CITATION: Crescent Limited v. Jones, 2024 ONSC 2209
DIVISIONAL COURT FILE NO.: 23/340
DATE: 2024/04/18
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McWatt ACJ, Sachs and McKelvey JJ.
BETWEEN:
Crescent (1952) Limited in the name and on behalf of Safety Insurance Service (1959) Limited
Appellants
– and –
Robert Jones, Richard Deslauriers, Jones Deslauriers Insurance Management Inc. and Blevins & Associates Insurance Agency Inc.
Respondents
AND BETWEEN:
Stephen F. Gleave and Breanna Needham, for the Appellant/Respondents in the Cross-Appeal
Jonathan Rosenstein, for the Respondents/Appellants in the Cross-Appeal
Crescent (1952 Limited)
Appellant
– and –
Safety Insurance Service (1959) Limited, Robert Jones, Richard Deslauriers, Daniel Sgro, Cory Struck, Lori McDougall and Aaron Nantais
Respondents
HEARD at Toronto: March 14, 2024
REASONS FOR DECISION
H. Sachs J.
Overview
[1] This is an appeal of the decision of McEwen J., released in a number of phases (the “Decision”). The Decision dealt with two actions arising out of a Share Purchase Agreement (“SPA”) entered into between Stephen Palmer and Crescent (1952) Limited on the one hand, and 6993354 Canada Inc. on the other. Under the SPA, Mr. Palmer and Crescent sold 6993354 Canada Inc. two companies: Safety Insurance Service (1959) Limited (“Safety”) and Safety Group Benefits Inc. (“SGBI”). Safety is a wholly owned subsidiary of the Respondent, Jones Deslauriers Insurance Management Inc. (“JDIMI”).
[2] Under the SPA, over $12,000,000.00 was paid to Crescent on closing for its common shares in Safety. The SPA also provided that at the end of a three-year period (the “Warranty Period”) Crescent could be paid up to $4,500,000.00 for its preference shares. The SPA stipulated that the price of the Preference Shares could be adjusted downwards if Safety failed to generate a certain amount of earnings (as defined in the SPA) during the Warranty Period (the “Target EBITDA”).
[3] After the sale closed, Mr. Palmer (who is the sole shareholder of Crescent) became employed as the manager of Safety. Mr. Jones and Mr. Deslauriers, who are the directors of JDIMI, became directors of Safety.
[4] The issue before the trial judge concerned whether Safety met the Target EBITDA during the Warranty Period, and, if it did not, what the consequences were under the SPA.
[5] Crescent alleged that JDIMI sabotaged its efforts to meet the Target EBITDA. It therefore claimed the $4,500,000.00 under the SPA for its Preference Shares.
[6] JDIMI denied the claim and counter-claimed, stating that under the terms of the SPA, Crescent was entitled to no compensation for its Preference Shares and had to pay JDIMI over $8,000,000.00 from the money it had received on closing because of its failure to reach the Target EBITDA.
[7] The trial judge found that JDIMI had constructively dismissed two of Safety’s top salespeople. He therefore applied a provision in the agreement that reduced the Target EBITDA by the amount that the salespeople would have earned during the Warranty Period.
[8] The trial judge also made a finding that the directors of JDIMI, who became directors of Safety, had engaged in conduct that amounted to oppression, which ultimately caused the two top salespeople to leave.
[9] Prior to the commencement of these proceedings, JDIMI sued the employer who hired the two salespeople who left. It received a settlement from that employer to compensate it for losing their book of business. According to Crescent, the Target EBITDA should have been reduced by the amount of that settlement (the “Settlement Amount”). The trial judge refused to do so, finding that the SPA did not provide for such a reduction.
[10] The first ground of appeal advanced is that the trial judge erred in failing to reduce the Target EBITDA by the Settlement Amount. According to Crescent, failing to reduce the Target EBITDA, even after making a finding of oppression against the Respondents, has the effect of allowing them to benefit from their oppressive conduct by keeping the full value of the book of business settlement.
[11] The SPA also contained a baseline item called the Lower Threshold that was contained in the formula used to calculate the amount payable for the Preference Shares (the “Deferred Payment”). By virtue of that formula, any shortfall in earnings below the Lower Threshold had the effect of significantly reducing the Deferred Payment. Thus, the lower the Lower Threshold number is, the less the reduction in the Deferred Payment will be.
