COURT FILE NO.: CV-15-541652
DATE: 20240402
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Block Developments Inc.
Plaintiff
– and –
Brewers Retail Inc.
Defendant
Matthew P. Sammon and Christopher Yung, for the Plaintiff
Michael I. Binetti, Meredith L. Hayward and Adam Casey, for the Defendant
HEARD: March 28, 29, 30, 31, April 1, 4, 5, 6, 7, 8, May 2, 3, 9, 11, 12, 13, August 29, 30, 31, September 1, 2, 6 and 7, 2022
Plaintiff’s Summary of Oral Submissions on Disputed Read-Ins dated January 12, 2023
Closing Submissions of the Defendant dated March 10, 2023
Reply Submissions of the Plaintiff dated March 27, 2023
Supplemental Closing Submissions of the Plaintiff dated January 5, 2024
Responding Supplemental Closing Submissions of the Defendant dated January 15, 2024
Reply Supplemental Closing Submissions of the Plaintiff, dated January 19, 2024
AMENDED REASONS FOR DECISION
C. J. Brown J.
Background
[1] The plaintiff, Block Developments Inc. (“Block”), brings this action for damages for breach of contract arising from Agreements of Purchase and Sale of Toronto properties by the Defendant, Brewers Retail Inc. (“Brewers”), which the plaintiff intended to develop into condominium projects.
[2] Block maintains that on February 26, 2015, it submitted offers for the purchase of three Toronto properties that had been listed by Brewers, and amended its offer on March 9, 2015. The offer was accepted by Brewers on April 10, 2015 and agreements of purchase and sale were executed on June 23, 2015. Two of the properties were sale and lease back, such that Brewers could maintain its beer stores in those premises. As such, interim and long-term leases had to be negotiated following entry into the Agreement of Purchase and Sale (“APS”) for those two properties. The third property is not the subject of this action.
[3] Block alleges that it worked diligently to satisfy the conditions for sale. However, following ongoing negotiations with respect to an interim lease and a long-term lease, Brewers unilaterally terminated the APS and ultimately sold the properties to another purchaser.
[4] Brewers denies that it unilaterally terminated the APS and maintains that Block failed to satisfy its conditions by the conditional date, resulting in the voiding of the agreement.
Positions of the Parties
Position of the Plaintiff
[5] It is the position of the plaintiff that they worked diligently to close the APS transactions. There were a number of impediments, including being provided by the defendant with standard leases for the leaseback to the defendant of space to conduct the business, which were intended for retail malls rather than mixed-use condominium projects.
[6] As the closing date approached and negotiations increased and intensified, the defendant failed to incorporate agreed-upon changes into the leases and failed to respond to telephone calls from the plaintiff and its lawyers. On the Mutual Lease Condition date, the defendant provided “executable copies” of the leases to the plaintiff for signature, without having incorporated any of the previously agreed-upon changes into the leases, thereby deliberately frustrating the finalization of the long-term leases and failing to provide revised drafts in a timely way.
[7] The plaintiff maintains that Brewers, through Tom Lucas (“Tom” or “Lucas”), had made representations to Block on October 29, 2015 that Brewers would not rely upon its strict legal rights in respect of the Mutual Lease Condition. Block relied on these representations by not waiving the condition on that day and by continuing to negotiate the form of lease in the days that followed. The parties were both negotiating beyond October 29 in an effort to come to a final agreement.
[8] The plaintiff and defendant agreed that they would continue working after the expiration of the Mutual Lease Condition date, over the weekend and into early the next week to attempt to finalize the leases, which were almost completed. Accordingly, both parties’ lawyers worked throughout the weekend to achieve this end.
[9] However, unbeknownst to the plaintiff, the defendant, Brewers, through Tom, sought the approval of the Board of Directors during that time, to sell the property to another third-party with whom Brewers had previously dealt, and who was a friend of Tom. As a result, while the parties’ lawyers were continuing to work through the final agreements for the leases, Tom, on behalf of Brewers, had moved on to sell the properties to a third party. The Board of Directors gave their approval and the third party provided its offers to purchase.
[10] Finally, on November 5, 2015, Brewers’ lawyers wrote a letter to Block terminating the APS and returning the deposits on the properties.
[11] While the defendant maintains that properties which Block purchased between 2016 and 2019 were all mitigating properties for purposes of damages, it is the position of Block that none of these properties were purchased to mitigate its damages from the loss of the two Brewers properties. It is the position of Block that these properties would have been purchased in any event, given Block’s business plan of aggressive growth, i.e., to purchase as many properties as quickly as possible for profit.
[12] Block claims damages for breach of contract, breach of the obligation of good faith performance, misrepresentation and promissory estoppel. Block claims that it was deprived of the opportunity to acquire the subject properties and, thereby, deprived of the profit it would have earned from developing them into mixed-use condominiums. Its experts calculate Block’s losses to be $15.5 million, as of the date of breach, plus prejudgment interest. The defendants’ experts calculate the present value of the lost profits to be in the range of $7.2 to $9.7 million, depending on the length of the construction period used.
Position of the Defendant
[13] It is the position of the defendant that the agreements of purchase and sale, including the leases for the leaseback provisions, had to be agreed upon by a certain conditional date, failing which, if not waived, the deals would automatically terminate. Brewers maintains that Block extended the conditional date by 15 days by lying about/misrepresenting having commissioned a Phase II Environmental Report. It maintains that no environmental work was done but, rather, Block used the time to secure a price reduction.
[14] Brewers maintains that following this, Block did nothing to move the deals forward until October 14-23, when Block’s lawyers provided proposed changes to the interim and long-term leases, including the landlord’s Work Schedule to the long-term lease.
[15] It is the position of Brewers that due to the Mutual Lease Condition, the APS would come to an end on the Mutual Lease Condition date (ultimately, after extensions, on October 29, 2015), if the conditions had not been satisfied or waived. In this case, neither occurred by October 29, 2015 and, as a result, the agreement was terminated.
[16] It is Brewers’ position that they began to worry that they would not be able to close the transactions with Block by December 31, as was required to meet Brewers’ budget deadlines. Tom indicated that he was afraid that Block would attempt to delay or try to obtain another price reduction, which was causing him stress.
[17] It is the position of Brewers that although the lawyers for the parties had been discussing reviving the deals or backdating the agreement, no deal was forthcoming and therefore the deals were at an end. It was the position of Brewers that Block was attempting to either seek another reduction or delay the whole process. Brewers maintains that Block is the author of its own misfortune.
[18] Brewers maintains that no damages are owing to Block. However, if any damages are awarded, it maintains that the properties that Block has purchased from 2016 to 2019 are all to be considered as mitigation properties.
The Evidence
Proceedings and Mid-Trial Disclosure
[19] In pretrial documentary discovery, Brewers produced a small number of documents in comparison to the number produced by Block. Block’s productions included numerous pieces of correspondence between the parties that should also have been in Brewers’ files.
[20] During the trial, it became clear that Brewers had more relevant documents. These were ultimately produced mid-trial. As Brewers had waived privilege mid-trial, these productions included privileged and non-privilege communications.
[21] It also became apparent that Brewers had failed to preserve relevant electronic evidence, including Lucas’ electronic agenda.
[22] An adverse inference may be drawn when, in the absence of explanation, a party litigant or material witness over whom the party has exclusive control, does not testify: Sidney N. Lederman, Michelle K. Furest & Hamish C. Stewart, Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 6th ed. (Toronto: LexisNexis, 2022), at para. 6.509 “Failure to testify or call a material witness or other evidence”. The 5th ed. of this section was cited with approval in Mann Engineering Ltd. v Desai, 2021 ONSC 7580, at para. 28. An adverse inference may also be drawn where a party fails to produce relevant documents: Tiwari v. Chevalier, 2022 ONSC 3071, at para. 28.
The Agreed Statement of Facts
[23] The parties agreed to an extensive list of facts which I set forth in full as follows, at paragraphs 24 through 88.
[24] Brewers Retail Inc. (“Brewers”) is a corporation under the laws of Ontario, carrying on business as The Beer Store. Brewers is owned by Labatt Brewing Company, Molson Coors Beverage Company, Sleeman Breweries and other Ontario breweries, and is governed by a board of directors.
[25] At the relevant times, Tom was employed by Brewers as Director Real Estate and Construction for Brewers, a management position, with responsibility for sale lease-back transactions (where Brewers would sell properties but with lease-back rights), leasing, and the construction of new stores. He reported to Andrea Randolph (“Randolph”, Vice President of Retail Operations.
[26] Block Developments Inc. (“Block”), is an Ontario company, incorporated in October 2014 by Shlomo Marder. Block’s filings were subsequently updated to add Barry Fenton (“Barry”) as President and Director effective as of October 2014. Ryan Fenton (“Ryan”), Barry’s son, joined Block on a full-time basis in June 2015. Barry is also the President and Co-Founder and a 50% shareholder of Lanterra Developments, a large condominium/residential real estate developer throughout Canada, headquartered in Toronto.
[27] In February 2015, Brewers listed for sale approximately ten Ontario properties, including five properties that it owned in Toronto. Three of the Toronto properties listed were municipally known as 1200 Dundas St. W. (the "Dundas Property”), 57 Brock Ave. (the “Brock Property”), and 28 River St. (the “River Property”). CBRE acted as Brewers’ real estate agent. The Dundas Property and the River Property were sale lease-back transactions, obligating the purchaser to deliver a specified amount of ground floor commercial space to Brewers in the redevelopment of the site. CBRE invited offers to be submitted by February 26, 2015 and directed that purchasers deliver with their offers an interim and long-term agreement to lease based on Brewers standard form, incorporating specific terms.
[28] On February 26, 2015, Block submitted offers to purchase all three properties. The offers included Brewers standard form of lease and a form of Landlord’s Work schedule, as provided in the CBRE data room.
[29] On March 6, 2015, Brewers (through its agent) afforded Block with the opportunity to improve all three offers, having regard to other bids.
[30] On March 9, 2015, Block submitted an amended offer to purchase all three properties.
[31] On April 10, 2015, Brewers advised Block that the prices offered were agreeable. Block and Brewers then engaged in negotiations over the forms of agreement of purchase and sale. Block was represented by a real estate solicitor named Joe Fried (“Fried”) of Mayer Wassenaar & Banach LLP. Brewers was represented by the firm WeirFoulds LLP wherein David Thompson (“Thompson”) [commercial/leasing lawyer] and Jonathan Born (“Born”) [real estate lawyer], acted on the transactions.
[32] On June 23, 2015, Block and Brewers executed agreements of purchase and sale in respect of the Dundas Property, the River Property, and the Brock Property, at the prices agreed to in April and in the form of agreement the parties negotiated.
[33] The agreements of purchase and sale (for the Dundas Property and River Property) each contained three conditions. Section 3(a) of Schedule “A” to the agreements (for the Dundas Property and the River Property) contained a “Seller’s Board Condition”, which rendered the mutual acceptance of the agreements conditional on approval of the Seller’s Board of Directors. Brewers waived this condition on June 26, 2015.
[34] Section 3(b) of Schedule (A) to the agreements (for the Dundas Property and the River Property) contained a “Mutual Lease Condition”, in respect of the negotiation of an “interim lease” and “long term lease” (as described in the agreements). The conditional period was for a period of 45 days from the mutual acceptance of the agreement. The Buyer had a right to extend the conditional date for an additional 15 days as described in section 3(b) of Schedule “A”. The agreement for the Brock property did not contain a Mutual Lease Condition.
[35] Section 3(c) of Schedule “A” to the agreements (for the Dundas Property and the River Property) also contained a Buyer’s Diligence Condition, which rendered the agreements conditional upon the Buyer being satisfied with the physical and environmental condition of the properties and the economic feasibility of the Buyer’s intended use and development of the properties.
