Court File and Parties

COURT FILE NO.: CV-17-573598 CV-17-575418 DATE: 20170810 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mt. Pleasant Roehampton Developments Limited, Applicant AND: Friedrich Christof Haussmann, Respondent

AND: RE: Friedrich Christof Haussmann, Applicant AND: Mt. Pleasant Roehampton Developments Limited, Respondent

BEFORE: Pollak J.

COUNSEL: Matthew P. Sammon and Melanie K. Baird, for the Applicant/Respondent Craig Colraine and Debbie Jorgensen, for the Respondent/Applicant Haussmann

HEARD: July 7, 2017

Endorsement

Applications

[1] The two applications before the court are the following:

(a) Mt. Pleasant Roehampton Developments Limited (the “Buyer”) seeks (i) A declaration that the Agreement of Purchase and Sale between the parties dated November 7, 2016 (the “APS”) is in full force and effect; (ii) An order for specific performance requiring Friedrich Christof Haussmann (the “Vendor”) to complete the sale pursuant to the APS.

(b) The Vendor seeks a declaration that the APS is null and void and an order removing the Caution of Agreement of Purchase and Sale registered by the Buyer against title to the property.

Background and Parties’ Positions

[2] The Buyer is the developer of a block of land on the south side of Roehampton Avenue in the City of Toronto.

[3] The Vendor is the owner of 435 Roehampton Avenue, which the Buyer wants to include in its development.

[4] The parties agree on the following:

• The Vendor gave the Buyer an offer to sell his property.
• The APS was signed by the parties on December 8, 2016.
• The APS was based on a previous agreement for the sale of the Vendor’s land, which did not proceed.
• The interpretation of paragraph 2.2 of Schedule “A” to the APS, which defines an “Investigation Period”, before the end of which the Buyer must waive conditions, is the subject of these Applications. The Buyer submits that the Investigation Period expired on March 31, 2017; the Vendor submits that it expired on March 29, 2017.
• On March 30, 2017, the Vendor advised the Buyer that the APS was null and void because of the Buyer’s failure to waive conditions within the required time limit set out in the APS.
• On April 4, 2017, the Buyer registered the caution against title to the Vendor’s property.

[5] The Buyer submits that even if the court accepts the Vendor’s interpretation of the APS, the Vendor should be estopped from claiming the Investigation Period expired on March 29, 2017 because of the parties’ course of dealings and their prior mutual understanding that March 31, 2017 was the date by which the Buyer was required to waive conditions.

[6] Further, in the alternative the Buyer submits that, based on the doctrine of mutual mistake, the court should rectify the APS to reflect the common intention of the parties that March 31, 2017 was the date by which the Buyer’s conditions had to be waived.

[7] The Vendor does not dispute that the remedy of specific performance is appropriate if the court finds that the APS is still valid and/or accepts any of the alternate arguments of the Buyer.

[8] The Buyer had alleged in its Application the Vendor breached his obligation of good faith but did not argue this allegation at the hearing of these two Applications.

Issues

[9] These two Applications raise the following questions for the court to determine:

(1) What is the proper interpretation of the APS? (i) Was the deadline for the Buyer to waive conditions March 29 or March 31, 2017? (ii) If the deadline was March 29, 2017, is the agreement null and void? (2) Is the Vendor estopped from claiming the deadline for the waiver of the Buyer’s conditions was March 29, 2017? (3) Should the court rectify the APS by applying the doctrine of mutual mistake? (4) Should the caution registered against the property be ordered to be removed?

Was the deadline for the Buyer to waive conditions March 29 or March 31, 2017?