[12] The second ground of appeal advanced by Crescent is that the trial judge erred in failing to reduce the Lower Threshold. Crescent argued that the Lower Threshold should have been adjusted downwards by the same amount as the trial judge reduced the Target EBITDA because of the Respondents’ conduct in relation to the two key salespeople. The trial judge refused to make that adjustment, finding that the SPA contained no provision providing for such an adjustment.
[13] The trial judge dismissed Crescent’s claim and JDIMI’s counterclaim. In view of this “divided success”, he declined to make an award of costs against either party. JDIMI seeks leave to appeal the trial judge’s costs award, arguing that it amounts to a “distributive” costs award.
[14] For the reasons that follow, I would dismiss the appeal and deny leave to pursue the cross-appeal.
Factual Background
The Agreements
[15] Stephen Palmer and Crescent entered into the SPA in June of 2008. The SPA was later amended in July of 2008 and again in March of 2009 (collectively the “Agreements”).
[16] As outlined above, the Agreements contained a post-sale three-year Warranty Period during which Safety had to achieve certain revenue in order for Crescent to receive $4,500,000.00 for its Preferred Shares. If sufficient revenue was not earned, the Agreements specified certain consequences. As it happens, the Warranty Period coincided with the 2008 recession.
The Dispute
[17] Following the sale, Safety became a subsidiary of JDIMI. Robert Jones and Richard Deslauriers, directors of JDIMI, became directors of Safety. Mr. Palmer became the manager of Safety.
[18] Shortly after the execution of the Agreements, the relationship between the parties deteriorated.
[19] Safety failed to meet the Target EBITDA. Crescent alleged that this failure was due to JDIMI’s misconduct. JDIMI’s position was that the failure was due to the 2008 financial crisis.
[20] Crescent alleged (among various other misconduct) that JDIMI constructively dismissed two of Safety’s key salespeople – Martin Skinner and Norman McIntyre – effectively sabotaging the ability of Safety to meet the Target EBITDA during the Warranty Period.
[21] The SPA contained a provision dealing with terminations and how they would affect the Target EBITDA:
3.5.6 The Purchaser agrees that it will not, during the Warranty Period, terminate, without cause, or “constructively dismiss” the employment of the Designated Producers [both Martin Skinner and Norman McIntyre were Designated Producers] during the Warranty Period. In the event that the Purchaser does terminate, without cause, or constructively dismiss any of the Designated Producers during the Warranty Period, the EBITDA relating to the commission income projected to be generated by such terminated Designated Producer for the remainder of the Warranty Period (based upon the commission income generated by such Designated Producer for the 12-month period prior to the First Closing Date) shall be deducted from the Target EBITDA for the purpose of the calculation and potential adjustment of the Purchase Price, Pref Price and the aggregate Redemption Amount of the Preferred Shares as set out in Section 3.5.1, 3.5.2, 3.5.3, and 3.5.4.
[22] JDIMI sued Mr. McIntyre and his new employer. A settlement in the amount of $2,215,000.00 was paid by the new employer to JDIMI, which, according to the trial judge, reflected the value of the book of business that Mr. McIntyre took with him (the “Settlement Amount”). The settlement was affected after the expiry of the Warranty Period. Mr. Skinner was also sued, but he did not contribute to the settlement.
The Action
[23] In two separate actions (the first a derivative action, and the second a direct claim for oppression), which were tried together, Crescent pointed to a number of decisions by JDIMI management which, Crescent said, were wrongful and had the effect of artificially reducing Safety’s apparent revenue during the Warranty Period. These actions, it alleged, unfairly deprived Crescent of the Deferred Payment. Thus, Crescent sued for $4,500,000.00, being the Deferred Payment that it never received.
[24] JDIMI counterclaimed based on its construction of the SPA that it said entitled it to a repayment in excess of $8,000,000.00 from the amount that it had paid for the Common Shares on closing.
The Decision
[25] In Phase I of the proceeding, the trial judge dealt with JDIMI’s proposed interpretation of the SPA. JDIMI contended that any reduction in the Purchase Price due to the shortfall in earnings during the Warranty Period was not limited to the $4,500,000.00 attributed to the Preferred Shares, and that the amount paid for the Common Shares could also be reduced. The Trial Judge rejected that interpretation and accepted Crescent’s position that any reduction in the Purchase Price, if there was one, was limited to the $4,500,000.00 attributed to the Preferred Shares. JDIMI is not appealing this finding.
