ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FK Applicant
– and –
GA Respondent
A. Khanlarbig, for the Applicant
V.P. Ambrosino, for the Respondent
HEARD: November 30 and December 1, 2022
REASONS FOR DECISION
Background to the Trial
1On June 16, 2022 Justice Bird heard a motion for summary judgment. She released her decision on September 9, 2022. Justice Bird made the following Order:
I direct a trial of the issue of whether the escrow condition was satisfied, specifically whether the Respondent’s commercial lawyer “reviewed and approved the commercial components of the agreement”. If the escrow condition was satisfied, the second separation agreement is valid and enforceable. The trial of the issue will take place under the following conditions:
If the Respondent intends to argue that solicitor client privilege applies and prevents her commercial lawyer from testifying, she will file a Notice of Motion, factum and book of authorities supporting that position no later than October 14, 2022. The Applicant will file responding material no later than October 31, 2022.
Motion Respecting Solicitor-Client Privilege
2On November 30, 2022 the parties attended for the trial of the issue as directed by Justice Bird.
3At the commencement of trial, the Respondent argued that she had not waived solicitor-client privilege and, accordingly, her commercial counsel should not be permitted to testify. I made an oral Ruling, summarized, as follows:
The presence or absence of legal advice must be relevant and material to the issue in the matter. The Respondent waived privilege when she put the issue of communication with her commercial counsel as a defence to the summary judgment motion. Justice Bird, in her Ruling released September 9, 2022, found that the Respondent swore affidavits claiming that her commercial lawyer never approved of the agreements. Accordingly, the Respondent waived privilege.
4I released my written decision on the issue of solicitor-client privilege on November 30, 2022 with the result aforementioned. Accordingly, the trial proceeded as directed by Justice Bird.
Brief Background Facts
5The parties were married in 2004 and separated on May 31, 2017.
6The Applicant is a chiropractor and the Respondent is a medical doctor.
7The parties share four children.
8While married, the parties worked from a shared office building in Richmond Hill. The business property was owned by a company called Innova Medical and Rehab Inc. (Innova). The Applicant owns 51% of the shares in Innova and the Respondent owns 49% of the shares. The office building was the sole asset in Innova.
9After separation, the parties attended mediation and worked to negotiate a settlement. They were unable to do so at that time.
10The Respondent moved out of the jointly owned office space in July of 2018. Shortly thereafter, the parties agreed to sell the building and signed a listing agreement in September of 2018. The Applicant subsequently stated that he wanted to remain in the property and said he was prepared to purchase the Respondent’s interest. However, the parties could not come to terms on a buyout.
11In January of 2019, the Respondent (in this action) commenced an application in Commercial Court in Toronto before either party began proceedings in Family Court. She sought an Order for the sale of the business property. An offer to purchase the property was received. The Respondent wanted to accept it. The Applicant did not want to accept the offer. On January 8, 2019, Penny J. made an Order directing that Innova accept the offer that had been made to purchase the property. In his Endorsement, Penny J. found that the Applicant was delaying matters and benefitting from remaining in the property, essentially for free.
12While the commercial proceedings were underway, the parties engaged in further settlement discussions with the assistance of their family lawyers. Ms. Khanlarbig was counsel for the Applicant and Mr. Ambrosino was counsel for the Respondent. The discussions were fruitful and resulted in Mr. Ambrosino drafting a comprehensive Separation Agreement that covered parenting issues, child support and Section 7 expenses, property, the parties’ business interests, a leased machine, spousal support and a dispute resolution mechanism.
13Mr. Ambrosino sent a second draft of the agreement to Ms. Khanlarbig via email on January 20, 2019. Mr. Ambrosino referred to it as the “final draft of the Separation Agreement” and asked Ms. Khanlarbig to have the Applicant sign five copies of it and return them to him. Mr. Ambrosino stated that upon receipt of the executed copies of the agreement, it would be held “in escrow confirming corporate counsel’s review and approval of the commercial components of the agreement.”
14The Applicant signed the Separation Agreement on January 24, 2019 and returned the agreement to Mr. Ambrosino. The Respondent signed the Separation Agreement on January 25, 2019. The Separation Agreement signed by both parties was never released to counsel for the Applicant. The Respondent takes the position that the Separation Agreement remains in escrow, almost four years after signature, as the Respondent has not waived the escrow condition.
