Court File and Parties
COURT FILE NO.: CV-20-646251
DATE: 20220722
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Skyline Real Estate Acquisitions (III) Inc., Applicant
AND:
Peterborough Retail Portfolio LP, by its General Partner, Peterborough Retail Portfolio GP Inc., Respondent
BEFORE: W.D. Black J.
COUNSEL: Melvyn L. Solmon, for the Applicant
Bradley Berg and Josianne Rocca, for the Respondent
HEARD: June 3, 2022
ENDORSEMENT
Overview
[1] The applicant Skyline Real Estate Acquisitions (III) Inc. (the âPurchaserâ) seeks an Order requiring the Respondent Peterborough Retail Portfolio LP by its General Partner Peterborough Retail Portfolio GP Inc. (the âVendorâ) to refund a deposit of $3.25 million (the âDepositâ) that Skyline paid in connection with a transaction in which it was to purchase two shopping plazas in Peterborough, Ontario (the âTransactionâ).
[2] The Purchaser and the Vendor entered into an initial Agreement of Purchase and Sale on January 21, 2020 (the âOriginal APSâ) pursuant to which the Purchaser would acquire the plazas, known as the âParkway Propertyâ and the âChemong Propertyâ (together, the âPropertiesâ). The Original APS was terminated by the Purchaser on February 21, 2020. The parties renegotiated and on February 26, 2020 they executed an amended version of the Original APS (the âAPSâ).
[3] The APS provided that the purchase price for the Transaction was $70 million; that the closing date for the Transaction would be March 30, 2020; and that the Purchaser would be given credit for its initial deposit of $750,000.00 (paid on January 23, 2020 in connection with the Original APS). On February 28, 2020, the Purchaser paid an additional deposit of $2.5 million such that the two amounts together formed the Deposit.
[4] In circumstances discussed below, the Transaction closing date was extended by the Vendor to April 15, 2020 (as the Vendor was entitled to do under s. 7.5(1) of the APS).
[5] Of particular importance for the determination of this motion, the parties agreed in the APS to certain conditions (the âConditionsâ or, individually, a âConditionâ) that were to be satisfied in order for the Transaction to close.
[6] The Conditions included the Sobeys Condition and the Dollarama Condition (as defined below). These Conditions contemplated that the Vendor would negotiate arrangements with certain tenants at the two shopping plazas, resulting in documents confirming these arrangements, which were then to be approved by the Purchaser, acting reasonably.
[7] The Purchaser alleges that these Conditions, requiring respectively the Walmart Estoppel Certificate (the âWalmart ECâ) and the Dollarama Lease Extension and Amending Agreement (the âDollarama Extensionâ), were not satisfied by the Vendor, such that the Purchaser was not obliged to complete the Transaction and is entitled to a refund of the Deposit.
[8] The Vendor, on the other hand, asserts that with the âexplosionâ of the COVID-19 pandemic on the eve of the closing of the Transaction and the widespread economic uncertainty the pandemic created, the Purchaser, which had failed to negotiate a force majeure clause in the APS, resorted to minor, technical and disingenuous reasons for refusing to close, even refusing reasonable further accommodations from the Vendor.
[9] The Vendor says that in any event the two bases on which the Purchaser purports to rely in terminating the Transaction were both expressly subject to an obligation of the Purchaser to act reasonably, and that the Purchaser failed to do so in either case.
Issue for Determination
[10] In my view the facts and circumstances leave little doubt that the Purchaser sought, in the anxious and uncertain early days of the Pandemic, to avoid closing the Transaction. The issue for my determination is whether, in that context, the Vendorâs admitted inability to entirely and precisely comply with the Conditions at issue is overridden by the alleged failure of the Purchaser to act reasonably and in good faith (and to accept in satisfaction of the Conditions the versions of the Walmart EC and the Dollarama Extension that the Vendor was able to obtain).
Relevant Facts
[11] Most of the relevant facts in this matter are not contentious. While the parties put different spins on those facts, the underlying events are largely agreed upon.
A. The Parkway Property and the Head Lease
[12] Over a period of 30 years prior to early 2020 the Parkway Property had a number of different owners, and the leased premises occupied by Walmart as of 2020 had a number of different tenants. Over that 30âyear period, there were modifications to the Head Lease (a lease initially entered into between Oshawa Properties Limited as Landlord and Oshawa Holdings Limited as tenant and dated November 1, 1990).
[13] Section 18.1 of the Head Lease governs the contents of an estoppel certificate. It says that:
ââŚ[T]he Tenant shall execute and deliver, as directed by the Landlord, a certificate of an officer of the Tenant certifying as at the date hereof, to the best of its knowledge and belief, whether the [Head Lease] is in full force and effect, whether or not it has been modified (and if so in what respect), the status of Minimum Rent and other accounts between the Landlord and the Tenant, whether or not there are any existing defaults on the part of the Landlord of which the Tenant has notice (and if so, specifying them) and as to any other matters in connection with this [Head Lease] in respect of which such certificate is reasonably requested and of which the Tenant has knowledge.â
B. The Walmart Estoppel Certificate
[14] The Purchaser maintains that the Vendor was obliged to obtain the Walmart EC in order to satisfy the Walmart Condition. In reference to s. 18.1 of the Head Lease, the Purchaser says that Walmart had to certify two material items: 1) the list of documents that comprised the Walmart Lease; and 2) that Walmart was not in default of the Lease. The Purchaser allows that a third aspect, regarding Walmartâs alleged refusal to certify that it had done independent investigation, would not have been an issue if Walmart certified the list of documents comprising the Walmart Lease.
[15] The Purchaserâs position is that the Vendor advised it unequivocally on April 9, 2020 that it would be unable to deliver the necessary Walmart EC by the closing date of April 15, 2020 and that the Vendor thereby repudiated the Transaction. The Purchaser says that on that day, April 9, 2020, it expressly did not waive the Walmart Condition and accepted the repudiation. Thus, the Purchaser argues the APS automatically terminated, and the Vendor was required to return the Deposit. The Vendor disagreed and refused to return the Deposit, which to date remains in an interest-bearing trust account.
C. The Walmart Lease Extension
[16] Of note, Walmart had entered into a lease extension agreement (the âWalmart Lease Extensionâ) on February 4, 2020.
D. Successive Versions of the Walmart EC
[17] The Vendor prepared a first draft of the Walmart EC and sent it to the Purchaser on February 27, 2020. That draft listed the documents that the Vendor considered to comprise the Walmart Lease at that time.
[18] The Purchaser, based on its due diligence efforts, suggested an amendment to the draft. The Vendor accepted the revisions, and the Purchaser approved the draft, as amended.
[19] The Vendorâs evidence is that it sent the amended draft to Walmart on March 2, 2020.