[26] The Phase I proceeding dealt with a number of other issues, including whether Mr. McIntyre and Mr. Skinner were constructively dismissed. The Trial Judge found that they were. In the event that his constructive dismissal finding was wrong, he also found that JDIMI’s actions in relation to Mr. McIntyre and Mr. Skinner constituted oppression.
[27] Having made these findings, the Trial Judge determined that the appropriate remedy for JDIMI’s misconduct was the one specified in Section 3.5.6 of the SPA – a deduction from the Target EBITDA of the projected gross commissions of both producers during the Warranty Period. The parties agreed that this amounted to a deduction of $968,996.84 from the Target EBITDA.
[28] Crescent sought to reduce the Target EBITDA by the amount paid to JDIMI in satisfaction of its lawsuit against Mr. McIntyre and his new employer, that is, the Settlement Amount.. The Trial Judge denied this claim, finding that the parties had specifically turned their minds to a remedy for JDIMI’s actions in relation to Mr. McIntyre when they agreed to Section 3.5.6 of the SPA.
[29] As noted above, part of the formula for calculating the Deferred Payment depended on an amount known as the Lower Threshold. This is set out in section 3.5.3 of the Amended SPA. Under that formula, the Deferred Payment was to be reduced by $1.00 for every $1.00 of shortfall between the Target EBITDA and the Lower Threshold, and by $4.00 for every $1.00 of shortfall below the Lower Threshold.
[30] In his Phase III and IV Decisions, the trial judge dealt with Crescent’s submission that the Lower Threshold number should be reduced by $968,996.84, the same amount as he had reduced the Target EBITDA. According to Crescent, if this was not done, the Target EBITDA could fall below the Lower Threshold, which would be an absurd result. Crescent also argued that given the oppressive conduct findings that led to the Target EBITDA reduction, a purposive reading of the SPA also required a similar reduction in the Lower Threshold. The trial judge disagreed, finding that “the plain wording of s. 3.5.6 clearly stipulates that the only deductions that can be made are from the Target EBITDA” and “that there was no mention of the Lower Threshold.”
[31] In the same decision, the trial judge also dealt with the issue of costs. In doing so, he decided that since success was divided, the parties should each bear their own costs. In particular, although Crescent failed in its claim for the Deferred Payment, he had also made significant adverse findings against JDIMI. He found against JDIMI’s interpretation of the SPA, which would have resulted in Crescent having to repay “most, if not all, of the value of the Purchase Price.” He also made “significant findings against JDIMI with respect to the wrongful termination of McIntyre and Skinner, as set out in the Phase I reasons.”
Issues Raised
This appeal raises three issues:
(1) Did the trial judge err in failing to reduce the Target EBITDA by the Settlement Amount?
(2) Did the trial judge err by failing to reduce the Lower Threshold?
(3) Should leave be granted to appeal the trial judge’s costs order, and if leave is granted, should that costs order be varied?
Analysis
Did the trial judge err in failing to reduce the Target EBITDA by the Settlement Amount?
[32] The Settlement Amount was $ 2,215,500.00. Reducing the Target EBITDA by that amount would have gone a long way to ensuring that Crescent received a significant portion of the Deferred Payment.
[33] The essence of Crescent’s submission on this point is that having found that JDIMI (and its principles) had engaged in oppressive conduct, the trial judge was required to find a remedy for that conduct. The remedy given pursuant to s. 3.5.6 of the SPA was merely the specified legal consequence of the constructive dismissal. It was not a remedy for the oppressive conduct.
[34] According to Crescent, the fair and logical remedy for the oppressive conduct was to include the Settlement Amount in the calculation of the Target EBITDA. The Settlement Amount constituted a benefit that JDIMI received as a result of its wrongful conduct in dismissing Mr. McIntyre. Allowing it to keep the full value of that benefit without having to account for it in its dealings with Crescent had the effect of allowing JDIMI to benefit from their wrongdoing. Such a result is antithetical to the law governing oppression remedies, which as the trial judge correctly noted, are “equitable remed[ies], which seek to ensure fairness.”
[35] The trial judge’s reasons for rejecting Crescent’s submissions on this point are encapsulated in the following paragraphs from the Phase I reasons:
[88] I agree with JDIMI. As noted, I accept Crescent’s position that JDIMI’s actions would be considered to be a breach of the SPA and oppressive. While I accept that JDIMI’s actions (or Safety as the case may be), were oppressive to, and unfairly disregarded, the interests of Crescent, the parties specifically turned their minds to the remedy when they agreed to the provisions of s. 3.5.6.
