2013 ONSC 3209
COURT FILE NO.: 12-54963
DATE: 2012/05/31
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Cruickshank Construction Limited
Plaintiff (Respondent)
– and –
Durrett Companies Limited, Durrett Co. Ltd., Peter Grant, David Grant and Christopher Piper
Defendants (Applicants)
John P. O’Toole, for the Plaintiff (Respondent)
Matthew J. Halpin/Jenna Anne de Jong, for the Defendants (Applicants) Durrett Companies Limited, Durrett Co. Ltd, Peter Grant and David Grant
Robert E. Houston, Q.C., for the Defendant (Applicant) Christopher Piper
HEARD: February 27, 2013
REASONS FOR DECISION ON MOTION FOR SUMMARY JUDGMENT
R. Smith j.
Overview
[1] The former and current owner of a quarry, Christopher Piper (“Piper”) and Durrett Companies Limited (“Durrett”) respectively have each brought summary motions seeking a dismissal of the action against them. They argue that the right of first refusal contained in the Agreement entered in 1991 (the “Agreement”) between Piper and the plaintiff Cruickshank Construction Limited (“Cruickshank”) expired at the latest in March or April of 2006. As a result, they submit that Piper could sell the quarry to Durrett without giving Cruickshank an opportunity to exercise the right of first refusal contained in the Agreement.
[2] Cruickshank submits that the Agreement entered into between it and the owner (Piper’s wife) was a lease, which was renewed in 2006 on a year to year basis. Cruickshank submits that the Agreement was renewed by Cruickshank continuing to pay rent and Piper continuing to accept rental payments and both parties continuing to follow the same terms as contained in the Agreement. The plaintiff further argues that the right of first refusal contained in the Agreement (lease) was also renewed based on the conduct of the parties continuing to follow the terms of the Agreement and Piper acknowledging the continued existence of the right of first refusal. In particular Piper’s lawyer assured Cruickshank in writing, that Piper would continue to honour the right of first refusal contained in the Agreement in 2011 after the Agreement had ended. Cruickshank further submits that Piper should be estopped from denying the continued existence of the right of first refusal by his conduct and the representation made to it on Piper’s behalf by his lawyer that the right of first refusal continued in force.
[3] Finally, the plaintiff submits that it had concluded an enforceable agreement to purchase the quarry property with Piper, when it matched Durrett’s offer to purchase for $850,000 after Piper said “it’s yours if you match the offer”.
[4] The following issues must be decided:
(1) Was the Agreement dated April 29, 1991 entered between Piper and Cruickshank a lease or a licence?
(2) If the Agreement was a lease, was the lease renewed after March 31, 2006 on a year to year basis by the parties’ conduct?
(3) Did the parties also agree to renew the right of first refusal contained in the lease Agreement by their conduct?
(4) Did Piper make an offer that Cruickshank could accept by matching Durrett’s offer to purchase for $850,000?
(5) Did Cruickshank match the terms contained in Durrett’s offer to purchase for $850,000?
(6) If the right of first refusal was renewed along with the lease, did Piper breach it by failing to give Cruickshank an opportunity to match Durrett’s offer for $950,000?
(7) Is Durrett entitled to immediate exclusive possession of the quarry property and is the plaintiff entitled to continued registration of its certificate of pending litigation?
Background Facts Which are Uncontested, Unless Specified
[5] On April 29, 1991, Cruickshank Construction Ltd. entered into the Agreement with Marilyn Piper. The Agreement gave Cruickshank the exclusive right to enter on the property which was defined as an area of approximately 75 acres to operate and maintain an existing quarry on the lands. The Agreement allowed Cruickshank the right to remove rock from the quarry and set out the price for various quantities of rock removed in each year and terms of payment.
[6] The contract year as defined in the Agreement was amended by an exchange of correspondence between the lawyers for Cruickshank and Piper. The exchange of the correspondence confirmed that the contract year in the Agreement was from April 1st to March 31st of each year.
[7] Paragraph 3 of the Agreement states that it shall take full effect on April 1, 1991 and shall continue for a period of five years. Paragraph 15 of the Agreement states that Cruickshank had the right to renew the Agreement for two further periods of five years under the same terms and conditions. The right to renew was subject to three conditions; firstly that it had not been and was not in default of any significant terms of this Agreement of which it has had notice, and has been given a reasonable period of time remedy and failed to do so, and secondly, that it has not done anything which places the licence from the Ministry of Natural Resources in jeopardy and thirdly, that it gave notice in writing to Piper at least 12 months prior to the last day of the contract.
[8] Paragraph 16 of the Agreement gave Cruickshank a right of first refusal. It states that if the owner (Piper) received a bona fide offer to purchase the lands or any part thereof which the owner was willing to accept, it shall not be accepted until Piper has given to Cruickshank ten days notice in writing to meet the terms of the said offer. The right of first refusal was also conditional on Cruickshank not being in default under the Agreement as defined in clause 15 of the lease.
[9] On September 24, 1991, the Agreement was registered on title by Cruickshank’s solicitor who described the document as a lease. The notice of lease registered on title stated that the lease could be renewed for two further periods of five years and also stated that it contained an option to purchase the property by way of right at first refusal.
[10] On March 18, 1996, Cruickshank wrote to Piper stating that “It is time to renew the Agreement again and we would appreciate hearing from you indicating if you wish to renew. We wish you and your husband the best.”
[11] In order to renew the Agreement after the first five year term, 12 months notice was required to be given by Cruickshank. Notice should have been given to Piper before April 1, 1995 in order to renew the Agreement on April 1, 1996. Cruickshank gave written notice on March 18, 1996 which was before the renewal date on April 1, 1996 but was not 12 months in advance. However, Piper accepted the renewal notice and both parties continued to follow the terms Agreement for a further five year period.
[12] On February 23, 2000, Cruickshank sent a letter to Piper giving notice that it intended to renew the Agreement to operate the quarry for a further period of five years. On April 29, 2001, this letter was sent by registered mail and gave clear notice that the agreement was being renewed for a further five year period. The February 23, 2000 notice was given 12 months before the renewal date on April 1, 2001. Piper accepted the renewal and both parties continued to follow the terms of the Agreement.
[13] Following the termination of the lease Agreement on March 31, 2006, Piper and Cruickshank met to discuss terms for a new agreement. There were some meetings and some exchanges of correspondence between the parties however they did not enter into a new written agreement. Both Piper and Cruickshank continued on in the same manner as they had under the 1991 Agreement. Cruickshank continued to provide monthly statements and payments to Piper for the rock removed each month. The amount paid by Cruickshank was in accordance with the prices set out in the 1991 Agreement. Cruickshank continued to make the monthly payments and Piper continued to accept these payments until the end of November of 2011. On December 1, 2011 Cruickshank stopped making the monthly payments for the quantity of rock removed in accordance with an offer to purchase it had made to Piper.
[14] On February 3, 2011, Mr. Worrad, the solicitor for Piper, sent a letter to a number of possibly interested parties seeking an expression of interest from those who might wish to put forward an offer to purchase the quarry property.
[15] On February 15, 2011, in response to Mr. Worrad’s letter, Cruickshank offered to purchase the quarry lands for $505,000. By letter of March 4, 2011, Mr. Worrad, on behalf of Piper, replied to the solicitor for Cruickshank making the following statement:
We understand and accept the letter on the basis that it does not impact on your client’s right to rely on the Right of First Refusal included in the Extraction Agreement. We understand the current term of the Extraction Agreement to expire in September, 2011.
Should another party’s offer (ie. Not the one submitted by your client) prove to be acceptable, we will provide the terms to your client for consideration in keeping with the Right of First Refusal provision set out in the Extraction Agreement. [Emphasis added.]
[16] On April 28, 2011, the solicitor for Piper sent a letter to the solicitor for Cruickshank advising him that they had received another offer which his client was considering and made the following statement; “We’ll be in touch with you should we be required to exercise those provisions in the Extraction Agreement relating to your Right to First Refusal.”