[10] Paragraph 2.2 of Schedule "A" to the APS provides:

Paragraph 2.2

The Agreement arising from acceptance of this offer is conditional for a period of time (the "Investigation Period") commencing on the acceptance of this Agreement and running until the earlier of (i) the Outside Date (defined in Paragraph 2.2(a) below) and (ii) seventy five (75) business days after the date of final execution and acceptance of this Agreement upon the Buyer being satisfied, in its sole and unfettered discretion, with all aspects of the Property, including but not limited to, the physical condition of the Property, title, survey matters, boundaries of the Property, encumbrances, environmental matters, anticipated approvals, all planning and development matters, and the economic and financial viability of the Development.

a. The Outside Date shall be March 31, 2017.

b. Notwithstanding that the foregoing condition may be a true condition precedent, whether deemed by a court of competent jurisdiction or otherwise, the parties acknowledge and confirm that the foregoing condition has been inserted for the sole benefit of the Buyer, and may be unilaterally waived by the Buyer in whole or in part by notice in writing to the Seller at any time prior to the expiry of the Investigation Period. It is specifically acknowledged and agreed by the parties that the Seller shall at no time claim: (i) that the Buyer is required to exercise reasonable direction in satisfying itself as to the foregoing condition or that an objective or reasonableness standard applies to any decision of the Buyer in respect thereof, (ii) that this condition is void for uncertainty, and (iii) that the condition is so ambiguous as to void or nullify this transaction, and the provisions of this sentence may be pleaded by the Buyer as a complete bar and estoppel to any such claim.

[11] In Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673, [2010] O.J. No. 4336, the Court of Appeal for Ontario summarized, at para. 16, the principles applicable to the interpretation of commercial contracts as follows:

When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as 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. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity. If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity.

[12] Paragraph 2.2 of Schedule “A” to the APS defines the Investigation Period by reference to two dates, either a date defined by subparagraph (i) or the other date defined by subparagraph (ii).

[13] Subparagraph (i) refers to a fixed, agreed-upon date, being the “Outside Date.”

[14] The Buyer submits that subparagraph (ii) provides that the time expires 75 days after the final execution and acceptance of the APS and “upon the Buyer being satisfied, in its sole and unfettered discretion, with all aspects of the Property”. On a plain reading of the provision, the qualifying language which starts with the word “upon” makes the date in subparagraph (ii) variable based on the Buyer’s completion of its due diligence.

[15] The Vendor disagrees and submits that such interpretation renders subparagraph (ii) meaningless since there could never be an earlier date than the Outside Date in subparagraph (i).

[16] The Buyer argues the Vendor’s interpretation is absurd and commercially unreasonable because it would result in the following:

(a) The APS would provide that the Investigation Period expires on the earlier of March 29 and March 31, 2017, which is illogical. There is no commercial purpose served by agreeing to an Investigation Period that expires on the earlier of two fixed dates. (b) The Outside Date would therefore be meaningless, which cannot be when the parties negotiated this important date.

[17] The Vendor argues that the reasonable and common sense purpose for providing two possible dates to waive the Buyer’s conditions was to provide certainty. When the APS was being negotiated, the 75-day period after the execution was not a fixed date and the deadline for the waiver of the condition by the Buyer was dependent on when the APS was finalized. The Buyer would have no more than 75 days after signing the APS to investigate, or until March 31, 2017, whichever was earlier.

[18] I agree with the Vendor that such interpretation of the Investigation Period does not make the Outside Date “meaningless.” The deadline is the earlier of two possible dates, which will ultimately make the later date inapplicable. The difficulty with the Buyer’s submissions is that they are based on the assumption that the date in subparagraph (ii) is a fixed date. It only became a fixed date after the APS was signed and was not a fixed date during negotiations.

[19] The court asked the Buyer to provide it with the wording that would have to be used if its requested rectification remedy were granted. The response, which is as follows, illustrates the Vendor’s argument:

Paragraph 2.2

The Agreement arising from acceptance of this offer is conditional for a period of time (the "Investigation Period") commencing on the acceptance of this Agreement and running until the earlier of (i) the Outside Date (defined in Paragraph 2.2(a) below) and (ii) seventy five (75) business days after the date of final execution and acceptance of this Agreement upon the Buyer being satisfied, in its sole and unfettered discretion, with all aspects of the Property, including but not limited to, the physical condition of the Property, title, survey matters, boundaries of the Property, encumbrances, environmental matters, anticipated approvals, all planning and development matters, and the economic and financial viability of the Development.

