COURT FILE NO.: CV-10-396669
DATE: 2014/01/09
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Trenwith Investments Inc.
Plaintiff
v.
First Capital Acquisition Corp
Defendant
BEFORE: Justice Moore
COUNSEL: Helen Daley, Simon Bieber & Julia Wilkes, for the Plaintiff
Ivan Lavrence & Bradley Phillips, for the Defendant
DATE HEARD: November 25, 26 & 27, 2013 and upon written submissions
E N D O R S E M E N T
[1] This action arises from a land transfer transaction that occurred in 2008. The plaintiff, as vendor, sold land to the defendant upon terms described below and asserts that it is entitled to payment of a bonus in addition to the net purchase price for the land. Simply put, the plaintiff claims that the defendant breached the purchase and sale agreement and seeks damages.
Agreed Facts
[2] In preparation for trial, the parties exchanged requests to admit facts and responses thereto. The upshot of those exchanges follows and offers a summary insight into the circumstances leading to the dispute placed before the court.
[3] Pursuant to an agreement of purchase and sale dated March 2, 2005, between First Capital Acquisition Corp. (“ First Capital”), as purchaser, and the plaintiff, Trenwith Investments Inc. (“Trenwith”), as vendor, First Capital agreed to purchase a 12.374 acre parcel of vacant land, municipally known as 3037 Derry Road, Milton, Ontario (“ the property”).
[4] Trenwith was aware that First Capital's interest in acquiring the property at a purchase price of $8,538,060 was in order to develop it into a retail shopping center anchored by a supermarket.
[5] The APS was conditional upon an Official Plan amendment and zoning bylaw amendments being obtained, necessary for First Capital to develop a commercial retail development, including grocery store uses on the property (the “development conditions”).
[6] On May 5, 2005, applications for an Official Plan amendment and zoning bylaw amendments (the “applications”) were submitted to the Town of Milton (the Town”).
[7] All experts’ fees and costs pertaining to the preparation and submission of the applications, up to and including preparation for subsequent appeals to the Ontario Municipal Board (“OMB”) were incurred wholly by First Capital and not the plaintiff.
[8] In support of the applications, a full planning justification report, a detailed market study, a transportation impact study and servicing studies were submitted to the Town.
[9] One of the contentious components of the applications was a request for permission for the development of a supermarket of approximately 46,000 ft.² of gross floor area to be constructed on the property.
[10] In June 2006, the consultant retained by the Town to conduct and prepare a town-wide retail market survey and study recommended against approval of the applications.
[11] Town planning staff, in its report to Town Council in June 2006, also recommended against approval of the applications.
[12] Notwithstanding the negative Town planning staff recommendation and negative feedback from the Town’s retained consultants, on June 26, 2006, Town Council did approve in principle the development of additional commercial uses on the property. The matter was then returned to staff for implementation purposes.
[13] However, in or about April 2007, a differently constituted Town Council refused the applications and expressed opposition to the proposed redevelopment of the property.
[14] The applications were then appealed to the OMB for a hearing. The OMB scheduled a prehearing attendance in October 2007 with the appeals to commence on March 31, 2008.
[15] The deadline for satisfaction or waiver of the development conditions had previously been extended by First Capital and Trenwith, via multiple amending agreements[^1] which ultimately extended the time to comply with the development conditions to January 26, 2008.
[16] As at December 2007, the January 26, 2008 deadline for satisfaction or waiver of the development conditions was approaching, without the development conditions having been met.
[17] The parties then negotiated and entered into an amending agreement dated December 21, 2007. The final amending agreement resulted in First Capital purchasing the property and waving the development conditions.
[18] Throughout late 2007 and up to and including March 2008, First Capital continued to pursue the appeals by:
a) retaining and relying upon Patrick Devine, an experienced counsel specializing in municipal and property development law at Dentons (formerly Fraser Milner Casgrain LLP);
b) continuing the retainer of and extensive consultations with land-use planning experts, transportation engineering experts, services engineering experts and retail market and real estate economists in preparation for the appeals;
c) preparation, service and filing of extensive expert witness statements and reports;
d) summonsing of witnesses in support of the appeals and preparation and provision of witness outlines; and,
e) serving and filing of extensive visual evidence in support of the appeals.
[19] In opposition to the appeals, extensive materials were filed and witnesses identified for the Town.
[20] A key issue on the appeals was whether significant commercial uses should be permitted on the property as it had been designated as “Employment Lands” under the Town's Official Plan.
[21] The issue of “Employment Lands” not being used for commercial development to the extent proposed on the appeals had gained currency, both pursuant to a Provincial Policy Statement and the Provincial Growth Plan.
[22] In late March 2008, both Patrick Devine and Wendy Nott, a registered professional planner with extensive experience and knowledge in many areas of land-use planning who had been retained by First Capital for the purpose of the appeals, met with Jamie Chisholm, (then) Vice President, Central Canada at First Capital, in preparation for the upcoming appeals. Both Mr. Devine and Ms. Nott advised First Capital that based upon the position of the Town and emerging Provincial Policies respecting employment lands, there was a significant risk that the OMB would refuse any commercial, retail development being permitted on the property.[^2]
[23] The advice First Capital received from its counsel and experts made it reasonable to negotiate a settlement rather than risk an adverse outcome on the appeals.[^3]
[24] Before leaving the general topic of agreed facts, I attach a chronology of key events related to the application for planning approval and the contract negotiations between the parties.
CHRONOLOGY
[25] This Chronology of Key Events[^4] includes events related to (i) the Trenwith/First Capital Application for planning approval and (ii) the contract negotiations between the parties. The contract events are identified in bold typeface.
KEY EVENTS:
EVENT
DATE
LOCATION IN JBD (document identifier)
Agreement of Purchase and Sale executed: purchase price is $8,538,000.
The agreement is conditional on, among other things, First Capital re-zoning the property for commercial retail development, including grocery store uses, of a design and density acceptable to First Capital.
March 2, 2005
Tab 1
(Plaintiff Productions (“Plaintiff”) #1)
Trenwith and First Capital submit joint Application for zoning by-law and Official Plan amendments to Town of Milton. The application is to change current designation of the site as Employment Lands to a site-specific Commercial Zone (C2 Special).
May 5, 2005
Tab 2
(Plaintiff #2 & #3)
First Amending Agreement
June 27, 2005
Tab 4
(Defendant Productions (“Defendant”) #300(1))
Second Amending Agreement
October 25, 2005
Tab 5
(Defendant #300(1))
Third Amending Agreement
January 20, 2006
Tab 6
(Defendant #300(1))
Fourth Amending Agreement
June 16, 2006
Tab 9
(Defendant #300(1))
Milton Town council approves the following motion with respect to the Subject Property: “…notwithstanding the approved recommendations of Report PD-035-06, Town of Milton staff be directed to identify the northwest corner of Derry Road and Bronte [STREET] (First Line) for Retail Commercial uses in order to accommodate a secondary mixed use node to a maximum 127,000 square feet within the context of the proposed Official Plan and Rezoning amendments.”
June 19, 2006
Tab 10 at page 12 of 14 and Tab 28
(Plaintiff #4 & Defendant #123B)
Fifth Amending Agreement
August 9, 2006
Tab 11
(Defendant #300(1))
Public meeting re: Trenwith/First Capital proposed site specific amendments to the Official Plan (“OP”) and zoning bylaw.
Town received application and Planning and Development Report (PD-067-06) for information.
Town approved a motion to delay decision on the application until after consideration of the OP Amendment.