[20] It is apparent that Walmart did not accept that version of the draft Walmart EC. It in turn sent back to the Vendor (as Landlord) a revised version of the Walmart EC. The Purchaser asserts that in doing so, âWalmart completely changed the Draft Certificate which had been approved by the Purchaser and the Vendorâ.
[21] Whether or not that is a fair characterization, Walmart did request modifications, and the ongoing further communications about and mark-ups of the draft Walmart EC went back and forth between the Vendor, Walmart, and the Purchaser.
[22] The details of those exchanges show that the parties were focusing on the proposed language of the representations Walmart was being asked to make, and that the partiesâ positions were crystallizing as the pandemic took hold.
[23] In relation to the Walmart revision of the version it received in early March, the Purchaser advised the Vendor (via the Vendorâs real estate agents) that the draft Walmart EC had to be amended to reference all agreements comprising the Walmart Lease, and that Walmartâs proposed use of the words âas amended from time to timeâ was not acceptable. The Purchaser also insisted that the gross leasable area occupied by Walmart had to be confirmed, and that Walmart had to certify that neither it nor the Landlord were in default.
[24] The Vendor sent these requests along to Walmart.
[25] Following additional discussions, on March 20, 2020, Walmart sent a further revised version of the Walmart EC to the Vendor. The Vendor noted that the Purchaserâs requested revisions had not been made, and the Vendor continued to follow up with Walmart relative to the points that the Purchaser was insisting upon.
[26] Walmart was largely unreceptive to the requests for further revisions, bristling that it was ânot going to start including everything each landlord asks for on a whimâ.
[27] It explained that part of its difficulty was the circumstances. Its lawyer wrote to the Vendor and said:
âAny further changes on Walmartâs end (were we to do a further review and ultimately agree to any additional changes) will require additional verification/approvals that will take time, especially as we are in the midst of dealing with COVID-19â.
[28] Walmart ultimately agreed to some additional revisions but was not prepared to unequivocally certify whether the Head Lease had been modified and if so, in what respect.
[29] Walmart was prepared to certify that the Walmart Lease was in full force and effect, but the Purchaser took the position that this attestation was meaningless unless what constituted the Walmart Lease was described, including all agreements on which Walmart intended to rely as tenant.
E. Stalemate as of End of March 2020
[30] An email from the Purchaserâs deputy general counsel to the Vendor on March 31, 2020 sets out the state of discussions, and the Purchaserâs position, as of that date. She wrote:
ââŚ[W]e require the recitation of the lease and related documents in the estoppel and confirmation of no defaults by Walmart without qualification. A time-limited postâclosing representation and warranty from the Vendor does not sufficiently cover Skyline for potential issues/damages that could arise from a missing document. Our request for confirmation of no defaults and a listing of the relevant documents is an estoppel from a tenant with whom we will continue to work for many years after closing is not unreasonable for us to ask and it is a material requirement.â
[31] Relative to the Walmart EC, the Purchaser essentially repeated that position in its argument before me.
[32] In addition, it repeatedly emphasized that at no point during these ongoing communications did the Vendor ever suggest that the Purchaserâs position was unreasonable. From this, the Purchaser asks me to infer that to the knowledge of the Vendor, the Purchaserâs positions were in fact reasonable and appropriate to insist upon as a condition precedent.
F. Vendorâs Observations re Status of Deal Through Due Diligence
[33] The Vendor notes a couple of background matters that it says are important context within which to understand the Purchaserâs purported issues.
[34] First, the Vendor points out that when it acquired the Properties in 2012, Mr. Driedger, who at the time of the events in this matter in 2020 was the president of a Skyline entity and Skylineâs principal witness in this application, was the Executive Vice President of the company that sold the Properties to the Vendor. Mr. Driedger in fact signed the agreement of purchase and sale on behalf of the entity from which the Vendor bought the properties in 2012. At the time of the 2012 transaction, Walmart, Dollarama and Sobeys were each already tenants of the Parkway Property. Mr. Driedger thus knew the Properties, these key tenants and their agreements.
[35] In midâ2019, the Purchaser (Skyline, now employing Mr. Driedger) approached the Vendor about buying the Properties, which were not at that time listed for sale.
[36] Negotiations ensued and led to the execution of the Original APS. The Purchaser undertook initial due diligence in January and February of 2020. It terminated the Original APS but immediately re-engaged with the Vendor, seeking to improve the terms of the purchase. In the result, the Vendor agreed to a price reduction and certain other amendments which were then embodied in the APS.
[37] The Vendor emphasizes that although it gave 22 representations and warranties in the APS, the Purchaser agreed to complete the Transaction on an âas is, where isâ basis, without any express agreement, representation or warranty from the Vendor relative to various issues. In that regard, the Purchaser agreed that it would rely solely upon its own inspections and investigations, including its own review of due diligence materials. The APS stated that the Vendor would provide a list of categories of due diligence materials for the Purchaserâs review, including all Existing Leases and Contracts (as defined in the Original APS) with respect to the Properties. The Vendor provided this information.
[38] The record reflects reasonably extensive due diligence efforts by the Purchaser, including requesting various additional materials from the Vendor, bringing subject matter experts to the Properties for various assessments and continuing ongoing communications with the Vendor about matters relative to the Properties.
[39] The Purchaser also took advantage of the opportunity provided in the APS to interview numerous tenants of the Properties, including Winners and Dollarama (tenants of the Parkway Property) and Sobeys (a tenant of both Properties). The Purchaser did not conduct an interview with Walmart, the biggest tenant at the Parkway Property, despite having the ability to do so under the APS.
[40] Pursuant to the APS, the Transaction was set to close subject to the satisfaction of specified conditions, barring which the Transaction would automatically terminate. Most of the conditions were for the benefit of the Purchaser and could be waived in whole or in part by the Purchaser at its sole discretion on written notice to the Vendor.
[41] Two of the Purchaserâs conditions dealt with the Purchaserâs due diligence efforts. The Purchaser agreed in the APS to satisfy these conditions by the due diligence date of February 26, 2020. The Purchaser did so. At that point the due diligence period had passed and in the nomenclature of the industry the Transaction was âfirmâ.
[42] As an indication of how rare it is for a âfirmâ deal not to close, a witness from Avison Young, the broker representing the Vendor, deposed that in his 30-year career this was the first and only transaction he had seen that had not closed after going âfirmâ.
[43] The Vendorâs overarching position is that the reason for the failure to close was not genuinely the two conditions to which the Purchaser points, but instead was the economic uncertainty arising in the tumultuous early days of the Pandemic.