[36] On July 13, 2015, Fried emailed Born and Thompson to ask for a draft lease. On July 17, 2015, Fried followed up for a copy of the lease.
[37] On July 21, 2015, Charlotte Hunter, a leasing law clerk at WeirFoulds, provided Fried with proposed draft leases (the Interim Lease and the Long-Term Lease) for the River Property and the Dundas Property, by email.
[38] On August 4, 2015, Block invoked its right as buyer to extend the Mutual Lease Condition date by 15 days pursuant to section 3(b) of Schedule (A) to the agreements for the Dundas Property and the River Property. Brewers was notified of the extension in writing and, given that the 15-day extension landed on a Saturday, the new conditional date was Monday, August 24, 2015.
[39] On August 17, 2015, Fried emailed Thompson his comments on and proposed revisions to the draft Long Term Lease Brewers had provided on July 21, 2015.
[40] On August 19, 2015, Ryan and Barry had a meeting with Tom, during which Barry asked for a reduction of $4 million in the total purchase price of the Dundas, River and Brock properties. Ryan sent Tom an email later that day outlining the requested price reduction.
[41] On August 24, 2015, Block and Brewers agreed in writing to further extend the Mutual Lease Condition (of the Agreements for the Dundas Property and River Property) to September 25, 2015. The written amendments provided that the Purchase Agreement as amended was to remain in full force and effect and that all the terms and conditions were to remain the same and that time remained of the essence.
[42] On September 25, 2015, Block and Brewers executed amendment agreements for the Dundas Property and the River Property, which, among other things:
(a) Reduced the purchase price for the Dundas Property by $750,000 (or 10.8%) to $6.15 million (from $6.9 million);
(b) Reduced the purchase price for the River Property by $750,000 or (15.3%) to $4.15 million (from $4.9 million);
(c) Waived the Buyer’s Diligence Conditions for both properties; and
(d) Extended the Mutual Lease Condition to October 29, 2015.
The written amendments provided that the purchase agreements as amended was[sic] to remain in full force and effect and that all the terms and conditions were to remain the same and that time remained of the essence.
[43] On September 29, 2015, Block delivered two cheques to WeirFoulds LLP, in Trust, for the amounts of $258,000 and $158,000 (the “Deposit”), being the additional deposits payable under the agreements for the Dundas Property and the River Property.
[44] On September 29, 2015, Thompson emailed Adam Perzow (“Perzow”) of Minden Gross LLP, retained by Block to handle the leases, requesting comments on the draft leases. Thompson advised that Brewers wanted to finish the leases within the following two weeks.
[45] On September 30, 2015, Dana Shen, one of Block’s real estate lawyers working with Fried, wrote to Born to confirm that Block did “not need to provide reasons in the event that they fail to approve the Lease and waive the Mutual Lease Conditions”. The following day, Born confirmed that although no reason was required, Block was required to act reasonably and in good faith to fulfil the Mutual Lease Condition.
[46] On October 1, 2015, Fried advised Thompson that Perzow would be handling the long term lease discussions on behalf of Block.
[47] On October 8, 2015, Tom emailed Ryan to ask him to follow up with Block’s lawyers who were handling the leases.
[48] On October 14, 2015, Perzow provided comments on the revisions to the Interim Lease to Thompson by email.
[49] On October 18, 2015, Joseph Reichmann of Block contacted Patrick Lam (“Lam”), a mechanical/electrical engineering consultant. Lam responded the following day, sending a profile outlining the services offered by his firm.
[50] On October 20, 2015, Tom emailed Ryan and Barry to inform them that they had not yet received comments on the Long-Term Lease.
[51] On October 21, 2015, Perzow provided his clients comments on and proposed further revisions to the Long-Term Lease to Thompson by email. Shortly afterward, Perzow sent a follow-up email to point out that the landlord’s work schedule to the Long-Term Lease was being reviewed independently, and that comments would be forthcoming later in the week.
[52] On October 22, 2015, Thompson provided a revised draft of the Interim Lease to Perzow by email.
[53] On October 23, 2015, Perzow provided further comments on the Landlord’s Work provisions of the Long-Term Lease by email that had been drafted by Stephen Ruse, a leasing consultant retained by Block.
[54] On Monday, October 26, 2015, Tom emailed Ryan and Barry to request a call to resolve the outstanding issues with the leases, in light of the lease condition that was set to expire in three days.
[55] On Tuesday, October 27, 2015, Block and Brewers convened a call among the parties and their counsel to discuss and negotiate the Interim Lease and the Long-Term Lease. Barry and Ryan attended for Block, along with Block’s counsel. Tom attended for Brewers, along with Thompson. Later that day, Perzow provided a further draft of the Interim Lease for review.
[56] On Wednesday, October 28, 2015, there were communications between counsel for the parties regarding negotiating and finalizing the Long-Term Lease and Interim Lease. Thompson provided a revised draft of the Interim Lease for review. A further draft of the Long-Term Lease was not circulated that day. Barry, Ryan, and Tom exchanged emails later in the day (between 6:29 pm and 6:42 pm) regarding a further discussion to finalize the lease terms.
[57] On Thursday, October 29, 2015, at approximately 9:30 am, there was a call among Tom, Barry, Ryan, Thompson and Perzow to discuss the leases. On that call:
(a) Block and Brewers agreed on the terms of the Interim Lease;
(b) Tom advised Block that Brewers would waive the Mutual Lease Condition if Block waived it;
(c) The parties said that they would continue to work to finalize the Long-Term Lease later that day.
[58] Subsequently, Born communicated orally to Fried (in a call at approximately 11:00 am) that his instructions were not to extend the Mutual Lease Condition date but that Brewers would waive the Mutual Lease Condition if Block waived. Born later wrote to Fried at 12:41 pm that day, advising that his instructions were that there would be no further extensions of the Mutual Lease Condition. There was an internet issue at the WeirFoulds office that affected the firm’s ability to send and receive emails.
[59] WeirFoulds had computer/internet problems on Thursday, October 29, 2015, and was not able to provide an electronic copy of the revised Long-Term Lease until approximately 4:00 pm. Hard copy of the revised Long-Term Lease was delivered to Perzow’s office, which was followed shortly thereafter by an electronic copy, following the restoration of internet at the WeirFoulds office.
[60] Fried left Born a voicemail in the early afternoon, acknowledging the position taken in Born’s email of 12:41 pm (which he had recently received), and asking to speak. The two spoke again at approximately 4:30 pm.
[61] There is a dispute between the parties regarding whether Tom and Barry had further discussion later that afternoon and what may have been said on such a call.
[62] Neither party waived the Mutual Lease Condition on (or before) October 29, 2015.
[63] On Friday, October 30, 2015, at 10:39 am, Perzow provided Thompson with his handwritten comments on the Long-Term Lease provided by WeirFoulds the day before. Later that day, at 4:32 pm, 5:04 pm and 5:12 pm, Perzow sent Thompson further emails regarding certain points in the Long-Term Lease. At 5:30 pm, Thompson sent Perzow a revised version of the Long-Term Lease.
[64] Barry and Tom also spoke by phone on Friday, October 30, 2015.
[65] At 5:13 pm, Tom sent an email to Barry concerning the Long-Term Lease.
[66] On Saturday, October 31, 2015, at 6:33 pm, Perzow provided Thompson with his further handwritten comments on the Long-Term Lease by email.
[67] On Sunday, November 1, 2015, at 6:46 pm, Thompson acknowledged receiving Perzow’s comments (by email), and indicated that they would speak the following day.
[68] On Monday, November 2, 2015, at 11:45 am, Perzow wrote to Thompson (by email). Thompson responded that his client (Brewers) wanted counsel to speak directly first. Perzow and Thompson then spoke directly. Following the call, Perzow emailed Thompson at 5:17 pm, advising that he had discussed the outstanding points with his client and proposed an all-party conference call the next day. Thompson replied at 5:52 pm, advising that his client was not available in the afternoon, and asking if Perzow had other suggestions as to times.
[69] Also on Monday, November 2, 2018, Barry and Ryan were communicating with Scotiabank to finalize details of financing for the developments on the River Property and the Dundas Property. Barry and Ryan told the Scotiabank representative that the leases were still being negotiated, and that Ryan would send them as soon as possible.
[70] On Tuesday, November 3, 2015, at 3:42 am, Perzow responded to Thompson’s email regarding scheduling a call, proposing a call late in the afternoon on Wednesday, November 4, 2015 for the reasons articulated in his email.
[71] On Tuesday, November 3, 2015, at 10:14 am, Perzow wrote to Thompson regarding the last turn of drafts.
[72] On Tuesday, November 3, 2015, at 10:39 am, Tom emailed Randolph, seeking instructions to sell the properties to an alternative purchaser named Rosewater.
[73] On Tuesday, November 3, 2015, at 3:22 pm, Randolph wrote (by email) to the Brewers board of directors requesting the Board’s instructions to sell the properties to Rosewater as Tom recommended.
[74] On Tuesday, November 3, 2015, at 4:24 pm, Perzow wrote to Thompson again (by email), following up on his email of earlier that day. Thompson did not respond.
[75] On Tuesday, November 3, 2015, at 2:58 pm, Block employees emailed Lam, an engineer and HVAC consultant. In their communications with Lam, Joseph Reichmann indicated that they needed to complete a deal by Thursday of that week.
[76] On Wednesday, November 4, 2015, at 10:38 am, Perzow wrote to Thompson, asking about the drafting and for a phone call at 5 pm that day. Thompson responded at 3:14 pm to say that they were unavailable for a call at 5 pm.
[77] On Wednesday, November 4, 2015, at 5:34 pm, Barry emailed Tom, noting that he had left a few messages and asking for a call. Tom did not reply.
[78] On Wednesday, November 4, 2015, at 7:31 pm, the Brewers Board of Directors provided Randolph with direction to proceed with Rosewater.
[79] On Thursday, November 5, 2015, at 8:40 am, Perzow emailed Thompson, noting that he was looking to set up a call, and asking whether a time between 2 and 4:30 that day would work. Thompson responded at 10:07 am, noting that he was waiting for instructions, but was going into a few meetings and would let Perzow know as soon as he was out/available.
[80] Later on Thursday, November 5, 2015, Patrick Nugent of WeirFoulds, wrote to Fried by letter, advising of Brewers’ position that the Mutual Lease Condition and section 3(b) to the purchase agreements had not been fulfilled (in respect of the Dundas Property and River Property), and consequently that the purchase agreements were terminated and of no further force or effect. He enclosed certified cheques representing the deposits paid by Block.
[81] Fried responded on Thursday, November 5, 2015, on behalf of Block by letter, advising of Block’s position that the purchase agreements for the Dundas Property and the River Property were not at an end, and that Block maintained that the agreements were still in full force and effect.
[82] On Monday, November 9, 2015, Rosewater submitted signed agreements of purchase and sale for the Dundas Property, the River Property, and the Brock property. Subsequently, Brewers sold the Dundas Property and the River Property to entities owned or controlled by Rosewater on December 15, 2015.
[83] On Tuesday, November 10, 2015, a representative from Scotiabank sent letters to Ryan confirming that the bank was willing to provide the loan necessary to the projects at the River and Dundas Properties.
[84] On Thursday, November 12, 2015, Fried sent a letter to Thompson informing him that Block registered a caution on title for the Dundas and River Properties. In this letter, Fried represented that the mutual lease condition had been “fully satisfied”.
[85] On December 3, 2015, Naomi Loewith, a lawyer from Lenczner Slaght LLP, sent a letter to WeirFoulds to advise that the cautions on the River and Dundas Properties had been withdrawn on the basis articulated in her letter.
[86] Block completed the acquisition of the Brock property on December 15, 2015.
