ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 1471/13
DATE: 20140416
BET.WEEN:
HIGH TOWER HOMES CORPORATION
Plaintiff
– and –
BRETT JEREMY DAVID STEVENS
And BRETT JEREMY DAVID STEVENS, TRUSTEE
Defendants
Ronald Allan, Counsel for the Plaintiff
Chris Reed, Counsel for the Defendants
HEARD: April 1, 2014
REASONS FOR JUDGMENT
trimble j.
[1] This application concerns the attempted purchase of 143 Blue Water Place, Burlington. The deal did not close. The Purchaser, High Tower Homes Corporation (“Purchaser”) seeks partial summary judgment to the effect that Agreement of Purchase and Sale (“APS)” is enforceable and the Defendants (“Vendors”) are liable in damages for breach of the APS. The Vendors submit they are not liable. Without serving a cross motion, the Vendors seek rectification of the Blue Water APS to reflect that the sale of the Blue Water property was part of a “package deal” whereby the Purchaser was to purchase 105 Avondale Court, as well. Further, the Vendors submit that the Blue Water APS was never completed as the Purchasers never provided notice of waiver of condition in accordance with the APS’ strict terms.
Facts
[2] The Vendor, Stevens, owned the Blue Water property. His wife, Gillian Stanley, owned the Avondale property which abutted the Blue Water property. Stanley explains that when she first met Ivan Curic, the Purchaser’s principal, controlling mind, and the person who negotiated on behalf of the Purchaser, they discussed the Purchaser’s purchase of the two parcels. Stanley said that she made it clear that the two properties would be sold as a ‘single parcel’. Curic denies that he was ever told this.
[3] Stanley says that at a second meeting, both parties agree that the Respondent and Stanley wanted as much of the total purchase price allocated to the Avondale property so that they could take advantage, as much as possible, of the principle residence exemption from capital gains tax. Curic denies being told this.
[4] From the evidence, there were six offers or counter-offers on the two properties. All of the offers were typed. The Purchaser made its changes by simply sending in a fully re-typed offer. The Vendors made their changes in handwriting, initialled by the Vendors. With the exception of pointing out the changed irrevocable date, neither party clearly warned the other of changes made to the previous offer(s). The sequence of offers is as follows:
Round One: January 15/13 - Purchaser’s lawyer faxes to Vendor’s lawyer at 11:40 a.m., first offers on properties.
Re Avondale: Price - $3.5 million. Standard clause 3 re Notice is struck out. Includes in Schedule A, clause 7 “ CONDITION FOR SALE OF ADJACENT PROPERTY: Closing of the transaction contemplated under this Agreement is expressly conditional until closing upon the concurrent completion of the purchase of the real property known municipally as 143 Blue Water Place (the mutual closing clause). This condition is inserted for the benefit of both parties, and may only be waived in wring (sic) by both parties”. There is also a Vendor take back mortgage. Conditions are to be waived in 60 days
Re Blue Water: Price - $1 million. Standard clause 3 re Notice is NOT struck out, but is not filled in. There is a Vendor take back mortgage clause, time for waivers and the mutual closing clause is identical.
Because of the mutual closing clause, I conclude that the Purchaser must have known that it was important to the Vendors that the properties should be sold together. As discussed below, I do not find that the Purchaser knew of the fundamental importance of the issue to the Vendors.
Round Two: January 17/13 - Vendor faxes Purchaser’s lawyer at 10:20 a.m., a counter offer on the properties:
Re Avondale: Vendors increase price to $5.3 from $3.5 million, and deposit from $50,000 to $100,000. Standard Clause 3 re Notice remains struck out. Clauses 1, 3, 4c, 5 and 6 in Schedule A are struck out including the Vendor take back mortgage. The shoreline credit clause is reduced to $400,000. Clause 8 is amended. The mutual closing clause remains.
Re Blue Water: Price - $1 million. Standard clause 3 re Notice is NOT struck out but is not filled in. Vendor take back mortgage clause is struck out. Marks are made by the Vendors next to, and some changes made to Schedule A clauses 8, 9 and 10. The mutual closing clause remains.