[17] The two letters from Mr. Worrad, written on behalf of Mr. Piper, confirm that at that time Mr. Worrad and Mr. Piper believed that the right of first refusal contained in the lease Agreement remained valid. The above letters are also a representation to Cruickshank that the right of first refusal was renewed, along with the lease Agreement and continued to be valid and would be honoured by Piper if an acceptable offer to purchase for the quarry was received.
[18] On April 21, 2011, Durrett offered to purchase the quarry for $750,000. Piper did not accept this offer.
[19] On October 30, 2011, Piper unilaterally sent a letter to Cruickshank contradicting the previous letters of March 4 and April 28, 2011 stating that the contract under which Cruickshank operated the Iroquois Quarry had lapsed and stated:
Therefore, Cruickshank Construction’s Right of First Refusal on the sale of the quarry no longer applies. Since I intend to sell the quarry, Cruickshank Construction has an opportunity to tender a last and before offer before I choose the best bid. Please let me know at your earliest convenience if I can expect to receive an offer.
[20] On November 26, 2011, Cruickshank sent an e-mail to Piper stating that subsequent to their initial offer to purchase, the matter was left with their lawyer to make a formal counter‑offer (ready for signature) to them that would detail how much land they are selling and how much they wish to keep.
[21] On November 26, 2011, Piper responded to Cruickshank and advised that Cruickshank’s low offer made in March of 2011 was not acceptable but that he would entertain a revised offer stating that he was prepared to sell the entire property (177.89 acres), including the farm house, and that he was looking for $1.1 million but would entertain something less. It took Piper approximately nine months to respond to Cruickshank’s March of 2011 offer.
[22] On December 5, 2011, Cruickshank wrote to Piper and offered to purchase the quarry lands for $662,250 with the conditions that the closing to be done quickly with the timing being left to their lawyers and that the royalty payments would end on December 1, 2011.
[23] On December 5, 2011, Piper responded stating that he would get back to him after he conferred with his lawyer.
[24] On January 24, 2012, Piper sent a further letter to Cruickshank stating that: “I am still examining my options”. He indicated that he was looking for a figure closer to $1 million but that a sale to Cruickshank would be in everyone’s interest, but it could not happen at a fire sale price and asked if he was in a position to revise his offer.
[25] On March 9, 2012, Piper sent a further letter to Cruickshank asking him if their firm was planning on making an improved offer asking if he could move him up to $800,000.
[26] On March 14, 2012, Cruickshank responded that he could not get any upward movement from Steve and the guys and proposed renewing the contract and then putting the property on the market as an investment property.
[27] On March 31, 2012, Cruickshank wrote to Piper “Any news on the quarry?” Piper responded as follows on the same date “I’ll keep you posted, I still wish to sell.”
[28] On April 2, 2012, Cruickshank wrote to Piper saying “Time on the purchase of the quarry is closing.” and stated that an early decision would be appreciated. On the same date, Piper responded to Cruickshank saying that “I’ll let you know, in the meantime, let me know if you are able to raise your offer.”
[29] On April 3, 2012, Cruickshank responded to Piper by stating that he could not get a raise in the offer and was doubtful if the last one will stand.
[30] On May 9, 2012, Piper sent an e‑mail to Cruickshank advising that they were closing in on a decision and would like to receive Cruickshank’s best and final offer for the property.
[31] On May 16, 2012, Piper sent a further e-mail to Cruickshank stating as follows:
If you are still interested in purchasing the quarry property on Binion Road, South Dundas, please ask your lawyer to prepare an offer and submit it to Brian Worrad at Menear-Worrad Associates by Friday, May 17th at the latest.
[32] On May 17, 2012, Cruickshank sent an e‑mail to Piper and to Worrad stating:
Chris,
As we agreed on the phone you were going to have your lawyer send me a copy of the offer which you have received and which you have asked us to match.
Thank you,
Steve
[33] On May 17, 2012 at 3:31 p.m., Piper responded as follows:
From: Piper, Chris [mailto: Cpiper@ivey.uwo.ca]
Subject: RE: Offer to Purchase
Yes. It will be faxed to you.
Chris
[34] On May 17, 2012 at 3:50 p.m., Piper’s solicitor, Brian Worrad, faxed a copy of the first page of the offer to purchase to Cruickshank indicating a purchase price of $850,000, blocking out the purchaser’s name, and with a closing date on May 24, 2012.
[35] On May 17, 2012 at 4:01 p.m., Steven Ault, the solicitor for Cruickshank, e‑mailed Worrad stating “I presume there are no conditions in the schedules.”
[36] On May 17, 2012 at 4:20 p.m., Worrad responded to Ault stating “There are a few covenants but no conditions in Schedule “A” and the legal description is attached as Schedule “B”.” Worrad did not advise Ault that the offer included a term that the vendor was required to take back a mortgage for $600,000 payable over three years.
[37] On May 17, 2012 at 4:40 p.m., Ault responded to Worrad:
I think our offer was totally clean wasn’t it – so it is only a matter of $ if Cruickshank instructs me to make an amended offer ie. I have no special conditions to meet to match the current offer. I am in OMB hearing so cannot check my file.
[38] On May 17, 2012 at 4:42 p.m., Worrad responds to Ault:
Thanks Stephen.
We will not be accepting until tomorrow after the lunch hour. I am sorry for the haste.
[39] On May 17, 2012 at 5:19 p.m., the solicitor for Cruickshank sent an e‑mail to Worrad:
Subject: RE: Offer to Purchase
If we wish to match are you expecting a letter to that effect from Cruickshank and $5,000 or an OREA form for $850,00[0] and $5,000.
[40] On May 17, 2012 at 5:23 p.m., Worrad responded to Ault and stated:
We would need an OREA for for $850,000.00, $5,000.00 deposit and same closing date. My concern, obviously, is to not lose a “bird in the hand” for one in the bush.
[41] On May 18, 2012 at 12:12 p.m., Ault wrote to Worrad:
This e-mail; did not get through to mex until a few minutes ago – we are preparing the offer and the deposit. We need your trust account info again.
[42] On May 18, 2012 at 12:36 p.m., Ault sent Worrad the following e-mail:
Subject: Cruickshank pf Piper
Cruickshank will be meeting the current offer – no conditions or reps other than standard in OREA 500 ;
Steve has been e-mailed the agreement and will be signing shortly – my office will e‑mail to your address;
we have deposit funds and if you send me your trust account info we will deposit today;
we will set return date as 4:00 pm Tuesday May 22 – we have no concern whatsoever that Mr. Piper will shop offer and we wish to allow a reasonable time to meet with him – if this is not enough, let us know.
I am still in OMB hearing but mainly just listening so I am checking my e-mails constantly if any issues.
[43] On May 18, 2012 at 2:01 p.m., Ault faxed Worrad an offer to purchase signed by Cruickshank offering to purchase the property for $850,000. Cruickshank’s offer to purchase specified a closing date on June 29, 2012, and did not require Piper to take a mortgage back. The Durrett offer had specified a closing date of May 24, 2012 but also required Piper to take back a mortgage of $600,000.
[44] Durrett’s initial offer to purchase dated on May 15, 2012 stated that $250,000 was payable on closing, to be followed by three annual payments of $200,000 without interest secured by a vendor take back mortgage. Piper proposed amending the mortgage back to provide interest at two per cent per annum which was agreed to by Durrett.
[45] On May 22, 2012 at 11:38 a.m., Durrett’s solicitor advised Piper’s solicitor that his clients were suggesting that Piper make a counter‑offer using the Agreement of purchase of sale in his possession, which was irrevocable until 5:00 p.m. that day. Durrett’s solicitor proposed that the balance of the purchase price would be paid on closing, without any vendor take back mortgage, subject to the usual adjustments.
[46] On May 22, 2012 at 2:11 p.m., Piper’s solicitor faxed Durrett’s solicitor an amended agreement of purchase of sale signed by Piper countering the $850,000 offer at $950,000. Piper’s counteroffer was open for acceptance until 5:00 p.m. on May 22, 2012 and also removed the proposed vendor take back mortgage for $600,000.