Motion for Summary Judgment
15The Applicant brought a motion for summary judgment pursuant to Rule 16 (1) of the Family Law Rules seeking an Order validating the Separation Agreement he signed on January 24, 2019.
Ruling, Justice Bird September 9, 2022
16In her Ruling released September 9, 2022, Justice Bird made the following comments:
Notwithstanding the fact that it was her lawyer who drafted the separation agreement, the Respondent takes the position that there is no proof that she ever executed it. The Respondent is able to advance this position because Mr. Ambrosino never provided Ms. Khanlarbig with signed copies.
The Respondent never addresses the question of whether or not she signed the separation agreement in either of her two lengthy affidavits filed in response to this motion. She refers to it as a draft agreement and says it was never finalized. However, the Respondent does not deny signing it.
For the following reasons, I am satisfied that the evidence establishes that the parties reached an agreement, which Mr. Ambrosino reduced to writing in the form of a comprehensive settlement agreement:
(a) In paragraph 21 of her September 18, 2019 affidavit, the Respondent states “In January 2019, the Applicant and I reached an agreement in principal conditional on the approval of corporate counsel”.
(b) Paragraph 4(a) of the agreement specifically states that the parties acknowledge that the agreement is entered into under Sections 51 and 54 of the Family Law Act.
(c) Paragraph 6(a) of the agreement states that the parties believe that they “have reached a fair and reasonable settlement of all issues arsing out of the breakdown of their relationship”.
(d) Paragraph 27(b) of the agreement states that the parties accept its terms in full and final satisfaction and discharge of all claims they may have.
(e) Paragraph 34 of the agreement states that both parties received independent legal advice and acknowledge that the terms are fair and reasonable.
17Justice Bird found that both parties did sign the Separation Agreement in the presence of a witness based on the following evidence:
(a) On January 31, 2019, Mr. Ambrosino sent the Respondent’s corporate counsel an email with an attachment that was described as “2019-01-25 Fully Executed Separation Agreement”.
(b) On January 31, 2019, Mr. Ambrosino wrote Ms. Khanlarbig a letter, the first line of which read “Since the parties finally executed their separation agreement last week”.
(c) In a text message to the Applicant dated January 30, 2019, the Respondent wrote “The agreement is signed so no going back”.
(d) In an email to the Applicant dated March 8, 2019, the Respondent wrote “So it’s time to sit down and discuss the terms of a contract as the current one has been signed with bad intentions.”
18As a result of the above, Justice Bird concluded that there was a valid domestic contract entered into between the parties.
Was the Agreement Placed in Escrow by the Respondent?
19On the issue of the escrow, Justice Bird stated the following in her Ruling:
I accept that counsel for the Respondent placed the separation agreement in escrow pending “corporate counsel’s review and approval of the commercial components of the agreement”, as stated in his email dated January 20, 2019. Mr. Ambrosino specially told Ms. Khanlarbig that was his intention. Further, his email to corporate counsel dated January 31, 2019 confirms that the agreement was being held in escrow pending “corporate counsel’s review of the terms relating to the business.
20The Applicant signed the Separation Agreement on January 24, 2019 and returned the partially executed agreement to Mr. Ambrosino.
21The Respondent signed the Separation Agreement on January 25, 2019.
22On January 31, 2019, Mr. Ambrosino sent the signed Separation Agreement to Mr. Kevin Power and indicated that the agreement would be held in escrow pending corporate counsel’s review.
Was the Escrow Condition Satisfied or Waived?
23On this issue, Justice Bird stated the following in her Ruling:
The Respondent denies ever waiving the escrow condition and there is no direct evidence that she did so. The Applicant relies on a letter sent to his lawyer by Mr. Ambrosino on January 31, 2019 in which he wrote “In order to ensure your client’s compliance with the parties’ agreement, we will be bringing a court application to take out an order reflecting the terms of this agreement”. He asserts that the escrow condition must have been waived or satisfied if the Respondent was threatening to take court action to enforce the agreement.
Similarly, in an email sent by the Respondent to the Applicant on February 1, 2019, she accused him of “breach of contract” and said that she would seek to enforce the agreement through a court order.