The requested remedy would render subparagraph (ii) meaningless.

[20] The court finds that the wording of the APS is clear and a proper interpretation of those words is that, having regard to the factors I set out above in paragraph 11, the deadline for the Buyer to waive conditions was March 29, 2017.

[21] The time period in subparagraph (ii) began to run when the APS was signed, and not at a later time after subsequent completion of due diligence.

If the deadline was March 29, 2017, is the Agreement null and void?

[22] At paragraph 2.3 of Schedule “A” to the APS (the “Investigation Condition”), there is the following provision on the effect of failure by the Buyer to waive the conditions in paragraph 2.2:

Paragraph 2.3

If, on or prior to 6:00 pm on the expiry of the aforementioned Investigation Period, the Buyer has not given notice to the Seller or the Seller's solicitor indicating that the conditions contained in paragraph 2.2 have been satisfied or waived, such conditions shall be deemed not to have been satisfied or waived, in which event this Agreement shall be null and void and of no further force or effect whatsoever, each party shall be released from all its liabilities and obligations under this Agreement and the First Deposit shall be returned to the Buyer in a commercially reasonable amount of time.

[23] Pursuant to this provision, as the Buyer has failed to waive, or indicate satisfaction of, the conditions by the deadline of March 29, 2017, the APS is null and void.

[24] The Buyer has, however, several alternate arguments for the court to consider.

Is the Vendor estopped from claiming that the deadline for the waiver of the Buyer’s conditions was March 29, 2017?

The Doctrine of Estoppel by Convention

[25] The parties agree that estoppel by convention will apply when all of the following conditions are met:

(a) The parties' dealings have been based on a mutual assumption of fact or law, arising out of statement or conduct, including silence (b) A party has conducted itself in reliance on such shared assumption, resulting in a change of its legal position (c) It would be unjust or unfair to allow one of the parties to resile or depart from the common assumption (d) The party seeking to establish estoppel can prove that detriment will be suffered if the other party is allowed to resile from the assumption: see Ryan v. Moore, 2005 SCC 38, [2005] 2 S.C.R. 53 at para. 59.

[26] The Buyer argues the doctrine of estoppel by convention applies to the facts of this case because both parties assumed the Outside Date of March 31, 2017 was the deadline – there was a common understanding that the Buyer’s conditions would have to be waived by that date. The Buyer submits that the Vendor’s email of February 6, 2017, in which the Vendor asks if “the waiver” can be moved ahead of March 31, is evidence of this assumption.

[27] The Buyer submits that Mr. Fenton, the Buyer’s principal, relied on this alleged common assumption throughout. Mr. Fenton testified that if he had known of the Vendor’s change of position in mid-March, he would have waived conditions by March 29, 2017.

[28] Because the Vendor allegedly acted sharply by not telling Mr. Fenton about his change in position, the Buyer submits that equities favour granting equitable relief.

No Misrepresentation by Haussmann

[29] The Vendor denies he represented to the Buyer that the deadline for it to waive conditions was March 31, 2017.

[30] Mr. Haussmann’s evidence is that he assumed Mr. Fenton, a lawyer by training and an experienced developer, had read the APS, which provided that the deadline was March 29, 2017. He did not know Mr. Fenton thought the deadline was March 31, 2017.

[31] The Vendor submits there is no evidence of specific, clear communications that establish both he and the Buyer were under the shared assumption the deadline was March 31, 2017. The Vendor testified that, after the APS was signed, his references to the "waiver date" in communications with Mr. Fenton were about the day by which conditions had to be waived, not to March 31, 2017. He emphasized that after the execution of the APS, the only written reference to the Outside Date of March 31st was in his February 6th email to Mr. Fenton, in which he inquired, “Any chance you can advance the waiver ahead of March 31?”