[47] Later on May 22, 2012, Durrett accepted Piper’s counteroffer and its solicitor faxed Piper the accepted offer to purchase.
[48] Durrett’s solicitor also forwarded Piper’s solicitor copies of tax certificates for the property which he had previously obtained to assist him in preparing the statement of adjustments, advised him that he would accept Worrad’s undertaking to remove the notice of lease registered on title, advised that he would be in funds and was prepared to close on the next day, May 23, 2013, and sent a direction regarding title.
[49] On May 24, 2012, Piper’s solicitor, Worrad, prepared a document stating that he had authority to determine the lease against the identified lands and had the notice of lease removed from title to the property.
[50] On May 24, 2012, the quarry property was transferred to Durrett and the transfer was registered as instrument number DU10327.
[51] On Friday, July 20, 2012, Aitken J. granted an injunction stating “…that the notice of termination dated May 25, 2012 given to the Plaintiff [Cruickshank] by Durrett…shall not be acted upon…” and permitted a certificate of pending litigation to be issued in favour of Cruickshank against the quarry property.
Analysis
Test on a motion for summary judgment
[52] Cruickshank submits that those aspects of this case which are based on non contentious documentation may be resolved by a summary motion, but that other issues may require additional viva voce evidence or an expedited trial of the remaining issues.
[53] Both Piper and Durrett, as the moving parties, submit that the “full appreciation” test as set out in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1 (C.A.) has been met and that I should decide all of the issues on a summary motion as this is a document driven case and credibility issues need not be considered to decide this case. The moving parties further submit that Cruickshank agreed at the case conference to have some or all of the issues in this case determined at a summary motion.
[54] The endorsement of the case management Master MacLeod states that:
The parties are all in agreement that a summary motion under Rule 20 would be an appropriate procedure to resolve some or all of the issues in dispute.
The Master’s endorsement does not reflect a clear agreement of all parties that all issues may be decided on a summary motion, but rather that some or all of the issues. In addition, the parties did not agree on which issues could be decided on a summary motion.
[55] At this two day summary motion hearing, counsel for Cruickshank was asked to clarify if his client agreed to having all of the issues raised determined by a summary motion. He agreed to having the summary motion heard, leaving it to me to decide if I could decide all issues on a summary motion, with the possibility of calling of viva voce evidence. Cruickshank agreed that a number of issues may be determined on a summary motion as set out in their factum.
[56] In any event, for each issue raised I will decide “whether the attributes of the trial process are necessary to enable him or her [me] to fully appreciate the evidence and the issues posed by the case.” (Combined Air, supra, para. 54) I will determine if I can accurately weigh and draw inferences from the evidence without the benefit of the trial narrative, without the ability to hear witnesses speak in their own words and without the assistance of counsel as I examine the record considering the submissions made by all counsel.
[57] I will also decide if further oral evidence is required to assist me to determine whether any of the issues require a trial for their fair and just resolution.
[58] The moving parties have the onus to demonstrate on a balance of probabilities that there is no genuine issue requiring a trial. If the moving parties meet their onus, then the responding party must put its “best foot forward” and the onus shifts to the responding party to show that there is a genuine issue requiring a trial.
[59] Durrett further submits that I should draw an adverse inference from Cruickshank’s failure to file an affidavit from Les Cruickshank on this motion.
Issue #1 Was the Agreement dated April 29, 1991 entered between Piper and Cruickshank a lease or a licence?
[60] The defendant parties agree that this issue may be determined on a summary motion. I agree as the evidence on this issue is not contested and largely involves a legal interpretation of the terms of the Agreement.
[61] Cruickshank submits that the Agreement is a lease that was renewed, after the expiration of the final five year term in 2006, by the conduct of Cruickshank continuing to pay the same monthly rental and by Piper continuing to accept the rental payments. Their conduct created a year to year tenancy.
[62] Durrett and Piper submit that the Agreement described on title in the registered document as a “Notice of Lease” is not in fact a lease but rather an extraction agreement, which is a type of licence agreement.
[63] If the Agreement is a licence, it would create a personal right which does not run with the land. A lease on the other hand is subject to both common law and statutory principles relating to hold over tenancies and may be renewed by the conduct of the parties.
[64] Durrett further submits that notwithstanding that the Agreement refers to the Landlord and Tenant Act, and the Planning Act, R.S.O. 1990, c. P.13, and was described as a “notice of lease” when it was registered on title, the Agreement was not a lease because it lacked two essential characteristics of a lease. Durrett submits that the first missing essential characteristic is a transfer of an estate in land to the tenant. The transfer of an estate in land is typically evidenced by words of demise, such as “lease”, and “demise”. These words do not appear in the Agreement. (Wal‑Mac Amusements Ltd. v. Jimmy’s Dining & Sports Lounge (Receiver of) (1997), 1997 ABCA 183, 47 C.B.R. (3d) 311, 51 Alta. L.R. (3d) 52, at para. 15). Durrett submits that the second missing essential characteristic is that the Agreement did not give Cruickshank exclusive possession of the quarry property.
Exclusive possession
[65] In Ocean Harvesters Limited v. Quinlan Brothers Limited, [1975] 1 S.C.R. 684 at pp. 686-87, Dickson J. stated as follows:
While exclusive possession may not always give rise to a tenancy (Errington v. Errington, [1952] 1 All E.R. 149, Cobb v. Lane, [1952] 1 All E.R. 1199). I think it beyond question that a tenancy cannot be created in the absence of exclusive possession.
[66] In Rio Algom Ltd. v. Canada (Attorney General), 2012 ONSC 550 at paras. 31‑39, the court summarized the following principles applicable to the interpretation of contracts and stated:
The primary goal of contractual interpretation is to give effect to the intentions of the parties at the time the contract was made…
…the court should give particular consideration to the terms used by the parties, the context in which they are used and the purpose sought by the parties in using those terms:…
…words should be given their ordinary and literal meaning:…However,…the court should reject an interpretation or a literal meaning that would make the provision or the agreement ineffective, superfluous, absurd, unjust, commercially unreasonable, or destructive of the commercial objective of the agreement:…
A court should construe a contact as a whole giving meaning to all its provisions:…
After a careful review of the background to the contract, a court will imply terms to a contract based on the presumed intention of the parties and to give the contract business efficacy:…
…a term is implied as a matter of an established custom or usage…
…a term is implied as a matter of presumed intention because it is necessary to give business efficacy to a contract.
[67] Cruickshank disagrees with Durrett’s submission that the Agreement did not give it exclusive possession and submits that paras. 1, 2, and 20 of the Agreement confirm that Cruickshank was given exclusive use and possession of the Iroquois Quarry property, and indicates that the Agreement is a lease.
[68] The following parts of the Agreement refer to the exclusive use granted to Cruickshank:
(a) The addendum to the Agreement states that the owner “has agreed to allow the Corporation to operate and maintain an existing quarry on the said Lands…”
(b) Part of para. 1 reads as follows:
The Owner grants to the Corporation the exclusive right, subject to the terms of this agreement, to enter upon the Property and remove therefrom any and all aggregate rock which includes stone, and any product derived from the stone, and to take all steps to extract, crush or process the same.
(c) Paragraph 2 states that “[t]he Corporation shall be entitled to use the Property and shall have free access to the same for the purposes aforesaid.”
(d) Paragraph 20 states that:
The Corporation shall not, without the express written consent of the Owner, …assign or sublet the rights to extract and process rock granted to the Corporation by this Agreement or share possession of the Property or encumber or otherwise charge this Agreement provided that this does not prevent the Corporation,…from entering into seasonal agreements with third parties to use rock extracted by the Corporation for processes on the Property…so long as at all times the Corporation is in exclusive possession of the Property and in a position to return same to the Owner in accordance with the terms of this Agreement and is solely responsible for all such activities. …provided always that the Corporation is in exclusive possession of the Property… [Emphasis added.]