The difficulty with the Applicant’s argument is that Mr. Ambrosino’s letter was written on the same day the agreement was sent by email to the Respondent’s corporate counsel for review. Had the letter been written later, after the corporate lawyer had an opportunity to review the agreement, the Applicant’s position might be persuasive. However, given the timing of the letter, I cannot conclude that it is evidence of a waiver of the escrow condition. Likewise, the Respondent’s email was sent the day after the email to corporate counsel. It is not reasonable to expect that the corporate lawyer would have had time to comprehensively review the separation agreement and provide advice on it within such a short period of time.
As a result, I am unable to rely on the letter and email to find that the Respondent waived the escrow condition. I understand the Applicant’s frustration with the Respondent’s current position. It seems disingenuous for her to argue that an agreement she was prepared to go to court to enforce is not valid. However, that apparently contradictory position cannot be a basis to conclude that the Respondent waived the escrow condition on the facts of this case.
The more difficult question is whether there is evidence that the escrow condition was satisfied. The Respondent swore in both of her affidavits that it was not. In her affidavit dated September 18, 2019 the Respondent stated that the separation agreement was held in escrow “pending the approval of and consultation with accountants/corporate counsel given the commercial elements of the transaction, tax issues and ongoing Commercial Court proceedings”. Further, she swore that paragraph 15 of the separation agreement did not adequately address the tax consequences associated with the transfer of her shares in Innova to the Applicant. The Respondent said that she never would have finalized the agreement without first obtaining advice about the tax consequences of the transfer. In paragraph 26 of that affidavit, the Respondent specially asserts that the escrow conditions were not satisfied.
In her second affidavit, dated October 7, 2019, the Respondent claims that her corporate lawyer did not have the opportunity to approve the agreement because the Applicant breached its terms before that could happen. This position appears to be contradictory on its face. On one hand, the Respondent is saying that the agreement was not operative at that point because it was being held in escrow. On the other hand, she asserts that the Applicant breached the terms of the agreement. This raises the question of why the Respondent expected the Applicant to comply with terms of an agreement that she says was not yet operative.
In addition, there is evidence that contradicts the Respondent’s position that the escrow condition was not satisfied. On February 22, 2019, both parties received an email from an accountant who was going to assist them with the transfer of the Innova shares. The Respondent replied to the email on February 25, 2019 and advised the accountant that the Applicant would be responsible for paying the retainer and fees. This suggests that as of that date, the Respondent was content to proceed with the share transfer as provided for in the separation agreement. She just didn’t want to have to pay the accountant.
The Respondent attached email correspondence between herself and the Applicant dated June 5, 2019 as an exhibit to her October 7, 2019 affidavit. In his email, the Applicant advised the Respondent that her corporate lawyer “mentioned to the judge that there is a contract signed”. Unfortunately, the Applicant did not address this comment in his affidavit or provide a copy of the transcript of the relevant court proceeding. If what the Applicant said is true, it may be clear evidence of the escrow condition being satisfied.
On March 14, 2019, Mr. Ambrosino sent Ms. Khanlarbig an email with a third version of the separation agreement attached. In the first paragraph of his letter, Mr. Ambrosino stated “it would appear that both parties require some minimal adjustments to their agreement which has thus far been held in escrow pending consultation with corporate counsel”. The fact that he sent Ms. Khanlarbig a revised agreement is evidence that corporate counsel had completed their review.
I have carefully reviewed the terms with commercial implications in the second and third versions of the separation agreement. There are no meaningful differences between them. Specifically, despite the Respondent’s professed concern about the tax consequences of the share transfer, there no mention of that issue in the third agreement. The fundamental terms are identical. Paragraph 15 of both versions deals with the transfer of the office building. This paragraph is word for word the same in both agreements.
Paragraph 16 of the agreements deals with Innova. Paragraphs (a), (b) and (c) are identical in both versions. Paragraph (d) in the second version is repeated word for word in paragraph (f) of the third version. The third version contains two additional subparagraphs. Subparagraph (d) states that the Applicant will be responsible for all accounting, legal and other professional fees incurred to transfer the Innova shares. Subparagraph (e) adds a deadline for the transfer. The inclusion of a term that the Applicant pay for fees related to the transfer is, as Mr. Ambrosino stated, a “minimal adjustment”. It does not impact the substance of the agreement between the parties which was encapsulated in the second version of the agreement. This is strong evidence that corporate counsel approved of the manner in which the second version of the separation agreement dealt with the share transfer.