Round Three: January 21/13 - Purchaser’s lawyer faxes Vendors’ lawyer at 5:29 p.m., a counter offer on the properties:
Re Avondale: Price - $4 million. Standard clause 3 re Notice is not struck out, but is not filled in. Re Schedule A, Vendor take back mortgage is NOT reinserted. Clause 4, mutual closing clause, remains as it was – conditional on closing of Blue Water. There are changes to the shoreline credit clause, accepting the Vendor’s last changes. The Purchasers accept the Vendors’ changes to the assignment clause. The Purchasers accepted the Vendors’ changes to the CONDITION FOR BUYER’S BENEFIT clause.
Re Blue Water: Price – $1 million. Standard clause 3 re Notice is not struck out but is not filled in. Re Schedule A, Vendor take back mortgage is re-inserted. Clause 3 re occupancy and 4 re Shoreline Allowance are “intentionally Deleted”. Clause 7, the mutual sale clause is revised “Closing of the transaction contemplated under this Agreement is NOT CONDITIONAL on the completion or closing of … Avondale
This offer lapsed.Round Four: January 23/13 - Purchaser’s lawyer faxes Vendors’ lawyer at 5:04 p.m., an offer on the properties. This fax cover sheet had a small handwritten note saying: “Please note the irrevocability date”:
Re Avondale: Price -$4.5 million. Standard clause 3 re Notice is not struck out, but is not filled in. Re Schedule A, Vendor take back mortgage is NOT reinserted. There is no shore line allowance provision. Clause 3, mutual closing clause, remains as it was – conditional on closing of Blue Water. The amended assignment clause remains. The Purchasers accepted the Vendors’ changes to the CONDITION FOR BUYER”S BENEFIT clause. A commission clause is inserted whereby each party agrees to pay 2% commission to their respective solicitors.
Re Blue Water: Price - $1 million. Standard clause 3 remains and is not filled in. There is no change from the last offer in Schedule A, clause 6, the mutual closing clause, which still says Blue Water closing is not conditional on Avondale. There is neither Vendor take back mortgage nor shoreline allowance. A commission clause is inserted whereby each party agrees to pay 2% commission to their respective solicitors.
Round Five: January 24/13 - Vendors’ lawyer faxes Purchase’s lawyer a counter offer on the properties. The timing of the fax is not clear. This fax cover sheet had a small handwritten note saying: “Please note the irrevocable date which is today.”
Re Avondale: Price – remained at 4.5 million. The changes were all to Schedule A, and involved removing the commission.
Re Blue Water: Price – remained at $ 1 million. The changes were to Schedule A. Changes were made to the “CONDITION FOR BUYER’S BENEFIT clause but the mutual closing clause, immediately above and beside the handwritten changes made to the condition for buyer’s benefit clause, remained unchanged. Blue Water was not conditional on Avondale closing.
Round Six: January 25/13 - Purchaser’s lawyer faxes Vendors’ lawyer a counter offer on the properties. The timing of the fax is not clear. The changes are all in handwriting, and initialled.
Re Avondale: The Vendor accepted all changes proposed by the Vendors, including eliminating the 2% commission clause. The mutual closing clause remained contingent on Blue Water closing
Re Blue Water: The Vendor accepted the irrevocability date and the changes to the CONDITION FOR BUYER’S BENEFIT clause. He reinserted the 2% commission clause. The mutual closing clause remained that Blue Water was NOT contingent on Avondale closing.
By fax at 10:28 a.m. on January 25, 2013, the Vendors signed back the deal, at which point the deal became a firm Agreement of Purchase and Sale.
[5] On February 20, 2013, the Purchaser’s solicitor provided to the Vendors’ the deposits. On February 22, the Purchaser’s solicitor faxed the Vendors’ solicitor advising that it had waived all conditions on the Blue Water APS, and that it was a firm deal. They asked for an extension of time for an additional 15 days to waive conditions set out in the Avondale APS. The Vendors’ lawyer said he would need five days to respond to the request as he needed to get instructions. Accordingly, the lawyer granted a five day extension on waiving conditions for Avondale. On February 25, the Vendors’ lawyer responded by a) granting the extension of the time to waive conditions on Avondale, and b) saying that there was no waiver on Blue Water within time, as service of the notice of waiver was not done personally as required by Standard clause 3 in the APS. Therefore, the Blue Water sale was at an end.