(e) Paragraph 24 states that the Corporation agrees to postpone this agreement to allow the Owner to mortgage the premises with the consent of Cruickshank, the mortgage not to exceed $75,000. Cruickshank is to receive notice of any default and is granted the right to redeem any mortgage placed by the Owner. [Emphasis added.]
The object of contractual interpretation is to give effect to the intentions of the parties at the time the contract was made. Applying this principal, particularly based on para. 1 which gave Cruickshank the exclusive right to enter the property and remove stone and para. 20 which required Cruickshank to remain in exclusive possession of the property at all times, I find that the terms of the Agreement referred to in para. [68] above demonstrate that the parties intended to give Cruickshank the right to exclusive possession of the quarry property.
Did the Agreement transfer an interest in land to Cruickshank?
[69] Paragraph 24 of the Agreement stated that the owner was permitted to obtain a mortgage and Cruickshank agreed to postpone its interest up to an amount of $75,000. The requirement for Cruickshank to postpone its interest granted under the Agreement, in order to allow the owner to register a mortgage on the property, is strong evidence that an interest in land was granted to Cruickshank in the Agreement. If the Agreement only granted a licence and created no interest in land, there would be no necessity for Cruickshank to postpone its interest in the Agreement to allow the owner to register a mortgage.
[70] In addition, para. 24 of the Agreement required the owner to use her best efforts to obtain a non‑disturbance agreement from the mortgagee and required Cruickshank to be given notice of any default and a right to redeem the mortgage. These terms are very strong evidence that the parties intended to give Cruickshank an interest in land when they signed the Agreement.
[71] In para. 25 of the Agreement, the owner was given the right to use a limited quantity of crushed rock to repair the driveway to the residence and was granted limited access to the area where exclusive possession had been given to Cruickshank. The owner’s access to the quarry area was limited to normal business hours and required that Piper be under the supervision of an employee of the Corporation. The wording of para. 25 is also strong evidence that Cruickshank did not have a mere licence to enter on the property, rather it was the owner that was granted limited access to the Schedule “B” lands to obtain crushed rock during normal business hours provided she was under the supervision of the employee of the Corporation (Cruickshank). The owner was not allowed to enter on the Schedule “B” lands outside of normal business hours and without the supervision of an employee of the Corporation. This is consistent with Cruickshank having exclusive possession of the “Schedule B” lands.
[72] The fact that the Agreement was registered on title by the land registrar and was described as a lease is further evidence that the parties intended to enter a lease which created an interest in land, especially as the document was titled Notice of Lease. The parties were aware of the registration of the notice of lease on title as evidenced by the correspondence between the solicitors for both Cruickshank and Piper when the contract term specified in the Agreement was corrected to run from April 1st to March 31st of each year. Paragraph 17 of the Agreement also permitted that the Notice of the Agreement could be registered against title to the lands or the property which is consistent with the parties’ intention to convey an interest in the lands and consistent with entering into a lease.
[73] Paragraph 15 of the Agreement, dealt with the renewal of the Agreement and states as follows:
In the event that the Owner wishes to dispute the Corporation’s right to renew the lease, she must by notice in writing indicate the default of one or more of the conditions set out in this paragraph within sixty (60) days of receiving the said notice of renewal.
[74] The wording in para. 15 refers to the Agreement as a lease and is evidence that the parties intended the Agreement to be a lease. In the correspondence between counsel on August 21, 1991, the document is referred to as a “Piper Lease to Cruickshank Construction Ltd.” by both counsel for Piper and Cruickshank in their correspondence.
[75] Paragraph 23 of the Agreement makes it subject to the Planning Act, 1983, S.O. 1983 c.1 as amended, which would only be included if the parties intended to transfer an interest in land. This paragraph would not be necessary if the Agreement was only a licence as a licence would not create an interest on land and the Planning Act would not apply.
[76] Paragraph 22 of the Agreement gives the owner the right to re‑enter in the event of default pursuant to the Landlord and Tenant Act¸ R.S.O. 1980 c.232 as amended. The Agreement’s specific reference to the Landlord and Tenant Act is strong evidence that the parties intended the Agreement to be a lease. Paragraph 22(c) also states that the owner may apply to seek relief from forfeiture pursuant to the Act. This language is further strong evidence that the parties intended the Agreement to be a lease and subject to the provisions of the Landlord and Tenant Act. In addition, section 22 gives the owner the right to re‑enter in the event of default under the provisions of the Landlord and Tenant Act.
[77] In his letter of May 24, 2012, the owner’s lawyer referred to the registered agreement as a lease and stated, in the document removing it from title, that he had authority to determine the lease.
[78] In addition, para. 20 of the Agreement deals with subletting which is consistent with the parties’ intention to treat the Agreement as a lease.
[79] The evidence supporting an inference that the parties did not intend to create a lease is as follows:
(1) the parties did not specifically call the Agreement a lease agreement however, this is not conclusive evidence that the parties did not intend the Agreement to be a lease as the intention is to be determined by an examination of the Agreement itself;
(2) the Agreement did not use the word demise or have a habendum clause. Again this is not conclusive as the question to determine is whether exclusive possession was granted to Cruickshank. I find the evidence as described above is overwhelming that the exclusive possession of the quarry property was granted to Cruickshank;
(3) the parties did not use the word “rent” to describe the payments in para. 6 of the Agreement. Paragraphs 5 and 6 refer to royalty payments based on calculations of the amount of rock removed from the quarry each month as well as specifying a minimum of 50,000 tonnes of rock to be removed from the quarry in each year. The fact that the payment terms were based on the amount of rock removed from the quarry is due to the unique nature of an agreement to operate a quarry as the payments were not the same every month and varied based on the amount of rock Cruickshank removed from the quarry. I find that the fact that monthly payments were based on the amount of rock removed is not persuasive one way or the other as to whether the Agreement was a lease or a licence. The method of calculating the amount to be paid is not related to exclusive possession or creating an interest in land which are the two main criteria to establish a lease.
Disposition of Issue #1
[80] Having considered the above evidence which is uncontested, and the parties having agreed to have this issue determined by a summary motion, I find that the evidence is overwhelming that the parties’ intended the Agreement to be a lease agreement, and that the Agreement gave Cruickshank exclusive possession of the quarry lands described in Schedule “B” thereto and also conveyed an interest in these lands to Cruickshank for the reasons set out above.
Issue #2 Was the Lease Agreement renewed after March 31, 2006 on a year to year basis by the parties’ conduct?
[81] Durrett submits that the Lease was not renewed by the landlord continuing to accept the rent payments from Cruickshank after the Agreement expired on March 31, 2006. In A Commercial Tenancy Handbook Volume I, Richard Olson (Carswell: Toronto, 2004), pp. 2-18 states as follows:
Tenancies from month to month and from year to year arise in two main ways:
by agreement to establish such a tenancy;
by a landlord continuing to accept rent from a tenant after the expiration of a lease.
At common law, if a landlord accepted rent from a tenant after the expiration of a lease for years (that is a lease with a term of one or more years), the new lease was deemed to be from year to year. However, this presumption (that a year to year tenancy has been created) can be rebutted by showing that:
the circumstances or facts show that no year to year tenancy was created; or
there was an agreement that a year to year tenancy was not created (or some other tenancy was created).
[82] In S.L. Ivans Jewellery Ltd. v. Bradbrooke (1997), 11 R.P.R. (3d) 207 (Sask. Q.B.), the court referred to the text of Christopher Bentley et al, Williams & Rhodes Canadian Law of Landlord and Tenant, Vol. 1, 6th ed. (Toronto: Carswell, 1988, updated 1997, Release 1) at pp. 4‑10:
If a tenant for a term of years, or for a term certain of a year or more, at a yearly rent, holds over after the expiration of his tenancy, and pays rent which is accepted, or agrees to pay rent, then, if no other tenancy appears to have been agreed upon, the presumption is that he becomes a tenant from year to year (a yearly tenant) upon such of the terms of the former holding as are not inconsistent with a tenancy from year to year.
