CITATION: Bennett v. A. Miron Topsoil 2017 ONSC 1811 COURT FILE NO.: CV-13-083
DATE: 20170321
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Darlene Bennett, Plaintiff (Applicant and Respondent to Cross-Motion)
AND:
The Estate of Joyce Margaret Bennett, Deceased, Alan Leslie Soles, Bertram Shaun Soles, Defendants (Respondents)
AND
A. Miron Topsoil Ltd., Defendant (Respondent and Applicant on Cross-Motion)
BEFORE: E.J. Koke
COUNSEL: Craig Allen, Counsel for the Plaintiff, Darlene Bennett
Christopher Statham, Counsel for the Defendant, A. Miron Topsoil Ltd.
No one appearing for the Defendants, The Estate of Joyce Margaret Bennett, Deceased, Alan Leslie Soles and Bertram Shaun Soles
HEARD: March 10, 2016
ENDORSEMENT-motions for summary judgment
Introduction
[1] The plaintiff, Darlene Bennett brings this motion for summary judgment requesting an order for specific performance, granting her the right to purchase a property (the “property”) owned by the defendants, the Estate of Joyce Margaret Bennett, deceased and Alan Leslie Soles and Bertram Shaun Soles (“the Estate of Joyce Bennett and Soles”). She relies on an agreement dated February 13, 2001 (the “first right agreement” or the “agreement”) which she submits grants her a right of first refusal with respect to the purchase of the property.
[2] The defendant, A. Miron Topsoil Ltd. (“Miron”) has responded by bringing a motion for summary judgment requesting an order dismissing the plaintiff’s claim on the basis that the first right agreement does not give Darlene Bennett a right of first refusal.
Background Facts
[3] Albert Bennett had four sons, Dennis, George, Donald and John (the “brothers”) and he gave them a large parcel of land. The brothers divided the land among themselves and after doing so they entered into a first right agreement with respect to their properties. The agreement provides that the right of first refusal is granted to “the remaining parties” (para. ll. (a)) or to “the other parties” (para. ll. (c) and preamble).
[4] The first right agreement was subsequently registered against the title to the property.
[5] Relevant provisions of the agreement include the following:
FIRST RIGHT OF REFUSAL
THIS AGREEMENT made this 13th day of February, 2001
AMONG
JOHN BENNETT
of the first part
-and-
GEORGE BENNETT
of the second part
-and
DENNIS BENNETT
of the third part
-and-
DONALD BENNETT
of the fourth part
IN CONSIDERATION of the sum of ONE DOLLAR($1.00) now paid by each party to the other, the receipt whereof is by each party acknowledged, each party grants unto the other parties a first right of refusal to acquire ownership of that party’s real estate herein identified upon the terms and conditions herein.
l. DEFINITIONS
(b) “Selling party” shall mean such party proposing to sell or dispose of his respective lands and includes his personal representative and successor in title thereto;
(d) “Buying Party” shall mean such party or parties who have indicated a desire to acquire the selling parties lands;
(e) “Family Member” shall mean a son, daughter or spouse, or any combination of them of any party;
II. FIRST RIGHT OF REFUSAL
(a) If during the currency of this agreement a party desires to dispose of his lands or part of them to a person other than a family member, he shall disclose such intention to the remaining parties and to attempt to negotiate a satisfactory sale with such parties;
(b) If a selling party is unable to conclude a satisfactory agreement with any of the other parties within thirty (30) days, he shall be at liberty to seek offers to purchase from outside parties.
(c) If a selling party receives a bona fide offer to purchase his lands or part of his lands described in the appendix hereto which he is willing to accept, then the selling party shall give written notice of the offer to each of the other parties by presenting them with a photocopy of such offer. The other parties shall have a right during the next twenty-one (21) business days after receiving such notice, by written notice to the selling party to elect to purchase the lands offered to be sold for the same price and on identical terms as contained in the offer presented to them.