Issues
[6] There are two issues in this matter:
Whether the Blue Water APS can be rectified to insert the mutual closing clause making the closing of Blue Water conditional on the closing of Avondale; and
Whether the Purchaser’s notice of waiver of conditions on Blue Water complied with Standard clause 3. If the Vendors are entitled to rectification, did they come to court with “clean hands”? If not, should they be denied equitable relief?
Positions of the Parties
- The Plaintiff/Purchaser
[7] Relying largely on Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, the Purchaser submits that there is a binding APS, which it honoured, and the Vendors did not. Rectification is an equitable remedy, used in extraordinary circumstances where one party has taken advantage of another’s unilateral mistake, in circumstances of fraud or “the equivalent of fraud”. Where unilateral rectification is claimed, the party claiming rectification must show that there was a prior oral contract whose terms are definite and ascertainable. Further, the Defendants must know or ought to have known of the error and the Plaintiff did not.
[8] The Purchaser says that the Vendors knew or ought to have known of the removal of the mutual closing clause from the Blue Water APS, since a) next to the price, this clause was the most important aspect of the deal; b) the changes to the various offers were clear on a reasonable reading of the documents; and c) the Vendors had experienced solicitors acting for them. Further, the Purchaser says that there was no prior oral contract, or that the Purchaser’s conduct did not amount to fraud or the equivalent of fraud.
[9] With respect to notice, the Purchasers admit that the notice provision in Standard clause 3, required personal service of notices. It argues, however, that the Vendors’ course of conduct, both pre and post the APS indicates that it allowed notice to pass between solicitors, thereby waiving Standard clause 3. The Vendors’ solicitor took no objection on February 20 to service of the waiver of conditions regarding Blue Water on the Vendors’ solicitor. On February 20, the Vendors’ solicitor granted a five day extension in the time to waive conditions concerning Avondale so that he could get instructions. On February 22, he granted a 15 day extension in the time to waive conditions on Avondale. In that same letter, the Vendors’ solicitor gave notice that the waiver of condition ought to have been delivered personally to the Vendors, not by leaving it at the door of the property or sending it to the solicitors for the Vendor. The Purchaser submits that the Vendor is estopped from insisting on formal compliance with the contract notice provision by its conduct.
[10] Finally, the Purchasers submit that because the Vendors do not have clean hands, they cannot avail themselves of equitable relief. The Purchasers say that by attempting to assign to Avondale and Blue Water prices that were grossly above and below market value, respectively, in order to take advantage of the personal residence exemption to capital gains tax, the Vendors conducted themselves nefariously, and therefore cannot receive equitable relief.
- The Defendants/Vendors
[11] The Vendors concede that this is a case of unilateral mistake. The Purchasers were aware that the Vendors wanted the properties sold together as the Purchasers inserted the mutual closing clause in their original offers on the both properties. Thereafter, the Purchasers did not draw attention to the changes in their offers, including to that of the mutual closing clause. The Vendors, in oral argument, went further. They argued that the actions of the Purchaser were tantamount to fraud, when taken in context. Even though the Purchaser changed the wording of the mutual closing clause in only the Blue Water APS, it intentionally left the title of the clause the same in both APS’s: “CONDITION FOR SALE OF ADJACENT PROPERTY”. This change in wording, given the failure to change the heading, was intended to lull the reader into not noticing the change in text.
[12] As to notice, the Vendors submit that the contract is clear. If the Purchasers are going to insist on strict interpretation of the contract, so will they. Notice ought to have been given personally, in accordance with Standard clause 3.
[13] Finally, the Vendors submit that there are issues of credibility that require a trial.
Analysis
- Onus
[14] Technically, this is a motion for summary judgment brought by the Purchaser enforcing an APS for the Blue Water property. Much of the Purchaser’s argument was, in effect, reply to the defence raised by the Vendors claiming rectification based on unilateral mistake. To be clear, notwithstanding how the matter was argued, the Purchaser has the onus to establish that the Blue Water APS is enforceable. In other words, he has to establish the contract, and that it was agreed, by conduct, that notice need not be in writing to the Vendors, personally. The Vendors have the onus of establishing that they are entitled to rectification.