[44] It says that the Purchaser was required to act reasonably in accepting satisfaction of the Conditions, and that the Purchaser failed to do so here, such that by failing to close the Transaction the Purchaser has forfeited the right to a refund of the Deposit.
Vendorâs Position re Walmart EC
[45] With respect to the Walmart Condition, the Vendor accepts that s. 5.2(c) of the APS required the Vendor to obtain and deliver to the Purchaser âThreshold Estoppelsâ from tenants in accordance with s. 7.5 on or before the closing date (in the Original APS, March 30, 2020).
[46] Section 7.5 of the APS provided only that the Vendor âcovenants to use reasonable commercial effortsâ to obtain and deliver these estoppel certificates.
[47] Section 1.1 of the APS provided that the estoppel certificates had to either be in a form prescribed by a tenantâs lease, or substantially in the form set out in Schedule C to the APS âwith no material changes or additions thereto except for those acceptable to the Purchaser, acting reasonablyâ.
[48] One of the threshold estoppels was the Walmart EC. The Vendor agrees that Walmartâs obligation to provide the Walmart EC at the request of the landlord (here the Vendor) is set out in s. 18.1 of the Head Lease.
[49] The Vendorâs position is that it substantially and substantively satisfied this obligation when considered in detail, in context, and having regard to the Purchaserâs obligation to be reasonable.
[50] The Vendor notes that the Purchaser knows Walmart well. The Purchaser lists Walmart as a âtop tenantâ on its website. On crossâexamination, Mr. Driedger confirmed that one of the reasons the Purchaser was interested in purchasing the Parkway Property was Walmartâs tenancy there. Like a number of other tenants at the Properties, Walmart was deemed an âessentialâ business and was allowed to remain open while other businesses were subject to mandatory closures due to the pandemic.
[51] It is also noteworthy, the Vendor argues, that during the negotiations of the Transaction, Walmart voluntarily entered into the Walmart Lease Extension, a ten-year extension of the Walmart Lease.
[52] The Vendor asserts that the Purchaserâs purported concerns about Walmart and the Walmart EC must be seen against the backdrop of the Walmart Lease Extension, which was a good indication of Walmartâs contentedness at the Parkway Property and ought to have been considerable comfort to the Purchaser. Indeed, Mr. Driedger in cross-examination confirmed that the Walmart Lease Extension was the reason it chose not to conduct a tenant interview with Walmart.
[53] To similar effect, the Vendor points out that Walmart had advised of its intention to invest $7 to $8 million into its premises at the Parkway Property over the next three years, and that Walmartâs intention to do so was communicated to the Purchaser by the Vendorâs broker. Again, the Vendor says, this ought to have been additional and significant reassurance to the Purchaser, underlining Walmartâs value as a tenant and its commitment to the Parkway Property.
[54] The Vendor notes, in relation to the Walmart EC, that it successfully obtained from Walmart and delivered to the Purchaser three successive versions of the Walmart EC, each of which contained more information than the last, to the benefit of the Purchaser. All of these versions substantively satisfied the Walmart Condition, yet the Purchaser unreasonably rejected each of them.
[55] The Vendor, in compliance with the APS, sent Walmart a first draft Walmart EC in the form set out in Schedule C to the APS. Although Walmart responded with an executed certificate in its own form, the Vendor attests that it is well-known in the commercial real estate industry that Walmart provides its own corporate form. In his affidavit, Mr. Driedger said that he âknew it was likely Walmart would use its own formâ and in crossâexamination he confirmed he knew that Walmart does not always agree with the first estoppel certificate it receives to execute.
[56] In the revised first draft Walmart EC that Walmart provided to the Vendor on March 4, 2020, and which the Vendor in turn sent to the Purchaser on March 9, 2020, Walmart confirmed, among other things, that:
(a) Walmart entered into the Walmart Head Lease, as amended from time to time, for a term expiring on January 31, 2031 (as extended by the Walmart Lease Extension);
(b) Walmart accepted possession of the premises at the Parkway Property;
(c) Walmart had no charge, lien, claim, abatement, reduction or offset against its rents;
(d) Walmart had paid its rent up to and including March 31, 2020; and
(e) Walmart had not assigned its lease.
[57] There is no dispute that these facts, confirmed by Walmart, were important for the Purchaser to know. The revised first draft Walmart EC also identified five requirements under Walmartâs lease which it believed had not been satisfied or completed (the âNon-Satisfaction Itemsâ). Again, this was important for the Purchaser to know.
Vendorâs Ongoing Efforts re Walmart EC
[58] After reviewing the first draft Walmart EC, the Purchaser, through the Vendor, requested that Walmart make certain additions to the first Walmart EC, including adding specific reference to all of the agreements that comprised the Walmart Lease.
[59] The Vendor expeditiously acted to resolve the Non-Satisfaction Items and to request that Walmart make the additions requested by the Purchaser. To that end, the Vendor deployed the head of its retail property management team (who had the most long-standing relationship with Walmart) to focus and liaise with Walmart on these issues as the closing date approached.
[60] As a result of these efforts, Walmart provided the second draft Walmart EC to the Vendor on March 23, 2020. In the second draft Walmart EC, Walmart had not incorporated the Purchaserâs requested amendments, but had removed some of the Non-Satisfaction Items. In response, the Vendor followed up with Walmart the next day to request again that the Purchaserâs requested changes be incorporated into the Walmart EC.
[61] Walmart refused at that stage to make any further changes, saying that the second draft Walmart EC was in the form that Walmart provides to all of its landlords and that it was unwilling to make further changes. The Vendor drafted an addendum to be attached to the second draft Walmart EC incorporating the Purchaserâs requested changes and asked Walmart to execute it. Again, Walmart balked, insisting that this was Walmartâs final form and all that it was prepared to provide.
[62] The Vendor sent the second draft Walmart EC to the Purchaser and advised that Walmart was unwilling to make any further changes. At the same time, though, the Vendorâs broker pointed out that two of the additions to the Walmart EC that the Purchaser was seeking â confirmation of Walmartâs gross leasable area and a list of agreements comprising the Walmart Lease â were contained in the Walmart Lease Extension, which the Purchaser had already reviewed and approved. The Vendorâs broker added that the Vendor was in the process of addressing the two remaining NonâSatisfaction Items on the second draft Walmart EC.
[63] The Purchaser responded by insisting that the second draft Walmart EC was still missing âcritical itemsâ. The Vendor alleges that the Purchaser refused to agree to a call with the Vendor to discuss the status of the second draft Walmart EC and the Walmart Condition.
Purchaserâs Non-Engagement in Discussions
[64] On March 24, 2020, the Vendor asked the Purchaser for a 48-hour extension to deliver the Walmart EC. The Purchaser refused, which then required the Vendor to exercise its one-time right to an extension under the APS, thereby extending the closing date to April 15, 2020.