[83] The court in S.L. Ivan Jewellery, supra also quoted from the authors as follows:
In Morgan v. William Harrison Ltd., [1907] 2 Ch. 137 (C.A.), Cozens‑Hardy M.R. said there was ample authority that a tenant holding over after the expiration of a lease, if he pays rent or agrees to do so, becomes a tenant from year to year (if no other terms are suggested), upon the terms and conditions of the original lease so far as they are applicable. . . .
[84] In Goodyear Canada Inc. v. Burnhamthorpe Square Inc., (1998), 41 O.R. (3d) 321 (C.A.) at pp.345‑346, the Court of Appeal held that where the original lease term was for more than one year, the new tenancy is deemed to be year to year and in the case of a year to year hold over tenancy, six months notice to quit is required to end the tenancy.
[85] In Eastern Capital Corp. v. CBCL Ltd. (1988), 71 Nfld & P.E.I.R. 162 (Nfld C.A.) at para. 10, O’Neill J.A. of the Newfoundland Court of Appeal quoted the following from Gasher v. Bellak Brothers Ltd.:
The mere holding over does not create the new tenancy. Mere holding over without the payment of rent or any new agreement results in a tenancy at sufferance.
[86] The Supreme Court of Canada made a similar statement in Attrill v. Platt, (1884), 10 S.C.R. 425, at p. 462:
It is out of the question to say that any presumption of an exercise of the option of purchase, or of its extension in point of time, or of the making of a new agreement for the purchase of the property, can, in the absence of all other proof, be inferred from the mere fact of the holding over after the time had expired; such possession can, I repeat, be attributed only to a mere tenancy at sufferance.
[87] In AIM Health Group Inc. v. 40 Finchgate Limited Partnership, 2012 ONCA 795, 113 O.R. (3d) 187 at para. 95, the Ontario Court of Appeal stated as follows with regards to the principles related to hold over tenancies:
Where a tenant remains in possession following the termination of a lease, or holds over, and where the landlord accepts rent from the tenant or otherwise consents, a new periodic tenancy arises at common law by implication on the same terms as the expired lease, subject to any evidence that the parties reached a different arrangement or understanding. … The payment and acceptance of rent is considered evidence of the parties’ intent to enter into a new tenancy arrangement.
[88] In AIM Health Group Inc., supra, the Court of Appeal went on to state:
But if the tenant remains without paying rent, then at common law, the tenant is there at the sufferance of the landlord and is subject to ejectment: see Doe dem. Burritt v. Dunham (1847), 4 U.C.Q.B. 99 (Upper Canada Court of the Queen’s Bench).
[89] Cruickshank submits that the 1991 lease Agreement was renewed on a year to year basis on April 1, 2006 as a result of Cruickshank paying and Piper continuing to accept ongoing payments of rent.
[90] Durrett submits that the lease was not automatically renewed by operation of law on a year to year basis on April 1, 2012 because Cruickshank was in default of making the rent/royalty payments since December 1, 2011 and therefore was not entitled to renew the lease on April 1, 2012.
[91] Cruickshank submits that it was not in default on payment of rent/royalties pursuant to the Agreement on April 1, 2012. Cruickshank acknowledges that it stopped paying the rent/royalties as of December 1, 2011 because this was a term of its offer to purchase the quarry, submitted to Piper in late November 2011 for a purchase price of $662,500. This offer contained a term that the royalty payments would cease on December 1, 2011. The parties subsequently exchanged e‑mails back and forth as to whether or not this offer would be accepted. Piper replied on several occasions inquiring if a higher offer could be made by Cruickshank. The parties continued to negotiate the terms of this offer. The e‑mail exchanges extended over several months and beyond the April 1, 2012 renewal date. Piper never refused Cruickshank’s offer and never demanded payment of the rent/royalties or gave notice that Cruickshank was in default in payment.
[92] Cruickshank argues that it was not in default under the terms of the lease Agreement. Paragraph 22 deals with default and requires the owner to give 15 days notice before re‑entering in the event of default pursuant to the Landlord and Tenant Act. Paragraph 22(a) states: “(a) on default of payment of moneys owing pursuant to this agreement for fifteen (15) days and on fifteen (15) days written notice of same;…”. [Emphasis added.]
[93] Piper never attempted to terminate the year to year lease agreement for non‑payment of rent or gave notice to Cruickshank that it was in default. In order to renew the 1991 Agreement for a further five year term, all payments due had to be paid.
[94] The evidence is uncontested that Piper did not give 15 days notice of default to Cruickshank therefore Cruickshank submits that it was not default under its lease Agreement, and that the lease renewed automatically on April 1, 2012 for a further one year term.
[95] Durrett and Piper submit that Cruickshank was in default in payment of rent/royalties as of April 1, 2012 and therefore, the right of first refusal and the lease was not renewed on April 1, 2012 for another year because (a) the landlord did not accept any further rental payments following April 1, 2012; and (b) para. 16 states that “[t]he right of first refusal granted by this clause…are conditional on the Corporation not being in default as provided under clause 15 above”.
[96] Paragraph 15 of the lease Agreement provided for the renewal for two further five year terms subject to these following conditions.
The Corporation has not been and is not in default in any significant terms of this agreement of which the Corporation has had notice and has been given a reasonable period of time to remedy and failed to do so; there has been substantial and regular compliance with the terms of this agreement; and all payments have been made by the Corporation to the Owner as due under the terms of this agreement and regularly in a timely manner;
[97] Paragraph 15 of the 1991 lease Agreement addresses renewal for two further five year terms and sets out three conditions that the tenant is not in default of a significant term and has been given a reasonable notice to remedy and failed to do so. Secondly, the tenant must have been in substantial and regular compliance with the Agreement. Thirdly, that all payments have been made to the owner which are due under the Agreement.
[98] Cruickshank was clearly in compliance with the first and second conditions as it had not received any notice of default and was in substantial and regular compliance with the Agreement. However, Cruickshank had not paid all payments due under the Agreement since December 1, 2011.
[99] However, the renewal provision in the 1991 lease Agreement for a term of five years is not applicable to the year to year lease because the year to year lease renewed automatically each year for a further year. Cruickshank was not in default on any rent/royalty payments on April 1, 2006 when the lease Agreement was renewed on a year to year lease by Piper continuing to accept rental payments thereafter.
[100] In addition, I infer by his conduct that Piper consented to the non‑payment of rent/royalties until Cruickshank’s offer was either accepted or rejected. Piper was negotiating with Cruickshank on the price to be paid for the quarry property and not on whether the rent/royalties stopped as of December 1, 2011. By not requesting payment Piper’s actions indicate he consented to this term of the offer and therefore until Piper rejected Cruickshank’s offer based on the price for the quarry, the rent/royalty payments of were not due and payable and Cruickshank was not in default.
[101] In this case, Piper never gave notice to Cruickshank that it was in default of payment of rent/royalties and a reasonable period of time to remedy that default. Secondly, Cruickshank reasonably believed that it was in the process of negotiating an agreement to purchase the quarry property, one of the terms of which was not disputed by Piper, was that the rent/royalty payments terminated on December 1, 2011. In these circumstances where the parties were in the process of negotiating the price for the quarry, I find that Piper was required to give notice before Cruickshank would be considered in default under the lease Agreement. I infer that Piper waived payment of the monthly rental/royalties until the negotiations on the offer to purchase were completed. As a result Cruickshank was not in default until Piper rejected its offer to purchase and was given a reasonable period to remedy the non‑payment of monthly rent/royalties.
[102] Cruickshank also submits that in these circumstances Piper owed Cruickshank a duty of good faith in its commercial dealings with regards to the sale of the quarry, with regards to the renewal of the lease, and with regards to the renewal or exercise of the right of first refusal.