- Issues Requiring a Trial
[15] I do not believe that there are any issues requiring a trial. The Vendors say that whether there was an oral contract before the written contract to the effect that the properties would be sold together, and not separately, is an issue that requires a trial. I disagree. the summary judgment materials filed provides the Court with the evidence required to fairly and justly adjudicate the dispute in a timely, affordable and proportionate procedure, under Rule 20.04(2)(a): see Hryniak v. Mauldin, 2014 SCC 7. There were extensive affidavits filed by all parties and cross-examination on those affidavits. I am able to weigh the evidence, evaluate credibility and to draw inferences as may be required for this motion, and in doing so, do justice between the parties to the extent of the relief sought. There is no need to send the issues raised on this motion to a trial.
- Rectification
[16] The leading and binding authority on rectification is Sylvan. In that case, the Plaintiff and Defendant agreed to form a joint venture to purchase and develop land into a golf course. The oral agreement provided that the Plaintiff would operate the golf course for five years. At that point, the Defendant would buy out the Plaintiff, but the Plaintiff had the option to develop residences on a 100 yard deep strip of land on the property. The parties left it to the Defendant’s lawyer to draft the agreement. In the written agreement, the size of the strip of land was described as 100 feet instead of yards. The Plaintiff signed the agreement without reading it.
[17] The Plaintiff built the club house and operated the golf course. After five years, it proposed developing the reserved part of the land. The Defendant rejected the development as it exceeded the 100 foot strip of land reserved in the written contract.
[18] The trial judge found for the Plaintiff and awarded damages. He made specific findings that the individual Defendant had acted fraudulently. He also rectified the contract because of unilateral mistake. The Court of Appeal upheld the decision.
[19] The Supreme Court of Canada tells us that rectification is an extraordinary equitable remedy. Binnie J. explains:
29 When reasonably sophisticated business people reduce their oral agreements to written form, which are prepared and reviewed by lawyers, and changes made, and the documents are then executed, there is usually little scope for rectification. Nor does a falling out between business partners usually attract an award of punitive damages. This case is unusual because of the findings of fraud and deceit made against the appellant O’Connor by the trial judge. The appellants are therefore obliged to try to make their case, if at all, out of the mouth of Bell, with such help as they can find in the law books for their position.
[20] He goes on to say:
31 Rectification is an equitable remedy whose purpose is to prevent a written document from being used as an engine of fraud or misconduct “equivalent to fraud”. The traditional rule was to permit rectification only for mutual mistake, but rectification is now available for unilateral mistake (as here), provided certain demanding preconditions are met. Insofar as they are relevant to this appeal, these preconditions can be summarized as follows. Rectification is predicated on the existence of a prior oral contract whose terms are definite and ascertainable. The Plaintiff must establish that the terms agreed to orally were not written down properly. The error may be fraudulent or it may be innocent. What is essential is that at the time of execution of the written document the defendant knew or ought to have known of the error and the plaintiff did not. Moreover, the attempt of the defendant to rely on the erroneous written document must amount to “fraud or the equivalent of fraud.” The court’s task in a rectification case is corrective, not speculative. It is to restore the parties to their original bargain, not to rectify a belatedly recognized error of judgment by one party or the other. [Citations omitted]. In Hart [v. Boutilier (1916) 1916 631 (SCC), 56 D.L.R. 620 (SCC)] at p. 603, Duff, J. (as he then was) stressed that “the power of rectification must be used with great caution.” Apart from everything else, a relaxed approach to rectification as a substitute for due diligence at the time a document is signed would undermine the confidence of the commercial world in written contracts.
[21] Binnie J. continues:
35 As stated, high hurdles are placed in the way of a business person who relies on his or her own unilateral mistake to resile from the written terms of a document which he or she has signed and which, on its face, seems perfectly clear. The law is determined not to open the proverbial floodgates to dissatisfied contract makers who want to extricate themselves from a poor bargain.
[22] In Sylvan, the Appellant/Defendant wished to add a fifth hurdle for the plaintiffs; namely, that lack of due diligence or negligence in not reviewing the contract adequately, or at all, is an absolute bar to rectification. Binnie J. was not prepared to go that far. He agreed, however, that lack of due diligence or contributory negligence was a factor to be considered in the exercise of the court’s discretion to grant an equitable remedy. One must bear in mind that the essence of unilateral mistake is often lack of due diligence or contributory negligence in not reviewing the contract: see Sylvan, at paras. 36 and 57-63. With respect to the exercise of discretion in allowing an equitable remedy, it is the extent of the lack of due diligence or the amount of negligence that is important.