[65] As a result of persistent efforts of the Vendor and its counsel, Walmart provided a third Walmart EC dated March 25, 2020. The third Walmart EC confirmed the gross leasable area of Walmartâs premises and advised that to Walmartâs knowledge neither Walmart nor its landlord (the Vendor) were in default under the lease. The third Walmart EC continued to list the same two Non-Satisfaction Items as the second draft Walmart EC, but to the knowledge of the Purchaser, the Vendorâs repairs of those items were at that time ongoing. In sending the third Walmart EC to the Purchaser in late March 2020, the Vendorâs broker again confirmed to the Purchaser that the list of agreements comprising the Walmart Lease could already be found in the Walmart Extension.
[66] Again, according to the Vendor, the Purchaser would not agree to a call with the Vendor to discuss these items. Through its lawyer, the Purchaser identified in writing three remaining issues with the third Walmart EC: (i) that Walmart had failed to list all agreements comprising its lease; (ii) that Walmart adding a âknowledge qualifierâ to its statement of non-default was ânot acceptableâ; and (iii) that Walmart continued to list Non-Satisfaction Items.
[67] The Vendor maintains that it continued to work hard to resolve the impasse. It continued to press Walmart but was met with unwillingness to go further, as reflected in a note from Walmartâs counsel to the Vendorâs counsel:
âThomas, I think we have been more than reasonable. Respectfully, we are in the midst of the epidemic and Walmart is being relied upon to keep food on shelves. I would think the Vendor would appreciate this. I am happy to have a call but we are unlikely to agree to any further changes. We will certainly not be removing any knowledge qualifiers.â
[68] As is evident, the Vendor was walking something of a fine line in its ongoing efforts. It risked irritating a key tenant, while at the same time seeking to provide sufficient information to satisfy the Purchaserâs ongoing demands.
[69] The Purchaser agrees that Walmartâs refusal to make further changes beyond those embodied in the third draft Walmart EC was not for lack of effort on the Vendorâs part and acknowledges that each successive version of the Walmart EC contained additional information.
[70] The Vendor argues that it is notable that the Purchaser, despite its purported dissatisfaction with all three versions of the Walmart EC, made no effort to speak with Walmart directly to try to resolve its issues, and points out that this lack of effort was despite the fact that one of the Purchaserâs in-house counsel, Ms. Crocker, was a Walmart employee for 12 years before joining Skyline.
[71] The Vendor also notes that, with a view to clearing the impasse, it offered in its own right additional accommodations to the Purchaser. On March 27, 2020, the Vendor offered to make an additional representation, to be incorporated into the APS, confirming the documents comprising Walmartâs lease and confirming that Walmart was not in default of its obligations under that lease. The Vendor then offered to bridge any perceived gaps in order to close the Transaction. The Purchaser refused these entreaties and also refused to engage in further discussions. Again, the Purchaser itself proposed no alternative solutions or assistance to overcome the impasse.
The Dollarama Condition
[72] The second Condition on which the Purchaser relies in this application relates to Dollarama, also a tenant at the Parkway Property. At the time of the Transaction, Dollaramaâs lease was set to expire on August 31, 2020. Section 5.2(b.1) of the APS required the Vendor to obtain and deliver to the Purchaser the Dollarama Extension, a fully executed 10-year lease extension and amending agreement from Dollarama, up to five days before the closing date.
[73] The APS gave the Purchaser a right of written approval, but provided that such approval was not to be unreasonably withheld.
The Dollarama Use Clause
[74] As part of the negotiation of the Dollarama Extension, Dollarama asked to incorporate a new âuse clauseâ into its lease (the âDollarama Use Clauseâ). This in turn required the cooperation of Sobeys (in its capacity as a tenant at the Parkway Property) inasmuch as Sobeysâ lease included restrictive covenants limiting the Vendorâs ability (as landlord) to permit other tenants at the Property to sell food in addition to Sobeys, except in accordance with a list of permitted uses set out in that lease.
[75] As such, the APS required the Vendor to obtain and deliver confirmation in writing from Sobeys that the proposed changes to the Dollarama Use Clause in the Dollarama Extension were acceptable to Sobeys.
[76] The Vendor maintains that, viewed in context, and again given the Purchaserâs obligation to act reasonably, the Vendor satisfied these obligations.
Purchaserâs Position on Dollarama Condition
[77] From the Purchaserâs perspective, the first purported stumbling block with respect to the Dollarama Condition is that it was necessary for the language of the Dollarama Use Clause to match precisely the terms on which Sobeys agreed to provide broader rights for food uses for Dollarama.
[78] More particularly, the Purchaser points to the Sobeys Lease Amending Agreement (the âSLAâ), which amended s. 3.5(a) of the Sobeys lease by adding a new subsection (viii) to set out the expanded permitted use for Dollarama (the âSLA Use Clauseâ), and which was executed by Sobeys and the Vendor on March 10, 2020. The Agreement provided:
âThe Landlord covenants that the above-noted restrictions shall form part of the dollar store tenantâs lease.â
[79] In the APS, the Vendor and Purchaser included as a condition the following:
ââŚ[O]n or before the date that is five (5) days prior to the Closing Date, the Vendor shall have obtained and delivered to the Purchaser the following, in respect of the Parkway Property: (i) confirmation in writing from the Tenant, Sobeys Capital Incorporated, that the changes to the use provisions contained in the Lease with the Tenant, Dollarama L.P., pursuant to a lease extension and amending agreement to be entered into with such Tenant as referenced in Subsection (ii) below, are acceptable.â
[80] The Purchaser argues that this means that Sobeys required the wording of the Dollarama Use Clause to match the language of the permitted the SLA Use Clause. It argues that any difference in language would potentially put the landlord in breach of the SLA, and expose the Purchaser, as the new landlord, to adverse impacts on the relationship with Sobeys and possibly to litigation.
[81] The Purchaser maintains that the Vendor had two options in this regard. The Vendor could have ensured that the Dollarama Use Clause exactly matched the language required in the SLA Use Clause. Alternatively, the Vendor could have obtained written confirmation from Sobeys that the Dollarama Use Clause was acceptable.
[82] The Purchaser asserts that the Dollarama Use Clause did not exactly match the permitted use language in the SLA Use Clause, and that there is no evidence that Sobeys accepted the Dollarama Use Clause. While the Purchaser argues about other items relative to the Dollarama Extension, set out below, its focus in argument was on this difference between the language of the SLA Use Clause and the Dollarama Use Clause.