Paragraphs 17 and 18 of the agreement are identical in versions two and three. In paragraph 19(a), there is a minor change in relation to the cosmetic machines. In the second version of the agreement, the Applicant was required to pay the Respondent $100, 000 if the machines had to be returned to the company from which they were leased. If the parties were able to find a third party to assume the lease, the Applicant would have to pay the Respondent half of the total amount paid towards the lease. The third version of the agreement states that because the parties had been unable to find a third-party lessee, the Applicant was required to pay the Respondent $100, 000. Once again, I find this to be a very minimal adjustment to the terms of the agreement. According to both versions, the Applicant owed the Respondent $100, 000 in relation to the cosmetic machines.
Other than the above noted minor adjustments, there were no changes to the commercial terms of the separation agreement. This provides the Applicant with a solid basis upon which to argue that the escrow condition was satisfied.
Notwithstanding this, I am of the view that the evidentiary record on this issue is not satisfactory. The best evidence on this issue is available from the Respondent’s commercial counsel.
Analysis
24Escrow agreements are typically entered into on specific terms. The Respondent, through counsel’s correspondence dated January 20, 2019, imposed the escrow term. In particular, counsel stated that “we will hold the agreement in escrow confirming corporate counsel’s review and approval of the commercial components of the agreement.” What is missing here, and it is glaring, is that there is no timeline outlined for the duration of the escrow. Counsel for the Respondent takes the position that the agreement continues in escrow, just shy of four years after signature.
Was the Escrow Agreement Satisfied or Waived?
25On January 31, 2019 Mr. Ambrosino sent an email to commercial counsel, Mr. Power, stating:
Hi Kevin,
Here is the A. SA I am holding in escrow pending corporate counsel’s review of the terms relating to the business. Please let me know when Michele is available for a conference call to discuss same/next steps Thanks.
Val Ambrosino
26The Respondent, in addition to her counsel in the family file, had three corporate/commercial counsel. Mr. Power represented the Respondent in the commercial litigation related to the sale of the property in question. Mr. Power assumed primary care of the commercial litigation while his colleague, Ms. Bale, assisted him with the commercial litigation. Ms. Guy was the Respondent’s corporate counsel. Ms. Bale did not testify.
Testimony of Kevin Power
27Mr. Kevin Power is a lawyer in good standing. He was called to the bar in 1996. Mr. Power testified that he received the Separation Agreement executed by the Applicant on or about January 31, 2019. The agreement was sent by email and included a note from counsel, Mr. Ambrosino, indicating that he was holding the agreement in escrow pending corporate counsel’s review.
28Mr. Power testified that he reviewed the Separation Agreement. When asked if he gave the Respondent advice regarding the commercial elements of the agreement, he answered that was a difficult question and he indicated that he had no recollection of having a discussion and he could not recall any specific discussions with the Respondent.
29Mr. Power testified that, in preparation for his testimony, he did not review the entire file. He did not bring the file to court.
30Mr. Power testified that Ms. Guy, as corporate counsel, would have provided this type of advice. He testified that he provided a copy of the Separation Agreement to Ms. Guy for review on or about January 31, 2019.
31Mr. Power testified that he may have received emails from Ms. Guy on the issue but he did not see them. In terms of emails in the file, in preparation for his testimony, Mr. Power testified that he reviewed some of his emails but not all of them.
32It is surprising that Mr. Power, a lawyer of considerable experience in commercial litigation, took such a lackadaisical approach to his preparation and his testimony. He did not bring his file. He did not review the entirety of the file. He did not review all of his emails.
33Mr. Power stated that his lack of preparation for testimony was because he was not expected to be called as a witness. That answer was disingenuous. Mr. Power testified that he was aware that Justice Bird made an Order that the commercial lawyer attend for a trial that was to last one day and that was to be peremptory. Mr. Power also testified that he was aware that there was a 14B motion filed by the Applicant specifically requesting his presence for testimony.
34It is also noteworthy that, when asked specifically how much contact he had with the Respondent in February 2019, he testified that he did not think there was much but he would have to review the file.