[23] On this point, it is of significance that in Sylvan, there appears to have been only one version of the written agreement, which the Plaintiff did not read, and which was based on insufficient information given by the individual Defendant to the lawyer drafting the agreement. It is also significant that there was an element of trust and reliance between the parties. The Court, at all levels, stresses that the Plaintiff’s not reading the document before signing it is an act of trust and faith that the Defendant abused.
[24] In this case, the facts are different. Whatever the oral agreement was, the Vendors had four versions of the Blue Water APS containing the mutual closing clause which said that the closing of the Blue Water purchase was not contingent on the closing of the Avondale APS.
[25] Binnie J. speaks of ‘four hurdles’ the Plaintiff (on the rectification issue) must clear in order to get rectification: see Sylvan, at paras. 37-43. These hurdles are in place to prevent the floodgates from opening and letting unhappy contracting parties get around what they later decide are bad bargains.
[26] First, the Plaintiff must show the existence of a prior oral contract that differs from the written contract.
[27] Second (although third for Binnie J.), the Plaintiff must show the precise nature of the oral contract. This precise form must be specific enough to clearly express the parties’ intentions. The court should not be left to speculate about the parties’ unexpressed intentions. The words of the oral contract must be precise enough to be the basis of the written term to be rectified.
[28] Third (second for Binnie, J.), the Plaintiff must show that the Defendant knew or ought to have known of the mistake in reducing the oral terms to writing, and took advantage of the mistake to the extent that it was fraud or the equivalent of fraud. Unilateral mistake, alone, is not enough: see Sylvan, at para.s 37-38.
[29] What is “equivalent of fraud”? It is not clear, but is said to be a broad definition the key earmark of which is conduct by the Defendant that falls short of deceit, but which is “unconscientious for a person to avail himself of the advantage obtained”: see Sylvan, at para. 39.
[30] Fourth, in stressing how extraordinary a remedy is rectification, Binnie J., sets a higher than normal standard of proof:
41 The Fourth hurdle is that all of the foregoing must be established by proof which the Court has variously described as “beyond a reasonable doubt” or “evidence which leaves no ‘fair and reasonable doubt’”….. or “convincing proof” or “more than sufficient evidence”…. The modern approach, I think, is captured by the expression “convincing proof”, i.e., proof that may fall well short of the criminal standard, but which goes beyond the sort of proof that only reluctantly and with hesitation scrapes over the low end of the civil “more probable than not” standard. [Citations omitted].
42 … [T]he objective is to promote the utility of written agreements by closing the “floodgate” against marginal cases that dilute what are rightly seen to be demanding preconditions to rectification.
[31] In my view, the Vendors/Defendants have failed to prove with “convincing proof” that they deserve rectification. I make this finding for several reasons.
Is there an Oral Agreement?
[32] The Defendants have failed to prove that there was an oral contract term that was left out of the written agreement. The unilateral mistake the Plaintiff claims to have made is to notice that the Purchaser removed mutual closing clause from the Blue Water APS. This began in Round Three of the offers. The Plaintiff must show by “convincing proof” that it was clear to all that there was an agreement at all times that the mutual closing clause was to be in both APS’s. They have not done so.
[33] Gillian Stanley’s evidence is equivocal. She states:
a. In her first or second meeting with Mr. Curic of the Plaintiff, “I explained to Mr. Curic that the Avondale/Bluewater lands were being sold as a single parcel.” (Stanley Affidavit, at para. 7).
b. In her second meeting with Curic, she said in respect of previous attempts to sell the properties “I explained that the lands were being sold as a single parcel and that in the prior agreements both properties were sold together.” (Stanley Affidavit, at para. 8).
c. “In all of my discussions with Ivan and Aaron [of the Plaintiff], it was clear that I expected the Avondale and Blue Water Properties to sell as a single parcel.” (Stanley Affidavit, at para. 11).
d. After the Blue Water APS became firm and she realized that the mutual closing clause was not in that APS, she said “I believed and understood that the Avondale/Bluewater lands were being sold together and that the Bluewater agreement continued to be conditional on a ‘condition for sale of adjacent property.” (Stanley Affidavit, at para. 15).
[34] Mr. Stevens’ understanding is based on what Ms. Stanley told him with respect to the conversations she had with Mr. Curic.