[32] Although the Buyer relies on this email as evidence of the alleged shared assumption, the Vendor submits that it is not clear evidence of such. I agree that the email cannot be so characterized. The reference to the “waiver” is too vague.

[33] The Vendor argues that the Buyer should not be allowed to rely on its “carelessness” to its advantage. Mr. Fenton admitted on cross-examination that he thought the deadline to waive conditions was March 31, 2017 (the Outside Date) regardless of what the APS provided.

[34] The Vendor’s position is that the Buyer made no mistake and that there was no shared assumption. The Buyer simply did not calculate the correct date and did not waive conditions by March 29, 2017 as required by the APS.

[35] Further, the Vendor relies on the “entire agreement” provision in paragraph 28 of the APS, which prohibits any alleged pre-contractual representations, warranties, or agreements affecting the Agreement. He also relies on paragraph 20 of the APS, which provides that time is of the essence.

[36] The “entire agreement” clause in the APS precludes the Buyer from relying on any pre-contractual representations. The “time of the essence” provision in the APS ensures the mandatory timing requirements in the APS.

[37] I conclude that on the basis of the evidence, the Buyer did not properly calculate the deadline to waive conditions under the APS. I agree with the Vendor that the evidence does not support a finding of a shared assumption, as submitted by the Buyer. I find that it is not inequitable to enforce the terms of the APS. For all of these reasons, I find that the Buyer has not proven the Vendor is estopped from claiming that the APS is now null and void.

[38] For these reasons, the Vendor’s estoppel argument cannot succeed.

Should the court rectify the APS by applying the doctrine of mutual mistake?

[39] Finally, the Buyer relies on the doctrine of mutual mistake. This doctrine is designed to correct mutual mistakes to reflect the common intention of the parties.

[40] For the doctrine of mutual mistake to apply, the parties agree all the following conditions must be proven:

• The parties had a common, continuing intention prior to the making of the document alleged to be deficient
• That intention remained unchanged or existed at the time when the document sought to be rectified was signed
• By mistake, the parties signed a document that did not accurately reflect their common intention: see McLean v. McLean, 2015 ONCA 788, [2013] O.J. No. 5956 at para. 45.

[41] The Buyer submits that, in accordance with the parties’ intentions, the doctrine of mutual mistake should be applied to ensure March 31, 2017 is the deadline to waive conditions. The Buyer suggests the court could accomplish this by severing subparagraph (ii) from paragraph 2.2 of Schedule "A" to the APS.

[42] The Vendor submits there was no mutual mistake. Rather, the Buyer made an erroneous assumption, as I have found above. The remedy of rectification would be to ensure the APS has the provisions which the parties intended. I agree with the Vendor that the evidentiary record on these Applications does not support the finding of mutual mistake or an intention of the parties to make March 31, 2017 the deadline for the waiver of the Buyer’s conditions.

Good Faith

[43] The Buyer did not pursue its good faith argument at the hearing. However, the Buyer submitted in its factum that the Vendor breached his obligation of good faith by not advising it of his change in position regarding his interpretation of the APS. Having found that Mr. Haussmann did not assume the Buyer’s interpretation of the APS, nor make representations as such, I find that no change in position occurred. The Buyer’s argument therefore cannot succeed.

[44] For all of the above-noted reasons, the court declares that the APS is null and void. The court also orders that the caution registered against the Vendor’s property be removed from title.

Costs

If the parties are unable to agree on costs, they may make brief written submissions to me no longer than three pages in length. The Vendor’s submissions are to be delivered by 12:00 p.m. on August 24, 2017 and the Buyer’s submissions are to be delivered by 12:00 p.m. on September 5, 2017. Any reply submissions are to be delivered by 12:00 p.m. on September 12, 2017.

Pollak J. Date: August 10, 2017