(d) If the offerees or some one or more of them wishes to exercise his right to purchase upon the same terms, they shall notify the selling party and such offeree or offerees so notifying shall become the purchasing parties. The agreement of purchase and sale shall be consummated in accordance with the terms, either agreed upon or as contained in the original offer;
(e) If none of the offerees elects to purchase the said property on the said terms as offered in the first offer to the selling party, then the selling party shall be free to sell the lands and premises identified on the terms and conditions set forth in his original offer. Such lands shall thereafter be freed and discharged of any further right to purchase by the other parties. Provided that if such lands and premises are not sold under the terms of the original offer, then the selling party shall be obliged to submit any further offers that he might receive by providing written copies thereof to the other parties as provided in the preceding paragraphs;
(f) If any party has transferred his interest in any of his respective lands to a family member, without giving an opportunity to the other parties hereto to acquire such interest, then such family member and his or her successor in title will be bound by the within agreement. Except as noted by this sub-clause, the right of the other parties shall not be enforceable against any assignee of the freehold who acquired the lands from a party who has followed the procedure outlined in this section.
lll. TRANSFER OF RIGHTS
(a) A party may transfer his lands to a member of the family without observing the provisions of Article 11, but any such transferee shall thereupon become bound by the provisions of this agreement;
IV. EXPIRATION
(a) All rights created hereunder shall automatically expire upon the twenty-third (23rd) anniversary date of this agreement;
[6] The property which is the subject of this dispute concerns the lands which belonged to John Bennett. John Bennett died in 2009. His property was transferred to his spouse Joyce Bennett and her sons Bertram and Alan Soles. Joyce passed away in 2016 and the property is now owned by the Estate of Joyce Bennett and Bertram and Alan Soles.
[7] Donald Bennett passed away on January 11, 2006. He is survived by his spouse, Darlene Bennett, who is the plaintiff in this action.
[8] On November 16, 2012, Michael A. Hardy (“Mr. Hardy”), a lawyer from Sundridge, Ontario, wrote to George Bennett, Dennis Bennett and Darlene Bennett to advise that he represented the property owners, the defendants Mrs. Joyce Bennett and her sons, Bertram Soles and Alan Soles, with respect to a proposed sale of the property to Miron. Mr. Hardy acknowledged in his letter that the property is subject to the first right agreement “in favour of George Bennett, Dennis Bennett and Donald Bennett” and advised the recipients that they had twenty-one (21) business days to exercise their right to acquire the property on the same terms and conditions as the attached written agreement made with Miron (the “Miron agreement of purchase and sale”). The Miron agreement of purchase and sale specified a purchase price of $135,000 with a deposit of $25,000 and the balance due on closing.
[9] The Miron agreement of purchase and sale contained a Schedule “A” which included the following provision:
“This agreement is conditional upon George Bennett, Dennis Bennett and the Estate of Donald Bennett failing to exercise their right of first refusal to purchase the property from the Vendor on the same terms and conditions as this agreement within 21 business days of their being given written notice of this agreement”
[10] On November 28, 2012, John Taylor, a lawyer retained by Darlene Bennett, advised of his client’s intention to exercise the first right and purchase the property. The two surviving brothers, George Bennett and Dennis Bennett, did not exercise their first right and Darlene Bennett was the sole person who declared an intention to purchase the property.
[11] A formal document entitled “Notice Exercising First Right of Refusal and Agreement of Purchase and Sale” was prepared by Mr. Taylor, executed by Darlene Bennett on December 3, 2012, and was forwarded to Mr. Hardy by Mr. Taylor under cover of a letter dated December 5, 2012. Accompanying the Notice Exercising First Right of Refusal was a $25,000.00 certified cheque payable to Mr. Hardy in Trust representing the deposit required under the first right agreement that matched the deposit paid under the Miron agreement of purchase and sale.
[12] By letter dated May 3, 2013, Mr. Taylor wrote that he was in funds to pay the balance due on closing and provided a photocopy of a certified cheque for that balance as proof of the buyer’s readiness, willingness and ability to close the transaction.
[13] Both Miron and Darlene Bennett have taken the position that they are entitled by law to purchase the property. Neither the sale of the property to Miron nor the sale to Darlene Bennett has closed. The vendors, the Joyce Bennett Estate and Soles are prepared to sell the property to either Miron or Darlene Bennett, pending a determination by this court as to who is entitled to purchase it.