Other Alleged Requirements re Dollarama
[83] The Purchaser also argues that a proposed change in the Dollarama Extension to a clause requiring the landlord to obtain a waiver of subrogation insurance from the landlordâs insurer in favour of Dollarama âif and only if available and at no additional cost to the landlordâ, to a provision unequivocally requiring the landlord to deliver a waiver of subrogation, was unacceptable. It says that under the revised clause, if the insurer refused for whatever reason to deliver a waiver of subrogation, the landlord would be in default of the Dollarama Extension.
[84] The Purchaser expressed concerns about the lack of clarity of a proposed increase, under the Dollarama Extension, of the dollar amount of alterations that Dollarama could perform in its premises without the landlordâs consent. The original Dollarama lease put this figure at $10,000.00, and there was some inconsistency, in the Dollarama Extension, as to whether that amount would increase to $30,000 or $50,000.
[85] Finally, the Purchaser required that if Dollarama remained in possession of its premises after the end of the Dollarama Extension, the overholding rent had to remain the same as provided in the original Dollarama lease. The original lease provided that overholding rent would be twice the monthly minimum rent plus future additional rent (as defined in the lease). The Dollarama Extension contemplated that overholding rent would be equal to the monthly minimum rent payable during the last month of the Term plus fixed Additional Rent (again as defined).
[86] With respect to each of these items, the Purchaser notes that again, in the ongoing communications and correspondence about these issues, the Vendor never obtained and provided satisfactorily definitive responses to meet the Dollarama Condition.
[87] In the case of the difference between the SLA Use Clause as compared to the Dollarama Use Clause, the Purchaser acknowledges that the Dollarama Extension was amended to include an attached Schedule J, containing a Dollarama Use Clause with language exactly matching the language of the SLA Use Clause. However, the Purchaser argues that the reference to Schedule J in the body of the Dollarama Extension (in s. 5.01) was qualified, and that inconsistency between the wording in s. 5.01 of the Dollarama Extension and Schedule J, without explicit written acceptance from Sobeys, created âuncertainty and riskâ.
[88] Again, with respect to the Dollarama Extension, the Purchaser relies on the absence of any suggestion from the Vendor during the exchanges described above as evidence of the Vendorâs knowledge that the Purchaserâs demands were reasonable.
Vendorâs Position on Dollarama Condition
[89] The Vendorâs position is that it clearly and substantively satisfied the Dollarama Condition, and that the Purchaserâs position with respect to this item manifests its true intention of avoiding the Transaction on insubstantial technical grounds.
[90] The Vendor agrees that Dollaramaâs request to incorporate the Dollarama Use Clause into the Dollarama Extension required the Vendor to obtain and deliver confirmation in writing from Sobeys that the Dollarama Use Clause was acceptable.
[91] As noted, Dollarama is a key tenant at the Parkway Property. Like Walmart, Dollarama is listed on the Purchaserâs website as a âtop tenantâ and performs well and remains stable during periods of economic duress.
[92] The Vendor maintains that Dollaramaâs willingness to extend its lease for ten years is a clear indication that it was content and wished to remain at the Parkway Property.
[93] It is also noteworthy, the Vendor says, that Dollarama and Sobeys had co-existed harmoniously at the Parkway Property for ten years, and that Dollarama had had Sobeysâ explicit consent throughout that timeframe to sell certain food and beverage products.
[94] The Dollarama Use Clause for purposes of the Dollarama Extension was in fact based on a precedent that Dollarama had developed with Sobeys for use at other properties. Using this precedent clause, the Vendor negotiated the SLA Use Clause with Sobeys. The SLA was executed on March 16, 2020 and sent to the Purchaser that day. The Vendorâs position is that the SLA Use Clause modified the restrictive covenants in the Sobeys lease to conform with the proposed Dollarama Use Clause.
[95] Specifically, the SLA Use Clause added a new subsection to the Sobeys lease that allowed one âdollar storeâ to sell food at the Parkway Property subject to certain conditions. The Vendor notes that the Purchaser had participated in the finalization of the SLA Use Clause and expressed no objection to it.
[96] In terms of the precise sequence of events, the Vendor emailed the proposed Dollarama Extension, which was acceptable to the Vendor, to the Purchaser on March 16, 2020.
[97] The Purchaser took issue with a number of the amendments that Dollarama sought and provided a mark-up of the Dollarama Extension on March 17, 2020, in which it accepted only 17 of 55 proposed amendments.
[98] Despite the fact that it viewed many of the Purchaserâs requested revisions to the Dollarama Extension as minor and unnecessary, and cautioned the Purchaser to be âmindful of not arguing over minor points in the current climateâ, the Vendor continued to negotiate with Dollarama to accommodate and incorporate the Purchaserâs demands.
[99] While Dollarama took a tough negotiating stance â among other things, it suggested that some of the proposed revisions would have to be reviewed by âCorporateâ, which would take months â the Vendor did succeed in exacting further amendments from Dollarama. The Vendor incorporated those changes into a further version of the Dollarama Extension, which it sent to the Purchaser on March 27, 2020. In its covering email, the Vendor advised that the attached proposed agreement was the result of âextensive negotiations on each point raised by Skyline to get the best possible deal we could with Dollarama. As a landlord with many Dollarama stores across our portfolio, this is absolutely a deal Bentall would do.â
[100] The Purchaser declined to discuss the revised document with the Vendor and, instead, sent a further mark-up on March 31, 2020. The Purchaser made it clear that it was not prepared to participate in discussions or negotiations relative to its demands.
[101] Given the Purchaserâs unwillingness to negotiate, the Vendor continued negotiations with Dollarama relative to the Purchaserâs remaining âasksâ.
[102] As a result of these ongoing negotiations, Dollarama agreed to further revisions and sent a version of the Dollarama Extension incorporating the further changes directly to the Purchaser on April 3, 2020. Again, the Purchaser declined to discuss the revised document, including with Dollarama. It refused to provide any feedback on the draft but maintained that âmaterialâ changes it required were not reflected in the document. Even though Dollarama had agreed to various of the Purchaserâs requests at that stage, the Purchaser declined to engage further and did not identify which of its requests remained unmet and were material. It did, however, emphasize as its only stated concern its perception that the Dollarama Use Clause did not conform with the use clause in the SLA.
[103] The Vendorâs position was and remains that the SLA Use Clause and the Dollarama Use Clause were substantively the same.
[104] For example, the SLA Use Clause referred to a dollar store selling items âpriced at one dollar ($1.00), two dollars ($2.00), more or less, but in no event more than ten dollars ($10.00)â. The Dollarama Use Clause referred to âthe sale of a variety of items at a price not to exceed ten dollars ($10.00) eachâ.