[103] The lease Agreement renewed on a year to year basis because Piper accepted the rental/royalty payments after the written lease expired on March 31, 2006. Thereafter, the parties agreed to enter a year to year lease which I find renewed automatically each year unless the owner/landlord gave six months notice of termination before the end of the term, or took steps to terminate the year to year lease based on a default by the tenant, in which case notice of default had to be given to Cruickshank by Piper.
[104] In order to terminate the year to year lease, Piper was required to give notice of termination six months before the expiration of the term of the lease, which would have been six months before March 31st, namely by September 30th of the previous year. Piper did not give notice terminating the year to year lease by September 30, 2011. Therefore even though Cruickshank did not make any further rent/royalty payments after December 1, 2011, the year to year lease created following April 1, 2006, renewed automatically each year unless notice was given by the owner six months before the end of the term terminating the year to year lease. As there was no default pursuant to para. 22 of the lease Agreement and no notice of default was given to Cruickshank. I find that the year to year lease renewed automatically for a further year on April 1, 2012.
Disposition of Issue #2
[105] In this case the evidence is uncontested that Piper continued to accept rent payments in the same manner that parties followed for the previous 15 years after the expiration of the lease Agreement on March 31, 2006. Durrett and Piper have not presented any evidence that some other tenancy was created or that no year to year tenancy was created. The previous three terms of the lease were for five years each, and therefore by continuing to accept rent after March 31, 2006 from Cruickshank on the same basis as provided in the lease Agreement, I find that Cruickshank became a tenant from year to year after March 31, 2006.
Issue #3 Did the parties also agree to renew the right of first refusal contained in the lease Agreement by their conduct?
[106] In Budget Car Rentals Toronto Ltd. v. Petro‑Canada Inc. (1989), 69 O.R. (2d) 289 (C.A.), at para. 18, the Court of Appeal held that:
…the right of first refusal in a lease, although not requiring separate consideration for its validity, is a separate agreement from the lease. Hence, it does not survive the end of the term unless the parties agree otherwise.
[107] In Budget Car Rentals, ibid, the Ontario Court of Appeal referred to the decision of Rafael v. Crystal, [1966] 2 O.R. 733, 58 D.L.R. (2d) 325, where Gale C.J.H.C. stated as follows with regards to the applicability to rights of first refusal:
…if a tenant under a lease overholds without any agreement as to whether or not an option [to purchase] such as the one here is to be carried forward, then it expires if it has not been exercised prior to the end of the lease.
[108] The facts in this case are somewhat different from Budget Car Rental, supra, because the 1991 lease Agreement, which contained the right of first refusal, was renewed by the parties on a year to year basis by their conduct.
[109] The critical period to examine is when Piper continued to accept rental/royalty payments after March 31, 2006 and continued the relationship with Cruickshank in the same manner as the parties had followed over the previous 15 years pursuant to the lease Agreement. Did the parties by their actions demonstrate an intention that the right of first refusal contained in the lease Agreement would also renew along with the lease on a year to year basis?
[110] Cruickshank submits that:
(1) The court should infer that the parties agreed to renew the right of first refusal based on their conduct namely by Cruickshank continuing to pay and Piper continuing to accept rental payments after March 31, 2006 and by both parties continuing to follow all of the terms of the 1991 lease Agreement after March 31, 2006;
(2) In 2011, Mr. Worrad, Piper’s lawyer, stated and represented to counsel for Cruickshank that Piper would recognize Cruickshank’s right of first refusal contained in the 1991 lease Agreement. This statement confirms that Piper intended and understood that the right of first refusal was renewed with the lease; and
(3) Piper’s action of calling Cruickshank, and offering to sell the quarry to Cruickshank if he matched Durrett’s offer for $850,000, which he was prepared to accept, is evidence that Piper believed there was a continuing agreement that Cruickshank continued to have a right of first refusal.
[111] In his cross-examination, Piper denied that he ever offered to sell the quarry to Cruickshank if he matched Durrett’s offer for $850,000. This raises a credibility issue. Piper instructed his lawyer to provide a copy of Durrett’s offer to Cruickshank and Cruickshank proceeded to match the terms of Durrett’s offer, other than the closing date.
[112] Cruickshank was also not made aware of the condition for a vendor take‑back mortgage for $600,000 in Durrett’s offer. Cruickshank’s conduct of preparing and submitting an offer to purchase in response to Piper’s telephone call is consistent with it attempting to match the offer and to exercise its right of first refusal. The evidence to the contrary consists of an e‑mail sent by Piper to Cruickshank in 2011, while he was involved in negotiations on an offer to purchase from Durrett, unilaterally advising Cruickshank that it no longer had a valid right of first refusal.
Disposition of Issue #3
[113] I find that the issue of whether the parties agreed to renew the right of first refusal contained in the lease Agreement by their conduct after March 31, 2006, by the representations made by counsel on behalf of Piper where he acknowledged the continued existence Piper’s right of first refusal, by Piper’s action of giving Cruickshank a copy of the first page of Durrett’s offer to purchase following their telephone conversation, and the question of whether a duty of good faith was owed by Piper to Cruickshank in the circumstances, and whether Piper breached any duty of good faith by his conduct, are issues that require a trial to fully appreciate the evidence and decide these issues.
Issue #4 Did Piper make an offer that Cruickshank could accept by matching Durrett’s offer to purchase for $850,000?
[114] Cruickshank submits that Piper agreed with him in the telephone conference on May 17, 2012 that it could purchase the quarry property if it matched Durrett’s offer to purchase for $850,000. Cruickshank’s evidence is that Piper said “if you match the offer, it’s yours”. Cruickshank asked Piper to have his lawyer send a copy of the offer received from the third party and Piper agreed to do so.
[115] Following their telephone conversation on May 17, 2012, Cruickshank sent an e‑mail to Piper with a copy sent to Piper’s solicitor Brian Worrad at 3:28 p.m. as follows:
Chris,
As we agreed on the phone you were going to have your lawyer send me a copy of the offer which you have received and which you have asked us to match.
Thank you,
Steve
[116] On May 17, 2012 at 3:31 p.m., Piper sent a text to Cruikshank with a copy to Brian Worrad, his solicitor and to Stephen Ault, the solicitor for Cruickshank:
From: Piper, Chris [mailto: Cpiper@ivey.uwo.ca]
Subject: RE: Offer to Purchase
Yes. It will be faxed to you.
Chris
Sent from my Windows Phone
[117] The front page of the Durrett offer with its name redacted was then forwarded to Cruickshank by Piper’s solicitor. Cruickshank agreed to purchase the property by matching the price on the terms of the offer that it had received from the third party. Cruickshank instructed its solicitor, Stephen Ault, to communicate with Piper’s solicitor, Brian Worrad, to implement and conclude the purchase and sale transaction. On May 18, 2012, at 12:36 p.m., Mr. Ault sent an e‑mail memo to Mr. Worrad confirming the agreement.
[118] In his e‑mail of May 18th from Mr. Ault to Mr. Worrad, the fourth paragraph states:
- we will set return date as 4:00 pm Tuesday May 22 – we have no concern whatsoever that Mr. Piper will shop offer and we wish to allow a reasonable time to meet with him – if this is not enough, let us know.
I am still in OMB hearing but mainly juts listening so I am checking my e-mails constantly if any issues.
[119] In his response, Mr. Ault gave Piper until May 22nd at 4:00 p.m. to accept his offer at $850,000. He asked the solicitor for Piper if this was a reasonable amount of time to allow Mr. Worrad to meet with Piper to sign the offer, but stated that if this was not enough to let him know. Mr. Worrad did not respond to Mr. Ault with regards to any issues about either the time for acceptance or the date for closing.
[120] Cruickshank’s e‑mail confirmed the two items which they had agreed to in their telephone conversation namely:
(a) that Piper would have his lawyer forward a copy of the offer to purchase he had received; and
(b) that he had asked Cruickshank to match the offer received stating “which you have asked us to match”.
[121] In his response Piper agreed that yes, “it will be faxed to you” but does not disagree with the statement that he had asked Cruickshank to match the offer.