[89] In these circumstances, that remedy ought to be employed to correct the wrong but go no further. To award damages on the basis of the payment to JDIMI of $2,215,000 would not be appropriate. Safety could have protected itself. It could have included some provision in the SPA that, should McIntyre be constructively dismissed, or any reason leave, and ultimately pay for his book of business (which would result in a payment to JDIMI), that the amount paid could be used in the calculation of the Target EBITDA. This was not done. Rather, the parties agreed to the formula in s. 3.5.6. Further the $2,125,000 settlement figure was broken down in various components with a significant amount being allocated to costs. It would be difficult to determine what portion of this amount would constitute reasonable damages.
[36] Thus, the trial judge’s reasoning was two-fold. First, as previously noted, he found that the SPA specified a remedy. That remedy did not include any adjustment to the Target EBITDA for the Settlement Amount. This could have been done and it was not. Second, it would be difficult to calculate how much of the Settlement Amount constituted reasonable damages, since a large portion of the amount was allocated to other components such as costs.
[37] Crescent also submits that the trial judge erred in failing to award a remedy because of the difficulty in calculating such a remedy. According to Crescent, even where a court cannot assess damages with “any degree of mathematical accuracy”, it is required to do the best it can: (Lauzon v. There it was Gone Inc., 2012 ONSC 3583; SEP Holdings Limited v. City of Cambridge, 2013 ONSC 2870). In this case, the trial judge found that the Settlement Amount “in large part, reflected a value with respect to the book of business that McIntyre took with him.” Having made this finding, the trial judge was required to consider the available evidence (including the evidence from Crescent’s expert that the Settlement Amount should have been included in the Target EBITDA), and then done the best he could to come up with an appropriate amount.
[38] In assessing Crescent’s position on this point, it is important to keep in mind the standard of review that is applicable to a trial judge’s oppression remedy decisions. As put by the Ontario Court of Appeal in Naneff v. Con-Crete Holdings Ltd., 1995 959 (ON CA), 23 O.R. (3d) 481, at para. 18:
[18] Before discussing the merits of the challenge to this remedy, I wish to make a brief reference to the principles which guide an appellate court in its review of a remedy ordered under s. 248(3) of the O.B.C.A. Section 248(3) empowers a court upon finding of oppression to make any order “it thinks fit”. When that broad discretion is given to a court of first instance, the law is clear that an appellate court’s power of review is quite limited. In Mason v. Intercity Properties Ltd. (1987), 1987 173 (ON CA), 59 O.R. (2d) 631 at p. 636, 38 D.L.R. (4th) 681 (C.A.), Blair J.A. set out the governing principle:
The governing principle is that such a discretion must be exercised judicially and that an appellate court is only entitled to interfere where it has been established that the lower court has erred in principle or its decision is otherwise unjust.
[39] Keeping this standard in mind, there are a number of problems with Crescent’s submissions.
[40] First, implicit in its submission is the proposition that the trial judge was required to award two types of remedies: one for the constructive dismissal, and another to recognize that the trial judge found the conduct that led to the constructive dismissal was also oppressive. This statement ignores that fact that the trial judge only made the finding of oppression as an alternative finding. In other words, if he was wrong in finding that the JDIMI’s conduct amounted to constructive dismissal, then it was still a breach of the SPA because it was also oppressive. This is clear from the following excerpt of the trial judge’s Phase I reasons:
[81] Alternatively, if I am in error and McIntyre was not constructively dismissed, I would still find that JDIMI breached the SPA and acted oppressively towards Crescent.
[41] The findings of constructive dismissal and oppression were not findings related to two separate wrongs. JDIMI’s conduct breached the SPA because it constituted constructive dismissal. If it did not, it still breached the SPA because it was oppressive. This fact undermines the force of Crescent’s submission that the trial judge’s decision restricting himself to the remedy for constructive dismissal provided for in the SPA was unjust.
[42] The second problem with Crescent’s argument is that it fails to adequately recognize that the point of the oppression remedy is to validate the reasonable expectation of the parties. Further, where the parties have turned their minds in an agreement to those reasonable expectations, that is the appropriate remedy. As put in Itak International Corp. v. CPI Plastics Group Ltd., [2006] O.J. No. 2637 (Ont. Sup. Ct.):
[45] The touchstone used by the courts for identifying conduct that satisfies the language of s. 248 and oppression remedy has been the “reasonable expectation of the shareholder”.