[87] From November 2015 to December 2020, related entities and/or affiliates of Block entered into agreements for the purchase of the following properties:
(a) 1601 and 1605 Dufferin St., Whitby, and three parcels of land (known as the “Boatworks” project), pursuant to assignment and assumption agreements dated from October 11, 2016 to November 16, 2016, for payment to the vendor(s) of approximately $4.9 million (and ultimately closed for payment to the vendor(s) of $4,516,500);
(b) 413-435 Roehampton Ave., Toronto (known as “Seville on the Roe” or “Ro Towns”), pursuant to assignment and assumption agreements dated March 23, 2016, and a purchase agreement dated November 1, 2017, for payment to the vendor(s) of approximately $13.5 million (and ultimately closed for payment to the vendor(s) of $12,880,000);
(c) 406-410 Keele St. and 11 Vine Ave. (known as the “Stockton” project), Toronto, pursuant to purchase agreements dated June 2, 2016, for payment to the vendor(s) of approximately $3.85 million (and ultimately closed for approximately that amount);
(d) 2483 Nash Rd., 2404 Regional Rd., #57, Bowmanville (known as the “Clarington” project), pursuant to an assignment agreement dated March 20, 2017, for payment to the vendor(s) of approximately $8.9 million (and ultimately closed for $8,200,000);
(e) 1494-1502 Dundas St. W., 1-3 Boland Lane, 649-648 Dufferin St., Toronto (known as the “Dundas & Dufferin Assembly” project), pursuant to purchase agreements dated August 3, 2017, October 10, 2017, and February 13, 2018, for payment to the vendor(s) of approximately $16 million (and ultimately closed for approximately that amount);
(f) 129-141 Vaughn Rd., Toronto (known as “Groove Urban Condominiums”), pursuant to an assignment agreement dated January 25, 2019, for payment to the vendor(s) of approximately $9.9 million (and ultimately closed for payment to the vendor(s) of $9,457,000).
[88] To date, the current owners of the Dundas Property and the River Property have not commenced construction on the sites. Block does not concede the relevance of this fact to the damages analysis.
Additional Facts
[89] While the agreed facts provide a bare structure for the negotiations between Block and Brewers during 2015, additional facts which give form to the structure were adduced in evidence at trial and include the following.
Block
[90] Block was founded by Barry Fenton (“Barry”), the President and CEO of Lanterra, a large development company operating since 1988 with commercial and retail holdings in Canada and the United States, and Shlomo Marder (“Shlomo”), the president of Nortown Electrical, a Marder family business, who has also created a significant real estate business.
[91] In 2014, Barry and Shlomo discussed how they could bring the second generation of their families together to work on business opportunities in the real estate sector. They decided to form a company like Lanterra which would be managed day to day by their children, but which they would capitalize. As a result, Ryan and Aaron Marder, as well as Shlomo’s son-in-law, Joseph Reichmann, joined the new company.
[92] The business plan was to grow Block as quickly as possible and to acquire as many assets as they could. The business model was aggressive growth.
[93] Block, through the connections of its principals, had brought access to equity and debt financing to acquire and pursue new developments. As well, Barry and Shlomo had substantial independent means that could finance the company’s acquisitions.
[94] From its incorporation, Block acquired numerous properties for development in Toronto and its environs.
[95] Brewers sold off some of its properties annually to raise money to fund its annual budget. Tom was employed after Brewers began to sell off its real estate assets. Each year, Brewers’ annual budget required the sale of properties to fund its operations for the following year. The property sales for each year had to be completed before year end. Once the sales were budgeted for that year, there were few, if any, other options to raise the cash needed to fund the company’s operations. Thus, it was critical to ensure that sales of properties closed before year end.
[96] Lucas, in his testimony, stated that the fact that the lease was not finalized, such that the deal could close before year end, was very stressful and that, as a result, he spent sleepless nights. He stated that there was “a lot on the line” with respect to the company and making sure that deals were completed to meet the budget within the year, all of which was very stressful. He testified that, as time went by, the stress really built on him and made it difficult to move forward with the project.
[97] During the material time, Brewers sold off 10 properties around the province, including some in Toronto.
The Agreements of Purchase and Sale
[98] Block made offers to purchase three of those properties, the Brock, Dundas and River properties. The APSs set out the conditions to the transaction in Schedule “A”. As stated above, section 3(a) contained a Sellers’ Board Condition, which made mutual acceptance of the agreements conditional on approval of the Seller’s Board of Directors. That condition was waived on June 26, 2015.
[99] Section 3(b) contained a Mutual Lease Condition, which provided:
The Seller and Buyer’s obligation to complete the transaction of Purchase and Sale contemplated herein is conditional for a period of 45 days from the mutual acceptance of this Agreement (the “Conditional Date ”) upon and subject to the Buyer and Seller having mutually agreed upon the form and content of the Interim Agreement to Lease and the Long Term Agreement to Lease as identified in and incorporating the provisions set out in Sections 4 and 5 of this Schedule “A” (the “Mutual Lease Condition”). The Mutual Lease Condition is for the benefit of the Seller and Buyer and in the event the Mutual Lease Condition has not been fully satisfied or otherwise mutually waived by the Seller and Buyer on or before the Conditional Date, this agreement shall come to an end and the deposit and all interest shall be returned to the buyer without deduction, upon which it is agreed that neither party shall have any further rights or obligations hereunder. The Seller and the Buyer agree that provided that the Buyer has commenced and undertaken its review of the environmental condition of the Property in a diligent manner and that despite the foregoing the Buyer has commissioned a Phase II Environmental Audit and such Audit will not be completed prior to the Conditional Date, then the Buyer may upon written notice to the Seller prior to the expiry of the Conditional Date, extend the Conditional Date for an additional fifteen (15) days.
[100] The agreement for the Brock property did not contain a Mutual Lease Condition, as it was not a sale lease-back transaction.
[101] Section 3(c), as above stated, set forth a buyer’s diligence condition which rendered the agreements conditional upon the buyer being satisfied with the physical and environmental condition of the properties and the economic feasibility of the buyer’s intended use and development of the properties.
[102] Section 5 of Schedule “A” to the agreements set forth the basic terms of the Long-Term Lease.
[103] Section 5(f) provided that the tenant (Brewers) was to be provided with a clean “retail shell” as per Brewers’ specifications detailed in the Landlord Work Schedule, contained within Brewers’ standard form agreement to lease. Section 5(j) provided that the Long-Term Agreement to Lease would be on Brewers’ standard form “which shall be modified to incorporate the buyer’s reasonable request for amendments to the non-financial terms thereof…”.
[104] It is of note that Schedule “D” is structured for use in a shopping centre or retail plaza and the prototype drawings were not appropriate for a mixed-use condominium development, which Brewers knew was the use to be put to the properties by Block. Brewers conceded in testimony that the standard prototype drawings would have to be amended to reflect the fact that the stores would be constructed in mixed use condominium structures.
[105] Schedule “D”, s. 33 provided that the form of lease would be prepared by Brewers on its standard lease form and “shall incorporate the terms and conditions of the agreement subject to such changes as the parties agree to, acting reasonably”. The provisions further stated that “the parties will use their reasonable efforts to finalize and execute the lease prior to the commencement date. In the event that the lease is not executed, the parties will be deemed to be operated under the tenant’s standard form of lease as amended by this agreement”.
[106] Thus, the provisions required the parties to work collaboratively to finalize long-term agreements, with Brewers having an express obligation to modify its drawings to reflect the fact that the stores would be located within a mixed-use condominium structure. The amendments to be undertaken by Brewers would guide and direct the landlord’s construction work in respect of the new demised premises.
[107] As indicated above, following execution of the agreements of purchase and sale, Brewers was responsible to provide initial drafts of the proposed interim and long-term leases. Despite the fact that the mutual lease condition was to be finalized within 45 days of signing the agreements of purchase and sale, Brewers did not provide proposed draft leases for the River and Dundas properties until July 21, 2015, despite multiple requests from Block’s real estate solicitor, Fried. This delay was conceded by Brewers, although no explanation was given. It is of note that the leases to be provided were pre-drafted, standard form leases. Documentation produced mid-trial indicated that these leases were actually being drafted by Brewers’ counsel until July 21.
[108] The documentation provided on July 21 was deficient in that it gave inconsistent instructions as to what drawings were to be used and also failed to appreciate or provide for the fact that the leaseback premises were to be constructed in a mixed-use condominium on a small site rather than in a retail mall or shopping centre.
[109] In this regard, the agreements referenced two drawings, dated 2001 and 2013. It is the position of the defendant that the two drawings were the same, and were only prototypical drawings and not site-specific preliminary drawings. It does not appear that the defendant made this clear to the plaintiff when the plaintiff inquired about the various references to the drawings as 2001 or 2013 drawings. Further, it does not appear that anyone made clear to the plaintiff that the drawings were designed for shopping malls.
[110] Further, while Thompson testified that there was only one set of drawings, and that the 2001 and 2013 drawings were the same, the evidence suggests that this was never made clear to the plaintiff, in response to their inquiries about the confusion of references to the “2001” or “2013 as amended” drawings.
[111] When the plaintiff requested clarification as regards the defendant’s references to both the 2001 and 2013 drawings, and Lucas told Thompson to provide the right set of drawings, Thompson testified that there was only one set of drawings relevant to the deal, and the 2001 and 2013 drawings were the same, but amended in 2013. I find that this was never explained or clarified to the plaintiff. Further, it does not account for the fact that those drawings were designed for shopping malls and retail plazas.
[112] The Dundas and River Properties included a Mutual Lease Condition date. On August 4, 2015, the Mutual Lease Condition date was extended by 15 days pursuant to s. 3(b) of Schedule “A”. At that time, Block retained environmental consultants who performed the preparatory work, including invasive drilling and related work, necessary to support a Phase II Environmental Report, which would have been finalized upon Block acquiring the properties. I accept Ryan’s evidence as regards the work done, and find that Block did not “lie” or obtain the extension under false pretenses, as suggested by the defendant.
[113] Block’s counsel, Fried, provided its initial comments on the long-term lease on August 17, 2015, and raised the issue of the errors regarding the prototype drawings provided to Block and contained in Brewers’ “data room”, including reference to two sets of drawings, the 2001 prototype and the 2013 prototype, neither of which contemplated a leaseback retail space in a condominium structure. Both Brewers and its counsel were aware of the discrepancy in the description of the drawings, although Brewers’ counsel, David Thompson, resiled from the evidence that he had given in this regard on examination in chief.
[114] Brewers’ counsel did not respond to Block’s counsel’s comments.
[115] On August 19, 2015, at a lunch meeting attended by Ryan, Barry and Tom, the Fentons informed Lucas of Block’s due diligence, and Barry requested a price abatement. Brewers requested an extension of the conditional date to September 25, to deal with the request, and this was memorialized in a written extension agreement. Thereafter, Ryan raised concerns about the long-term lease, indicating that for such a small site, with a Beer Store located in a mixed-use condominium development and not a retail shopping mall, the loading dock dimensions indicated were too large. Further, Ryan was concerned that the height specifications did not make sense, given the fact that the City had its own set of guidelines for urban infill developments, that two sets of template or prototype drawings were both referenced, such that there was confusion, and that there were parking issues given the small size of the development site. Lucas appeared to understand the issues. He admitted in cross-examination that the long-term lease referred to two sets of drawings and had to be resolved.
[116] The parties agreed to a price reduction of $1,500,000 on August 24, 2015 which was memorialized in an amendment agreement on September 25, 2015. Block was satisfied with its due diligence inquiries. The Buyer’s Diligence Conditions were waived for both properties and the Mutual Lease Condition was extended to October 29, 2015.
[117] On September 29, 2015, the deposits of $258,000 for the Dundas property and $158,000 for the River property were delivered to the defendant.
[118] At that time, Perzow of Minden Gross LLP, a well-known leasing expert and solicitor, was retained by Block to act with respect to the leases.