[122] Piper had sent a previous letter to Cruickshank on May 16, 2012 at 8:50 p.m. asking him if he was still interested in purchasing the quarry property and asking him to send an offer to Worrad by Friday on May 17th at the latest which indicates that he was soliciting an offer from Cruickshank.
[123] Cruickshank submits that Piper’s evidence for not denying that he agreed to allow Cruickshank to match Durrett’s offer on his cross‑examination, was confusing and not credible. However, in order to have a full appreciation and to assess the credibility of Cruickshank and Piper I find that a trial is required to decide this issue.
[124] I find that a trial is required to provide the trier fact with a full appreciation of the evidence and appropriate inferences to be drawn to decide whether there was an oral agreement between Cruickshank and Piper that he would sell the quarry property to Cruickshank, if it matched Durrett’s offer to purchase for $850,000. This issue involves a finding of credibility which I find requires a trial of this issue to decide.
Disposition of Issue #4
[125] I find that a trial is required to decide the issue of whether Piper made an offer that Cruickshank could accept by agreeing to match Durrett’s offer for $850,000 thereby creating a binding agreement of purchase and sale between Piper and Cruickshank.
Issue #5 Did Cruickshank match the terms of Durrett’s offer to purchase for $850,000?
[126] Cruickshank states that in their telephone conversation Piper advised him that if it matched Durrett’s offer the quarry was theirs. Cruickshank confirmed in his e‑mail that Piper’s lawyer would fax him a copy of the offer that Piper had asked it to match the offer.
[127] The first page of the copy of Durrett’s offer to purchase was sent to Cruickshank. Cruickshank forwarded an offer to purchase for the same price of $850,000 without any conditions and without the requirement for a vendor take-back mortgage of $600,000. However, Cruickshank’s offer proposed a closing date of June 29, 2012 instead of May 24, 2012 as proposed by Durrett.
[128] In Van v. Qureshi, 2011 ONSC 5746 (Ont. Sup. Ct.) at para. 32, Lauwers J. stated as follows:
In my view, the essential elements of a contract for the sale of land are subsumed in the very concept of a ROFR [right of first refusal]. The nature of a ROFR is that the one who possesses it must take the same land on the same terms including price, closing date, and so on: Harris, Erie Sand.
[129] In Erie Sand & Gravel Limited v. Seres’ Farms Ltd., 2009 ONCA 709, 97 O.R. (3d) 241, at para. 101, the Court of Appeal held that:
Further, Tri-B’s closing date was later than that in the Offer. Therefore, Tri-B did not give Seres' Farms an offer “with the same deposit, terms and conditions”, as the right of first refusal required.
[130] In Erie Sand, supra, Seres submitted an offer for $1.1 million which included a deposit of the $1.1 million. Seres presented a copy of the offer to Tri‑B, which held the right of first refusal, who offered to purchase for the same price but only gave a $25,000 deposit and also proposed a closing date later than that contained in Seres’ offer. The Court of Appeal upheld the trial judge’s decision finding that the accepted offer did not match the offer from Seres as the deposit was smaller and the closing date was later.
[131] Durrett had previously submitted an offer to purchase the quarry lands for $750,000 on April 21, 2011. This agreement of purchase of sale was forwarded to Piper on or about April 26, 2011. At that time Durrett did not include a closing date and ultimately proposed a closing date on October 21, 2011. Durrett initially proposed a closing date six months after the offer was made and then proposed to close on the 20th day after fulfillment of a condition to completing environmental, building, and engineering inspections on the property. These terms were contained in Schedule “A”.
[132] By letter dated May 18, 2011, the solicitor for Durrett indicated that he had searched the title and was aware of the notice of lease registered on title. He stated:
The extraction agreement further provided that upon termination Cruickshank Construction Ltd. would vacate the property. The mystery is of course the agreement, even if renewed pursuant to its provisions, expired in April 2006, however it is obvious Cruickshank Construction is still carrying on quarry operations. We need assurances in that regard.
[133] Durrett’s May 18, 2011 letter confirmed that Durrett was aware that the lease Agreement registered on title expired in April of 2006 and was aware that Cruickshank was still carrying on operations at the quarry site. I infer that based on the acknowledgment in the letter from Durrett’s solicitor to Mr. Worrad, that Durrett was aware that there was some current agreement between Piper and Cruickshank under which Cruickshank continued to operate the quarry.
[134] On June 6, 2011, Durrett sent an amended agreement of purchase and sale to Piper. Durrett stated that it was interested in purchasing the property on the basis that the licence could be transferred immediately to the buyer, confirmation that Cruickshank Construction no longer has an interest in or any right to quarry the property, and the notice of lease (instrument number DR71671) was to be deleted from title. Durrett’s lawyer further stated that:
… the current extraction agreement with Cruickshank assuming the current extraction agreement with Cruickshank has terminated (which has yet to be determined), your client can demand from Cruickshank an assignment of the license to your plant or as he may direct.
[135] Durrett’s offer dated June 6, 2011 contained condition number 3 in Schedule “A” which reads as follows:
This offer is further conditional on the seller being in a position to grant vacant possession of the subject property to the buyer on the completion date, free and clear of any pre-existing agreement or agreements allowing any other person to carry on operations on the property for whatever purpose, save and except those rights afforded to prior operation in section 19 of the extraction agreement registered on title.
[136] This offer proposed a closing date 14 days following the date the quarry licence was transferred to the buyer or the buyer received satisfactory confirmation that the licence would be transferred on terms acceptable to the buyer.
[137] On July 7, 2011, Mr. Worrad advised Durrett that he was prepared to sign back the previous agreement of purchase and sale for the sale price of $1.1 million.
[138] The conversations and correspondence between the solicitor for Durrett and the solicitor for Piper commenced again on May 3, 2012. The May 3rd conversation was confirmed in a letter dated May 4, 2012 wherein Durrett agreed to increase the purchase price to $850,000 and to revise its previous offer to purchase dated June 6, 2011, including a term for a mortgage back for $600,000.
[139] Durrett prepared an agreement of purchase and sale dated May 15, 2012 which set out a closing date of May 24, 2012 and included a vendor take back mortgage for $600,000 for a period of three years with interest payable at two per cent per annum.
[140] Durrett’s solicitor had previously worked on the June 6, 2011 offer to purchase and as a result, I infer, was in a position to close on short notice, was aware of the notice of lease on title which it had referred to by instrument number and therefore had previously searched title to the property. Durrett’s solicitor also stated that he had obtained tax certificates for purposes of preparing the statement of adjustments and verifying that there were no tax arrears on the quarry property. The Durrett offer was ultimately accepted on May 22, 2012 after Durrett accepted Piper’s counteroffer for a purchase price of $950,000, with a closing on May 24, 2012. The closing date was only two days following the date of acceptance for a commercial licensed quarry.
[141] Cruickshank was given a copy of the face page of Durrett’s offer for $850,000 on May 17, 2012 in the late afternoon at 3:50 p.m. Cruickshank advised Piper at 12:30 p.m. on May 18, 2012 that it would match the offer and agreed to forward the deposit to Piper’s solicitor’s trust account.
[142] I find that Piper did not give Cruickshank a reasonable period of time to decide if it would match Durrett’s offer to purchase. Cruickshank received a copy of the offer on May 17, 2012 and forwarded its offer to purchase for $850,000 on May 18, 2012. Requiring Cruickshank to close on May 24, 2012, two days after May 22, 2012, which was the time limit for Piper to accept Cruickshank’s offer, was not commercially reasonable. The short time period did not allow Cruickshank time to properly search the title, verify the property taxes were current and prepare the required closing documents. Cruickshank proposed a closing date on June 29, 2012 which was reasonable in the circumstances for a commercial quarry property.
[143] If the right of first refusal was renewed along with the lease on a year to year basis para. 16 of the lease Agreement required Piper to give 10 days’ notice to Cruickshank before accepting another offer. Paragraph 16 states:
The Owner undertakes and agrees that if during the term of this agreement she seeks out or receives from any purchaser a bona fide offer to purchase the lands described in Schedule “A” or any part thereof which offer the Owner is willing to accept, such offer shall not be accepted until she shall have given the Corporation ten (10) days notice in writing to meet the terms of the said offer. [Emphasis added.]