35Mr. Power did confirm that a meeting occurred between he, Ms. Guy and Mr. Ambrosino on February 4, 2019 to address the commercial aspects of the Separation Agreement.
36When Mr. Power was asked if there were other meetings with Ms. Guy, he testified that he could not recall.
37When Mr. Power was asked if he was aware that Mr. Ambrosino and the Respondent met with the accountant in February 2019, he testified that he did not know.
38When Mr. Power was asked if he knew the accountant sent a retainer on February 22, 2019 he testified that he did not recall and he was unaware.
39The question that Justice Bird required an answer to was whether or not the Respondent received advice from her corporate/commercial counsel. I draw an adverse inference from the testimony of Mr. Power that he could not recall if he provided advice on the commercial aspects of the agreement and elected not to review his file in its totality.
Testimony of Ms. Guy
40Ms. Michele Guy is a lawyer in good standing. She was called to the bar in 1989. Ms. Guy testified that she received the Separation Agreement on or about the end of January 2019 and/or the beginning of February 2019.
41Ms. Guy testified that she reviewed only those portions of the Separation Agreement impacting the business aspects.
42Ms. Guy testified that she completed the review of the provisions sometime between January 31, 2019 and February 4, 2019. Surprisingly, Ms. Guy had no notes that would reflect the date of her review. However, Ms. Guy testified that she had a conversation with Mr. Ambrosino and Mr. Power on February 4, 2019 where she advised of the concerns she had with the agreement.
43When asked what concerns she had with the Separation Agreement, she testified there were three.
Concern #1: Office Building
(a) the agreement states at paragraph 15 (a) that the office building municipally known as 1650 Elgin Mills Road East, Richmond Hill is owned by Innova Medical;
(b) the agreement states at 15 (b) that the Applicant shall purchase the Respondent’s interest in the office building for the sum of $600,000; and
(c) Ms. Guy’s Concern: The Respondent does not own the building. Innova Medical owns the building.
44The Applicant and the Respondent own shares in Innova Medical. Innova Medical owns one commercial building, 1650 Elgin Mills Road East, Richmond Hill. The Applicant and the Respondent operated their chiropractic/medical business from the location. They own the shares as follows: Applicant (51%) and the Respondent (49%).
Concern #2: Innova Medical Debts
(a) paragraph 16 (b) of the Separation Agreement states that the Applicant and the Respondent acknowledge and confirm that there are no debts or liabilities related to and/or arising from Innova Medical, save and except for the medical machines, for which the parties are liable pursuant to paragraph 19 below. In the event it is discovered that a party is directly responsible for a debt or liability relating to Innova Medical, prior to the execution of this agreement, that party shall indemnify the other;
(b) it is noteworthy that clause 16 (d) of the agreement states that the Applicant shall indemnify and save harmless the Respondent from any and all obligations or liabilities related to and/or arising from Innova Medical; and
45Ms. Guy’s concern: Ms. Guy testified that she needed to speak to the accountant to determine if there were debts. She also needed to know how the parties would work out capital gains, if any, following a transfer of the shares.
46Ms. Guy testified that she contacted the accountant on two occasions between January 31, 2019 and February 11, 2019 and he never got back to her. She did not follow up again. Ms. Guy testified that February 11, 2019 was, essentially, the end of her involvement.
Concern #3: Other Payments
(a) paragraph 19 (a) of the Separation Agreement stated that Innova Medical had cosmetic machines that were leased. The agreement stated that the machines would be returned to the lessee or the parties would need to find a third party to assume the lease. The agreement went on to state that if the parties secured a third party to assume the medical lease, the Applicant would owe the Respondent half of the amounts paid towards the lease. If the parties had to return the cosmetic machines, to the lessee, the Applicant would owe the Respondent $100,000. The Applicant would owe the Respondent an amount that is the lesser of the two foregoing options.
47Ms. Guy testified that she communicated these three concerns to the Respondent. Surprisingly, Ms. Guy did not memorialize these concerns in writing. She did not provide her advice to the Respondent in writing. Ms. Guy provided no documentary evidence regarding the advice.
48Ms. Guy testified that she communicated the three concerns to the Applicant sometime between January 31, 2019 and February 4, 2019.
49Ms. Guy testified that she never received the documents she wanted from the accountant.