Position of Darlene Bennett
[14] The schedule attached to the agreement of purchase and sale to Miron which accompanied the November 16, 2012 Notice of Sale from Mr. Hardy refers to the right of the “estate of Donald Bennett” to purchase the property. The parties agree that Donald’s “estate” is entitled to exercise this right. However, Darlene does not make her claim on behalf of the ‘estate” of her late husband. Instead, she bases her claim that she has a right to purchase the property on the fact that she is a “family member”, as defined in the first right agreement.
[15] The preamble and paragraphs 11. (a) and 11.(c) of the first right agreement purports to grant the right of first refusal to “the other parties” or to “the remaining parties”. Darlene submits that these paragraphs should be construed in such a way that this right is not restricted to the four brothers who signed the first right agreement but should be construed broadly to include “family members” as defined in the first right agreement. Since she was the spouse of Donald she falls within the definition of a “family member” and is therefore also entitled to exercise this right of first refusal.
[16] Darlene’s reasons for asking the court to adopt a broad and liberal interpretation include the following:
[17] Firstly, she submits that the court should look to the intention of the parties in interpreting the agreement. She argues that the intention of the first right agreement was to keep the property within the Bennett family. “Family member” is defined to include a son, daughter or spouse, or any combination of them.
[18] In support of this submission Darlene has produced an affidavit from her lawyer, John Taylor. Mr. Taylor, together with Michael Hardy drafted the original first right agreement in 2001. In paragraph 3 of his affidavit Mr. Taylor states:
- I actually drafted the first right of refusal (“first right agreement”) along with Mr. Hardy. The lands which are the subject of this litigation and the first right agreement are family lands. Based on instructions received, I verily believe that it was intended by the parties that those lands would remain in the Bennett family if a member, including a surviving spouse or child, wanted to purchase those lands. These family lands formed a large acreage owned by Albert Bennett who was the father of the parties to the first right agreement. The parties, who are brothers, apportioned the acreage among themselves in a relatively equal manner, subject to two agreements. Those agreements provided the following: one provided that the brothers and their families and guests would continue to enjoy hunting rights over all of the acreage, including the lands in this action, subject to certain rules; and the second limited the right of each brother to dispose of his piece of land to any third party without giving the other brothers or their family members as defined a first right of refusal. If a family member acquired that brother’s land, then that family member himself or herself had to observe the first right agreement if he or she intended to dispose of that land to anyone outside of that family member’s family.
[19] Secondly, Darlene submits that the terms of the first right agreement provides that family members can acquire burdens or obligations. These burdens and obligations are set out in subparagraph 11.(f) of the first right agreement which reads:
If any party has transferred his interest in any of his respective lands to a family member, without giving an opportunity to the other parties hereto to acquire such interest, then such family member and his or her successor in title will be bound by the within agreement. Except as noted by this sub-clause, the rights of the other parties shall not be enforceable against any assignee of the freehold who acquired the lands from a party who has followed the procedure outlined in this section.
[20] Darlene argues that it would be contrary to the intention of the parties to impose potential burdens or obligations on third parties, purporting to bind them to the first right agreement without extending corresponding benefits entitling them to exercise rights of first refusal;
[21] Thirdly, the fact that party family members are potentially burdened with obligations under the first right agreement in the absence of any express provision allowing them the opportunity to exercise the right of first refusal creates a conflict in the agreement and a resulting ambiguity. The law provides that in circumstances where an agreement contains an ambiguity the courts can attempt to resolve or reconcile such ambiguity by considering parol evidence of intention. Darlene submits that the evidence of intention by her lawyer, Mr. Taylor should be admitted as evidence since it confirms her belief that it was the intention of the parties to keep the property within the Bennett family if any “family member” wished to do so.
Position of Miron
[22] Miron’s position can be summarized as follows.
[23] Firstly, Miron submits that a plain and literal reading of the first right agreement indicates that the right of first refusal is extended only to “parties” and the only “parties” to the agreement were the four brothers who signed it. The agreement refers to the four brothers individually as being “of the first part, the second part, the third part and the fourth part”. There is no reference in the first right agreement to a right of first refusal which can be exercised by a “family member”.