[47] Agreements between the parties tend to constitute the best evidence of the parties’ reasonable expectations. Oppression proceedings that are based on the enforcement of the prior contractual arrangements tend to be clearer than other such proceedings in that such contracts may inform the Court’s decision as to the reasonable expectation of the parties.
[43] Thus, contrary to Crescent’s submission, the trial judge did not err when he crafted a remedy that was consistent with the contract between the parties. As the trial judge implicitly acknowledged, the SPA constituted the best evidence of the reasonable expectation of the parties, and the SPA did not provide for the Settlement Amount to be included in the calculation of the Target EBITDA.
[44] Further, the Settlement Amount was compensation for the value of Mr. McIntyre’s book of business, which he took with him when he left Safety for his new employer. That is to say, Mr. McIntyre had departed Safety with a capital asset, that properly speaking, belonged to Safety. The Settlement Amount was to repay Safety for the value of that capital asset.
[45] Crescent had no interest in the value of Safety’s capital assets. Pursuant to the SPA it had sold its interest in those assets to JDIMI. Therefore, there was nothing unfair to Crescent when JDIMI, who was the owner of the capital asset at issue (Mr. McIntyre’s book of business), got paid the Settlement Amount.
[46] Mr. McIntyre’s departure affected Safety’s potential revenue stream during the Warranty Period. This in turn jeopardized Crescent’s ability to meet the Target EBITDA and receive the Deferred Payment. Section 3.5.6 provided a remedy for this loss which the trial judge awarded. In doing so, the trial judge met the reasonable expectations of the parties and compensated Crescent for the damage caused by JDIMI’s conduct. In other words, the result was entirely in accord with the principles governing the award of oppression remedies.
Did the trial judge err by failing to reduce the Lower Threshold?
[47] The Deferred Payment formula that contains the reference to the Lower Threshold is set out at s. 3.5.3 of the SPA. It reads:
3.5.3. The parties have agreed that, in the event that the Aggregate Warranty Period EBITDA is less than the Target EBITDA (with the amount by which the Target EBITDA exceeds the Aggregate Warranty Period EBITDA being hereinafter referred to as the “Warranty Period: Deficiency”), the Purchase Price, the Pref Price and the aggregate Redemption Amount of the Preferred Shares shall be adjusted downward as follows:
a) in the event that the Aggregate Warranty Period EBITDA is less than the Target EBITDA but greater than Six Million Dollars ($6,000,000.00), then the Purchase Price, the Pref Price and the Aggregate Redemption Amount of the Preferred Shares will be adjusted downward, on a dollar for dollar basis, by the amount of the Warranty Period Deficiency.
As an example, if the Aggregate Warranty Period EBITDA is $7,110,000.00, which is $90,000 less than the Target EBITDA of $7,200,000 for the Warranty Period, the Warranty Period Deficiency is $90,000.00. This would result in a downward reduction of the Purchase Price, the Pref Price and the aggregate Redemption Amount of the Preferred Shares by an amount equal to the Warranty Period Deficiency of $90,000.00, being $90,000.00. On such basis the Pref Price payable by the Purchaser to the Vendors for the Preferred Shares on the Second Closing would be $4,410,000.00.
b) in the event that the Aggregate Warranty Period EBITDA is less than Six Million Dollars ($6,000,000.00), then, in addition to the downward adjustments set out in Section 3.5.3(a) above, the Purchase Price, the Pref Price and the aggregate Redemption Amount of the Preferred Shares shall be further adjusted downward by an amount equal to four (4) times the amount by which Six Million Dollars ($6,000,000.00) exceeds the Aggregate Warranty Period EBITDA.
As an example, if the Aggregate Warranty Period EBITDA is $5,910,000.00, which is $1,290,000.00 less than the Target EBITDA of $7,200,000 for the Warranty Period, the Warranty Period Deficiency is $1,290,000.00. This would result in a downward reduction of the Purchase Price, the Pref Price and the aggregate Redemption Amount of the Preferred Shares by an amount equal to $1,560,000.00 calculated as follows: (i) a dollar for dollar reduction for the Warranty Period Deficiency between $7,200,000.00 and $6,000,000.00, being $1,200,000.00; and (ii) four (4) times the amount by which $6,000,000.00 exceeds the Aggregate Warranty Period EBITDA of $5,910,000.00, or four (4) times $90,000.00, being $360,000.00. On such basis, the Pref Price payable by the Purchaser to the Vendors for the Preferred Shares on the Second Closing would be $4,500,000.00 minus $1,560,000.00, being $2,940,000.00.