October 16, 2006
Tabs 12 and 13
(Plaintiff #5 & #6)
Public meeting re: the Municipality’s OP Amendment, includes consideration of Trenwith/First Capital Application Town passed a motion directing planning staff to present a finalized Municipal OP Amendment to council for adoption on March 26, 2007
February 26, 2007
Tabs 15 and 22
(Plaintiff #8 and Defendant #93)
Town Council Meeting to consider the Trenwith/First Capital application. Submissions made by Patrick Devine, in support of the applications.
Result: Town approved the Municipality’s OP Amendment No 22 (“OPA 22”) but not the concurrent site-specific application of Trenwith/First Capital.
April 23, 2007
Tabs 22, 23, and 28
(Defendant #93, #123B & #123D)
Decision is made to appeal Town Council decision to the OMB.
May 17, 2007
Tabs 25 and 26
Trenwith/First Capital appeal the Town Council decision to the OMB in proceeding #PL070435. They appeal the approval of the Municipality’s OPA 22 “without taking into consideration the merits of our client’s site”.
May 22, 2007
Tabs 27 and 28
(Defendant #119 and #123B)
Town suggests the appeal should be limited to the Trenwith/First Capital site.
May 31, 2007
Tab 29
(Defendant #123G)
Driedger (of Gordon Driedger Real Estate Advisor Inc.) advises First Capital to agree to limit the appeal of OPA 22 to First Capital site.
June 7, 2007
Tab 30
(Defendant #124)
First Capital offers to purchase the Property (subject to the approval of its investment committee) for a purchase price of $7,000,000 with a 30-day close.
On closing $3.5 million would be paid in cash and Trenwith would take back an interest free mortgage for the balance ($3.5 million) maturing in three years.
If Rezoning is obtained prior to the maturity of the 3-year vendor take-back mortgage (“VTB Mortgage”), First Capital would be obligated to pay the remainder of the Original Purchase Price ($8,538,000).
June 8, 2007
Tab 31
(Defendant #126)
Trenwith’s solicitor, John Weir, communicates a counterproposal of $8,000,000 paid now with no VTB Mortgage.
June 11, 2007
Tab 32
(Defendant #127)
First Capital’s solicitor, Dan Weinryb, communicates a further First Capital offer (subject to the approval of its investment committee) to purchase for $7.6M.
June 13, 2007
Tab 33
(Defendant #130)
Trenwith signs and returns the above offer to First Capital.
June 14, 2007
Tab 34
(Defendant #129)
Devine writes to the OMB and further limits the OPA 22 appeal by excluding the Octavian Meadows lands.
June 28, 2007
Tab 38
(Defendant #135)
Devine and the Town negotiate scoping the OPA 22 appeal to the Derry Road property.
July 9 and 13, 2007
Tabs 39 and 41
(Defendant #142 & #145)
Devine withdraws the global OPA 22 appeal except for the Derry Road property.
July 27, 2007
Tabs 43 and 44
(Defendant #162 & #164)
Devine files Notice of Appeal re: zoning by-law amendment application on basis of s. 34(11) Planning Act based on Town’s refusal to make a decision within 120 days of the application.
Devine files Appellant’s Form with OMB re: the Zoning By-law Appeal. Requests 15 day consolidated appeal hearing.
August 3, 2007
Tabs 45
(Defendant #167 & #170)
Planner retained to provide report for OMB appeal Wendy Nott, produces reporting memo with her preliminary assessment. Frank Clayton produces a report entitled “Review of Industrial (Employment) Land Needs – Milton”
September 4, 2007 September 5, 2007
Tab 47
(Defendant #175) Tab 48
(Defendant #176)
First Capital offers to purchase the Property for purchase price of $7,000,000 with a 10-day close following execution of the Purchase Agreement.
September 6, 2007
Tab 49
(Defendant #177)
Trenwith conveys a counteroffer for a purchase price of $7,900,000 with a 10-day close.
September 10, 2007
Tab 50
(Defendant #179)
First Capital submits a site plan to Town.
September 20, 2007
Tab 53
(Defendant #184)
Pre-hearing conference is held before the OMB.
October 26, 2007
Tab 57
(Defendant #214A)
At pre-trial conference, OMB hearing date is set for March 31, 2008 for 15 days.
November 16, 2007
Tab 57
(Defendant #214A)
OMB Procedural Order transmitted to Devine setting out, among other things, dates for exchange of witness statements (and replies) and a list of issues for the hearing.
November 27, 2007
Tab 69
(Defendant #214B)
First Capital sends offer to purchase property to Trenwith. The offer includes, among other things, a purchase price of $7.35 million plus a “bonus” of $400,000 if First Capital is “successful in obtaining the rezoning the [sic] Property to permit the Purchaser’s Proposed Development as a grocery store anchored shopping center” on or before December 31, 2008.
December 14, 2007
Tab 73
(Defendant #224 and Plaintiff’s Answers to Undertakings Tab 1)
Trenwith communicates counteroffer to First Capital. The offer includes, among other things, a purchase price of $7.35 million plus a “bonus” of $550,000 if First Capital is “successful in obtaining permission from the applicable authorities to construct a grocery store”.
December 16, 2007
Tab 74
(Defendant #226)
Chisholm communicates First Capital’s counteroffer to Trenwith. The offer includes, among other things, a purchase price of $7.35 million plus a “bonus” of $550,000 if First Capital is “successful in obtaining permission… from the applicable authorities to construct a supermarket of not less than 46,000 square feet plus ancillary retail”.
This permission is defined to occur when First Capital “receives written confirmation that the current application for the subject property for an Official Plan Amendment and Rezoning to permit the construction of a supermarket of not less than 46,000 square feet and ancillary retail has received final approval”.
He advises that the offer has not been reviewed by counsel.
December 20, 2007
Tab 76
(Defendant #227 and Plaintiff’s Answers to Undertakings Tab 1)
First Capital through Weinryb circulates a modified offer to Trenwith’s counsel John Weir
The offer includes, among other things, a purchase price of $7.35 million plus a “bonus” of $550,000 if First Capital obtains “final approval of the Rezoning Application” on or before February 4, 2009.
The Rezoning Application is defined as an application for an “official plan amendment and rezoning of the property, to permit the construction on the property of a supermarket of not less than 46,000 square feet of gross floor space plus ancillary retail uses”.
The offer required First Capital to “continue to prosecute the Rezoning Application with all reasonable due diligence.”
December 20, 2007
Tab 78
(Defendant #228)
Weinryb circulates a further draft to John Weir, Jamie Chisholm of First Capital and Bill Trenwithfor any comments they may have.
The offer includes, among other things, a purchase price of $7.35 million plus a “bonus” of $550,000 payable within 5 days of First Capital “receiving written confirmation the Current Application has final approval from all applicable authorities, with all applicable appeal periods having expired or with any appeal commenced with respect thereto having been finally and fully determined and includes, without limitation, a favourable decision of the appeal of the Current Application to the Ontario Municipal Board.”
The Current Application is described as an “application to the appropriate authorities for an official plan amendment and rezoning of the property to permit construction on the Property of a supermarket of not less than 46,000 square feet of gross floor area plus ancillary retail uses…, which Current Application has been appealed to the Ontario Municipal Board.”
In the offer First Capital undertook to “continue to process the Current Application with all reasonable due diligence.”
December 20, 2007
Tab 82
Plaintiff’s Undertakings Tab 1
First Capital through Weinryb communicates a further modified offer to Trenwith and its counsel John Weir,
The offer includes, among other things, a purchase price of $7.35 million plus a “bonus” of $550,000 the Current Application “has received final approval from all applicable authorities, with all applicable appeal periods having expired or with any appeal commenced with respect thereto having been finally and fully determined and includes, without limitation, a favourable decision of the Purchaser’s appeal of the Current Application to the Ontario Municipal Board.”
