obligations under the Conditional Provision. On the contrary, in the Responding Letter, Romandale affirms that the 2005 August Agreement is operating, that it is complying with it, and that it is considering its position under the 2005 August Agreement as a result of Kerbel having entered into the Settlement Agreement.
[269] In terms of the law, the Second Finding was not open to the trial judge either. In the Reasons on this issue, when the trial judge makes the Second Finding, she does not explicitly refer to anticipatory breach or the legal principles that govern it. However, based on the parties’ positions on this issue, it appears that she made the Second Finding based on those principles. On that assumption, the trial judge was considering Romandale’s language and conduct in the relevant period to determine whether it could be construed as a repudiation of its obligations under the Conditional Provision before they became due for performance. In other words, the trial judge was considering whether Romandale had committed an anticipatory breach of the 2005 August Agreement by indicating that it would not comply with its obligations under the Conditional Provision. Romandale made no express assertion to that effect. Therefore, the Second Finding must have been based on Romandale’s conduct. However, as I have just explained, in light of the Responding Letter in which Romandale affirmed the 2005 August Agreement, its conduct cannot be so construed.
[270] Thus, there was no anticipatory breach by Romandale of its obligations under the Conditional Provision in 2011 and the limitation clock did not begin ticking.
[271] Romandale’s anticipatory repudiation of the 2005 August Agreement occurred for the first time in 2015 through its express statement to that effect by its new counsel. As the innocent party, Kerbel had the choice whether to accept the repudiation or treat the 2005 August Agreement as subsisting. It elected to accept the anticipatory breach and commenced the 2016 Action, which was within the two-year limitation period.
[272] I note that Romandale points to other findings the trial judge made regarding Romandale’s conduct after Fram and Kerbel entered into the Settlement Agreement, which Romandale says demonstrate that it treated the 2005 August Agreement as dead. These findings relate to events that occurred after February 2011. As the trial judge based her determination on Kerbel having discovered its claim by February 2011, it is unnecessary to consider Romandale’s conduct falling after that time.
[273] I conclude on this issue with the following two points. First, it is trite law that not every breach of a contract amounts to a repudiation. By February 2011, Kerbel was aware that Romandale was in breach of para. 5 of the 2005 August Agreement because of its conduct respecting the development process for the Lands. However, that breach was not a repudiation of the Conditional Provision. Second, even if Romandale’s conduct could be construed as a repudiation of the Conditional Provision, it was an anticipatory breach. As such, the limitation period did not begin running unless Kerbel accepted the repudiation (Ali, at paras. 26-27) and that Kerbel did not do. On the contrary, as discussed above, Kerbel protested Romandale’s conduct in its February 2011 Letter and affirmed the validity of the 2005 August Agreement. Kerbel then continued its work with the NMLG in the development process and maintained its position in the various lawsuits that the 2005 August Agreement was valid and enforceable. Thus, Romandale’s breach of its obligations relating to the development process by February 2011 could not have started the limitation clock running.
Issue #7: Did the trial judge err in concluding that Kerbel was not entitled to specific performance of the 2005 August Agreement?
A. The Parties’ Positions
Kerbel
[274] Kerbel submits that the trial judge erred in law in rejecting its claim for specific performance because she ignored the uniqueness of the Lands to Kerbel. Instead, the trial judge focused entirely on whether the Lands were capable of valuation and whether substitute properties were available.
[275] Kerbel gives five reasons for its contention that the Lands have a peculiar or special value to it.
[276] First, Kerbel already owns a 4.75% undivided interest in the Lands. It purchased that interest with the express intention that it would become the owner of all of the Lands. For that reason, Romandale and it never contemplated what a co-owner relationship would look like (unlike Romandale and Fram which entered into COAs). If specific performance is not ordered, Romandale and Kerbel will be forced to remain as co-owners of the Lands, a relationship that neither expected nor wanted. Granting specific performance, however, would allow the parties to put an end to their “fraught – and highly litigious – relationship”.
[277] Second, in light of this court’s ruling in the Triple R Lands Litigation, Kerbel is entitled to set off the purchase price adjustment for those lands from the purchase price it is to pay Romandale for the Remaining Interest. Such a price reduction is not available for any other property that might come on the market and gives the Lands a quality that cannot be duplicated.