[119] Brewers had not, at that juncture, responded to the comments made by Fried on August 17, 2015 regarding the long-term lease. Block provided further comments on the interim lease on October 14, 2015. Brewers introduced a new term regarding a retrofit allowance which was not in the APS. Despite this new addition, the parties came to an agreement on the interim lease.
[120] While the defendant maintains that the parties had agreed to the retrofit lease provision, I accept the plaintiff’s submissions that this was a new provision inserted by the defendant.
[121] Regarding the long-term lease, Brewers requested comments from Block on two occasions in October 2015. Block was delayed in responding with its comments due to the fact that significant revisions were required, given that the long-term lease was not drafted for a condominium development on a small site, as known to Brewers. Due to this, Ryan requested that Lucas speak with Block’s consultant, Stephen Ruse, but Lucas refused to do so.
[122] The communications and negotiations which occurred from this point until November 5, 2015 when Brewers gave notice that the transaction was at an end and returned the deposits, will be carefully reviewed in the analysis portion of this decision, in order to determine the issues in this case.
[123] Lucas resigned from Brewers in April 2016.
Witnesses Testimony and Credibility
[124] I do not intend to review all of the evidence of each party, as contained in each party’s transcript of evidence at this juncture. The relevant evidence of each party has been included in this decision in the appropriate and relevant passages throughout my analysis.
[125] I will, however, give my assessment of the credibility and/or reliability of each party, below.
Barry Fenton
[126] I found Barry Fenton to be forthright and straightforward in answering the questions asked of him in examination-in-chief and cross-examination. He answered questions candidly, did not attempt to avoid answering questions, and admitted when he did not know or could not answer a question, without attempting to guess in order to fill gaps.
[127] While he stated that he was the principal decision-maker for Block and had participated in many teleconferences and meetings with Brewers, on a number of occasions, he deferred questions regarding details of the long-term leases to Ryan. Ryan answered those questions where he was able to and where he could remember.
[128] While Brewers submitted that this made Barry’s testimony unreliable and not credible, I do not find that to be the case.
[129] I found Barry Fenton to be credible and his evidence to be reliable.
Ryan Fenton
[130] I found Ryan Fenton to be equally forthright and candid. He answered all questions in examination-in-chief and cross-examination in a straightforward manner, calmly and without argument. He indicated where he did not know or remember or could not answer a question posed.
[131] I found Ryan Fenton to be credible and his evidence to be reliable.
Tom Lucas
[132] I found Tom Lucas, particularly in cross-examination, to be argumentative and defensive. He attempted to avoid answering difficult questions, to obfuscate, and to avoid answering questions, the answers to which did not fit his narrative. He attempted to explain away certain evidence. His answers were often not consistent with the documentary evidence or with answers he had given on examination for discovery. In those cases, he would attempt to work around the answers he had given once he was shown his previous answers or the contradictory documentary evidence. In cross-examination, he admitted to having made misrepresentations to his lawyers, to Block, to Randolph, his supervisor at Brewers, and to the Board of Directors.
[133] He further continued to maintain his position on statements he had made even where the documentary evidence proved that his version of facts could not have occurred.
[134] I found Tom Lucas’ answers to be unreliable and did not find him to be credible.
David Thompson
[135] I found the evidence of David Thompson to be problematic. He appeared to be acting as advocate for his client, Brewers, throughout his testimony. Much of his evidence consisted of after-the-fact inferences and not actual memories or recollections of events.
[136] In cross-examination, he reversed or abandoned numerous of his statements in the face of contradictory documentary evidence which was shown to him.
[137] I did not find his testimony to be straightforward or candid. He attempted to avoid answering difficult questions which did not fit Brewers’ narrative, and to explain away certain facts and events that would have an adverse impact on Brewers.
[138] He was on the stand for several days and contradicted himself numerous times throughout his testimony in examination-in-chief and cross-examination. His evidence also contradicted the documentary evidence. He would attempt to explain away these contradictions wherever he felt it was possible. He obfuscated and tried to avoid difficult areas of evidence. In cross-examination, he reversed or abandoned numerous of his statements in the face of contradictory documentary evidence.
[139] I did not find Thompson’s evidence to be reliable and did not find him to be credible.
Jonathan Born
[140] I found Jonathan Born’s (“Born”) evidence to be problematic. He testified to having prepared a note on October 29, 2015 which, he stated, accurately reflected a telephone conversation he had with Fried. He also testified that he had communication with Thompson and detailed instructions from Thompson. His evidence fit Brewers’ position, but ultimately proved to be false and inaccurate, based on late-produced documentary evidence.
[141] Once confronted with the contradictory late-produced evidence in cross-examination, Born changed his evidence and conceded that his earlier version of facts and his earlier note were inaccurate, and were not reflective of reality. He further conceded that he could not and did not recall any discussion with Thompson or with being provided with Thompson’s instructions.
[142] I find Jonathan Born’s evidence to be unreliable, and where it contradicts the plaintiff’s evidence, I prefer the plaintiff’s evidence to Born’s unless otherwise stated.
Issues
[143] The plaintiff alleges that the defendant committed three distinct breaches of the purchase agreements, as follows:
Breach of the duty of good faith and honest performance;
Breach of the duty of cooperation to fulfil the Mutual Lease Condition; and
Breach of the defendant’s obligation to sell the Dundas and River Properties to Block by wrongfully terminating the agreements.
[144] In this case, the following issue must be determined:
Was Brewers Retail Inc. entitled to conduct itself the way it did from October 29 to November 5, 2015 and then terminate the Agreements of Purchase and Sale between it and Block Developments for 1200 Dundas St. W. and 28 River St. as of November 5, 2015?
Analysis
[145] In the Analysis portion of the decision, it will be important to carefully review the evidence surrounding all of the events occurring between October 19 and November 5, 2015. It is from the Agreed Statement of Facts and the additional evidence adduced at trial that I piece together what transpired during the critical period of October 19 to November 5, 2015.
[146] The defendant’s Brief of Closing Submissions does not appear to tell the whole story. They have omitted from the entire narrative, numerous critical acknowledgements, admissions, and concessions made by their witnesses in cross-examination.
[147] As indicated above, the parties came to an agreement on the interim lease in October, leaving only the long-term lease agreement to be finalized.
[148] Thereafter, Block worked on finalization of the long-term lease, which entailed revising the original provisions, designed for retail shopping malls, to fit into the contemplated mixed-use condominium with a small plate size. As also indicated above, Lucas had seemed to understand the issues facing Block with respect to the lease when Ryan explained them to him on August 19, 2015.
[149] The evidence indicates that on October 19, 2015, Ryan spoke with Lucas and requested that Lucas speak with Block’s lease consultant, Stephen Ruse (“Ruse”), regarding the terms of the lease, in order to work through the Landlord’s Work Schedule, but Lucas indicated that he could not meet as he was too busy, and did not see any reason why it would be necessary to speak with Ruse in any event.
[150] On October 20, 2015, Lucas emailed Ryan expressing concern about the leases and indicating that the standard leases had been accepted by other developers in the past.
[151] On October 21, 2015, Perzow provided Block’s comments and revisions to the long-term lease to Brewers’ counsel, Thompson, indicating that the long-term lease was being independently reviewed and further comments would be forthcoming.
[152] On October 22, 2015, Thompson provided a revised draft of the interim lease to Perzow, and indicated that Block wanted to meet to discuss the outstanding business points. Lucas would only meet with Block with lawyers present so that any legal issues arising could be addressed.
[153] On October 23, 2015, Perzow provided Ruse’s comments regarding the long- term lease to Thompson and Lucas. These comments proposed drawings for the leased-back Beer Store which would conform with the overall development, addressed the issues of height to conform with City guidelines, and made other changes which were consistent with construction of the Beer Store within the mixed-use condominium development, instead of a shopping mall or retail plaza.
[154] On October 26, 2015, the parties agreed to meet on October 27 to resolve the outstanding issues for the interim and long-term leases, with the lawyers present in order that all agreed upon changes could be made immediately and the documents finalized.
[155] The October 27, 2015 meeting, which lasted several hours, was attended by Ryan, Perzow, Ruse, Lucas, and Thompson. Both the interim and long-term leases were discussed. The parties reviewed both documents in what was described as a “page flip”, during which the parties went through the documents page by page, discussed all outstanding issues, and came to agreements where possible.
[156] While Lucas insisted that the meeting had occurred on October 22, 2015, the Ruse comments were not circulated until October 23, 2015, such that a meeting on October 22, 2015 to review all of the comments provided by Ruse would not be possible.
[157] A significant number of issues were agreed upon. Lucas acknowledged that there had been agreement on the issues of construction drawings, minimum clearance heights which were changed to comply with City requirements, the description of HVAC services to be provided, amendments required regarding banner awnings and lights, proposed amendments regarding underground utilities, proposed amendments regarding refrigeration equipment, proposed changes to garbage and recycling provisions, proposed removal of two handicapped parking spots contemplated in the original schedules, and proposed revisions to the landscaping provisions.
[158] Despite the fact that Lucas testified that the Ruse comments were not received until October 23, 2015, that he had written on the Ruse document “okay” where an agreement was reached concerning a point, and there was no evidence, other than his viva voce testimony, to suggest that the meeting had happened earlier, he continued to assert in cross-examination that the meeting had proceeded on October 22, 2015, despite the fact that this was prior to the circulation of the document on which he had written his comments. I do not accept his evidence regarding the meeting date.
[159] Thompson confirmed the evidence of Ryan and Lucas regarding the October 27, 2015 meeting and indicated that after that meeting, they thought that they were done with the negotiations. However, in cross-examination, he reversed his evidence and stated that he could not recall whether there was a “page flip” of the Ruse document, and finally testified that he could not recall the meeting. Upon being shown the notes of Lucas, made on the Ruse document, he ultimately conceded that Lucas had verbally agreed to numerous changes made by Ruse, although he had not made note of those agreements.
[160] Thompson further indicated that the lawyers were to be present at the meeting, in order that the changes could be made and memorialized immediately and the documents finalized. Despite this, no revisions were made by Brewers. Thompson stated that amendments had been made but, subsequently, in cross-examination, he reversed that position and testified that no amendments were made. Accordingly, no written response was made by Brewers to Block’s comments of October 22 and 23, 2015 and to the negotiations and agreements of October 27, 2015.
[161] Thompson provided a revised draft of the interim lease to Block following the teleconference meeting.
[162] Based on all of the evidence, it is apparent that no changes were made to the long-term lease following the October 27, 2015 meeting. It is of note in this regard that Lucas admitted on cross-examination that a failure by a party negotiating the long-term lease to incorporate agreed-upon changes would be a barrier to finalizing the leases and would constitute unreasonable conduct. I find that this is what happened as regards Brewers, namely they failed to make the required amendments to the agreement following the meeting of October 27, 2015. This was unreasonable conduct, given that the parties were attempting to finalize the agreements.
[163] On October 28, 2015 at 4:04 pm, Perzow advised Thompson by email that he was reviewing the retrofit lease, reference to which had not been included in the APS, and which was drafted later. Thompson and Perzow discussed outstanding issues at a teleconference later that afternoon, in preparation for a final all-party call on October 29, 2015 to resolve all outstanding issues.
[164] In the evening of October 28, 2015, Ryan emailed Lucas indicating that he had reviewed the lease and comments from both sides and requested that Lucas give Barry a call. Lucas responded as follows:
I got revised comments through my/your lawyer this afternoon and note nothing we agreed to yesterday stood today. Thus, I will only have a call with our lawyers present. There should not have been any reason to go through further revisions based on what we all agreed to yesterday. You can set up a call for tomorrow morning with our lawyers again to finalize before the deadline tomorrow.
[165] It is the defendant’s position that those comments only referred to the interim lease.