[105] Similarly, the SLA Use Clause stated that the area selling food in the dollar store could not exceed 800 square feet out of a maximum area of 11,000 square feet for the entire store. The Dollarama Use Clause stated that the area in which food could be sold could not exceed 800 square feet of the âRentable Area of the Leased Premisesâ, which was defined in the Dollarama lease, of which the Purchaser had a copy, as 10,182 square feet.
[106] Moreover, Dollarama had also expressly agreed to strictly comply with the restricted permitted use provided in the SLA Use Clause. The revised Schedule J of the third and final version of the Dollarama Extension set out the SLA Use Clause verbatim (a fact that the Purchaser acknowledges).
Impact of the Pandemic
[107] As noted above, the Purchaserâs positions regarding the Walmart EC and the Dollarama Extension coincided with the initial onset and early development of the pandemic. On March 17, 2020, the provincial government declared a state of emergency and began to implement provinceâwide lockdown procedures. On March 24, 2020, all ânon-essentialâ businesses were ordered to close temporarily, including all non-essential retail stores. This created significant uncertainty in the commercial real estate market (and virtually everywhere else). Tenants were concerned about the impact of retail closures of unknown duration, and landlords were dealing with tenantsâ concerns about income generation and the need for rent deferrals. Within this context, retail sales plummeted in March and April of 2020.
[108] Mr. Driedger acknowledged in cross-examination that the Purchaser took various steps in March of 2020 to preserve cash in response to the Pandemic. In a letter to its stakeholders on March 20, 2020, the Purchaser advised that it was managing a balance between âbusiness as usualâ and âcrisis managementâ. It said that it would be applying a monthly limit on cash payments required to be made when units are tendered for redemption and explained to unit holders that this decision was necessary in order to secure financial stability and investor capital. It advised that it was trying to protect its capital fund against a run on cash redemptions, as it was not certain as of March of 2020 that it would be able to meet its obligations.
[109] During this same time period (in March and April of 2020), the Purchaser also withdrew from purchasing two other significant retail shopping properties during the due diligence phases of those transactions. One property was in Windsor, Ontario (a shopping center with a purchase price of $50 million), and the other was in Edmonton, Alberta (a property with a purchase price of $30 million).
Law and Argument
[110] The Vendor agrees with much of the recitation of the law in the Purchaserâs factum, describing it as largely âuncontroversial and/or not applicableâ. It agrees that the parties intended the legal consequences of the terms of the APS, including the Purchaserâs Conditions. It says, however, that the Conditions must be read and the partiesâ intentions must be understood in context and in light of the entire APS. It says that on a plain reading of the APS, both the Walmart EC and the Dollarama Extension are explicitly subject to reasonableness requirements and required the parties to act in good faith relative to their satisfaction.
[111] The Vendor asserts that the reasonableness and good faith obligations included in the relevant agreements in this matter form an essential part of the bargain made by the sophisticated parties involved in this case. While the Vendor specifically agrees that there is nothing âcommercially unfairâ about holding the parties to their bargain, it argues that the bargain is explicitly moderated by those obligations and is thus not an âall or nothingâ proposition.
[112] The Purchaser, for its part, agrees that these are sophisticated commercial entities. It says that such parties, assisted by experienced counsel, must be taken to intend the consequences of the words chosen in the APS. The APS, it argues, clearly identified material conditions precedent which had to be satisfied by the Vendor in order to require the Purchaser to close the Transaction.
[113] It argues that the failure to satisfy any one of the Conditions by the closing date was clearly set out in the APS as a basis for termination of the Transaction. The APS stipulates that if any one of the Conditions set out in s. 5.2 âis not satisfied or waivedâŚon or before the applicable date⌠such condition will be deemed not to have been satisfied or waived, in which case this Agreement shall be automatically terminated, the parties shall be released from all liabilities and obligations hereunder⌠and the Deposit⌠together with all interest incurred thereon, shall be returned to the Purchaser forthwith without deductionâ.
Purchaserâs Position on Relevant Law
[114] The Purchaser argues that giving effect to this clear language is consistent with principles consistently applied by courts, and results in economic certainty for businesspeople. As an example of the strict enforcement by courts of contractual requirements, it points in particular to cases interpreting âtime of the essenceâ clauses, including 1473587 Ontario Inc. v. Jackson (2005), 137 A.C.W.S. (3d) 649 (Ont. Sup. Ct.), affâd (2005), 2005 ONCA 26121, 75 O.R. (3d) 484 (C.A.), and Multani Custom Homes Ltd. v. 1426435 Ontario Ltd., 2018 ONSC 4655, in which Courts stringently enforced âtime of the essenceâ clauses and deadlines even where the transgressions appeared relatively minor and the consequences were significant.
[115] The Purchaser maintains that once a term is agreed to be a condition precedent, clearly the party entitled to the satisfaction of that condition â here, the Purchaser â is not required to assume the risk if the condition precedent cannot be satisfied, nor is that person obligated to waive the condition.
[116] As another example of the need for strict adherence to such conditions, the Purchaser relies on the decision of Justice Brown in Champlain Thickson Inc. v. 365 Bay New Holdings Ltd., [2007] O.J. No. 3254 (Sup. Ct.), in which there was a condition precedent that an elevator be repaired and a certificate of compliance with all regulations be delivered on closing. The vendor in that case failed to satisfy this condition precedent by the time of closing. Justice Brown held that the purchaser was entitled to terminate the transaction and to the return of its deposit, even though the cost of the elevator repair was $6,200.00 and the value of the transaction was nearly $25,000,000.
[117] In response to the Vendorâs position that the Purchaser was obliged to act reasonably and in good faith relative to the purported satisfaction of the Conditions, the Purchaser argues, in effect, that the objective guidance set out in the APS relative to the two Conditions at issue means that no subjective considerations of the Purchaserâs conduct arise. Put another way, the Purchaser did not and could not act unreasonably or in bad faith in requiring the Vendor to strictly comply with its obligations under the APS to satisfy Conditions inserted in the APS for the Purchaserâs benefit.
Vendorâs Argument re Walmart Condition
[118] In response, the Vendor says that the âtime of the essenceâ cases cited by the Purchaser are not relevant to this application. It points out that the Vendor was not late in delivering any of its obligations under the APS, and that none of the authorities cited by the Purchaser, including Champlain, deal with circumstances in which the satisfaction of a contractual obligation is subject to express requirements of reasonableness.
[119] The Vendor maintains that the overriding obligations of reasonableness and good faith require the parties to exercise their contractual discretion reasonably and in a manner consistent with the purpose for which the discretion was granted in the APS.
[120] Turning to the specific Conditions at issue, the Vendor argues that the Walmart EC served its intended purpose. It certified the important facts about Walmartâs lease and tenancy (including the fact that Walmart paid its rent and that neither it nor the Vendor as landlord were in default) and exposed certain Non-Satisfaction Items that the Vendor promptly addressed.