[24] Miron points out that the definition of “family member” as set out in the first right agreement precludes family members from being parties because it distinguishes between family members and parties…in other words a family member is defined in relation to its familial connection to a party, which is distinct from being a party. The definition is as follows:
“Family Member” shall mean a son, daughter or spouse, or any combination of them of any party. [Emphasis added]
[25] Secondly, if Darlene’s interpretation of the first right agreement is accepted, the terms of the first right agreement would require each of the brothers to provide not only each other but also each of their brother’s spouses and children with formal notice in the event they wished to sell their property to a non-family member. Miron submits that if it was the intention of the brothers to place such an onerous requirement on the parties this would have been more clearly stated in the agreement.
[26] Miron points out that in the circumstances of this case Mr. Hardy, who was one of the lawyers who drafted the first right agreement, did not extend notice of the intended sale of John’s property to all family members. Mr. Hardy addressed the notice only to Darlene and the two surviving brothers. Although Darlene received a copy of the formal notice, Mr. Hardy included with the notice a copy of the agreement of purchase and sale which specified that the right of first refusal could be exercised by George, Dennis and the estate of the late Donald Bennett. [Emphasis added]. The schedule did not include Darlene and the other family members as persons who were entitled to exercise this right of first refusal.
[27] Thirdly, Miron submits that the reference to “parties’ in the agreement is clear and unambiguous, and that the restriction of this right to the four brothers does not lead to an unfair or absurd result.
[28] Fourthly, Miron argues that since Darlene Bennett is not a party to the first right agreement she is precluded from enforcing any rights under that agreement by operation of the doctrine of privity of contract.
[29] Finally Miron argues that the court should disregard the oral evidence of intention from Mr. Taylor and from Darlene because this offends the Parol Evidence Rule.
Discussion
Is the first right agreement Ambiguous?
[30] Darlene argues that the contract is ambiguous because it imposes obligations on family members without extending corresponding benefits to them. I disagree. In my view, the contract provides family members with a significant benefit. The agreement provides that a family member who acquires an interest in one of the properties also acquires thereby a legal obligation to extend a right of first refusal to other parties in the event he or she decides to sell the property. However in my view any burden or obligation imposed thereby is offset by the benefit the family member receives by being entitled to acquire the property in the first instance without the property being subject to a right of first refusal.
[31] Furthermore, and as pointed out by Miron in its submissions, the fact that the first right agreement specifies only that “parties” are entitled to exercise a right of first refusal does not create any ambiguity or confusion. If anything it provides clarity and protects against ambiguity. Since the definition of “family member” distinguishes between family members and parties it is clear that family members are not parties who can claim a right of first refusal.
[32] In conclusion, I fail to find any ambiguity in the first right agreement. A plain and literal reading of the agreement provides that the right of first refusal is granted to “parties” only, and the restriction of the right of first refusal to the four owners of the properties does not result in any apparent unfairness or absurdity.
Does the Parol Evidence Rule Apply?
[33] Miron submits that the oral evidence of intention from Mr. Taylor on which Darlene relies offends the parol evidence rule which precludes, among other things, evidence of the subjective intentions of the parties.
[34] I have already found that there is no ambiguity in the contract which would require such other extrinsic or parol evidence of intention. In the event I am mistaken in this conclusion I find that the oral evidence of intention relied on by Darlene has little or no probative value. Although Mr. Taylor believes that the parties intended to extend the right of first refusal to all family members, his evidence is inconsistent with the evidence of intention set out in the affidavit filed by George Bennett, who is one of the parties to the agreement. In his affidavit, George deposes at paragraphs 7 through 9:
- My understanding of the first right of refusal, as of my execution and continuing to date, was and is as follows:
(a) The parties were myself and three (3) brothers;
(b) If I wished to transfer my property to anyone, other than to my wife or children (my family), I had to first offer my property to my brothers;
(c) I could transfer my property to my family without offering same to my brothers; and,
(d) If I transferred my property to my family, my family member would not gain a first right of refusal in relation to the remainder of the brothers’ property.
I believe this understanding was shared by my brothers.
I subsequently transferred my interest in my property to my sons. I do not believe they [my sons] gained a first right of refusal in relation to any of the remainder of the brothers’ property. My sons share my belief.
[35] Clearly, the affidavit evidence of intention from George Bennett is in direct conflict with the evidence of intention set out in the affidavits of Darlene and Mr. Taylor. It is George’s understanding that his children, who are included in the definition of family members do not have a right of first refusal in relation the properties owned by their three uncles. He states that “the parties were myself and three (3) brothers”.