[166] However, Block had not received any further documentation from Brewers’ counsel and had not reversed itself on anything related to the discussions and agreements of the day before. It is of note that just before trial, Lucas conceded in updated answers to advisements that he was mistaken regarding his evidence and that he had not received any email from his solicitors on October 28, 2015 which would indicate that Block had changed its position with respect to the Landlord’s Work Schedule. He confirmed this in his testimony at trial. However, at trial, he presented a new and different explanation regarding his reversal of position. He said that he had taken the position he did because Barry had stated that he could not agree on the Landlord’s Work Schedule until Ruse reviewed it again on his return in one week. I do not accept that evidence, as Ruse had been at the teleconference meeting on October 27, 2015 at the time that his written comments had been discussed, and there was no reason to review it again.
[167] Barry responded to Lucas’ email, noting that:
There are a few issues still to be discussed. If you are not prepared to appreciate the above, I will respect that. If so, please advise and I will advise our lawyers to stop working on the file. I am sorry that it has come down to this, but life is short and there is no need to get to the point where we are.
[168] Barry explained that his email was intended as a pressure tactic (“muscle email”) to attempt to get Lucas to focus on finishing the leases as Block wanted to close on the transaction.
[169] It appears that, at about that time, Lucas was considering selling the subject properties to another development company called Rosewater, the principal of which, Bottero, was a friend and business associate of his, with whom he had had several other transactions. While Lucas denied that Bottero was a friend and claimed that Bottero was only someone with whom he had done business on behalf of Brewers, in cross-examination, he confirmed that they socialized.
[170] It is further of note that at about that time, there appeared to be concern that a lawsuit may ensue, which caused Brewers’ counsel to involve one of WeirFoulds’ senior litigators in the file. According to Thompson’s testimony, this occurred well prior to October 29, 2015.
[171] On October 29, 2015, at approximately 9:30 am, a teleconference was held which involved Lucas, Barry, Ryan, Thompson, and Perzow. There is much evidence in dispute arising from that teleconference. However, based on the Agreed Statement of Facts, the following facts were agreed to between the parties:
Block and Brewers agreed on the terms of the interim lease;
Lucas advised Block that Brewers would waive the Mutual Lease Condition if Block waived it; and
The parties said they would continue to work to finalize the long-term lease later that day.
[172] The testimony of both Barry and Ryan is consistent with the above agreed-upon facts. Ryan testified that the purpose of the meeting was to finalize the interim lease and long-term lease. As regards the interim lease, Barry and Ryan testified that this was finalized at the meeting, consistent with the Agreed Facts. Brewers had not responded to Block’s last comments with respect to the long-term lease.
[173] As regards finalization of the long-term lease in the last days of negotiation, I do not accept the evidence of Lucas and Thompson which is contradictory and which contradicts the Agreed Statement of Facts. Lucas had suggested that Brewers was prepared to waive the Mutual Lease Condition if Block did. However, Barry proposed that the parties continue to work through finalizing the long-term lease, and based on the testimony of both Barry and Ryan, Lucas agreed to this. As Brewers had not responded to Block’s last comments regarding the long-term lease, Brewers was to provide the revised draft to Block. Lucas’ testimony was different from the Agreed Statement of Facts, the evidence of Barry and Ryan and, indeed, Lucas contradicted himself in cross-examination as regards the long-term lease.
[174] Lucas testified in examination-in-chief that Barry and Ryan advised that the long-term lease could not be finalized until their construction expert, Ruse, returned to the City the following week and reviewed the final Landlord’s Work Schedule. Accordingly, the long-term lease had to be put “off the table” until Ruse returned.
[175] Thompson also confirmed this. However, on cross-examination, he reversed his position and stated that while Barry and Ryan stated that they had to meet with Ruse, they did not say that the long-term lease could not be substantively discussed. On the following day, Thompson again reversed his own testimony stating that Block had said that the Landlord’s Work Schedule was “off the table”.
[176] It is of note that, although the parties were ordered by the court to prepare “Will Say” statements, Brewers did not disclose Thompson’s anticipated evidence regarding the meeting of October 29, 2015, nor did Brewers put Thompson’s anticipated evidence to Ryan and Barry pursuant to the Rule in Browne v. Dunn.
[177] This testimony, of course, contradicted the Agreed Statement of Facts, set forth above, in which the parties stated that they would continue to work to finalize the long-term lease later that day. Thompson stated that he had no recollection of anyone saying that on the day in question, but if the statement had been made, his memory of the event was incomplete in that he did not recall an important part of the meeting that day.
[178] Further, Thompson testified that he took notes at the meeting, but did not produce notes taken on that day or any other day. No notes were produced of any of the meetings.
[179] Considering all of the evidence before this Court as regards the teleconference meeting of the morning of October 29, 2015, I do not accept the evidence of Lucas and Thompson and find their evidence to be unreliable. Had their evidence been accepted, there would have been no reason for the parties to continue working on the long-term lease later in the day, or over the next several days, as proposed by Barry. Further, Brewers agreed to continue to work on the long-term lease and to provide a revised draft later that day, which they would not have done had their evidence been accepted.
[180] October 29, 2015, was, of course, the Mutual Lease Condition date. Despite this, Brewers did not provide comments on the revised long-term lease, as it was to do, until 4 pm on October 29, purporting to have had Internet/computer problems.
[181] Based on all of the documentary evidence provided mid-trial and Brewers’ waiver of privilege at that time, it appears that there was no drafting that occurred on October 29, despite Brewers’ indication that it would continue to work that day to finalize the leases. It is of particular note that none of the changes agreed to on October 27 by the Fentons and Lucas, as noted above, were incorporated into the draft long-term lease sent back by Brewers to Block on October 29 at 4 pm. Nor were any of the obvious errors in the Landlord’s Work Schedule, such as the contradictory references to the prototype drawings, corrected.
[182] Born, a real estate lawyer at WeirFoulds, gave evidence regarding a transcript-like note he had purportedly prepared during a telephone call with Fried on the morning of October 29.
[183] Brewers maintained that there could have been numerous calls between Born and Fried that day, although Born could not recall the discussions. There were no other notes to memorialize the calls. While Born testified that he likely spoke with Block’s counsel more than once that day and may have written more than one note, there is no supporting evidence for this. Having heard and considered the evidence, I do not accept this explanation.
[184] Brewers alleged that there was another conference call on the morning of October 29 between Fried and Born, that Born had taken notes that read something like a transcript and that indicated that Fried had suggested that they should let the deal die and then revive the deal once all terms were settled, whereupon Born advised that he could not agree to that as he understood the lease was settled and there would be no further extensions. Based on all of his evidence, and on productions made by Brewers mid-trial, it became apparent that his earlier evidence regarding his earlier note was not accurate. It appears, based on all of Born’s evidence, that the note in question was prepared after the fact and was not accurate, and that the conference call mentioned therein was not held until later.
[185] The documents produced by Brewers midway through the trial included email correspondence which demonstrated that Born did not have instructions that morning when he spoke with Fried, and that Fried had believed that the business issues had been resolved and the parties needed time to paper them. He was advised by Thompson at 9:43 am, when he asked whether there was any update on the Mutual Lease Conditions, that Thompson was on a conference call.
[186] The late produced documentation indicates that Born did not have any instructions from Thompson until after 12:18 pm. Based on the productions, Born conceded in cross-examination that he did not have instructions on the issue of an extension and that Fried had advised him that the clients had settled the terms of the long-term lease and needed time to paper the agreement. He admitted that the initial handwritten note had conveyed the opposite information. He further admitted that Fried conveyed to him the opposite of what he put in the Born note, and that his note was inaccurate and omitted key details of the first telephone conversation. He finally conceded that the Born note was prepared after the fact.
[187] Given all of the foregoing, I place no weight on the Born note, which I find to be inaccurate, and not authentic.
[188] Due to the fact that Brewers did not provide comments on the long-term lease in a timely way on October 29, the lawyers sought instruction from Lucas on how to respond to Block’s query concerning a formal extension to the Mutual Lease Condition date. Lucas did not have authority to extend or not extend the Mutual Lease Condition, which authority was required from Randolph at the direction of the Board of Directors. When the lawyers sought Lucas’ instruction, he advised that he had sought instructions from Randolph but had been unable to obtain instructions to extend the Mutual Lease Condition date. However, he was impeached in cross-examination and conceded that he had not sought instructions from Randolph or the Board of Directors and that he had provided false information to his lawyers in that regard, and to Block, in contradiction of his duty to act in good faith in conducting business.
[189] Barry Fenton testified that he spoke with Lucas on the afternoon of October 29, given that Brewers had not agreed to an extension and had not provided a revised form of the lease. During that teleconference, Lucas apparently suggested that he wanted to continue working on finalizing the leases, and then the parties could backdate the Mutual Lease Condition to October 29.
[190] While the defendant takes the position that there was no discussion between Lucas and Barry Fenton that they would continue to work on the lease and backdate the Mutual Lease Condition and states that Lucas has no recollection of such discussions, it is clear from the evidence that the parties’ lawyers did just that — work through the weekend to finalize the lease.
[191] Barry Fenton further testified that had Lucas advised him that he was not prepared to do any further work on finalizing the long-term lease, such that Block would have to determine that day whether they wished to waive the Mutual Lease Condition, Block would have waived the condition in order to avoid losing the deal. He testified that he was relying on Lucas’ representations to him that they would continue to work on the long-term lease, and then backdate the agreement. Ryan Fenton corroborated this evidence. Lucas conceded that he had discussed the concept of reviving the deal with Barry Fenton on October 29 and further conceded that he was familiar with the concept of backdating.
[192] A further draft of the agreement, prepared by Brewers, was delivered to Block at 4 pm on the afternoon of October 29, one hour before the end of the business day, and one hour before the Mutual Lease Condition deadline. Lucas testified that these drafts were “execution copies”, that they were acceptable to Brewers, and that they incorporated all of the changes previously agreed to, which was not the case. Indeed, none of the changes had been incorporated into the “execution copies”, as was ultimately conceded by both Lucas and Thompson.
[193] While the draft had not been changed in any way by Brewers and therefore could have been sent to Block immediately after the morning teleconference, it was not delivered immediately after the 9:30 am teleconference, but was only delivered at the end of the day at 4 pm, based on Lucas’ instructions. As Lucas admitted, if the document did not incorporate the changes the parties had agreed to, Block would not be in a reasonable position to agree to it and that such action would frustrate the process of arriving at agreed- upon leases. Lucas admitted that he understood that because of the late delivery of the redraft of the long-term lease, which did not include any of the agreed-upon changes, that there would need to be work done and a teleconference the next day to resolve the terms of the long-term lease.
[194] Brewers blamed this on Block, stating that they had no revisions from Block. I do not accept Brewers’ position or Brewers’ placement of said blame, based on the foregoing.
[195] As Lucas had stated earlier, the deal had to be completed by year end in order that he could make budget, which was important to Brewers. He testified that as the date got closer to year end, he became more and more stressed.
[196] It appears that his stress and anxiousness informed his subsequent decisions regarding the pending agreement. His conduct suggests that at the end, he became sufficiently stressed that he turned to Bottero, who he anticipated, from past business dealings with him, would purchase the properties without negotiating, accepting the short-term and long-term leases without amendments.
[197] Further, Lucas testified, without any concrete evidence to that effect, that he surmised that Block, at the end, was attempting to either delay or to obtain another price reduction, and became concerned about the transaction. In my view, without evidence, this was merely conjecture.
[198] It would appear from all of the evidence that Lucas and business associate, Bottero of Rosewater Developments, with whom he had done transactions on behalf of Brewers in the past, had been in touch with one another in October and November as regards another property that Bottero was purchasing from Brewers, and spoke about the Dundas and River Properties. Rosewater had been interested in purchasing these properties when they were first put on the market by Brewers, but was outbid by Block.