[35] While Ms. Stanley’s evidence points to her intention, it falls short of establishing that there was an enforceable, precise agreement indicating that it was vital to them that the properties had to be sold together, and that they would not have sold Blue Water without Avondale and vice versa.
Did the Purchaser’s actions constitute fraud or the equivalent of fraud?
[36] The parties agree that there is no proof that the Purchaser acted fraudulently in taking advantage of the Vendors’ unilateral mistake. The Vendors agree that to succeed in rectification of a unilateral mistake they have to prove that the Purchaser’s actions were the equivalent of fraud.
[37] The Vendors have failed to prove by “convincing proof” that the Purchaser’s action were the equivalent of fraud. The Vendors’ main argument in this respect is that the Purchasers knew that the Plaintiffs intended to sell the properties together, and never changed that intention. That is why the Purchasers included in the first round of offers with a mutual closing clause in each APS. They submit that by altering the mutual closing clause in the Blue Water APS in round three without drawing their attention to the change, the Purchaser’s reliance on the lack of the mutual closing clause in the Blue Water APS was equivalent to fraud.
[38] This argument rings hollow. Neither party, with the exception of the irrevocability date, ever forewarned the other about changes they made to the offers.
[39] The Vendors point out as evidence of equivalence of fraud, that the Purchaser made the amendments to the mutual closing clause in the Blue Water agreement in such a way as to be calculated to be overlooked. The Purchaser’s changes were made in a re-typing of that portion of the APS, as opposed to being made by the traditional handwritten, initialled change. Second, the heading of “CONDITION FOR SALE OF ADJACENT PROPERTY” or “CONDITION FOR BUYER’S BENEFIT” was left in. This was done, the Vendors submit, to fool the casual observer. This activity should not be condoned. The Vendors rely on Granger J.’s dicta in Stepps Investment Ltd. et al. v. Security Capital Corporation Ltd. (1976), 1976 648 (ON SC), 14 O.R. (2d) 259 (H.C.J.) where he explains at pp. 272-273.
[I]n modern commercial relations, to require the parties, where an important amendment is being made, to ensure that knowledge of such amendment comes to the other side. I do not mean that a party must overcome obtuseness in his opposite number but he must at least give him a real opportunity to appreciate the change. And if the circumstances are such that the amendment might readily be missed he should be particularly reluctant to assume such knowledge. Here the plaintiffs could have resolved the whole problem clear reference to the amendment in the correspondence or in the recitals or the operative parts of the agreement itself. It could even have been resolved in a clear, unambiguous, oral conversation with the defendant’s solicitors and I cannot find that such a clear and unambiguous conversation ever took place.
[40] They also point to Binnie J.’s statements in Sylvan that contributory negligence in not reading a document or a lack of due diligence is not a defence to rectification. Indeed, they argue that contributory negligence or lack of due diligence are at the very heart of unilateral mistake.
[41] The Vendors overstate the case. Sylvan makes it clear that while lack of due diligence and contributory negligence are not absolute defences, they are relevant to whether the court should exercise its discretion in granting equitable relief.
[42] The more recent formulation of this principle in a rectification case is contained in 978011 Ontario Ltd. v. Cornell Engineering Co. (2001), 2001 8522 (ON CA), 53 O.R. (3d) 783 (C.A.). In that case, Stevens, a very experienced engineer asked MacDonald, his friend, mentor and confident, to come to work for, and buy out the Steven’s partner’s interest in Cornell, through his professional services company. Stevens asked MacDonald to prepare the contract, which he did using the professional engineers standard form, but struck out the termination provisions. He asked Stevens to read and sign it. Stevens signed it after glancing at the first page. The Trial Judge rectified the contract holding, in part, that MacDonald ought to have brought to Stevens’ attention the change in the termination provision. The Court of Appeal reversed the trial judge after considering Stepps and Downtown King West Development Corp. v. Massey Ferguson Industries Ltd. (1996), 1996 1232 (ON CA), 28 O.R. (3d) 327 (C.A.), both of which the Vendors relied on in argument. On the issue of bringing something to the attention of the opposing party, the court said:
[32] … [W]e have a judicial system that emphasizes individual responsibility and self-reliance. Generally, parties negotiating a contract expect that each will act entirely in the party’s own interests. Absent a special relationship, the common law in Canada has yet to recognize that in negotiation of a contract, there is a duty to have regard to the other person’s interests, namely, to act in good faith…… In keeping with the principle of self-reliance imposed by law on each party to a contract, the failure to read a contract before signing I is not a legally acceptable basis for refusing to abide by it. Nor is the fact that the clause was not subject to negotiations sufficient in itself. [Citations omitted.]