[121] It argues that the Purchaser, as a sophisticated commercial retail landlord with knowledge of the Properties and specific relevant experience with Walmart, understood and indeed expected that Walmart, because of its considerable influence over retail landlords, would insist on using its own form of estoppel certificate and would resist making unqualified representations.
[122] The only expert who provided evidence on this application, Michael Pelyk, a long-time real estate broker and former executive, confirmed that Walmartâs use of its own template estoppel certificate is something that would be known to âknowledgeable retail professionals in the shopping centre industryâ who would âaccept their standard estoppel with very few if any changesâ. Again, the Purchaserâs principal and main deponent in this matter, Mr. Driedger, specifically confirmed his own knowledge and expectation to exactly this effect.
[123] In relation to Walmartâs unwillingness to list the documents comprising its lease in the Walmart EC, which as the Vendor notes appears to be the main purported basis on which the Purchaser refused to accept it, the Vendor asserts that this ought to have been a non-issue.
[124] First, it notes that the Purchaser undertook extensive due diligence efforts and as part of those efforts reviewed all of Walmartâs lease documents. In fact, the Vendor points out, the Purchaser made corrections to the draft Walmart EC provided by the Vendor based on the Purchaserâs own familiarity with the Walmart lease documents.
[125] Second, the recent Walmart Lease Extension, the documents for which had been reviewed and approved by the Purchaser, specifically included a list of the documents comprising the Walmart lease in its definition of âLeaseâ. In that regard as well, the Vendor notes that the versions of the Walmart EC delivered to the Purchaser each stipulated that Walmartâs then current lease term expired on January 31, 2020, implicitly referencing the Walmart Lease Extension, and argues that a reasonable businessperson in the Purchaserâs position could rely on a very recent tenâyear lease renewal.
[126] Third, the Vendor argues that the Purchaserâs demand to include a list of lease documents on the face of the Walmart EC was based, as the Purchaser confirmed in its evidence, on hypothetical fears of future disputes that could arise on the basis of lease obligations allegedly unknown to the Purchaser. However, here the lease obligations were not unknown, and the experience to which the Purchaser referred in its evidence â in which Mr. Driedger had been involved in an arbitration proceeding with Walmart over a Dryden, Ontario location regarding restrictive covenants â did not involve an estoppel certificate and has no bearing on the matters at issue. In passing, the Vendor notes that the estoppel certificate delivered in connection with the Dryden property did not include a list of the documents comprising Walmartâs lease in that matter.
[127] Fourth, the Vendor notes that until the arrival of the pandemic, the Purchaser was comfortable with Walmartâs tenancy, so much so that it declined even to conduct an interview with Walmart as part of its due diligence efforts. By the Purchaserâs own admission, it was not aware of any disputes in relation to the Walmart tenancy at the Parkway Property, either with the landlord or with anyone else. Indeed, as it confirmed, the Walmart tenancy was one of the primary reasons for the Purchaserâs interest in the Parkway Property.
[128] Fifth, the Vendor notes that the relevant case law makes it clear that a fundamental purpose of estoppel certificates is to prevent a landlord from relying on untrue or incomplete statements in an estoppel certificate to estop a tenant from asserting otherwise where the truth or completeness of the statement in question was known to or discoverable by the landlord through due diligence. In this case, the Vendor argues that the Purchaser had full disclosure of the documents comprising the Walmart lease and could not demonstrate any detrimental reliance on statements made (or not made) in the Walmart EC.
[129] With respect to Walmartâs addition of a âknowledge qualifierâ to its statement in the third and final version of the Walmart EC, the Vendor notes that the relevant provision of the Head Lease does not explicitly provide that Walmart must make a statement as to its own default (or nonâdefault) under its lease or at all, and certainly does not require an unqualified statement to that effect. In fact, s. 18.1 of the Head Lease expressly provides that all information in an estoppel certificate is to be certified to the best of Walmartâs knowledge and belief. The Vendor reiterates that Walmartâs statement in the Walmart EC meets the requirement under the Head Lease, and that the Purchaserâs purported insistence on anything more is unreasonable.
[130] On this issue the Vendor also notes that other tenants at the Properties provided estoppel certificates including broad knowledge qualifiers, to which the Purchaser did not object.
Vendorâs Argument re Dollarama Condition
[131] Relative to the Dollarama Condition, the Vendor argues that contrary to the Purchaserâs assertion, s. 7.4(2)(a) of the APS does not provide that the âmaterialâ terms of the Dollarama lease should not be changed. Rather, that section clearly contemplates that the Vendor (as landlord) may enter into a new lease or amend an existing lease so long as it obtains the Purchaserâs approval (again, not to be unreasonably withheld).
[132] Once again, the Vendor says that as a sophisticated commercial landlord with experience dealing with Dollarama, the Purchaser would know that Dollarama, with growing power in the market, would seek significant improvements in its lease terms. In fact, the evidence shows that the Purchaser was in the midst of negotiating another lease amendment with Dollarama at a property in Orangeville, Ontario at the relevant time, and that Dollarama was attempting in that setting to exact significant changes to its lease.
[133] As set out above, the Purchaserâs primary reason for refusing to accept the Dollarama Extension, and the reason it emphasized during the lead-up to the closing date and extended closing date for the APS, was the allegation that the Dollarama Use Clause did not precisely match the SLA Use Clause.
[134] In response, again as set out above, the Vendor notes that the effect of the versions in the Dollarama Extension and the SLA was the same and that in any event, Dollaramaâs agreement to comply with the SLA Use Clause, attached verbatim in Schedule J to the Dollarama Extension, rendered any concerns academic, and provided any comfort the Purchaser required.
[135] With respect to the other three allegedly material issues the Purchaser raised relative to the Dollarama Extension, the Vendor notes that the record reflects no suggestion by the Purchaser during negotiations that these issues were material or in fact that they mattered to the Purchaser at all. The Vendor says that raising these as purportedly material issues after the fact is neither reasonable nor in good faith, but rather an example of âhiding the ballâ. In any event, the Vendor points out that the uncontroverted expert evidence relative to these other three issues confirms that they are in fact minor, non-material items and do not affect the central elements of the business deal.
[136] The Vendor submits that, on the other hand, the record shows that it acted in good faith at all times and used reasonable commercial efforts to satisfy both the Walmart and Dollarama Conditions.
[137] To that end, through continued diligence and ongoing efforts, the Vendor points out that it obtained three versions of the Walmart EC, each more favourable to the Purchaser than the last, and that the third and final version contained more information than the seller (for which Mr. Driedger spoke at the time) had provided in the 2012 sale of the property to Bentall.