[278] Third, Kerbel has already made significant investments – in time, money, and expertise – in the development of the Lands and surrounding properties.
[279] Fourth, Kerbel entered into all of the transactions in the 2005 August Agreement with a view to its long-term plan to secure large tracts of undeveloped land for the purposes of development and construction. The transactions in the 2005 August Agreement included its purchase of the Triple R Lands, which adjoins the Lands, and a right of second refusal on the Elgin South Property.
[280] Fifth, Kerbel is not seeking specific performance of a purely executory contract. It is seeking performance of a contract which it has already substantially performed. The transactions in the 2005 August Agreement were intertwined and formed part of a package. Kerbel has upheld its end of the bargain by assuming the BNS mortgage, purchasing the initial 4.75% interest in the Lands, and purchasing the Triple R Lands.
[281] Kerbel also submits that the trial judge erred in finding its claim for specific performance was barred by laches. It says that, in determining whether there has been delay amounting to laches, the main considerations are acquiescence on its part and any change of position by Romandale arising from reasonable reliance on Kerbel’s acceptance of the status quo. Kerbel says neither of those considerations applied. It never acquiesced and, as the trial judge found, there was no change to the status quo after the Settlement Agreement.
[282] Finally, Kerbel takes issue with the trial judge’s statement at para. 406 of the Reasons that, because Romandale had spent years investing significant time, effort, and money into the Lands, it would be “unjust” to disrupt that by granting specific performance. It notes that the 2005 August Agreement required Romandale to cooperate in the development of the Lands and there is no injustice or prejudice that follows from compliance with its legal obligations. To the extent that Romandale incurred development costs, it can seek reimbursement from Kerbel under the terms of the 2005 August Agreement, just as it did in the past.
Romandale
[283] Romandale submits that this court owes a high degree of deference to the trial judge’s exercise of discretion in refusing to grant specific performance. It argues that the trial judge did not ignore the uniqueness of the Lands to Kerbel – she rejected Kerbel’s claim of uniqueness because she found Mr. Kerbel’s own expert evidence contradicted his bald assertion that the Lands were unique and because the Lands were “just an investment” for Kerbel.
[284] Further, Romandale says, the trial judge considered whether substitute properties were available and concluded that the undeveloped Lands were not unique to Kerbel, a developer engaged in a profit-seeking venture, and there were plenty of substitute properties available. Romandale says that Kerbel has not articulated any palpable and overriding errors in the trial judge’s conclusion.
[285] As for the five arguments that Kerbel advances for why the Lands are special and unique to it, Romandale says they are simply re-argument, which the trial judge was entitled to reject, as she did. Romandale says that Kerbel has not pointed to a palpable and overriding error in the trial judge’s determination, therefore it must stand.
[286] On laches, Romandale says that the trial judge found both acquiescence and reliance and Kerbel has not cited any evidence to show the findings were the result of palpable and overriding error.
B. Governing Legal Principles
[287] Specific performance is not to be ordered for breach of contract unless damages are inadequate. When damages are found to be inadequate, it is generally because of the unique nature of the property bargained for. It is for this reason that specific performance has historically been granted in cases involving the purchase and sale of real property: Erie Sand & Gravel Ltd. v. Series’ Farms Ltd., 2009 ONCA 709, 97 O.R. (3d) 241, at paras. 110-11.
[288] However, it cannot be assumed that damages for breach of contract for the purchase and sale of real estate will be an inadequate remedy in all cases. Specific performance should not be granted absent evidence “the property is unique to the extent its substitute would not be readily available”: Semelhago v. Paramadevan, 1996 209 (SCC), [1996] 2 S.C.R. 415, at para. 22. Whether a substitute is readily available depends on the facts of the particular case. Therefore, uniqueness is a fact-specific inquiry: Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 67, leave to appeal refused, [2019] S.C.C.A. No. 55.