[48] The Lower Threshold number set out in this section is $6,000,000.00. The parties agreed that the number should be amended to $5,425,000.00.
[49] In his Phase III reasons, the trial judge dealt with the one remaining dispute between the parties: whether the Lower Threshold could be adjusted downwards. Crescent asserted that it should be reduced by close to $1,000,000.00 – the same amount as the Target EBITDA had been reduced. As noted above, any reduction in the Lower Threshold could have a significant impact on the value of the Deferred Payment since any shortfall in earnings below the Lower Threshold is penalized under the formula at a 4:1 ratio.
[50] Crescent argued before the trial judge that construing the SPA as a whole, it should be read as requiring such an adjustment. Failing to make such an adjustment both incentivized JDIMI’s dismissal of Mr. McIntyre and Mr. Skinner and could lead to absurd results. In particular, as the trial judge put it, “there could be situations where, depending on the downward adjustment of the Target Warranty Period EBITDA, it could fall below the Lower Threshold. In such a circumstance, it would be confusing as to what downward adjustments would apply, i.e., the $1 to $1 model or the $4 to $1 model.”
[51] The trial judge rejected Crescent’s submissions. First, he found that the plain wording of s. 3.5.6 of the SPA only provided for a downward adjustment in the Target EBITDA; there was no mention of the Lower Threshold. To imply such an adjustment would result in what the trial judge characterized as a “tortured analysis” of the section. Although the trial judge accepted that there was merit to the submission that the Target EBITDA could fall below the Lower Threshold and thus “complicate the issue of what downward adjustments should apply”, the parties were sophisticated. If they had wanted to provide for such an adjustment, they could have expressly done so.
[52] The trial judge also did not agree with the submission that failing to lower the Lower Threshold somehow incentivized JDIMI to dismiss Mr. McIntyre and Mr. Skinner. Under s. 3.5.6 of the SPA, its actions in doing so caused a significant reduction to the Target EBITDA, which in turn lowered the reduction in the Deferred Payment. Thus, the SPA contained a real disincentive.
[53] On this basis, the trial judge concluded that “the SPA, and particularly the provisions of s. 3.5.6, did not allow for the Lower Threshold to be adjusted downward.”
[54] Crescent made the same submissions before this court on appeal as they did before the trial judge on the contractual interpretation issue. It also argued that the trial judge erred by failing to craft a remedy that addressed the oppressive conduct that he found JDIMI had engaged in. Instead, the trial judge’s decision had the effect of rewarding JDIMI for its conduct in relation to Mr. McIntyre and Mr. Skinner.
[55] The trial judge’s construction of the SPA requires deference. As the Court of Appeal recently confirmed in Spot Coffee Park Place Inc. v. Concord Adex Investments Ltd., 2023 ONCA 15:
- In Sattva, at para. 50, Rothstein J. reasoned that contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix. He went on to note, at para. 51, that:
One central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute.
- As he observed at para. 52, legal obligations arising from a contract are, in most cases, limited to the interests of the particular parties. Deference to first instance decision-makers on points of contractual interpretation promotes the goal of limiting the cost of appeals and the autonomy and integrity of trial proceedings. In Corner Brook [cite omitted], Rowe J. affirmed this deferential standard of review in the face of a question of mixed fact and law involving the interpretation of a contract.
[56] I agree with JDIMI that Crescent’s submission to the trial judge was essentially an invitation to re-write the contract between the parties. However, courts do not rewrite contracts between sophisticated parties, even if there is some justification for believing that the contract may have an issue and could have been improved. As the British Columbia Court of Appeal explained in Alpine Veneers Ltd. v. Reed Lumber Co. Ltd., [1983] BCJ No. 2289 (citing the House of Lords in Trollope v. Colls v. Northwest Metropolitan Regional Hospital Board, (1973) 2 All E.R. 260):
…the basic principle [is] that the court does not make a contract for the parties. The court will not even improve the contract which the parties have made for themselves, however desirable the improvement might be. The court’s function is to interpret and apply the contract which the parties have made for themselves. If the express terms are perfectly clear and free from ambiguity, there is no choice to be made between different possible meanings; the clear terms must be applied even if the court thins some other terms would have been more suitable. An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract; it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must be a term that went without saying, a term necessary to give business efficacy to the contract, a term which, although tacit, formed part of the contract which the parties made for themselves.