50While Ms. Guy testified that February 11, 2019 was, essentially, the last time she dealt with the issue, at the tail end of her testimony, Ms. Guy testified that, in November 2022 she was asked to review valuation reports. When asked, Ms. Guy testified that she was not instructed to review valuation reports by her client. Rather, Mr. Ambrosino asked her to look at the reports, almost three years following her last involvement.
51I conclude from the testimony of Ms. Guy that she did review the Separation Agreement and she provided her advice to the Respondent.
52I conclude, on the evidence before me, that the escrow condition was completed by February 11, 2019.
Discussion
53For four years, the Respondent maintained that she never signed the Separation Agreement. The Respondent did, in fact, sign the Separation Agreement.
54The Respondent also maintained that her corporate counsel did not have time to review the agreement before the Applicant was in breach of the court Order. In her affidavit sworn October 7, 2019 she states:
Ultimately, our proposed agreement broke down before these conditions upon which our agreement was held in escrow were satisfied. Prior to corporate counsel having had the opportunity to approve the agreement, as required by the conditions upon which the agreement was held in escrow, the Applicant began to flagrantly breach the terms and repudiated the very idea and core of the agreement by failing to follow the parenting terms of the agreement.
55Corporate counsel, however, did review the agreement in a timely way and provided her advice to the Respondent.
56It is noteworthy that the Respondent opposed the testimony of both her corporate counsel and her commercial counsel. At the commencement of the trial the Respondent objected on the basis of solicitor-client privilege. A motion was argued and a ruling made. As noted, on the only day of a scheduled peremptory trial, Mr. Power did not attend court until the court insisted, stood the matter down for an hour or two, and waited for Mr. Power to attend court.
57It is also noteworthy that the Respondent obtained the opinion of her accountants. In her affidavit sworn October 7, 2019 she outlines Mr. Power’s receipt of the Separation Agreement on January 31, 2019 and she states: “Thereafter, I also sought the opinion of accountants, Rohit Nayyar and Ken Khosla, who advised me with respect to the tax consequences of transferring my shares in the Applicant’s and my joint business.”
58At no time did the Respondent or her counsel set out in writing to the Applicant or his counsel that they were not proceeding with the agreement because, following advice from her accountants and corporate counsel, there were issues. To the contrary,
(a) on February 22, 2019, both parties received an email from the accountant who was going to assist them with the transfer of the Innova shares. The Respondent replied to the email on February 25, 2019 and advised the accountant that the Applicant would be responsible for paying the retainer and fees. Following the advice from the accountants and the corporate counsel, the Respondent was content to proceed with the share transfer as provided for in the Separation Agreement. She just did not want to have to pay the accountant;
(b) on March 14, 2019, Mr. Ambrosino sent Ms. Khanlarbig an email with a third version of a Separation Agreement attached. In the first paragraph of his letter, Mr. Ambrosino stated “it would appear that both parties require some minimal adjustments to their agreement which has thus far been held in escrow pending consultation with corporate counsel”;
(c) Justice Bird carefully reviewed the terms with commercial implications in the second and third versions of the Separation Agreement. There were no meaningful differences between them. Specifically, despite the Respondent’s professed concern about the tax consequences of the share transfer, there was no mention of that issue in the third agreement. Justice Bird found that the fundamental terms were identical. Paragraph 15 of both versions dealt with the transfer of the office building. This paragraph is word for word the same in both agreements;
(d) paragraph 16 of the agreements dealt with Innova. Paragraphs (a), (b) and (c) are identical in both versions. Paragraph (d) in the second version is repeated word for word in paragraph (f) of the third version. The third version contains two additional subparagraphs. Subparagraph (d) states that the Applicant will be responsible for all accounting, legal and other professional fees incurred to transfer the Innova shares. Subparagraph (e) adds a deadline for the transfer. The inclusion of a term that the Applicant pay for fees related to the transfer is, as Mr. Ambrosino stated, a “minimal adjustment.” It does not impact the substance of the agreement between the parties which was encapsulated in the second version of the agreement; and
(e) paragraphs 17 and 18 of the agreement were identical in versions two and three. In paragraph 19(a), there was a minor change in relation to the cosmetic machines. In the second version of the agreement, the Applicant was required to pay the Respondent $100,000 if the machines had to be returned to the company from which they were leased. If the parties were able to find a third party to assume the lease, the Applicant would have to pay the Respondent half of the total amount paid towards the lease. The third version of the agreement states that because the parties had been unable to find a third-party lessee, the Applicant was required to pay the Respondent $100,000. This was a very minimal adjustment to the terms of the agreement. According to both versions, the Applicant owed the Respondent $100,000 in relation to the cosmetic machines.