[144] In this case, Cruickshank was not given ten (10) days notice to match the terms of the Durrett offer. If ten days notice had been given Cruickshank would have had until May 27, 2012 to match Durrett’s offer, by which time the closing date of May 24th would have passed.
[145] Piper’s action of advising Cruickshank on May 17, 2012 that he was agreeing to a closing date on May 24, 2012 and requesting an offer to purchase to be prepared together with a $5,000 deposit to be forwarded to Piper’s solicitor in London, Ontario gave Cruickshank only two days, if the offer was accepted by Piper on May 22nd, to search the title or at a maximum six days, which included the date that they were notified and the date of closing to obtain tax certificates, verify zoning and to search the title which is not a reasonable period of time.
[146] I find that Piper did not comply with the terms of the right of first refusal contained in para. 16 of the lease Agreement when it only gave Cruickshank until after the lunch hour on May 18, 2012 to submit its offer after notice was given to Cruickshank at 3:50 p.m. on May 17, 2012. The time given to Cruickshank to decide whether to exercise its right of first refusal and to prepare and submit an offer was less than 24 hours. I find that Piper did not comply with the terms of the right of first refusal by failing to give Cruickshank ten days notice as required.
[147] I also find that Durrett’s offer was not a bone fide offer as the proposed closing date would have had to have been outside of the ten day notice period that Cruickshank was entitled to receive. Finally, the conduct of Durrett and Piper agreeing together to give Cruickshank less than six days to match their offer, to complete all searches and prepare the required closing documents and to close the deal was not a commercially reasonable period of time which raises an inference that they were not acting in good faith. However, the issue whether Piper failed to act in good faith is one that I have previously found requires a trial of an issue and also raises the issue of whether the offer was a bone fide offer given the shortness of time for the closing and the near impossibility for Cruickshank to exercise the right of first refusal within the time periods agreed to between Piper and Durrett.
Disposition of Issue #5
[148] I conclude that if it is found after a trial that Cruickshank’s right of first refusal was renewed with the lease on a year to year basis by the conduct of the parties and/or by representations by Piper that the right of first refusal would be respected by him, then I find that Piper did not give Cruickshank the required ten day notice to match Durrett’s offer. Further, Durrett’s offer to purchase which specified a closing date seven days after notice was given to Cruickshank was not a bone fide offer which could be accepted by Piper because the closing date was within the ten day period that Cruickshank had to exercise its right of first refusal.
[149] If the right of first refusal is found not to have been renewed by the parties’ conduct, I find that the issue of whether Cruickshank matched Durrett’s offer is a genuine issue requiring a trial as it would require a finding of what Piper actually said and what the parties intended and understood the chance to match the offer meant.
Issue #6 If the right of first refusal was renewed along with the lease, did Piper breach it by failing to give Cruickshank an opportunity to match Durrett’s offer for $950,000?
[150] The answer to this question is self-evident as Piper failed to give Cruickshank the chance to exercise its right of first refusal at the price of $950,000. If the right of first refusal was renewed with the lease on a year to year basis by the parties’ conduct and remained in force, then the failure to give Cruickshank ten days notice to match the offer to purchase from Durrett by counter offering at $950,000 would constitute a breach of the right of first refusal.
Disposition of Issue #6
[151] I therefore find that if Cruickshank’s right of first refusal was renewed along with the lease and was valid, then Piper failed to give Cruickshank the required notice to match Durrett’s offer at $950,000.
Issue #7 Is Durrett entitled to immediate exclusive possession of the quarry property and is the plaintiff entitled to continued registration of its certificate of pending litigation?
[152] Durrett gave notice to Cruickshank to vacate the premises on October 23, 2012 on the belief that the end of that year of the lease was April 28, 2013.
[153] The 1991 lease Agreement was dated April 29, 1991, however para. 3, which described the commencement of the Agreement states as follows: “This agreement shall come in to full force and effect on the 1st day of April, 1991 and shall continue for a period of five (5) years.” The Agreement further provided Cruickshank the right to renew the Lease for two further five year terms. I find the lease Agreement is unambiguous that the Agreement came into full force and effect on April 1, 1991 and therefore the first five year term would have expired on March 31, 1996.
[154] Paragraph 6(a) of the lease Agreement initially stated that the contract year, which relates to the payment for rock removed, was between April 30th to March 31st. The definition of the contract year was corrected to read from April 1st to March 31st by correspondence exchanged between counsel for Cruickshank and for Piper in 1991. I find that both the term of the contract, which was for five years commencing on April 1, 1991, and the contract year which was confirmed to run from April 1st of each year until March 31st of the following year, is unambiguous evidence that the third term of the lease Agreement ended on March 31, 2006. The fact that the Agreement was made on some other date is not relevant to the term of the lease Agreement, which was agreed upon by the parties to end on March 31st.
[155] Durrett submits that it gave its notice for April 28, 2013 in reliance on a sworn statement from Dave Read, the manager of Cruickshank, on July 16, 2012. Durrett submits that it had not yet received disclosure of the exchange of correspondence between the solicitors for Cruickshank and Marilyn Piper, where the typographical error for the contract year was corrected to read April 1st to March 31st. However, this does not explain the failure to note that para. 3 of the agreement sets out a term which commences on April 1, 1991 or that in para. 6 of the Agreement the contract year ended on March 31. Dave Read was mistaken when he stated that the lease Agreement was last renewed on April 29, 2012.
[156] I therefore find that the term of the lease Agreement commenced on April 1st and ended on March 31st. As the lease became a year to year lease, I find each one year term commenced on April 1st and ended on March 31st of the following year. In order to terminate the year to year lease, Durrett had to give six months notice before March 31, 2013, the end of the term. The notice sent on October 23, 2012 was only five months and eight days before the end of the term, which is less than the required six months. I therefore find that the notice to terminate given less than six months before the end of the term is not valid.
Disposition of Issue #7
[157] I therefore conclude that Durrett is not entitled to immediate exclusive possession of the quarry property and that Cruickshank is entitled to maintain the registration of its certificate of pending litigation. In any event, an expedited trial is required to determine whether the right of first refusal continued to be valid and if so, then Durrett would be in breach if the parties agreed to renew the right of first refusal by their conduct, and the issue of whether Cruickshank and Piper entered into a binding agreement of purchase and sale for $850,000 must be decided by a trial. For these reasons, I dismiss Durrett’s motion for an order to immediate exclusive possession of the quarry property as of April 28, 2013.
Disposition of Summary Motion
[158] Piper’s and Durrett’s motions for summary judgment are dismissed. I have not heard Cruickshank’s motion for summary judgment as it was not served within the time period directed by the case management master and an opportunity was not given to the defendants to respond. In any event, I have ordered that several issues require a trial and have determined some issues on these motions for summary judgment.
[159] Under Rule 20.05(2), the court has discretion to order an expedited trial which I order. I therefore give the parties 30 days to agree on a timetable and all issues, including those I have identified, to be determined at an expedited trial. Failing agreement, each party to make written submissions within a further 15 days on the terms and issues for an expedited trial pursuant to Rule 20.05(2).
Costs
[160] Cruickshank shall have 15 days to make written submissions on costs, the defendants Piper and Durrett shall have 15 days to respond and Cruickshank shall have 10 days to reply.
Mr. Justice Robert J. Smith
Released: May 31, 2013
2013 ONSC 3209
COURT FILE NO.: 12-54963
DATE: 2012/05/31
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Cruickshank Construction Limited
Plaintiff (Respondent)
– and –
Durrett Companies Limited, Durrett Co. Ltd., Peter Grant, David Grant and Christopher Piper
Defendants (Applicants)
REASONS FOR DECISION ON MOTION
FOR SUMMARY judgment
R. Smith J.
Released: May 31, 2013