[43] The exception to this rule is in cases of unconscionability, bad faith and the fiduciary standard, none of which apply here.
[44] In the case between these two litigants, it is not the case of an exceedingly complex transaction (as in Stepps), or abuse of a trust or reliance relationship. Rather, it is a straightforward purchase of real estate. Accepting, as I must, that the Vendors’ lack of due diligence and/or contributory negligence are not a bar to rectification. I also accept that they are something to be considered in determining whether I should exercise my discretion in allowing equitable relief. In the circumstances of this case, the negligence or lack of due diligence is extraordinary. I say this for several reasons:
a) The nub of the Vendors’ case on rectification is that, next to the price, the most important provision to them was that the two transactions proceed as one, and that neither property could be sold without the other. This is the basis on which oral arguments proceeded.
b) The Vendors are engaged in land speculation, and must be taken to be sophisticated commercial players.
c) The Vendors had counsel.
d) The Vendors’ review of the offer in Round 1 resulting in their counter offer in Round 2, shows that they were reviewing all clauses carefully, especially in Schedule A.
e) In Round 5, the Vendors signed-back counter offer to Round 4, the Purchaser’s clause that the sale of Blue Water was not dependent on the closing of the deal on Avondale existed in the offer in Round 5. Changes were made to the clause immediately below the clause that said that the sale of Blue Water was not conditional on the sale of Avondale. There are comments the Vendors wrote, right beside the Purchaser’s version of the mutual closing clause. Some of the pen strokes for the Vendors’ handwritten amendment in the clause below the Purchaser’s version of the mutual closing clause end at the words “shall not” contained in the Purchaser’s version of the mutual closing clause.
f) In Round 6, the Purchasers signed back, initialling the Vendors changes, including those to the paragraph just below the Purchaser’s version of the mutual closing clause.
g) The Purchaser’s version of the mutual closing clause making the closing of the Blue Water APS expressly not conditional on the closing of the Avondale APS, existed in the last four rounds of negotiation.
[45] I can only conclude that the Plaintiff’s failure to see changes to the second most important aspect of the deal (second to price), an aspect of the deal without which they say they would not have closed, was the result of anything other than lack of due diligence on their part.
[46] Rectification, as a discretionary, equitable remedy, is designed to relieve against the harshness of the common law, or the unconscionable conduct of the other contracting party which is equivalent to fraud. While the Purchaser’s conduct might be hard and pointed, that is the nature of the rough and tumble, sometimes cut-throat nature of commercial contract negotiations; it is not equivalent to fraud. Both parties were acting as sophisticated commercial players, and knew what they wanted to achieve. Both parties acted through counsel. Both parties were responsible for looking after their own interests. The Vendors merely failed to do so.
Have the Vendors come to court with clean hands?
[47] The Purchaser argues that, if the Vendors meet the test for rectification, they should be denied equitable relief as they do not have “clean hands”. It relies on Taylor v. Guindon, 2005 25894 (Ont. S.C.). In that case, the court held that intentional improper actions that are immediately and necessarily related to the claim by a person seeking an equitable remedy, are a bar to that remedy: see Taylor, at para. 54. The Purchaser says that by assigning a value clearly in excess and below market value for the Avondale and Blue Water properties, respectively, the Vendors engaged in improper activities.
[48] I cannot accept this argument. There is no evidence which suggests that the Vendors were trying to do anything other than maximize their tax position vis-à-vis the principle residence exemption from capital gains. Tax avoidance is permissible. Tax evasion is not. Whether they were correct or not, or too aggressive, or not, is not important. In order to not have “clean hands”, the Vendors must be engaged in an improper purpose. There is no evidence of this. It is mere speculation.
- Notice
[49] The Blue Water APS contained as Standard clause 3, a notice provision, the operative parts of which read:
Any notice relating hereto or provided for herein shall be in writing. In addition to any provision contained herein and any Schedule hereto, this offer, any counter-offer, notice of acceptance thereof or any notice to be given or received pursuant to this Agreement or any Schedule hereto (any of them “Document”) shall be deemed given and received when delivered personally…..”