The Current Application is described as an “application to the appropriate authorities for an official plan amendment and rezoning of the property to permit construction on the Property of a supermarket of not less than 46,000 square feet of gross floor area … which Current Application has been appealed to the Ontario Municipal Board.”
In the offer First Capital undertook “continue to process the Current Application with all reasonable due diligence.”
December 21, 2007
Tab 84
Defendant’s Productions at Tab 231
Final Amending Agreement executed.
December 21,2007
Tab 86
(Defendant #300 and Plaintiff #16)
Devine, Town, and Manaman submit their witness lists to OMB.
January 29-30, 2008
Tabs 89, 90, and 91
(Defendant #268A, #268B & #269)
Regional approval of proposed site plan application is granted with conditions to be cleared prior to final site plan approval.
February 4, 2008
Tabs 93 and 94
(Defendant #279 & #280)
Sale of Subject Property Closes
February 5, 2008
Tab 95
(Defendant #282)
Town withdraws issue No. 7 as set out in OMB procedural order and Manaman has confirmed it will do the same.
February 22, 2008
Tabs 98 and 99
(Defendant #289 & 291)
Witness statements are completed and exchanged.
February 20-29, 2008
Tab 100
(Defendant #292 A-K)
First Capital delivers reply witness statement of Ken Poulson.
March 7, 2008
Tab 103
(Defendant #295)
Town’s witnesses deliver reply statements.
March 7, 2008
Tab 104
(Defendant #297)
OMB allows both appeals and approves the OP Amendment attached as Appendix 1 and the zoning amendment attached as Appendix 2 to First Capital’s amended application.
April 2, 2008
Tab 115
(Defendant #303)
Trenwith executes Mortgage Statement, Direction, Release of Interest and Discharge of VTB Mortgage on Property
February 4, 2009
Tabs 116-120
(Defendant #303, 306(a)-(d) and 307)
[26] As is evident from the foregoing, the trial of this action had the potential to be a protracted, complicated and costly event. Clients and counsel are to be complimented on focusing upon issues and evidence in advance and working together to produce a much streamlined and cost-effective trial.
[27] It must be said as well that the witnesses in this case were remarkable. They were each poised, confident, articulate thoughtful, responsive, intelligent and helpful. Their evidence conflicted very little from one to another. This was not a credibility case. It is a contract interpretation case and the oral evidence served the court well in developing the factual matrix within which the agreements were generated and explaining the many documents filed as exhibits at trial.
[28] The next section of these reasons sets out a summary of the facts that I accept as proven from the evidence of the witnesses.
The Witnesses
Bill Trenwith
[29] Bill Trenwith is 58 years of age and has lived in the Milton area for almost all of his life. He is an equal business partner with his brother, Robert. They originally ran a farm operation and later they ran a transport company and more recently they incorporated Trenwith Investments Inc. to hold properties, including the property at issue in this matter, a 12.374 acre property located at the north-west corner of Derry Road and Bronte Street in Milton.
[30] The property hosted a 55,000 ft.² building with a day care and a fitness center as tenants and a warehouse as well as parking space and adjacent, vacant land. Trenwith purchased the property for $3.1 million in the late fall of 2003. At that time the population of the town of Milton was about 35,000 people and as of 2012 it approximated 102,000 people.
[31] Mr. Trenwith testified that he spent about $300,000 on modifications to the buildings on the property before attracting tenants. The income from rentals is about $350,000 a year including taxes, maintenance and insurance for a net income of about $280,000.
[32] He testified that that he listed the property for sale in November of 2004. This eventually led to negotiations with First Capital and an agreement to sell the property, as will be described more fully below.
[33] To his knowledge, First Capital was interested in developing the property to include retail outlets and a grocery store. Representatives of First Capital never told Mr. Trenwith of any other intention motivating its purchase overtures. For this development, rezoning was necessary. He described discussions and negotiations with First Capital as open and cordial.
[34] He remained involved after First Capital offered to buy the property to assist in the rezoning application because of his familiarity with Town Councilors and the Mayor, whom he met with to encourage support for the application. Everyone he approached at the Town was very supportive. There was a well-known need for a major grocery store on the west side of the Town. He was a "fly on the wall" at meetings with First Capital and its experts. He did not speak independently with counsel, Patrick Devine.
[35] The Town did not deal with the re-zoning application until June of 2005 when it came before the Planning Committee. Town staff had recommended that a hold be placed on this and other matters pending receipt of a retail market study report that was expected in the fall of 2005. There was nothing to do but wait.
[36] In the meantime, the time periods for conditions in the sale agreement were in jeopardy of expiring. Accordingly, through a series of amending agreements, the parties extended the time periods out into the future.
[37] The Administration and Planning Standing Committee met in June of 2006. The outcome was that staff had recommended against the development but the committee went against that recommendation and adopted reports filed by planners in favour of accommodating a 127,000 square-foot secondary mixed use node for the property for retail commercial use. This was hugely positive news for Mr. Trenwith and First Capital.
[38] In October of 2006, the Administration and Planning Standing Committee held two public meetings for input following which the committee was to prepare a report to Town Council which it ultimately did on 26 February 2007.
[39] Town Council met on 26 February 2007 to receive input from businesses and members of the community. Patrick Devine spoke on behalf of Trenwith and First Capital. Counsel directed that the paperwork be prepared for the proposal to go to the Council meeting for ratification on 26 March 2007. The matter did not, however, make it onto the agenda for that meeting. The Planning Department report had not been prepared in time; the matter was put over to the April meeting.
[40] Town Council met on 23 April 2007. Much to his surprise, Mr. Trenwith heard counsel vote against the application. He described it as solely a political decision. There were some new Councilors on this occasion. Councilors were pressured by other big developers with plans for future development in the Town who did not want First Capital to build and capture the market ahead of them. Mr. Trenwith described the Council vote as shocking and unexpected. The only alternative to allowing the sale to First Capital to die was to consider appealing to the Ontario Municipal Board. He agreed that First Capital had a legal right to walk away from the transaction on receiving the decision from the Town but it elected to appeal and to extend the development conditions date out to permit of that appeal process continuing.
[41] Moving forward into the appeal process, Mr. Trenwith agreed that the matter no longer involved a political decision. Mr. Trenwith signed the appeal papers but he had no further involvement in the process. He was aware that First Capital hired Wendy Nott as a planning expert for the appeal but he had no discussions with her.
[42] Out of the blue on 8 June 2007, First Capital, through its real estate lawyer, Mr. Weinryb, delivered a formal offer on the property. Mr. Trenwith responded with an $8 million price and removal of reference to a vendor take-back mortgage. He heard nothing for about a week and then received a new offer dated 14 June 2007 by which First Capital offered to pay $7.6 million with a vendor take-back mortgage of 50% of that amount. Mr. Trenwith replied back and agreed to the terms. There was then no communication between the parties. Mr. Trenwith believed that he had a deal. Nevertheless, he had his lawyer, Mr. Weir, contacted Mr. Weinryb in order to get a sign back on the most recent draft agreement.
[43] There were no discussions in July or August of 2007 but on 6 September 2007, Mr. Weinryb wrote outlining virtually the same proposal as had been received in June. Mr. Trenwith reviewed the Weinryb letter with Mr Weir. He instructed Mr Weir to respond confirming that he was not prepared to grant a further extension of the closing and offering a $7.9 million purchase price open for acceptance for 10 days.