[199] While, during the trial, Lucas insisted that the transactions were at an end on October 29, as the Mutual Lease Condition date was not waived and the agreement was not finalized, all the evidence shows that the parties’ lawyers continued to work through October 30 and through the weekend to finalize the long-term lease. The evidence indicates that this was known to the parties. Indeed, the parties spoke on October 30, which was described by Barry Fenton as a cordial discussion, but by Lucas as heated. Throughout October 30 and the weekend, the parties conduct was consistent with the testimony given by Barry Fenton that the parties would continue to attempt to finalize the long-term lease. On October 30, the interim lease was finalized.
[200] Following this, at 10:39 am,Perzow sent to Thompson comments on the revised long-term lease that Brewers had provided the day before, and noted that none of the revisions to the Landlord’s Work Schedule that had been agreed upon earlier that week had been incorporated into the final draft sent by Brewers. There were ongoing communications among the lawyers throughout the day. Further, Lucas and Barry Fenton had a telephone call at the noon hour to discuss the leases. At the end of the day, Lucas sent an email to Barry Fenton stating “Spoke with David. He had a chat with Adam is [sic] revising the document and getting back ASAP. We’ll keep you posted.” Barry Fenton understood from this call that the parties would continue to work to finalize the long-term lease and, once completed, would backdate the lease to October 29.
[201] Brewers sent back a revised lease in the late afternoon of October 30, which, again, did not incorporate any of the changes to the Landlord’s Work Schedule to which the parties had agreed on October 27. In testimony, Lucas agreed that this was the case. Indeed, based on the productions provided mid-trial, email correspondence indicated that Lucas had not provided any instructions to his lawyers to incorporate the agreed-upon changes to the Landlord’s Work Schedule as of the end of day on October 30.
[202] Over the weekend, October 31 and November 1, the lawyers for Block and Brewers continued to work together to finalize the long-term lease.
[203] On Monday, November 2, Perzow indicated to Thompson that there should be one last teleconference among the parties to finalize any outstanding issues. Thompson responded that Brewers wanted the counsel to speak together first, which they continued to do on November 2. Perzow again indicated that there should be an all-party conference call the next afternoon to settle all issues. Thompson responded indicating that his client was unavailable, and asking for other suggestions regarding time, thus still indicating that Brewers intended to continue its work to close the transactions.
[204] On November 2, the Fentons were also continuing to finalize financial details, and Scotiabank was confirming that the financing was ready to be advanced.
[205] While Lucas had stated at trial that he was pessimistic by November 2 about any deal being concluded, this evidence was impeached in cross-examination by his prior discovery testimony where he testified that he was hopeful at that time of concluding a transaction.
[206] As of November 3, Block continued to attempt to arrange an all-party call to finalize the long-term lease. At that juncture, Block also sought to have Ruse attend, hoping that he may be able to induce Brewers to incorporate the changes they had agreed to on October 27 when Ruse was on the teleconference, and the parties were discussing Ruse’s comments. On Monday, November 2, Perzow indicated to Thompson that there should be one last teleconference among the parties to finalize any outstanding issues. Thompson responded that Brewers wanted the counsel to speak together first, which they continued to do on November 2. Perzow suggested a call for Wednesday in the late afternoon. Again, Block was advised that Lucas was unavailable.
[207] On the morning of November 3, unbeknownst to Block, Lucas was attempting to obtain instructions from the Board of Directors to get out of the transactions with Block. Lucas wrote the following email to Randolph, to be given to the Board of Directors. This email was replete with errors and misrepresentations to which Lucas ultimately admitted. The email read as follows:
Andrea,
The above three properties have not gone firm on the Mutual Release Condition (it was due last Thursday after we had asked him to push his conditional dates out for us going back to August), as the Purchaser (Block Developments), keeps coming with more changes to the lease, regarding business/financial terms (including terms that were agreed to in the purchase and sale agreement), as well as the Landlord’s Work Schedule (which will compromise TBS’s ability to operate our location), and that wording/”legaleze”, around the Landlord’s obligations to build out the new building to our specifications as well as the timelines which will keep us hanging. Every time we finish a call and have “agreed” on everything the Purchaser either backtracks/comes up with other issues or both. All of these issues combined will hinder our operation as well as cost TBS more money in the long run and it definitely sets up a poor landlord/tenant relationship.
We are now in November and the closing is slated for December 15 and I am certain that he is delaying us, to put the “gun to our heads”, to get another price reduction as well. I have recently found out (through a planning acquaintance of mine) that the City has put a stop to zoning changes in the area that affects Brock Avenue, and the Purchaser just mentioned to me over the weekend that “we still need to talk about Brock”… I’m not entertaining with him. I purpose [sic] did not extend the mutual lease condition with the Purchaser, as it would have given him more leverage…… I think he feels that there is no one else lined up to buy the properties even though I have told him people are still calling.
The total Purchase Price for the three properties currently totals $14,950,000 (Dundas at $6,150,000, River at $4,150,000 and Brock at $4,650,000 and my gut feeling is that he’s going to look for a reduction down to around $14M mark…… I called him out on this on a call last week and he didn’t answer me.
I’ve gone to the next purchaser in line and he is still interested (Rosewater….they bought all 5 last year as well as Oakwood and Wilson this year….Oakwood closed and Wilson is binding and closing on the 15th of December), however, the total purchase price for all three is at $13,500,000 which was negotiated up $300,000 from where they were on final tender submissions. He will close on the 15th of December this year and will use all of the legal forms that were used last year (thus, this would be a quick turnaround). He only needs time to complete environmental reports, which he said he can get done in time.
Knowing this is a massive gap from the current Purchase Price, we would still be above budget on the total sales needed for budget purposes, leaving us $1,015,000 over on gross proceeds and to bridge the gap, we could scrap the refrigeration replacement program for the end of this year which would leave a gap of $260,000. If you consider where I think the current purchaser is going to try to get to on the purchase price, then we are not that far apart.
After numerous calls with the current Purchaser and our lawyers, my recommendation is to move onto the next Purchaser as I have no confidence that he will close at the current price and given how the negotiations are going, I’m not confident that our Landlord/Tenant relationship will be a good one, which could result in further costs/delays to TBS.
Given the lack of time available to us to get this resolved, please go to our owners asap and get direction on the above, so that I know either way which way they would like me to proceed.
If you need anything/have any questions/comments, I am available.
Thanks.
[208] The above email was provided to the Board of Directors that afternoon, and the Board of Directors gave its approval, the final board member affirming his approval at 7:49 pm on November 4.
[209] Lucas finally admitted to having made five misrepresentations in his email to Randolph and the Board of Directors including the following:
The email suggested that all three properties (Dundas, River and Brock) had not gone firm on the Mutual Lease Condition which, as Lucas knew, was not true. The Brock property did not have a Mutual Lease Condition and was in the due diligence phase.
The email suggested that Brewers could terminate the transactions on the three properties, and sell them all to Rosewater, which was not true.
The email suggested that Lucas had spoken with Barry Fenton over the weekend, which was not true.
The email asserted that Block continued to come back with more changes to the Landlord’s Work Schedule, which was not true. In fact, Lucas confirmed at trial that Brewers had received only one draft of the Landlord’s Work Schedule from Block on October 23 and had agreed to many of the proposed revisions during the teleconference on October 27.
The email failed to disclose that Block had been seeking a further meeting to finalize the lease terms as of Monday, November 2, but had been put off by Lucas.
[210] Further, the email to the Board of Directors indicated that Lucas had reached out to Rosewater to negotiate a sale of the properties to them, and had negotiated up their original bid price of $13.2 million by $300,000 to $13.5 million, although he had denied this in testimony at trial. He further indicated that he had negotiated a closing date, the use of legal forms, and the timeline for completion of environmental reports. Based on all the evidence, it appears that Lucas had negotiated the entire transaction with Rosewater by or before the morning of November 3. Following this, on November 9, Rosewater submitted offers for all three properties for a total price of $13.5 million, the amount that had been reported to the Board on November 3. Further, the offers were dated November 3. Brewers and Rosewater did not engage in any further negotiations, and the agreements for Dundas and River were signed and returned without any changes.
[211] At the same time, Brewers was continuing to negotiate with Block regarding finalization of the long-term leases.
[212] In my view, Lucas’ worry, as admitted in his testimony, that the deals may not be completed by year end, meaning that he would be unable to meet the budget set for him, caused him to recontact his business associate and friend at Rosewater to ensure that the budget was met by year end. This concern is further addressed in his memo emailed to Randolph.
[213] It is likely, also, based on his behaviour in the last days of the negotiations with Block, that he sought to withdraw from the deals and benefit his business associate and friend, Bottero at Rosewater, as urged by the plaintiff.
[214] It appears from the memo to Randolph and the Board, that, despite his denial in his testimony at trial that he approached Bottero concerning the River and Dundas Properties, he did actually approach Bottero (“I have gone to the next purchaser”) and had “negotiated up $300,000 from where they were on final tender submissions”.
[215] The Bottero offers, received by Lucas on November 9, but dated November 3, were for the exact amount that Lucas had indicated to the Board in his memo of November 3.
[216] While Lucas testified at trial that his first communication with Bottero was on November 3, when Bottero called about another property he was buying from Brewers, I am of the view, based on a consideration of all of the evidence, that the communication and preliminary negotiations with Bottero had to have occurred prior to November 3, the date on which Lucas’ memo to the Board was sent and when the Rosewater offer to purchase was signed.
[217] Moreover, on November 3, Block’s lawyer, Perzow, proposed to Thompson, Brewers’ lawyer, an all-party meeting for November 4 to accommodate the parties’ schedules and inquired about the next/final drafts of the leases. Thompson did not respond to Perzow’s several emails that day, as Thompson had no instruction from Brewers to do so. Thompson was aware that Lucas was seeking instructions from the Board of Directors of Brewers to sell the properties to Rosewater.
[218] Perzow continued to attempt to contact Thompson on November 4, regarding final drafts and to determine whether there would be a 5 pm all-party call that day. There was no response from Thompson until 3:14 pm, when Thompson indicated that Brewers could not make the call.
[219] Barry Fenton attempted to contact Lucas directly several times on November 4, without success. No one advised Block that Brewers’ counsel was awaiting instructions as to whether they would continue with negotiations. Had Block known the real situation, Block would have waived the Mutual Lease Condition to avoid losing the transactions. Indeed, the evidence of both Barry and Ryan Fenton confirmed that had Brewers advised them back on October 29 that they would have to waive or lose the deals, they would have waived. Instead, they continued to negotiate the long-term lease with Brewers’ counsel, based on Lucas’ statements regarding working to finalize the leases.
[220] On November 5, Brewers’ counsel wrote to Block advising that they considered the transactions terminated and returned the deposits. Block disputed Brewers’ position and advised that they expected Brewers to conduct itself in good faith.
[221] Block attempted thereafter to proceed with the transactions. They registered a caution on title to the lands. Block wanted to close as the properties fit into its model of development, and comparable properties on small sites in the City suitable for development were difficult to find.
[222] Block takes the position that Brewers terminated the transactions on November 5, 2015, while Brewers takes the position that the transactions died pursuant to the contracts on October 29, when Block failed to waive the Mutual Lease Condition.
[223] However, Brewers fails to take into account the discussions between Lucas and Barry Fenton concerning backdating or reviving the agreement once all amendments to the long-term lease had been incorporated. Brewers also ignores its instructions to its lawyers to continue working on the negotiations and draft leases after October 29 to finalize the transactions. Their counsel continued to work with Block’s lawyers through November 3, when they failed to respond to Block’s lawyer’s attempted communications, until November 5, when their termination letter was served.