[289] Laches is an equitable doctrine that offers a defence to delayed equitable claims. Mere delay is insufficient to trigger laches. The party asserting laches must establish one of two things: (1) acquiescence on the claimant’s part; or (2) a change of its position arising from reasonable reliance on the claimant’s acceptance of the status quo: Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, [2013] 1 S.C.R. 623, at paras. 145-47; Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2015 ONCA 764, 128 O.R. (3d) 658, at paras. 8-11.
C. Application of the Law
[290] The trial judge declined to order specific performance largely because she concluded that the Lands were not unique to Kerbel. In my view, she erred in three ways in reaching that conclusion.
[291] First, the trial judge erred in law in relying on the evidence of the experts called to provide a value for the Lands to find that the Lands were not unique to Kerbel. The experts had used the direct comparison approach to value the Lands. That approach required the experts to find comparable properties with similar characteristics to the Lands. While the direct comparison approach is an accepted method for valuing land, it does not speak to whether a property is “unique” in the legal sense. Put another way, because the direct comparison approach does not address the legal requirements for determining whether land is unique, it cannot be used as a proxy for that purpose. It was an error in law to do so.
[292] Second, it was a palpable and overriding error for the trial judge to find that the only evidence on uniqueness was Mr. Kerbel’s “bald assertion” to that effect. In so doing, the trial judge neglected to consider the following points:
(1) Kerbel already owns a 4.75% undivided interest in the Lands and fully owns the adjoining property, the Triple R Lands. No other property has both these characteristics;
(2) In light of this court’s ruling in the Triple R Lands Litigation, Kerbel is entitled to set off the purchase price adjustment for the Triple R Lands from the purchase price it is to pay Romandale for the Remaining Interest. Such a price reduction is not available for any other property that might come on the market and gives the Lands a quality that cannot be duplicated;
(3) Kerbel has already made significant investments – in time, money, and expertise – in the development of the Lands;
(4) With Romandale’s full knowledge and consent, Kerbel entered into the package of intertwined transactions in the 2005 August Agreement in order to secure a large tract of undeveloped land for the purposes of development and construction. The transactions in the 2005 August Agreement include Kerbel’s purchase of the Triple R Lands, which adjoins the Lands, and a right of second refusal on the Elgin South Property; and,
(5) Kerbel is not seeking specific performance of a purely executory contract. It is seeking performance of a contract which it has already substantially performed. On the trial judge’s findings, Romandale received over $16.7 million of immediate value under the 2005 August Agreement. The “upfront” money Kerbel paid Romandale was to satisfy Romandale’s need for liquidity. Kerbel has upheld its end of the bargain by assuming the BNS mortgage, purchasing the initial 4.75% interest in the Lands, and purchasing the Triple R Lands.
[293] Third, a property is unique if there is no readily available substitute property: Semelhago, at para. 22. One method of proving that there is no readily available substitute is to show that the property has a quality that cannot be readily duplicated elsewhere: Erie Sand, at paras. 115-16. The above considerations establish that the Lands have qualities that cannot be readily – if at all – duplicated elsewhere. They also show that, contrary to the trial judge’s finding, the Lands are not merely an investment for Kerbel with any number of suitable substitutes available. The Lands are unique to Kerbel.
[294] While the trial judge’s analysis focused on the uniqueness of the Lands, I also view her to have fallen into error in failing to consider the effects of refusing to grant specific performance. In this case, if specific performance is not ordered, Romandale and Kerbel will remain co-owners of the Lands. As Kerbel points out, that situation was not expected, wanted, or provided for in the 2005 August Agreement. And, as the events of the past 12 years have shown, the situation is unworkable. This consideration militates in favour of finding that damages are an inadequate remedy.
[295] The trial judge gave laches as a further reason for refusing to grant specific performance. In my view, she erred in law in this regard because Romandale made out neither of the two requirements enunciated in Manitoba Metis Federation.