[44] There was a prehearing at the OMB on 26 October 2007. Mr. Trenwith attended. It was an opportunity for people to register to be participants in the OMB hearing. Shortly afterwards, Mr. Trenwith received a verbal, followed by a written, notice of the OMB hearing date of March 31, 2008.
[45] In discussions with representatives of First Capital, Mr. Trenwith was repeatedly told that the property was not worth the price that had been offered originally by First Capital, because of its zoning. Mr. Trenwith therefore sought information from his realtor, Mr. Borczok, who reviewed similar properties in the Milton area and sent an e-mail on 10 October 2007 giving current trading price information for employment lands. He specifically referred to a property just north of Highway 401 offered at $699,000 per acre. Mr. Trenwith forwarded that e-mail and information on to Derek Hull (former Director of Acquisitions) and Jamie Chisholm (former Vice President, Central Canada) at First Capital.
[46] By November of 2007, the final deadline for First Capital to waive conditions in its favour for the sale of the property was 26 January 2008. Mr. Trenwith was interested in finalizing negotiations. His principal contact at First Capital at that time was Jamie Chisholm but he was concerned that Mr. Chisholm may not have had sufficient authority to finalize the deal.
[47] In November, Mr. Chisholm arranged a meeting at the First Capital office in downtown Toronto. Mr. Trenwith attended with his broker, Mr. Borczok. Attending for First Capital were Mr. Chisholm, Ms. LaChance and Mr. Segal. The meeting did not produce a deal. Another meeting followed which moved negotiations along.
[48] Ultimately, the deal became $7.35 million of which $4.5 million was to be paid to Trenwith on closing with a vendor take-back mortgage of $2.85 million, interest free for one year from closing, and a $550,000 bonus if the parties were successful at the OMB in obtaining in the rezoning they sought.
[49] The mortgage had value to Mr. Trenwith. A market mortgage for a principal amount of $2.85 million and an interest rate of 6% would have cost about $180,000 a year in interest. As well, the net tenancy income to First Capital on closing the deal would be about $280,000 a year.
[50] To this point, there was no suggestion of First Capital seeking a pharmacy anchored zoning for the property rather than a grocery store anchored zoning.
[51] Had First Capital advised Mr. Trenwith that it would have considered a different deal involving a pharmacy store anchor for the property, Mr. Trenwith testified that he would have renegotiated the entire arrangement.
[52] Mr. Trenwith conceded that there was no certainty of outcome at the OMB but added that First Capital never advised him of any outcome sought other than a grocery store anchor for the property.
[53] Mr. Trenwith agreed that he could have allowed the status quo to remain with extensions on going through to the completion of the OMB appeal process. If he had done that, and if the appeal had been successful, he agreed that he would have been entitled to a payment of $8.5 million. The flipside is that First Capital could walk away from the deal if the appeal was not successful and Mr. Trenwith would then have had to start again to market the property. For Mr. Trenwith, the 21 December 2007 deal was attractive because although he was taking less money, he did not face the risk of an adverse outcome at the OMB, First Capital walking away from the deal and the risk of having to remarket the property at a time when he had concerns coming into 2008 that it might be more difficult to market the property than it had been before.
[54] There were further negotiations and rewordings of draft agreements. Mr. Weinryb represented First Capital and Mr. Weir represented Trenwith. The transaction closed without drama or difficulty on 4 February 2008. At that time, Mr. Trenwith had no information other than that First Capital was preparing for the upcoming OMB appeal.
[55] In e-mail exchanges shortly after the transaction closed in early February of 2008, Mr. Chisholm confirmed that he was looking forward to pushing the OMB matter “over the goal line”. Mr. Trenwith responded that he too was looking forward to a favourable decision at the OMB. Mr. Trenwith assumed that all was well. He had no discussions with Mr. Chisholm or anyone at First Capital about the prospects for success at the OMB.
[56] Mr. Trenwith understood that the OMB had the power to decide the appeal and allow of zoning for something less than the 47,000 square-foot grocery store sought.
[57] The OMB appeal was scheduled to take place on 31 March 2008. Mr. Trenwith attended with Mr Borczok and learned for the first time that a settlement was under consideration. Mr. Chisholm was present but he left quickly and did not explain the proposed settlement terms.
[58] Mr. Trenwith assumed that First Capital had persuaded the Town to agree to a re-zoning that would permit of a grocery store anchored development on the property. The matter was back before the Board on 2 April 2008. Again, Mr. Chisholm and Mr. Borczok attended. Within the first half-hour, Mr. Trenwith learned that the proposed settlement involved a development excluding a supermarket. On learning of the settlement on 2 April 2008, Mr. Trenwith did not rise in the OMB hearing and oppose it. Indeed, he felt that he had no right to oppose after the property changed ownership in February of 2008.
[59] He agreed that if First Capital obtained zoning for not less than a 46,000 square-foot supermarket, either by OMB decision or by a negotiated settlement with the Town, he would be entitled to a bonus of $550,000. Mr. Trenwith added, however, that he never had an expectation that First Capital would settle for anything less than the supermarket anchor that it asked for and was dumbfounded to learn of the settlement it actually achieved with Town. This was because First Capital never told him that they would take anything less than what they asked for on the appeal.
[60] Mr. Trenwith sent an e-mail to Mr. Chisholm asking for particulars but they were not forthcoming by e-mail or in response to his follow up telephone calls.
[61] Mr. Trenwith confirmed that he has no evidence to dispute that First Capital was contacted by the Town to discuss settlement. He has no evidence that the settlement achieved was anything other than a reasonable settlement from the First Capital point of view. As well, he has no evidence to dispute that First Capital relied on its experts and counsel regarding the prospects of continuing forward with the appeal as originally structured.
[62] Mr. Trenwith met with his lawyer, Mr. Weir, and as a result he allowed the $2.85 million vendor take-back mortgage to stand and mature. On maturity he was paid out and he discharged the mortgage after again taking advice from Mr. Weir.
[63] His business rationale for allowing the mortgage to mature arose from his concern that by challenging his entitlement to a bonus at that time, in the winter of 2008 and 2009, a very challenging time in his other businesses, he might delay access to payment of the $2.85 million covered by the mortgage and it was important for him to have that money immediately.
[64] Mr. Trenwith confirmed that he chose not to object to a discharge of the mortgage in February of 2009. He agreed that First Capital did not threaten him; he said that First Capital did not explain anything to him. He added that he knew he had two years to sue if he chose to and, in fact, he did sue First Capital in this action about one year after the mortgage was discharged.
Jamie Chisholm
[65] In the 26 years since Mr. Chisholm left university, he has consistently worked in the commercial real estate acquisition, development and management fields. He was the Vice President for Central Canada at First Capital between March of 2007 and June of 2011. In that capacity, he oversaw all aspects of his company’s shopping center development business, including leasing, future acquisition of properties and development.
[66] On joining First Capital, the company managed about 10,000,000 ft.² of retail property, including about 80 properties in total throughout Ontario. It did not involve itself in large mega malls.
[67] Mr. Chisholm described the First Capital mandate or strategy was to become the leading developer and manager of grocery anchored properties throughout Canada. Its motto was "shopping for everyday life". Mr. Chisholm explained that grocery stores are prime anchor tenants because everybody needs to eat and grocery stores attract other tenants such as LCBO, banks, beer stores and drugstores.
[68] The property at issue in this matter is one that he was familiar with before he joined First Capital. He was previously employed at Sobey’s and was aware that it had an interest in leasing a 46,000 square-foot property in Southwest Milton. That deal did not finalize before he left for First Capital. Also, Loblaw's had expressed an interest in locating a store in the vicinity also but its interest did not come to fruition.