The Law
Principles of Contractual Interpretation
[224] The following principles of contractual interpretation, which are set forth in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 47, 48, 57, 60 are to be considered in this decision:
The contract must be read as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time the contract was formed;
Contract interpretation requires a common-sense approach not dominated by technical rules of construction;
The meaning of words in a contract is often derived from several contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement;
The primary goal of contractual interpretation is to ascertain the objective intentions of the parties as expressed in the written agreement, considered in light of the factual matrix existing and known to the parties at the time the contract was formed;
Evidence of the circumstances surrounding a contract’s formation — what is known or reasonably ought to have been known to the parties — may be considered in order to “deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the contract”.
[225] Duty of honest performance. Parties to a contract have a duty to act honestly in the performance of the contract and must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract: CM Callow Inc. v. Zollinger, 2020 SCC 45, 452 D.L.R. (4th) 44, at para. 3; Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at para. 73. A party to a contract must not seek or attempt to undermine the interests of the other party in bad faith: Bhasin, at para. 65. A party must not engage in active or intentional deception: Canlanka Ventures Ltd. v. Capital Direct Lending, 2021 ABCA 115, 20 Alta. L.R. (7th) 252, at paras. 24–25.
[226] A party to a contract has a good faith duty of honest performance where the parties must cooperate to achieve the objects of the contract, which may include taking all reasonable steps to fulfil the contract: Bhasin, at paras. 47 and 73; Wastech Services Ltd. v. Greater Vancouver Sewerage and Draining District, 2021 SCC 7, 12 B.L.R. (6th) 1, at para. 128.
[227] Duty to cooperate in fulfilling conditions. The duty to take all reasonable steps to fulfil conditions precedent extends to post-contractual conduct. To the extent that there remain matters outstanding under the agreement reached by the parties, the law is clear that both parties have an ongoing obligation to make a genuine effort to perform steps required to complete the terms of the agreement: Bhasin, at paras. 47 and 49, citing Dynamic Transport Ltd. v. OK Detailing Ltd., 1978 CanLII 215 (SCC), [1978] 2 S.C.R. 1072.
[228] A party cannot use its own breaches or default in satisfying a condition precedent as a basis for being relieved of its contractual obligations: Southcott Estates Inc. v. Toronto Catholic District School Board, 2010 ONCA 310, 104 O.R. (3d) 784, at para. 13, aff’d 2012 SCC 51, [2012] 2 S.C.R. 675; Barclays Bank PLC v. Metcalfe & Mansfield Alternative Investments VII Corp., 2013 ONCA 494, 308 O.A.C. 17, at paras. 147–61; UBS Securities Canada Inc. v. Sands Brothers Canada Ltd., 2009 ONCA 328, 95 O.R. (3d) 93, at para. 94; Park Avenue Flooring Inc. v. Ellis Don Construction Services Inc., 2015 ABQB 478, 49 C.L.R. (4th) 214, at para. 223, citing Mugford v. Maple Lane Homes Inc. (1992), 26 R.P.R. (2d) 152 (Ont. Gen. Div.). And as regards “time of the essence” clauses, see Fortress Carlisle Peter St Inc. v. Ricki’s Construction and Painting Inc., 2019 ONSC 1507, 89 B.L.R. (5th) 268, at paras. 99–105, aff’d 2019 ONCA 866, 98 B.L.R. (5th) 1. See also Leung v. Leung (1990) 1990 CanLII 6866 (ON SC), 75 O.R. (2d) 786 (Gen. Div.), citing Koffman et al v. Fischstein et al (1984), 1984 CanLII 1874 (ON SC), 49 O.R. (2d) 124 (H.C.J.), aff’d 1986 CanLII 2656 (ON CA), 53 O.R. (2d) 671 (C.A.); Morgan v. Lucky Dog Ltd. (1987), 45 R.P.R. 263 (Ont. H.C.J.).
[229] Nor can a party to a contract rely on its own wrongful conduct, which caused the failure of a transaction to close, to terminate an agreement: Morgan.
[230] Lucas, in cross-examination, admitted to having provided false information to his solicitors regarding instructions from his superior, Randolph, and to causing his solicitor to provide that false information to Block. Lucas further admitted that Brewers failed to incorporate the agreed-upon changes to the long-term lease. Lucas also admitted to having provided false information and material misstatements to Randolph and the Board of Directors to obtain their approval to withdraw from the transaction with Block and sell the properties to Rosewater.
[231] I find these misrepresentations and Lucas’ overall conduct to constitute bad faith business dealings as regards Block. I find that Brewers generally did not fulfil its duties to act honestly and in good faith, to cooperate to achieve the objects of the agreements, and to fulfil conditions in its dealings with Block.
[232] Promissory Estoppel. Promissory estoppel operates where one party has, by words or conduct, made a promise or assurance with the intention of affecting their legal relationship and the other party relies on it: Maracle v. Travelers Indemnity Co. of Canada, 1991 CanLII 58 (SCC), [1991] 2 S.C.R. 50, at p. 57.
[233] As set forth in Trial Lawyers Association of British Columbia v. Royal & Sun Alliance Insurance Company of Canada, 2021 SCC 47, 163 O.R. (3d) 398, at para. 15, a legal obligation will arise in promissory estoppel where three requirements are met:
A promise was made by one party to another while a legal relationship existed between them;
The promise was intended to affect the legal relationships; and
The other party altered its position to its detriment because of its reliance on the promise made to it: see H. S. C. Aggregates Ltd. v. McCallum, 2014 ONSC 6214, 20 C.C.E.L. (4th) 50, at para. 103.
[234] Where the elements of promissory estoppel are established, the promisor will be held to the promise or assurance made and will be prevented from relying on their strict contractual rights. A promise or assurance can be either expressly stated or implied from actions: Maracle, at p. 57.
[235] Promissory estoppel was recently explained by this Court in Cronnox Inc. v. Lloyd’s Underwriters, 2018 ONSC 6437, 88 C.C.L.I. (5th) 228, at para. 89, citing Tudale Explorations Ltd. v Bruce (1978), 1978 CanLII 1471 (ON SC), 20 O.R. (2d) 593 (Div. Ct.), as follows:
In that case, an option to explore and develop mining claims under an option agreement was required to be exercised within three years. Before the expiry of this period of time, the party that granted the option assured the other party that it would grant an extension. The contract could only be modified by instrument in writing. The extension was later refused, and the three-year period had expired. The Divisional Court noted that the “sword/shield maxim” had been heavily criticized but held, in any event, that the claim to the rights under the option was set up as a defence to the assertion by the other party that the rights under the contract had expired. The Divisional Court held that where the party that granted the option had agreed to extend the time for exercising it and then repudiated the agreement upon the ground the time had expired, the party that granted the option could not deny the extension of time, or at least it must give the other party a reasonable time to regain its position. In Tudale Explorations Ltd. v Bruce, estoppel was used to prevent a party that was in a contractual relationship with another party from insisting upon its strict legal rights.
[236] Based on the defendant’s conduct from October 29 to November 3, the plaintiff understood that the defendant was continuing to finalize the transaction. The defendant did not require the plaintiff to waive the Mutual Lease Condition or lose the deal. The defendant never told the plaintiff that it was insisting on that date as the final date for waiver until November 5 when Brewers advised that the contract was terminated. The defendant did not state that the contract was terminated on October 29 and did not return the deposits at that time or any time prior to November 5. Thus, the defendant by its conduct, made an assurance that it would not rely on the strict wording of the APSs, with the intention of affecting the parties’ legal relationship and the plaintiff relied on this to its detriment, in this case continuing to work on the deal past the date at which it could have waived the condition. Indeed, the defendant did not act on its strict right to terminate the contract pursuant to the APSs until after it had an alternate purchaser in place and approval by the Board.
[237] Thus, the defendant, by its conduct and words, assured or purported to assure the plaintiff that it would not insist on its legal rights set forth in the contract. The defendant relied on this to their detriment and rather than waiving the condition, had their lawyers continue to work with the plaintiff’s lawyers, through the next several days to finalize the terms of the long-term lease. The defendant could not thereafter revert and insist on the terms of the contract. They are estopped by so doing pursuant to the doctrine of promissory estoppel.
[238] Based on all of the evidence, documentary and viva voce, I find, as I set forth at paragraphs 230–31 and 236–37 above, that the defendant, Brewers, failed to act honestly and in good faith in dealing with Block to close the transactions for the sale of the Dundas and River properties to Block, and further failed to take all reasonable steps to finalize the leases so that the Mutual Lease Condition could be satisfied, thus breaching its duty of cooperation to achieve the objects of the contract. The defendant also breached its obligation of honest performance.
[239] Brewers failed to cooperate in finalizing the leases and incorporating agreed-upon terms, even after the final all-party teleconference where the agreements were finalized. It failed to deal straightforwardly with Block as regards the Mutual Lease Condition.
[240] As regards these breaches, in addition to paragraphs 230–31 and 236–37, above, I note the following conduct:
On October 26, 2015, Lucas proposed an all-party teleconference, with counsel present, to resolve the terms of the leases and to incorporate all changes agreed-upon immediately. At that point, it was up to Brewers to respond to Block’s comments on the long-term lease, which Block had provided on August 17, 2015, October 21, 2015, and October 23, 2015;
On October 27, at the teleconference meeting, the parties made substantial progress to resolve the terms of the leases. Lucas testified that he believed the parties were “done” and could move forward. This view is shared by Brewers’ counsel, Thompson, and also by Ryan Fenton;
Brewers’ counsel was to incorporate the changes agreed upon and circulate a revised draft in a timely manner, so that the leases could be finalized by October 29, as admitted by Thompson himself;
Despite this, Thompson admitted that he took no notes as to the agreements arrived at by the parties on October 27 and did no drafting on that day or at any time subsequently;
Brewers did not incorporate the agreed-upon changes. Rather, on October 28, Brewers asserted, falsely, that Block had reversed itself on various points agreed to, such that Lucas refused to speak with the Fentons;
On October 29, at 9:30 am, the parties and their counsel met again. Brewers represented that it was prepared to continue working with Block to finalize the long-term leases later that day. Block understood that Brewers would incorporate agreed-upon changes and provide a revised form of the lease for review.
However, Brewers failed to do this. It made no changes, but provided the lease late in the day to Block just before the Mutual Lease Condition deadline. The evidence indicates that this was all done on Lucas’ instructions. Brewers gave its oral assurance that it would not rely on its strict rights in respect of the Mutual Lease Condition, and the parties, through their counsel, continued to work through the weekend and into the following week.
[241] Block was ready to close, had secured the financing and agreed upon the majority of the lease terms. However, Brewers did not indicate that it would insist on the mutual condition date but rather, by its words and conduct, indicated that it would continue the deadline to complete the deal.
[242] Had Lucas disclosed to Block at any time between October 27 and 29 that Brewers was no longer prepared to discuss the long-term lease, or to incorporate changes, the evidence indicates that Block would have waived the conditions in order to avoid losing the deal. Brewers’ evidence was that it would have waived conditions if Block had done so. Thus, it was Lucas’ misrepresentations, which were relied upon by Block, that caused Block to lose the properties.
[243] Without the knowledge of the plaintiff, the defendant had, prior to October 29 and through November 3, approached the alternative purchaser, Rosewater, which had originally bid on the properties when Brewers first put them on the market but had been outbid by the plaintiff. As a result of that contact, Rosewater expressed continued interest in purchasing the properties. Lucas then sought to obtain Brewers’ Board of Directors’ authorization, providing numerous significant misrepresentations in the memorandum to the Board, which misrepresentations Lucas admitted to at trial. As a result, Brewers terminated the APSs with Block and instead sold the properties to Rosewater.
[244] Brewers acted egregiously, breaching its contract with Block, and breaching its duty of good faith dealing. It failed to perform its contractual duties vis-à-vis Block honestly and reasonably. It also failed to take all reasonable steps to finalize the leases so that the Mutual Lease Condition could be waived. It failed to make all genuine efforts to perform all steps required to complete the terms of the agreement, both before the Mutual Lease Condition date and thereafter when it instructed its lawyers to continue working on finalization of the leases. I find that it acted dishonestly and in bad faith.