[296] First, Kerbel did not acquiesce in Romandale’s attempts to shut it out of the development process. As discussed above, counsel for Kerbel wrote to counsel for Romandale in February 2011, complaining about this conduct, stating it was a breach of Romandale’s obligations under the 2005 August Agreement, and demanding that Romandale confirm to the NMLG that Kerbel’s planning consultant had the sole authority to represent the Lands. Moreover, despite Romandale’s attempts to shut Kerbel out of the development process, Kerbel continued to be actively involved in the development process through the NMLG. Kerbel also continued to maintain that the 2005 August Agreement was in force until – in response to Romandale’s declaration in 2015 that it would not perform its obligations under the 2005 August Agreement – it started the 2016 Action.
[297] Second, Romandale did not change its position in reliance on Kerbel’s alleged acceptance of the status quo. The trial judge found, at paras. 118-19 and 339 of the Reasons, that there was no change in Romandale’s behavior and the “status quo did not change” after Kerbel and Fram entered into the Settlement Agreement.
[298] Further, to the extent that the trial judge found reliance based on Romandale’s investment of time, money and effort into the Lands’ development, in my view she erred. Under the terms of the 2005 August Agreement, Romandale was obliged to cooperate with Kerbel in development of the Lands. Reliance cannot be claimed when it is a matter of compliance with one’s legal obligations. And, in any event, Romandale can seek reimbursement for development costs from Kerbel under the terms of the 2005 August Agreement, just as it did in the past.
IX. FRAM’S CLAIM FOR DAMAGES
[299] Fram asks that it be awarded damages of $11,997,500 “for its loss respecting 50% of the Lands that go to Kerbel under the Settlement Agreement”. Its very brief submissions are as follows. The 2005 August Agreement was a breach of the prohibition against Dispositions in s. 5.03 of the COAs. Upon breach, pursuant to s. 6.02(d) of the COAs, Romandale was obliged to sell the Lands to Fram for 95% of fair market value. As Romandale refused to do that, Fram is entitled to the difference in the market value of the Lands between then and trial. Fram says it mitigated its losses by entering into the Settlement Agreement and withdrawing its challenge to the validity of the 2005 August Agreement. Because Romandale’s actions were responsible for Fram giving up its 50% interest in the Lands, Fram should be compensated in damages.
[300] The foundation for Fram’s claim to damages is that Romandale breached the prohibition against Dispositions in s. 5.03 of the COAs when it entered into the 2005 August Agreement. However, the trial judge found against Fram on that matter. In paras. 168-90 of the Reasons, the trial judge gives a thorough explanation for her determination that Romandale did not breach the prohibition against Dispositions in s. 5.03 of the COAs by entering into the 2005 August Agreement (the “Determination”). In its appeal, Fram did not challenge the Determination. Therefore, the Determination stands and Fram’s claim to damages must necessarily fail.
X. The Costs Appeal
[301] By order dated April 2, 2020 (the “Costs Order”), the trial judge ordered costs in favour of Romandale in the amount of $2,708,651.57. Costs were awarded on a substantial indemnity basis and made payable on a joint and several basis by Fram and Kerbel.
[302] Both Fram and Kerbel seek leave to appeal the Costs Order.
[303] The general principle is that when an appeal is allowed, the order for costs below is set aside and the appellant is awarded costs below and on appeal: St. Jean v. Cheung, 2009 ONCA 9, 45 E.T.R. 3(d) 171, at para. 4; Climans v. Latner, 2020 ONCA 554, 449 D.L.R. (4th) 651, at para. 85. As I would allow the appeals, the general principle applies and the Costs Order is set aside. Thus, it is unnecessary to determine whether leave to appeal the Costs Order should be granted and, if so, whether the appeals against that order should be allowed.
[304] Based on the parties’ brief submissions on this matter at the oral hearing of the appeals, I understand that all three agree that if the appeals are allowed, costs below should be awarded on a partial indemnity basis. However, they disagree on the basis by which those costs should be determined. Fram and Kerbel argue that this court should fix those costs at 60% of the full indemnity request contained in the bills of costs they submitted at trial. Romandale contends that, if the parties are unable to agree on the quantum of partial indemnity costs, costs should be assessed.
[305] Romandale also challenges Fram’s entitlement to costs below. It submits that Fram has no appeal but, rather, only an “economic interest” in the outcome of Kerbel’s appeal. Consequently, if the appeals are allowed, Romandale says that Fram is not entitled to costs below.