[69] When Mr. Chisholm joined First Capital in March of 2007, he was aware that these two grocery chains would be interested in this property. First Capital had not decided which chain would be preferable; rather, Mr. Chisholm and his staff were working to optimize the best rents and other business terms possible from each chain. This property fell squarely within his duties. He was not principally involved with it as he had a direct report, Derek Hull, who dealt with the day-to-day activities on the property. Mr. Chisholm supervised. Mr. Hull left First Capital in April of 2008. Thereafter, Mr. Chisholm's involvement changed. He became more closely involved and that involvement grew after the town of Milton refused to approve rezoning for the property and First Capital opted to appeal that decision to the OMB.
[70] At that point, First Capital had invested several hundreds of thousands of dollars in expenditures including expert reports and legal expenses. First Capital had attractive tenant opportunities and it appealed in order to reverse the Town's decision. Patrick Devine was involved with carriage of the matter as legal counsel and he continued in that capacity through to the end of the OMB involvement. He was paid entirely by First Capital as were the outside planners, engineering companies, market planning experts and other technical consultants.
[71] In addition to having had at least two meetings with Town Councilors, First Capital reached out to the Director of Planning, Mel Iovio, his assistant, Bill Mann, and to Gordon Krantz, the Mayor.
[72] Mr. Krantz was gracious but the staff members made it very clear that there was nothing left to discuss. They wanted Employment Land uses at the site and would not support a compromise to allow the First Capital proposal for a large grocery store anchored development on the property to go forward.
[73] Mr. Chisholm explained his understanding was that the Official Plan for the Town and the zoning bylaw had designated lands for employment purposes and that would not permit of a grocery store anchored development. Also, the Province was pushing at that time for the protection of Employment Lands generally throughout the province.
[74] As there was no known timeline for the outcome of the OMB appeal process and as the existing agreement with Trenwith would expire in January of 2008, time was running short. Derek Hull and Jamie Chisholm tried to persuade Mr. Trenwith to extend out further in order to deal with the reality of the planning process for the property but the challenge was that Mr. Chisholm was not interested in waiting.
[75] Mr. Chisholm described the negotiations and documents confirming efforts between June and December of 2007 to find alternatives that might work for both Trenwith and First Capital. Mr. Trenwith expressed frustration with the process. Mr. Chisholm said that he would not knowingly have wasted Mr. Trenwith's time or his own. He added that well-intentioned real estate professionals try to negotiate deals that sometimes don't get approved by senior management. He admitted this was a self-serving statement but indicated it was true to say nevertheless.
[76] He described the exchange of discussions and documents to be "ping-ponging" back and forth toward a solution. This occurred against the dynamic of the investment committee and the First Capital CEO (Dori Segal) not apparently wanting to spend $7.9 million for property that could not be used, due to zoning restrictions, for First Capital ‘s core business pursuits.
[77] Mr. Chisholm was responsible, as lead First Capital representative, to make a business case to his investment committee and senior executives for going forward with the transaction with Mr. Trenwith.
[78] In that regard, he developed scenarios for his supervisors, Ms. LaChance and the CEO, Mr. Segal, to consider. These included payment of a purchase price on terms including a vendor take-back mortgage and an immediate closing. He explained the benefit to First Capital of rental income from existing tenants and the benefit of an interest-free mortgage. He recommended the deal adding that First Capital would have greater leverage and the appearance of commitment at the Town. He explained that he was trying to make the best of a bad financial situation, the lesser of evils.
[79] He endorsed his proposed scenarios on the basis that the property was a good site, especially if First Capital got zoning on it for a supermarket. In other communications to his superiors, he referred to it as a great site and noted that two grocery chains were interested in locating there and added that that was a rare thing. He also noted the Milton was the first or perhaps the second fastest-growing community in Ontario.
[80] Mr. Chisholm agreed that at no time was Mr. Trenwith told that First Capital would want anything less than a grocery store anchored shopping center. The deal was not reached until the Friday before the Christmas break. By then, First Capital was prepared to pay a premium if it got approval for a grocery store anchored proposal for at least a 46,000 ft.² store. He explained that 46,000ft.² was the size of Sobey's "standard box" store at the time and a size attractive to Loblaw’s as well.
[81] He testified that Mr. Trenwith ultimately accepted a First Capital offer which involved a cash payment for the property of $7.35 million subject to a vendor take-back of $2.85 million and a $550,000 bonus if the appeal was successful. At the time this deal was finalized on 24 December 2007, preparations were well underway for the upcoming OMB appeal.
[82] He said that First Capital had no meetings with the town of Milton in November or December of 2007 although they had reached out by phone to see if there was any change in the Town’s position. Mr. Devine had also reached out to the Town’s counsel on the OMB matter. There was no change reported.
[83] The deal having been made with Trenwith in December of 2007, Mr. Chisholm testified that First Capital threw things into full gear to prepare for the upcoming OMB appeal, as it then had some certainty that it was going to own the property as of February 2008. Mr. Chisholm estimated that First Capital spent a further $250,000 at least in final appeal preparations.
[84] Mr. Chisholm testified that First Capital knew that failure was a possibility at the appeal. He testified that there would not have been any need for a two-tiered agreement if First Capital was optimistic for success on the appeal.
[85] Despite the fact that First Capital had assembled a dream team of counsel and experts to support the appeal, everyone knew that there was risk. He added that Mr. Trenwith was a very intelligent businessman who would have known of the risk, a contingency that was paramount in the minds of the First Capital team members.
[86] By March of 2008, First Capital was resigned to the fact that the OMB hearing would be going forward but about 10 days before the hearing date of 28 March 2008, Mel Iovio, the Director of Planning at the Town of Milton, called Mr. Chisholm. This was an unexpected and unsolicited call suggesting a meeting.
[87] Mr. Chisholm assembled his dream team together on the following Monday to talk about status, strategy and issues. Present at the meeting were Ms. Nott, the planning expert, Mr. Clayton, the market research expert, site engineers, traffic engineers as well as Mr. Devine and his staff and First Capital representatives. 99.9% of the OMB materials had been prepared. Mr. Chisholm added fancy packaging and pictures to “wow” Mr. Iovio and his assistant, Mr. Mann, at the meeting. They had no interest in seeing the materials. They were polite but abrupt. There was no change in the Town’s view of the need to maintain the site designated as Employment Lands.
[88] The Town was not prepared to allow a development anchored by a grocery store and other commercial tenants with an industrial park feel to the development. It was prepared to allow some retail use with tenants occupying small footprint retail spaces and with an Employment Lands feel to the overall site.
[89] Mr. Chisholm attended that meeting with Wendy Nott who reinforced the First Capital request for reconsideration of supermarket use on the development. The outcome was for each side to go back and consider the discussions and whether compromise was possible.
[90] Mr. Chisholm had specifically asked Ms. Nott and Mr. Devine for a percentage chance of success at the appeal. Neither gave him a percentage. Ms. Nott said it was a positive sign that the Town was willing to negotiate but she thought First Capital’s chances were not impossible but not great. She said the chances would be better if they got the right Board member. It sounded to Mr. Chisholm like the chances of success on the appeal were less than 50-50.
[91] If First Capital was not successful before the OMB, the Employment Lands land-use designation would remain and that was not an attractive proposition, Mr. Chisholm testified. He described this as an unpredictable dynamic posed by the OMB hearing.