[36] Disregard of the plaintiff’s parol evidence in this case would also appear to be mandated by the approach to contractual interpretation prescribed by the Supreme Court of Canada. The purpose of the Parol Evidence Rule is to promote certainty when parties enter into contractual relations. The difficulties and uncertainty which would arise if this court was required to consider the conflicting evidence of intention as described by Mr. Taylor and George Bennett underscores why this Rule continues to be of practical significance. In Creston Moly Corp. v. Sattva Capital Corp., 2014 CarswellBC 2268 (S.C.C) at para. 59 the Supreme Court described the parol evidence rule and its role in interpreting contracts as follows:
59 […] The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing (King, at para. 35; and Hall, at p. 53). To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties (Hall, at pp. 64-65; and Eli Lilly & Co. v. Novopharm Ltd., 1998 CanLII 791 (SCC), [1998] 2 S.C.R. 129 (S.C.C.), at paras. 54-59, per Iacobucci J.). The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract (C.J.A., Local 579 v. Bradco Construction Ltd., 1993 CanLII 88 (SCC), [1993] 2 S.C.R. 316 (S.C.C.), at pp. 341-42, per Sopinka J.).
[37] In my view, if the court admitted subjective evidence of intention to interpret the term “party or parties” the court would run the risk of “adding to, subtracting from, varying or contradicting a contract that has been wholly reduced to writing”. There is no need to consider such evidence, the intention of the parties is made clear by a plain and simple reading of the words of the contract. Furthermore, an interpretation of the agreement which restricts the exercise of the right of first refusal to the four signatories of the agreement is neither unfair nor illogical.
[38] In conclusion, I am of the view that in the circumstances of this case the court should not rely on the parol evidence of intention in interpreting the agreement.
Does the doctrine of Privity of Contract Apply, so as to preclude Darlene from Exercising rights thereunder?
[39] The traditional rule of common law is that no one but the parties to a contract can be bound by it, or entitled under it, save and except for cases in which the person claiming under the contract can show that it was made on his or her behalf by her agent or a trust has been constituted of which she is a beneficiary, neither of which applies to the present case: Greenwood Shopping Plaza Ltd. v. Neil J. Buchanan Ltd., 1980 CarswellNS 26 (S.C.C.) at paras. 9 and 12-14.
[40] More recently the doctrine pertaining to privity of contract has been modified, such that where the traditional exceptions no longer apply, the relevant functional inquiry is whether the doctrine should be relaxed in the given circumstances: Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., 1999 CanLII 654 (SCC), 1999 CarswellBC 1927 (S.C.C.) at para. 27. (See also London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 CanLII 41 (SCC), 1992 CarswellBC 315 (S.C.C.).)
[41] This functional inquiry involves the application of the following two-part test:
a) did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision; and
b) are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, again as determined by reference to the intentions of the parties? : Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., 1999 CanLII 654 (SCC), 1999 CarswellBC 1927 (S.C.C.) at para. 32.
[42] In my view, Darlene does not meet the test set out above. The “benefit in question” i.e. a right of first refusal, is not extended to her…this benefit is limited to the four signatories of the agreement.
[43] In conclusion, I find that the terms of the agreement do not provide Darlene and the other family members with an enforceable rights to claim a right of first refusal.
Conclusion and Decision
[44] I find that the provision in the first right agreement which is at play in this case is 2(c), and this provision clearly provides that the benefit of a right of first refusal accrues only to “the parties”. A plain reading of the contract makes it clear that the parties are the four brothers who were the signatories to the agreement. The term “party” does not include family members and Darlene therefore does not have a right of first refusal with respect to the property which was formerly owned by John Bennett.
[45] Accordingly, I find in favour of the defendant in its cross motion and grant Miron summary judgment dismissing the plaintiff’s claim and motion.
Costs
[46] If the parties are unable to resolve the issue of costs, they can file written submissions in relation thereto within 10 days of the release of this decision. Such submissions should be no more than 3 pages in length, exclusive of attachments. Thereafter, they have 10 days to reply to each other’s submissions.
Justice E.J. Koke S.C.J
Date: March 21, 2017