[306] For the reasons given in my determination of Romandale’s first alleged threshold flaw, I reject Romandale’s submission that Fram is disentitled to costs below.
[307] The oral submissions do not provide the court with an adequate basis on which to quantify the costs below for Fram and Kerbel. I trust that the foregoing provides the parties with sufficient guidance that they can resolve the quantum of costs below among themselves. If they are unable to do that, as indicated in the disposition below, the parties may have recourse to this court to resolve the matter.
XI. A COMMENT ON THE CONCURRING REASONS
[308] My reasons do not address the first proposition set out in my colleague’s concurring reasons because no party raised or argued the legal effect of Fram’s consent.
[309] In terms of the second proposition – estoppel by convention – no party raised or argued the legal issues addressed by my colleague in his concurring reasons. Consequently, my reasons do not address those legal issues.
[310] Accordingly, nothing in my reasons should be taken as approving of those parts of the concurring reasons relating to the first and second propositions.
XII. Disposition
[311] Accordingly, I would allow the appeals and declare that the 2005 August Agreement is valid and enforceable, and I would order specific performance of Romandale’s obligations under the 2005 August Agreement.
[312] Counsel for the parties advised that they had resolved the matter of costs of the appeals and that no order was required in that regard. Thus, I would make no order as to costs of the appeals.
[313] In terms of costs below, if the parties are unable to resolve that matter, I would permit them to make written submissions to a maximum of 5 double-spaced pages. I would give the Appellants 14 days from the date of release of this judgment to file their written submissions and Romandale 21 days.
[314] Neither Fram nor Kerbel specified what changes should be made to the Judgment if the appeals were successful. In light of that and the complexity of the pleadings, I will leave it to the parties to resolve that matter. I offer the following comments as guidance:
i. because I would dismiss Fram’s request for damages and no appeals were taken in respect of the 2007 Action and the 2008 Action, I would make no change to paras. 1 and 2 of the Judgment to the extent it dismisses those actions. However, that part of para. 1 of the Judgment dismissing Kerbel’s crossclaim may need to be altered to reflect the result of these appeals;
ii. I would set aside para. 3 of the Judgment and substitute an order dismissing the 2016 Action;
iii. I would set aside para. 5 of the Judgment and substitute an order declaring that the 2005 August Agreement is valid and enforceable and an order for specific performance of Romandale’s obligations under it; and,
iv. I would set aside para. 6 of the Judgment.
“Gillese J.A.”
“I agree. M.L. Benotto J.A.”
SCHEDULE “A”: CHRONOLOGY OF EVENTS
2003
[1] Romandale sells Fram an undivided 5% interest in two neighbouring farms in Markham known as the McGrisken Farm and the Snider Farm (the “Lands”) and the parties enter into two identical sets of agreements, one set for each farm property: the Co-Owners Agreement (“COA”), which sets out the terms and conditions on which Romandale and Fram, as co-owners, hold title to the Lands; the Construction Management Agreement (“CMA”), under which Fram is to construct and sell residential units on the Lands, once they achieve Secondary Plan Approval (“SPA”); and the Development Management Agreement (“DMA”), which governs the development process for the Lands. Bordeaux Developments (Ontario) Inc. (“Bordeaux”) is also a party to the DMAs and, under its terms, is appointed the development manager. When the parties enter into these agreements, they expect to obtain SPA for the Lands around 2010.
[2] Of these agreements, the COAs are the most significant for these appeals. The buy-sell provision in s. 5.07 of the COAs permits either co-owner, under certain conditions, to tender on the other an offer to sell its entire interest in the Lands and, at the same time, an offer to buy the other’s entire interest in the Lands on the same terms as the offer to sell. The non-tendering party must choose whether to buy out the tendering party or sell its interest. The buy-sell is available once SPA is obtained for the Lands or the DMA is terminated.
[3] Section 6.02 of the COAs provides that if an Event of Default occurs and is continuing, the non-defaulting party can, among other things, bring proceedings for specific performance and/or buy the defaulting party’s interest in the Lands at 95% of fair market value.