[138] Similarly, the Vendor notes that it was able to obtain three versions of the Dollarama Extension, again each better for the Purchaser than the last.
[139] The Vendor says that the record reflects its significant and reasonable efforts to continue to engage with the tough negotiating stances presented by Walmart and Dollarama. That engagement was in contrast to the Purchaserâs refusal to engage or even discuss issues during the course of the negotiations.
[140] The Vendor admits that its obligation did not go as far as âbest effortsâ, and comprised only reasonable efforts, but argues that in any event its conduct should be fairly viewed as going above and beyond any measure of reasonable.
[141] In sum, the Vendor submits that by unequivocally refusing to accept the Walmart EC and the Dollarama Extension, the Purchaser repudiated the APS. The Vendor accepted the Purchaserâs repudiation, and the Transaction was not completed solely as a result of the Purchaserâs default, entitling the Vendor to the Deposit.
Analysis
[142] In my view this case raises interesting issues that are characteristic of certain consequences of the pandemic.
[143] Despite the Purchaserâs mild protestations to the contrary, I have little doubt that, but for the onset of the pandemic in March and April of 2020, more or less precisely at the time the closing of the Transaction was pending, the Transaction would almost certainly have closed.
[144] That observation does not end the matter. Clearly the language and intent of the Conditions, and the specific content of the Walmart EC and the Dollarama Extension, have to be given full weight and consideration.
[145] However, it is also fair, reasonable, and consistent with the guidance of leading authorities to consider the language in issue within its full commercial context. In my opinion, the ravages of the early days of the pandemic are in fact important context for this matter and cannot be ignored.
[146] As it more or less and fairly acknowledges, as it was approaching the closing of the Transaction, the Purchaser found itself suddenly plunged into pervasive economic uncertainty.
[147] That uncertainty understandably caused the Purchaser to retrench in various settings.
[148] By its own admission, during this immediate timeframe the Purchaser sought ways to preserve cash and explicitly advised its stakeholders of its intention to do so, in part driven by the need for âcrisis managementâ.
[149] In March and April of 2020, the Purchaser also withdrew from purchasing two other significant retail properties, in each case during the due diligence phase.
[150] With respect to the Properties, with the deal having âgone firmâ, the Purchaser was past the point of withdrawal during due diligence. The APS did not include a force majeure clause.
[151] The Purchaser therefore cast about and latched on to the Walmart Condition and the Dollarama Condition as plausible ways out of the Transaction. Whereas pre-pandemic the Transaction and the Properties had seemed like attractive additions to the Purchaserâs portfolio, complete with tenants regarded and described by the Purchaser as âtop tenantsâ, once the pandemic started the Transaction appeared fraught with economic uncertainty and financial peril.
[152] Again, this does not, on its own, mean that the Conditions are unenforceable. Generally speaking, conditions like the ones at issue here are in place for good reason and provide protection for a purchaser from genuinely unknown risks.
[153] However, when one examines the specific clauses and evidence involved, it is important to understand that context â to see the âforestâ containing the âtreesâ the Purchaser relied on to withdraw from the Transaction.
Conclusions
[154] While again acknowledging the importance and function of these types of conditions, and the important role of estoppel certificates generally, the Purchaserâs purported reliance on those items in this case should be seen as a late-breaking attempt to avoid a firm deal, driven by fear of the turmoil created by the pandemic.
[155] My reasons for this conclusion are as follows:
(a) It was the Purchaser that set this deal in motion at first instance. The Properties were not listed for sale when the Purchaser approached the Vendor, unsolicited, to express an interest in purchasing them.
(b) After the first version of the deal had foundered over price, the Purchaser came back to the Vendor within days to renegotiate and revive the deal.
(c) In terms of knowledge of the Properties, in 2012, the principal representative of the Purchaser, Mr. Driedger, had led the transaction in which his then-employer had sold the Properties to the Vendor.
(d) The Transaction went âfirmâ, with the Purchaser having raised no âdeal-breakersâ as a result of its thoroughgoing due diligence process.
(e) During due diligence, the Purchaser declined to interview Walmart, despite having the opportunity to do so. This decision in my view reflects the Purchaserâs knowledge of Walmart, and the comfort that the Purchaser reasonably took as a result of Walmart recently extending its tenancy and expressing an intention to invest in upgrades to its premises.
(f) During due diligence, the Purchaser learned the details of the Walmart and Dollarama leases, knew and had in hand the agreements comprising the Walmart lease, and was aware of and encouraged by the ten-year extensions of both leases.
(g) Most importantly, the Purchaser was provided with increasingly extensive information in relation to the three versions of the Walmart EC and Dollarama Extension it received, which in substance gave it all of the assurances that could be obtained through technically compliant versions of the Walmart EC and Dollarama Extension.
(h) In collecting this increasingly extensive information and negotiating improved clauses for the benefit of the Purchaser, the Vendor more than met its obligation to make commercially reasonable efforts relative to the APS and the Transaction.
(i) The Purchaser, on the other hand, did not fulfil its obligations to act reasonably and in good faith. Having made demands for technical compliance with the Conditions, it refused to engage in a meaningful way in ongoing discussions or negotiations and refused even to clarify its purported concerns and objectives. It did so notwithstanding its knowledge of the negotiating stance of both Walmart and Dollarama; notwithstanding its knowledge that each would predictably insist on certain items and limit the representations they would give; and, most importantly, notwithstanding that it was provided, particularly within the third and final versions of the Walmart EC and the Dollarama Extension, with information which ought to have allayed its purported concerns.
[156] Given the uncertain climate of the early days of the pandemic, it is understandable that the Purchaser was looking for a âway outâ, consistent with its announced corporate strategy of preserving cash at that time.
[157] However, as a sophisticated commercial entity, it had to know that in doing so it risked the forfeit of the Deposit.
Result
[158] In the circumstances, I find that the Purchaser repudiated the Transaction. The Vendor is therefore entitled, pursuant to s. 3.2(2) of the APS, to retain the Deposit together with all interest accrued to date.
Costs
[159] The Vendor is also entitled to its costs of the application.
[160] It does not appear that the parties have filed costs outlines. I am prepared to give the parties 20 days from the date of this decision to attempt to agree on costs.
[161] If the parties cannot agree within that timeframe, then I will receive written submissions, not to exceed five pages in length.
[162] The Vendor is to provide those submissions, together with a costs outline, within a further 20 days (40 days from the date of this decision). After that, the Purchaser is to provide its responding submissions within a further 20 days (60 days from the date of this decision). The Purchaser may wish to provide its own costs outline but is not obliged to do so.
[163] I wish to thank all counsel for the thorough and professional way in which they prepared materials and presented their arguments.
W.D. Black J.
Date: July 22, 2022