[92] In that last week before the scheduled hearing date, the First Capital team met with Mel Iovio and his assistant, Bill Mann. They were unmoving on a supermarket anchored shopping center for this site and specifically did not support the First Capital application at anything close to face value. First Capital, in turn, did not support the Town proposal of a hybrid retail zoning for the site.
[93] The decision to accept the Town's final proposal was made on the afternoon of the first day of what was to have been the hearing start date, 29 March 2008. The appeal was adjourned to permit of further negotiations.
[94] On the weekend before that date, the First Capital team had asked Mr. Devine to opine on what a realistic alternative outcome could be because despite all efforts to date it felt like it was all coming apart. Mr. Devine wrote on 31 March 2008 and advised that First Capital that it would be reasonable to consider alternatives to the appeal.
[95] Wendy Nott gave it as her view that achieving something was better than nothing and if First Capital was not careful it could end up with the worst case scenario by going through with the appeal.
[96] Mr. Chisholm testified that they went into the Monday feeling the solution was there to be found. They asked for leave to continue negotiations with a mandate from First Capital senior executives to do the best that they could do and, as it turned out, a settlement including some amount of retail but no grocery anchor was the best they could do.
[97] Mr. Chisholm recalled sitting within a few feet of Mr. Trenwith at the appeal on March 31, 2008. They did not discuss the negotiations in detail but Mr. Chisholm recalls giving Mr. Trenwith a high-level overview of the fact that negotiations were ongoing and that First Capital was trying to do the best they could do in discussions with the Town.
[98] Mr. Chisholm does not recall having had discussions with Mr. Trenwith in the week before the scheduled appeal and specifically does not recall telling him of the overture initiated by the Town on 20 March 2008 or of discussions or events after the 25 March meeting in Mr. Devine's office.
[99] After the OMB hearing adjourned, Wendy Nott, Mr. Devine and Mr. Chisholm met again with the Town planning representatives, Mr. Iovio and Mr. Mann. The participants got out paper and drew out what an acceptable site plan could look like.
[100] There would be no grocery supermarket but discussions did focus on how the development could be made to look like an employment or business park, for example, with office space on the second story above retail units and with a cap on the amount of retail uses permitted such as a maximum cap of 50,000 ft.² and discussions on the size of any one retail unit.
[101] They did not get to a solution or a deal on the first day. That evening, the First Capital team developed ideas together and met again with the Town representatives the next day. A deal was verbally reached by mid-Tuesday and Ms. Nott and Mr. Devine began to craft an outline of what the new bylaw should look like.
[102] Mr. Chisholm was asked why Mr. Trenwith was not included in these discussions with the Town representatives and he responded that:
• The game had changed. The First Capital /Trenwith relationship changed between the fall of 2007 and April of 2008. The historic sense of cooperation between Trenwith and First Capital had changed although both would still like to see a grocery store on the site.
• Loose lips sink ships. Mr. Chisholm used the phrase to describe his absolute fear that discussions held in camera on a confidential basis with Town representatives might be disseminated and jeopardize the mostly constructive dialogue ongoing between First Capital and the Town.
• Mr. Chisholm did not think that Mr. Trenwith would have anything to lose by First Capital going forward with the appeal whereas First Capital had everything to lose.
[103] The OMB reasons reveal that, on 2 April 2008, the OMB was advised that Trenwith Investments no longer owned the land, no longer had an interest in the matter and had withdrawn its appeals.
[104] Mr. Chisholm accepts that Mr. Devine so advised the OMB on instructions from First Capital. Mr. Chisholm did not ask Mr. Trenwith to withdraw his appeals, although he added that Mr. Trenwith had no contractual right to object to First Capital resolving the appeals.
[105] To the suggestion that Mr. Chisholm anticipated that Mr. Trenwith would object to the settlement, if he knew of it, because he been led to believe First Capital was going for supermarket zoning or bust and that is why Mr. Chisholm asked for an opinion letter from Mr. Devine, Mr. Chisholm did not agree. He stated that it is completely in the realm of normalcy to ask for backup to put before Ms. LaChance and Mr. Segal to say that First Capital’s options are potentially devastating if they did not agree to the settlement.
[106] It was suggested to Mr. Chisholm that the settlement with the Town left open the possibility of a food store being built on the site in the future. That was not a specifically negotiated term, he testified, but his understanding of planning law was insufficient to know if it might ever be a possibility. He accepted, however, that in an e-mail dated 28 March 2008, from Mr. Devine to Wendy Nott, it was stated that "Jamie has asked me to caution you that under no circumstances can we agree to something in either the [Official Plan] or [Zoning Bylaw] that says that there will never be a food store on this site”.
[107] He agreed it was important to leave that door open if possible.
[108] The hearing convened on schedule and the parties announced that an agreement in principle had been reached. Mr. Chisholm did not recall how far along the papering of the deal had progressed by that time. Wendy Nott gave an outline to the OMB of the planning merits of the settlement in support the reasonableness of the deal from the perspective of good planning and community interests.
[109] Mr. Trenwith did not raise a formal, public objection nor did he privately object to Mr. Chisholm beyond asking what had happened. Mr. Chisholm responded at that time and thereafter that the outcome was not a victory for First Capital.
[110] In his capacity as Vice President, Mr. Chisholm was involved in the discharge of the vendor take-back mortgage in order to make sure that the paperwork and funding was appropriate. At that time, Mr. Trenwith made no mention of entitlement to the bonus.
Patrick Devine
[111] Mr. Devine is currently the head of the municipal law group at Dentons Canada. He was called the bar in 1978 and is a certified specialist in municipal law [land-use planning and development]. He primarily acts for landowners in classic barrister and solicitor roles, in representing clients in matters at the municipal level and in connection with matters before the OMB.
[112] He opened a file for First Capital relating to the property on 1 November in 2006. His mandate then was to assist First Capital in attempting to have a rezoning application and an official plan amendment approved by Town Council.
[113] As the matter proceeded toward Town Council approval, he was aware that Mr. Trenwith was the owner of the property that First Capital proposed to acquire and develop. Mr. Devine met Mr. Trenwith periodically and he participated in conference calls with Mr. Trenwith and others. He understood that Mr. Trenwith’s role was to use his connection to attempt to persuade councilors to agree with the project.
[114] Once the Town Council voted [6 to 3 against] Mr. Devine's retainer changed such that he appealed to the OMB. From that point forward, Mr. Trenwith was not an active participant in the appeal process. Mr. Devine did not report to Mr. Trenwith and did not seek instructions from him.
[115] Mr. Devine was aware that in early 2008 the title to the property was transferred from Trenwith to First Capital. He testified that that change made no difference to his retainer, it was just a fact that it had occurred.
[116] By the end of March of 2008, Mr. Devine was aware that settlement negotiations had been initiated by the Town. He found that surprising because so much time and effort had been spent in preparations for the upcoming appeal. Mr. Devine did not participate in negotiations with Town.
[117] By 31 March 2008, Devine was aware that the terms of a proposed settlement had been reached subject to Town Council approval which was to have been dealt with that night. He was later advised that the Town concurred in a tentative settlement and, on consent, he requested an adjournment for two days to finalize terms.
[118] By 2 April 2008, the Town had agreed with First Capital to terms for the settlement but it was still incumbent upon First Capital, as appellant in the matter, to lead evidence. Accordingly, Mr. Devine called the evidence of Wendy Nott to establish that the settlement constitutes good planning. There was no opposition to the settlement.
[119] Mr. Devine prepared a letter of opinion on 31 March 2008 explaining settlement options to Mr. Chisholm. He did this because Mr. Chisholm told him he wanted his professional advice in writing with the rationale as to how the matter could settle and specifically how it could settle without reference to a supermarket development for the property.