[4] Development of the Lands depends on obtaining planning approval, including appropriate amendments to the official plan. These changes are made to the secondary plan, which provides more detailed policies for the development of a specific area. The process of obtaining development approval for specific lands is known as SPA. This is reflected in s. 5.07(a) of the COAs, which defines SPA as “an amendment of the official plan of the Town of Markham applicable to the Lands, obtained in accordance with the Planning Act (Ontario)”.
[5] When Romandale and Fram enter into these agreements in 2003, Romandale has not yet started the SPA process.
2004
[6] With Fram’s consent, Romandale borrows $6 million from the Bank of Nova Scotia (“BNS”) secured by a mortgage on the Lands.
2005
[7] With Fram’s consent, Romandale terminates the DMAs with Bordeaux.
[8] In response, Bordeaux brings an action against Romandale and Fram, alleging the termination was invalid and of no force and effect.
[9] The ongoing work to move the Lands through SPA continues through a new agreement between Fram and Romandale to co-manage development of the Lands.
[10] BNS calls the $6 million mortgage. Romandale needs financing to repay the BNS loan by August 30, 2005. It also needs cash to make distributions to the Roman family. The solution is an agreement which Romandale and Kerbel enter into on August 29, 2005 (the “2005 August Agreement”).
[11] In the 2005 August Agreement, Kerbel agrees to pay off the BNS mortgage and extend the same amount as a new loan to Romandale under the same security and Romandale agrees to: (1) sell to Kerbel its 95% interest in the Lands, at a fixed price of $160,000 per acre; (2) sell to Kerbel (on behalf of the Roman family) the Triple R Lands for $175,000 per acre, subject to a price adjustment for non-developable acreage; and (3) grant Kerbel a right of second refusal over other lands called the Elgin South Property. The sale of Romandale’s interest in the Lands is to occur in two steps:
a. an initial sale of 5% of Romandale’s interest in the Lands; and
b. the sale of Romandale’s remaining interest in the Lands (“Remaining Interest”), conditional on:
i. Romandale buying out Fram’s interest in the Lands pursuant to the buy-sell provisions in the COAs; or
ii. Fram consenting to the transaction.
[12] The second step of the sale of Romandale’s interest in the Lands to Kerbel is referred to as the “Conditional Provision”.
[13] All the transactions in the 2005 August Agreement have been completed, except the sale of Romandale’s Remaining Interest to Kerbel under the Conditional Provision.
[14] Paragraph 5 of the 2005 August Agreement empowers Kerbel to cause Romandale to trigger the buy-sell provision in the COAs following SPA being obtained for the Lands. It also gives Kerbel full control over the development of the Lands.
[15] When the parties entered into the 2005 August Agreement, Romandale expected the Lands would advance through the planning process by approximately 2010 and Kerbel hoped that SPA might take only seven to ten years to unfold.
[16] Ms. Roman-Barber tells Fram she reached an agreement with Kerbel under which Keel bought the Triple R Lands, assumed the BNS mortgage, and bought 5% of Romandale’s interest in the Lands. She does not disclose that Romandale has committed to sell its entire interest in the Lands through the Conditional Provision.
2007
[17] In January, Romandale discloses to Fram that it sold its entire interest in the Lands to Kerbel. Fram’s repeated requests for a copy of the 2005 August Agreement are refused. Fram’s counsel is shown a copy of the agreement in April, on conditions.
[18] In June, Romandale attempts to sell a further 7% interest in the Lands to Kerbel on the same terms as the 2005 August Agreement. This time it notifies Fram, which issues a notice of default for a prohibited disposition.
[19] In July, Fram starts an action against Romandale and Kerbel, alleging that the 2005 August Agreement was a prohibited disposition under the COAs, and seeking an injunction restraining Romandale from any further sale of its interest in the Lands (the “2007 Action”).
[20] Fram also gives notice it will seek to exercise its remedy under the COAs to purchase Romandale’s interest in the Lands at 95% of fair market value.
[21] In July, Ms. Roman-Barber produces a copy of the 2005 August Agreement as an exhibit to her affidavit on the injunction motion. This is the first time that Fram is provided with a copy of the agreement.
[22] In