[50] In addition, at Standard clause 26, the contract provided as follows:
AGREEMENT IN WRITING: … This Agreement including any Schedule attached hereto shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.
[51] The Purchaser argues that on February 22, its lawyer faxed to the Vendors’ solicitor, a letter in which the Purchaser’s lawyer advised the Vendors’ lawyer that the Purchaser waived all conditions with respect to Blue Water, making the deal firm. The letter also asked for an extension of 15 days for waiving conditions on Avondale property. The letter was also delivered to and left at the Blue Water property. The Vendors submit that notice of waiver of the condition was not delivered personally to the owners of Blue Water as required by the APS, and therefore the conditions never were waived, and the Blue Water APS died. The evidence is that the owner of Blue Water was available at work and at home to receive delivery of the Notice, had it been delivered to him, personally. The Vendors insist on strict compliance with the contract.
[52] In this case, the contract was clear. Notice should have been delivered personally, and, given Clause 26, there can be no waiver or agreement contrary to the terms of the APS.
[53] The Vendors rely on 640612 Ontario Inc. v. 253547 Ontario Ltd. (1989), 3 R.P.R. (2d) 136 for the proposition that notice must be given. While the case says that, it is irrelevant as there was no notice provision in that contract. It was implied.
[54] The Vendors also rely on McKee v. Montemarano, 2009 ONCA 359, for the proposition that where the APS appointed the real estate agent as agent to receive certain notices, it required that waivers of condition must be delivered personally, and therefore, the delivery of a waiver of condition to the real estate agent was insufficient. In support of its finding that the real estate agent was not cloaked with authority to receive notices of waiver, the court looked to the fact that the parties had not, in their earlier dealings, cloaked the real estate agent with such authority. They had dealt with each other personally.
[55] The Purchaser says that in interpreting the notice provision in the Blue Water APS, I can look to all the conduct of the parties, pre-contractual and post-contractual. It points to the fact that all but one offer went solicitor to solicitor. It also points to the fact that, through their solicitors, the Vendors accepted the request to extend the time to waive conditions in the Avondale APS, and twice gave notice of extension of time for waiving conditions on Avondale (20 and 22 February). By this conduct, the Vendors waived strict compliance with the personal delivery requirement in the notice provision.
[56] The Purchaser relies on D.W. Squared Ltd Partnership v. Oxford Properties Canada Ltd, 2001 CarswellOnt 3523 (Ont. S.C.). That case dealt with the renewal of a lease. Justice Nordheimer held that by delivering the renewal to the security guard contractor, there was adequate delivery. This case is distinguishable as the notice provision allowed delivery “to a responsible employee of the party being served”. Justice Nordheimer held that the security guard at the desk was cloaked with the responsibility for receiving such notices as the tenant had delivered such notices in this manner before.
[57] The Purchaser says that the course of conduct of the parties, as in McKee, should be considered in determining whether the parties had waived the personal service of notice requirement.
[58] None of the cases proffered by the Purchaser dealt with a clause similar to Clause 3 and/or clause 26 in the standard form APS. It is clear by Clause 26 that the parties intended that the Agreement is the written agreement. They specifically agreed that “[t]here is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein”. Waiver is nothing more than a representation by conduct or a collateral agreement affecting the APS, both of which Clause 26 prohibits.
Conclusion
[59] Based on the foregoing, this motion for partial summary judgment must fail. While there is no basis for the defence of rectification of the Blue Water APS, the notice of waiver of conditions was not given personally, in accordance with Standard clause 3. Waiver of this condition, by conduct, is not permitted by virtue of Standard clause 26. Accordingly, the Blue Water APS was never completed according to its terms, and is therefore not enforceable.
Costs
[60] If the parties cannot agree as to costs, each can submit to me not more than 2 pages in
submission (excluding cases and a bill of costs) concerning who should pay costs, and in what amount. These submissions are due within 30 days from the date of these reasons.
Trimble J.
Released: April 16, 2014
COURT FILE NO.: 1471/13
DATE: 20140416
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HIGH TOWER HOMES CORPORATION
Plaintiff
– and –
BRETT JEREMY DAVID STEVENS
And BRETT JEREMY DAVID STEVENS, TRUSTEE
Defendants
REASONS FOR JUDGMENT
Trimble J.
Released: April 16, 2014