[120] Mr. Devine agreed, in connection with the fact that his firm was on the record for both Trenwith Investments and First Capital at the Town level and on the appeal to the OMB, that he would not have been comfortable with that if there was any conflict of interest between the two parties.
[121] He was not aware of any conflict of interest at any time. First Capital never advised him of a conflict between its interests and Trenwith’s.
Positions of the Parties
Trenwith’s Position
[122] Trenwith submits that First Capital should have paid $7.9 million for the property, including the bonus at issue in this matter. It offers a number of arguments in support of its position.
[123] Trenwith’s principal position is that, on the plain language of the final agreement, the event giving rise to the full $7.9 million price occurred, hence that price ought to have been paid by First Capital in or about April 2008, when the OMB approved the zoning change.
[124] Further, or in the alternative, Trenwith submits that if, contrary to the interpretation advanced above, the $7.9 million price is tied to a zoning change which specifically allows for a supermarket, then the final amending agreement included an express undertaking that required First Capital to seek that result. The language of the agreement did not permit First Capital to unilaterally withdraw its request for zoning to permit a supermarket and then assert that the trigger for the $7.9 million purchase price remained amending zoning to allow of a supermarket development.
[125] Trenwith points to the progression of negotiations and states that First Capital offered to pay $7.5 million to close the purchase with the existing by-law restrictions. Trenwith responded by offering to take less provided that it receive a $550,000 bonus if First Capital obtained what it wanted at the OMB appeal.
[126] Trenwith asserts that the implication of this is significant to interpreting the final agreement by which Trenwith agreed to leave $150,000 on the table if the appeal was rejected because it had been led to believe that First Capital would do what it repeatedly said it would and pursue an outcome at the OMB allowing of a supermarket anchored development of the property.
[127] Trenwith submits that it relied to its detriment on First Capital’s word, by potentially forfeiting $150,000 in exchange for an opportunity to receive a $550,000 bonus if First Capital achieved the rezoning it said it wanted.
[128] Trenwith insists its interpretation of the bonus entitlement provisions accords with sound commercial sense because if the property was worth $7.35 million or more to First Capital with no zoning upgrade, it is axiomatic that it must be worth more and the bonus is triggered with enhanced zoning that permits a commercial shopping plaza.
[129] Trenwith asserts that First Capital’s proposed outcome is fundamentally unfair in the circumstances. Whether the analysis is to be framed as estoppel, breach of condition or contract interpretation, Trenwith argues that it should be awarded the unpaid bonus and be made whole for the full price that the parties bargained for. To find otherwise, Trenwith insists is to create a commercial absurdity because one party can unilaterally avoid its obligation without notice or disclosure to the other.
[130] Trenwith admits that it was reasonable for First Capital to settle the OMB appeal but asserts that that does not preclude it from being reasonable for First Capital to have continued to process the appeal. Its prospects of success had not changed, it argues, since the appeal was brought on in May 2007.
[131] Trenwith says that First Capital ought to have returned to Trenwith if it no longer wished to pursue the appeal and sought an agreement to vary the Amending Agreement that the Parties reached in December of 2007; it did not and thereby breached the Amending Agreement.
First Capital’s Position
[132] First Capital submits that the principal issue in this action is the proper interpretation of the bonus clause. It asks that the court apply certain principles of contractual interpretation, that I will refer to below, and asks the court to conclude that the bonus clause has a clear and unambiguous meaning: that First Capital was required to, and did, pursue an official plan amendment and rezoning of property to permit the construction of a supermarket of not less than 46,000 ft.² of gross floor area with all reasonable due diligence and that First Capital was not required to pay the bonus because, with all its due diligence, it failed to obtain supermarket zoning.
[133] Put another way, First Capital insists that the bonus is payable only when a supermarket zoning is achieved.
[134] With reference to the wording of the bonus clause, it insists that the words "current application" do not refer to an official plan amendment and rezoning of the property to permit a retail development but only one that allows of a supermarket. First Capital asserts that there is only one possible interpretation of the bonus clause: the bonus is payable only when First Capital achieves official plan and zoning approval required to build the retail development that it applied for, one that includes a supermarket of 46,000 ft.².
[135] It insists that this interpretation is consistent with the "factual matrix" and it is clear that the parties understood from the outset that their agreement was intended to sell lands to First Capital based on a supermarket use. It adds that when they entered into the amending agreement on December 21, 2007, they did so on the understanding that the value ascribed it to the property is dependent on whether or not First Capital achieves that result – the supermarket.
[136] First Capital relies on a number of principles of law regarding contractual interpretation, all of which I accept, I have considered and applied. They include:
• Contract interpretation is an exercise in determining the intention of the parties when they entered into the contract;[^5]
• The court will consider the words that the parties have chosen, construed and their ordinary and literal meaning, and in accordance with the contract as a whole;[^6]
• The court will also consider the context underlying the contract, the factual matrix;[^7]
• The factual matrix includes surrounding context such as the genesis of the agreement, its purpose and the commercial context in which the agreement was made, as well as the commercial objectives of the parties;[^8]
• The court will give effect to clear and unambiguous language chosen by the parties to the contract and that meaning is presumed to be the intention of the parties at the time that the contract was made;[^9]
• The court will strive to avoid a meaning which has the effect of rendering the contract ineffective or which creates commercial absurdity;[^10] and
• The focus is not on the subjective intent of the parties and evidence as to subjective intention is not admissible pursuant to the parole evidence rule.[^11]
Analysis
[137] This case calls for a judicial interpretation of a commercial contract, the final amending agreement between the parties, and specifically, interpretation of provisions relating to the entitlement that Trenwith seeks to a bonus following upon the disposition of the appeal before the OMB in April of 2008.
[138] On the subject of Principles of Contractual Interpretation, I also adopt the views of Blair J.A. stated in The Plan Group that:
Broadly speaking, however – as this Court noted in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24 – a commercial contract is to be interpreted,
a) whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;
b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended what they have said;
c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract),
d) in a fashion that accords with sound commercial principles and good business sense, and that avoid a commercial absurdity. [Footnotes omitted.]
In addition, as Doherty J.A. observed in Glimmer Resources Inc. v. Exall Resources Ltd. (1999), 1999 CanLII 1102 (ON CA), 119 O.A.C. 78 (C.A.), at para. 17, each word in an agreement is not to be “placed under the interpretative microscope in isolation and given a meaning without regard to the entire document and the nature of the relationship created by the agreement.” Courts should not strain to dissect a written agreement into isolated components and then interpret them in a way that – while apparently logical at one level – does not make sense given the overall wording of the document and the relationship of the parties. [^12]
[139] In concluding their negotiations and documenting their agreement the parties knew full well that they had embarked together on a course of action that was leading them to an application to the Town of Milton for approval of a project that required an amendment to its official plan and by-laws. They also knew that, while they were optimistic that Town Council would approve their request, if they were not successful, an appeal lay to the OMB.
[140] Following upon the Town’s rejection of the project, they decided to appeal. They knew that there were risks attendant upon continuing through with the appeal, including that the OMB might dismiss the appeal or vary the decision below, with the result that the desired outcome might not be achieved.
[141] The parties did not discuss the possibility of a settlement as an alternative to a litigated outcome to the appeal process. Regardless, any settlement proposed to the OMB required a hearing and evidence to support an OMB determination that the settlement was appropriate.