59I am satisfied, on the evidence before me, that that the Respondent received the advice of her accountants and corporate counsel and elected to proceed.
60The escrow condition was satisfied and the Respondent, through her actions (and inaction) demonstrated that the escrow condition was satisfied and waived. As the escrow condition, unilaterally imposed by Respondent, was for her benefit, she could waive it at any time.1
Implied Terms
61Although I find that the Respondent fulfilled the escrow condition, I also find that there is an implied condition of the escrow.
62Terms may be implied in a contract based on the presumed intention of the parties.2
63Placing this agreement in escrow was meant to be temporary. It was meant to be temporary because there are provisions within the agreement that are time sensitive. Parenting time, as an example, is set out in the Separation Agreement. The commencement date of the agreement is also set out and it was the date the last of the parties signed, in this case January 25, 2019. The parenting provisions were to commence January 25, 2019.
64With no time limit on the escrow condition, the Respondent was left with great power. She could waive the condition at any time or she could refuse to waive it leaving the parties in limbo. For example, as long as the agreement was in escrow, the agreement could not be filed with the court and enforcement of the provisions could not occur.
65On March 7, 2019 the Applicant advised the Respondent that the accountant was away until March 12, 2019 and that the share transfer would be complete by April 1, 2019. The Respondent decided to wield her power when she replied to the email stating that she was not paying for that, noting, “when I decide if I am going through with the sale of the property or not.” As a matter of necessity, for a fair functioning of the Separation Agreement, the escrow condition must be time limited.
66The Respondent imposed the escrow on January 20, 2019. It is not only necessary, but also reasonable and equitable, for there to be an implied term that the Respondent act on the escrow judiciously and within a reasonable period of time. Surprisingly, the Respondent advances the position that, almost four years following the execution of the Separation Agreement, it still remains in escrow. There is no doubt in my mind that the parties would have agreed to a time limit on the escrow had it been raised on January 20, 2019. Accordingly, I am imposing an implied term, that the escrow condition was to be satisfied within 21 days of the date both parties executed the agreement. This implied condition provides sufficient time to satisfy the escrow and it is consistent with the Separation Agreement which had terms, like parenting time, commencing on January 25, 2019 – the date of the last signature.
67It is noteworthy that the Supreme Court of Canada recognized the importance of the organizing duty of good faith in contractual performance. It requires the parties to perform their contractual duties honestly and reasonably and not capriciously or arbitrary.3 The Respondent expressed displeasure with the Separation Agreement. The evidence was clear that her primary objection was that she wanted to redo the parenting provisions and she was not particularly concerned with the transfer provisions related to the business. She does not get a redo.
Order
For all of these reasons,
The escrow condition was satisfied and the Respondent, through her actions and inactions, waived the escrow condition.
There is an implied term to the escrow agreement agreement that the Respondent had 21 days to satisfy the escrow condition failing which, the escrow condition was waived.
The next step, should there be a material change in circumstances related to decision-making/parenting time, is to attempt to resolve the dispute through negotiation as is set out in the Separation Agreement.
If the parties cannot agree on the issue of costs regarding this trial, I shall consider the request for costs. The Applicant shall serve on the Respondent and file electronically, through the Trial Coordinator, written submissions, limited to five pages, exclusive of the Bill of Costs and Offers to Settle within 20 days of the date of this decision. The Respondent shall serve on the Applicant and file electronically, through the Trial Coordinator, written submissions, limited to five pages exclusive of the Bill of Costs and Offers to Settle within 10 days thereafter. There shall be no right of Reply.
Justice G.A. MacPherson
Released: December 20, 2022
Footnotes
- City Front Developments Inc. Toronto Catholic District School Board and Toronto District School Board 2007 D.L.R. (4th) 557, para 71.
- Canadian Pacific Hotels Ltd. v. Bank of Montreal, 1987 CanLII 55 (SCC), [1987] 1 S.C.R. 711, para 51.
- Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494