[57] In this case the trial judge was correct. The SPA did not provide for a reduction to the Lower Threshold. Crescent was asking him to imply such a term. He correctly concluded that this was not a situation where the court should imply a term that the parties had not chosen to make express. It was not a term “that went without saying” or that was “necessary to give business efficacy to the contract.” The argument that without such a term the contract incentivized JDIMI to dismiss Mr. McIntyre and Mr. Skinner is also without merit. As the trial judge found, the SPA contained an express disincentive to engage in such conduct. The fact that the disincentive did not go as far as Crescent might have liked is not a reason for the court to rewrite the contract.
[58] There is also no merit to Crescent’s argument that the trial judge should have reduced the Lower Threshold because he found that JDIMI had engaged in oppressive conduct. As outlined in the previous section, the remedy for oppressive conduct is to validate the reasonable expectations of the parties. Where there is an express agreement between the parties, that agreement is the best evidence of those expectations.
Should leave be granted to appeal the trial judge’s costs award?
[59] JDIMI has filed a cross-appeal seeking leave to appeal the trial judge’s costs disposition. They submit that the trial judge exercised his discretion injudiciously when he deprived it of its costs of the action. According to it, Crescent commenced an action for $4,500,000.00 and received nothing. Therefore, it was the successful party.
[60] As noted above, the trial judge decided that each party should bear their own costs. He did so for two reasons. First, while Crescent was unsuccessful in its claim, JDIMI was unsuccessful in its counterclaim, which was for substantially more money than Crescent’s claim. Second, while the trial judge made significant findings against Crescent, he also made significant findings against JDIMI, particularly when it came to its conduct towards Mr. McIntyre and Mr. Skinner.
[61] Leave to appeal a costs award is only granted where a party can convince a court that there are strong grounds to believe that a judge erred in the exercise of his discretion. If leave is granted, a costs award will only be set aside on appeal if the trial judge made an error in principle or the award is “plainly wrong”: (Smith v. MacKinnon, 2017 ONSC 4638, at para. 13 (Div. Ct)).
[62] JDIMI argues that the trial judge erred in principle by making a distributive costs award. I disagree. The trial judge’s reasons for depriving JDIMI of its costs were driven by the fact that success at trial was divided. While Crescent’s claim was dismissed, so was JDIMI’s counterclaim. JDIMI’s counterclaim was for far more money than Crescent’s claim. In view of this, it cannot be said that the high threshold necessary to grant leave to appeal the trial judge’s costs award has been met. Nor can it be said that if leave were granted, it would be appropriate for this court to interfere with the trial judge’s exercise of his discretion.
Conclusion
[63] For these reasons, the appeal and cross-appeal are dismissed. The parties agreed that the following amounts should be awarded to the successful party – for the appeal, $12000; for the cross-appeal, $6000. Based on this agreement and offsetting the costs that each party is entitled to, the Appellant/Respondent in the Cross-Appeal shall pay the Respondents/Appellants in the Cross-Appeal $6000 in costs.
Sachs J.
I agree _______________________________
McWatt ACJ
I agree _______________________________
McKelvey J.
Released: April 18, 2024
CITATION: Crescent Limited v. Jones, 2024 ONSC 2209
DIVISIONAL COURT FILE NO.: 23/340
DATE: 2024/04/18
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
McWatt ACJ, Sachs and McKelvey JJ.
BETWEEN:
Crescent (1952) Limited in the name and on behalf of Safety Insurance Service (1959) Limited
Appellants
– and –
Robert Jones, Richard Deslauriers, Jones Deslauriers Insurance Management Inc. and Blevins & Associates Insurance Agency Inc.
Respondents
AND BETWEEN:
Crescent (1952 Limited)
Appellant
– and –
Safety Insurance Service (1959) Limited, Robert Jones, Richard Deslauriers, Daniel Sgro, Cory Struck, Lori McDougall and Aaron Nantais
Respondents
REASONS FOR DECISION
SACHS J.
Released: April 18, 2024