[142] In my view, the key to interpreting the bonus provision of the final agreement is the outcome of the application to appeal the Town Council decision to the OMB. That the appeal focused initially and through to the day of the commencement of the appeal hearing upon the grocery store anchored development proposal flows logically from the decision appealed from.
[143] The bonus would be payable when the “current application” received final approval from all applicable authorities and that included a favourable decision of the First Capital appeal of the “current application” to the OMB.
[144] First Capital and the Town reached an agreement to settle the appeal that they put before the OMB, supported with the evidence that Mr. Devine lead from Ms. Nott that the proposed official plan and zoning bylaw amendments were consistent with the Provincial Policy Statement and all other relevant Provincial policies and plans, conformed to the Region of Halton Official Plan, conformed to the policy regime of the Town of Milton Official Plan, was reasonable, appropriate and embodied the principles of good community planning.
[145] On Ms. Nott’s evidence, the Board found the proposed official plan and zoning bylaw amendments met the appropriate standards, and it rendered a “favourable decision of the purchaser’s appeal”. The words “favourable decision” are not defined in the agreement but surely must include a decision urged upon the OMB by First Capital and agreed to by the OMB following evidence and argument in the hearing that finalized the appeal process.
[146] Success required more than the will of the parties before the OMB. It required proof to the OMB that the goal was reasonable, appropriate and represented the principles of good community planning. The approval process is a statutory requirement applicable regardless of whether it appears as a term of the Trenwith/First Capital final agreement or not.
[147] The parties were represented by counsel in connection with reaching their agreement and upon the appeal. They must be taken to know that the bonus clause could not be triggered without OMB approval to amendments to the official plan and bylaws.
[148] Notwithstanding Mr. Chisholm’s evidence that he viewed the plan actually approved by the OMB not to have been a victory for First Capital, it is clearly an outcome First Capital urged upon the Board and one that it undertook the evidentiary burden to support. It may not have been Mr. Chisholm’s first choice in the appeal process but it was, upon the evidence before me, at least a lesser included outcome. Interestingly, this finding appears to accord with the view that Mr. Chisholm took when he directed Ms. Nott and Mr. Devine to finalize the paperwork for the First Capital/Town of Milton joint submission to the OMB.[^13]
[149] The only evidence lead by First Capital as to the factual matrix surrounding the formation of the final agreement and/or the First Capital decision to support the proposed settlement put before the OMB came from Mr. Chisholm. He is no longer an employee of First Capital and he never had authority to bind First Capital in these matters. He could, and did, make recommendations to his bosses, Ms. LaChance and Mr. Segal and to the investment committee. Conspicuous by its absence in this trial, however, was evidence from First Capital’s decision maker(s).
[150] Whether First Capital decisions were made because of or despite Mr. Chisholm’s recommendations remains unknown. Whether the retail pharmacy anchored project ultimately approved by the OMB represents a financially or otherwise less attractive outcome to First Capital’s decision maker(s), as compared to a grocery store anchored development, is likewise unknown. What is known is that First Capital refused to produce information or documents to support Mr. Chisholm’s view on this and it called no evidence at trial to establish the point.
[151] Further, whether the decision maker(s) saw the proposed settlement as a first step to ultimately placing a grocery store on the property, as Mr. Chisholm urged the OMB settlement documents be drafted to allow, remains unknown. It would surely not be fair to Trenwith to deprive it of a bonus if that outcome comes to pass.
[152] First Capital asserts that Trenwith’s interpretation of the bonus clause would lead to a commercial absurdity because First Capital was required to close the deal and purchase the property without desired zoning in place, which it was reluctant to do. The argument lacks force however as the best evidence, that of the decision maker(s), is missing. It bought the property as is and continued on with the appeal. The chances of success at the OMB changed not at all during the appeal process. I agree with Trenwith that First Capital faced two alternatives as the appeal date approached, to settle on a basis it was content to urge upon the OMB or to argue the appeal. Either alternative was reasonable.
[153] It continued forward with the appeal and although it changed the goal it asked the OMB to approve, the goal embraced by First Capital and the Town at the final hearing was the only goal urged upon the OMB and lead to a favourable decision of the appeal process, thereby triggering the bonus entitlement for Trenwith.
[154] First Capital also asserts that Mr. Trenwith admitted that if the appeal had proceeded with full argument and the exact same outcome was ordered by the OMB as was negotiated, he would not be entitled to payment of the bonus. I reject this submission for two reasons: first, there is no such admission made formally on the record; there was an exchange in Mr. Trenwith’s cross examination and a question calling for a lay person’s subjective interpretation of the clause but that is not a proper basis upon which to judicially interpret the clause and, second, because the premise of the question (that the OMB decision followed upon a contested appeal) did not happen and is therefore irrelevant to what did happen, i.e. OMB approval of a proposal urged upon it jointly by First Capital and the Town.
Disposition
[155] In reading the final agreement as a whole, therefore, and in order to give meaning to all of its terms and to avoid an interpretation that would render the bonus clause ineffective, I am compelled to find that First Capital achieved the zoning it desired and the proposal actually approved by the OMB falls within the meaning of the terms “favourable decision of the purchaser’s appeal” and “current application” as they appear in the final agreement. The parties must be taken to have intended what they said of the bonus in their agreement. There is no ambiguity in the provisions in the agreement relating to the bonus. As such, the outcome that First Capital achieved at the OMB triggered the bonus clause.
[156] Trenwith shall have judgment for $550,000, the amount of the bonus, together with applicable pre-judgment interest thereon and costs in an amount to be agreed upon or fixed by me. In the event that the parties cannot agree on costs issues, they may contact the trial coordinator to schedule a conference call with me and I will determine a process to most efficiently and cost effectively fix costs.
Moore J.
DATE: January 9, 2014
[^1]: See Key Events Chronology for Summary Details [^2]: Trenwith responded by stating that it is not in a position to admit or deny these assertions. [^3]: Trenwith's response confirmed, for greater clarity, that it did not intend to make an issue of First Capital’s good faith in settling the appeals. [^4]: Extracted from Trial Exhibit 4. [^5]: Dumbrell v. Regional Group of Companies Inc. (2007), 2007 ONCA 59, 85 O.R. (3d) 616 (C.A.), at para 48; and Canada (Atty. Gen.) v. Rostrust Investments Inc., [2010] O.J. No. 3117 (Ont. S.C.J.), para. 39-40. [^6]: Dumbrell, supra, at paras. 52-55 and Onex Corp. v. American Home Assurance Co. (2013), 2013 ONCA 117, 114 O.R. (3d) 161 (C.A.), at para 106-108. [^7]: Dumbrell, supra, at paras. 52-55 and Onex, supra, at paras 106-108. [^8]: Dumbrell, supra, at para 55, Onex, supra at para 109, Langley Lo-Cost Builders Ltd. v. 474835 B.C. Ltd. (2000) 2000 BCCA 365, 76 B.C.L.R. (3d) 278 (C.A.), at para 29 and Edper Brascan Corp. v. 117373 Canada Ltd. (2000), 2000 CanLII 22694 (ON SC), 50 O.R. (3d) 425 (S.C.J., at paras. 16, 17 and 20. [^9]: Onex, supra, at para. 106. [^10]: Rio Algom Ltd. v. Canada (Attorney General), 2012 ONSC 550, [2012] O.J. No. 100 (Ont. S.C.J.) at para. 33 and The Plan Group v. Bell Canada (2009) 2009 ONCA 548, 96 O.R. (3d) 81 (C.A.), at para 37. [^11]: Dumbrell, supra, at para 51. [^12]: The Plan Group, at paras 37, 38. [^13]: See paras 106 and 107, above.