[245] I find based on all the evidence, that Brewers is precluded from relying on its strict legal rights in relation to the Mutual Lease Condition to terminate the purchase agreements by virtue of promissory estoppel.
Misrepresentation
[246] The plaintiff alleges that the defendant is liable for negligent misrepresentation. They point in particular to the following misrepresentations.
[247] On the morning of October 29, Brewers told Block that it was prepared to work with Block to finalize the leases later that day. Lucas later told Barry Fenton that Brewers would continue to negotiate past the conditional date and backdate the waiver to October 29. This was similar to his representations on October 26 when he suggested convening a meeting on the 27th to finalize the leases.
[248] However, based on the evidence, Lucas took no steps to incorporate the changes agreed to by the parties on October 27 in order to finalize the leases. Nor did he advise Block of his intention to adhere to the October 29 waiver date. Had he done so, Block would have waived the condition by October 29.
[249] Because of Lucas’ misrepresentations to Block as outlined above, Block relied on said misrepresentations to his detriment, thereby losing the deals.
[250] I am satisfied that the five requisite elements to establish negligent misrepresentation are present in this case. The relationship between the parties was sufficiently proximate and the injury to Block reasonably foreseeable to create a “special relationship” from which a duty of care arose. The representations made to Block were inaccurate, misleading and not true. In making such misrepresentations, Brewers was negligent. Block relied on the misrepresentations, chose not to waive the condition, but rather to continue finalizing the lease, which was to its detriment, causing Block to lose the deals.
[251] I find, based on the evidence, that by October 29, Lucas had no real intention of finalizing the long-term lease or continuing negotiations beyond the mutual condition waiver date as he had represented to Block.
[252] I find that Brewers is vicariously liable for Lucas’ misrepresentations, as Lucas had sole responsibility for directing counsel and managing the transactions on behalf of Brewers.
[Statute of Frauds](https://www.canlii.org/en/on/laws/stat/rso-1990-c-s19/latest/rso-1990-c-s19.html)
[253] I do not find the arguments of the defendant as regards the applicability of the Statute of Frauds, R.S.O. 1990, c. S.19 to this action to be persuasive. The Statute of Frauds precludes unwritten agreements for the sale of land. That is not the situation which presents itself in this action.
[254] In this case, we are dealing with promissory estoppel, which involves a promise made by one party not to rely on its strict contractual rights. This is different and distinct from a verbal contract, which is an agreement that creates new rights between the parties.
[255] In the present case, Brewers, by its words and actions, indicated or promised, prior to the termination of the Mutual Lease Condition deadline, that it would not rely upon its strict legal rights but would continue with the negotiations, which gave rise to promissory estoppel. As a result, Brewers is not able to revert and to rely on the original termination date to terminate the APS with respect to the two properties.
[256] Based on all of the foregoing, I make the following findings.
I find that Brewers was not entitled to conduct itself as it did from October 29 to November 5, and then terminate the transaction.
I find that promissory estoppel is applicable to the circumstances of this case. I find that Brewers is estopped from relying on the strict legal rights set forth in the APSs, based on its words and conduct on and after October 29 as set forth above.
I find that Brewers was in breach of its contractual obligations. In its actions, it failed to act honestly and in good faith in its commercial transactions with Block and failed to take all reasonable steps to fulfil the conditions.
I further find Brewers liable for misrepresentation arising from Lucas’ misstatements to Block, to Block’s principals and its lawyers, which Block relied on to its detriment.
Damages
[257] Block seeks damages based on the profit it would have earned from developing the properties into mixed-use condominiums.
[258] The plaintiff’s experts have calculated Block’s losses at $15.5 million as at the date of breach, plus pre-judgment interest. The defendant’s experts calculate the present value of the plaintiff’s losses between $7.6 million and $10.2 million, depending on the length of the construction period used.
[259] While the defendant argued that the damages for lost profits are not available for breaches of contract regarding real estate, this proposition is not in accord with the jurisprudence. See Performance Industries Ltd. v. Sylvan Lake Golf and Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, paras. 72–73; Rousseau Group Inc. v. 2528061 Ontario Inc., 2022 ONSC 486, paras. 229–34 and 353.
[260] In December 2023, both counsel requested that they be permitted to provide supplemental submissions by January 15, 2024 regarding the appropriate approach to measure of damages, as discussed in the recently released Court of Appeal decision in Rousseau Group Inc. v. 2528061 Ontario Inc., 2023 ONCA 814, which I permitted. Both parties had made reference to this court’s decision in Rousseau Group Inc. v. 2528061 Ontario Inc., in their closing submissions.
[261] The submissions involve measures of damages and the appropriate measure of damages to be used in failed real estate development transactions.
[262] I have carefully considered the subject decision and the submissions of the parties. I do not find any reason to alter or change my conclusion as regards measures of damages.
[263] While the Court of Appeal held that the normal measure of damages is the difference between the purchase price and the market value of the property on the assessment date, they also recognized that the normal measure of damages may not address the type of loss allegedly suffered.
[264] In the present case, I find that the market value approach would not appropriately or fairly assess the plaintiff’s damages in the circumstances of this case.
[265] I remain of the opinion that the lost development profit approach, adopted by both parties economic loss experts is the fair and appropriate means to assess damages in all of the circumstances of this case.
The Experts
[266] Block retained four experts to calculate various aspects of the lost profit analysis, as follows:
Mark Conway (“Conway”) of N. Barry Lyon Consultants Ltd. (NBLC) determined the probable revenues associated with the plaintiff’s development of the properties.
Michael Chung (“Chung”) of Deloitte LLP opined on the appropriate overall capitalization rate to value the foregone leases of the two properties; Chung’s evidence was not contested and was filed on consent of the parties.
James Ryan and Ronald Mandowsky (“Ryan and Mandowsky”) of Pelican Woodcliffe Inc. (PWI) assessed construction costs and prepared pro forma calculations of profit showing what Block would have earned had it been able to pursue development of the defendant properties.
Larry Andrade (“Andrade”) of Deloitte LLP performed an assessment of the present value of Block’s damages as at November 5, 2015, the date of the breach of contract.
[267] The defendant’s experts were as follows:
Charles Ross (“Ross”) of CB Ross opined on the construction costs and profitability of the developments proposed by the current owners of the River and Dundas properties.
Dennis Leung (“Leung”) was qualified as an expert in economic loss quantification and business valuation. He was called to opine on economic loss.
[268] I prefer the reports of the plaintiff’s experts regarding construction costs, construction timelines, lost profits and mitigation, as set forth below.
Probable Revenue of the Developments
[269] Expert evidence regarding the probable revenues associated with the plaintiff’s development of the properties was given by Mark Conway, who was qualified as an expert professional planner and land economist to give evidence regarding the probable revenues associated with Block’s development of Dundas and River. His evidence was not contested or undermined in cross-examination. His opinions on probable revenues, sales absorption rates, and price escalation were uncontroverted.
[270] In cross-examination, the defendants did not take issue with his opinions on probable developments that would have occurred, sales prices, sales periods, or rate of sales. Rather, the defendant challenged the plaintiff’s expert, Mark Conway, on his assessment of the construction period. I found the defendant’s challenge to be based on fallacious assumptions.
[271] They attempted to challenge Conway’s assumption on when sales of units would have begun. Conway had based his timelines on his more than 30 years of experience with construction projects and stated them to be reasonable.
[272] The defendants did not adduce any evidence to suggest that they were not reasonable. Instead, they pointed to the fact that the current owner’s timelines were different.
[273] Conway explained that timelines are based on the principles of urban planning. They are not based on ownership, but rather on the planning instruments, local planning context, local Council, and regulations of the City. Conway explained that his estimates were based on the assumptions for reasonable development application, not the identity of any one owner, and not the progress of the present owner.
[274] While the defendant submitted that Conway’s estimates should not be accepted because the present owner did not adhere to that timeline, I do not accept the defendant’s arguments. The present owner may have deviated from Conway’s estimated timeline for various other reasons not applicable to the plaintiff. I am of the view that this is not a valid basis to undermine Conway’s opinion. Indeed, as regards River, the current owner subsequently acquired adjacent land and will, as a result, construct a different type of development, which has delayed that construction. That had nothing to do with the plaintiff as regards timelines.
[275] I note that, in any event, the risk of any development not being achieved in the estimated timeframe is addressed in the discount rate used by the economic loss experts to present value the damages.
Probable Costs and Profits
[276] The probable costs and profits of the developments were assessed by Ryan and Mandowsky of PWI for the plaintiff and by CB Ross for the defendant.
[277] To provide the calculation of profits, PWI relied upon revenue and sales information provided by Conway of NBLC and the capitalization rate estimated by Deloitte. Based on these, they prepared a pro forma financial statement of estimated profits, deducting from the revenue the land costs, the “hard costs” (bricks and mortar), and the soft costs (consultant fees, taxes, development charges, insurance and financing), adding offsetting income earned by condominium developers during interim occupancy.
[278] Hard costs were calculated using a “square-foot” approach, which is commonly used for residential projects.
[279] The defendant’s expert, CB Ross, used the “elemental approach” for calculation of hard costs, which is more detailed, labour-intensive and, as Ryan explained, may result in a more accurate cost estimate at an early stage of design.
[280] The elemental approach estimates both the quantities of materials required and the cost per unit of those materials. Both PWI and CB Ross generally agreed on the estimated quantities of materials, but differed in opinion on unit rates. As an example, they agreed on the number of appliances needed, based on the number of suites to be built, but differed on the cost of appliances to be installed in the units.
[281] In its 2021 Reply Report, PWI adopted the elemental approach used by CB Ross, which eliminated the methodological difference between PWI and CB Ross on hard costs.
[282] The defendant challenged the calculations of the plaintiff’s experts, Ryan and Mandowsky as regards their 2021 Reply Report, on the ground that they changed their methodology and adopted the elemental approach used by CB Ross, rather than the methodological approach that they had used earlier in their first report.
[283] In my view, the 2021 Reply Report of the plaintiff uses an acceptable methodology also used by the defendant, which makes comparison of the two expert reports easier and more understandable.
[284] I do not find the change in methodological approach used by PWI in its second report to render the report unreliable. Both methodologies are acceptable, as indicated by the plaintiff’s experts. Rather, in my view, because PWI adopted the elemental approach in its second report, this eliminated the methodological difference between PWI and CB Ross on hard costs. Both experts used the same elemental approach in formulating their opinions.
[285] The plaintiff’s experts considered the defendant’s unit estimates to be too high and in most cases higher than the cost ranges published by the Altus Group, the largest cost consulting group in Canada. Altus provides an annual guide of construction cost ranges.
[286] While Ross justified his higher estimates on the basis that the two projects had complexities, he acknowledged that such complexities were prevalent in Toronto, many of the buildings of which had the same features that he termed “complexities”. Ryan indicated that these complexities would be reflected in the Altus Guide.
[287] Ross testified that he supported his opinion on elevated costs on comparable projects selected from his own database, although these were not identified in his report. In testimony, he did identify and describe four of these “comparable projects”, which turned out to be earlier constructions (2015–2017) and before a significant cost shift in constructions recognized by both parties.
[288] I do not find the defendant’s “comparable projects” to be significantly comparable to be of assistance to the court.
The Present Value as at the Date of Breach
[289] As regards calculations of present value as of the date of breach, Andrade of Deloitte LLP assessed the present value of damages on behalf of the plaintiff and Leung of Grant Thornton LLP on behalf of the defendant.
[290] The parties’ experts in economic loss quantification, Andrade and Leung, used the same methodology for calculating the present value of the plaintiff’s damages. Each assessed damages from the date of breach, and arrived at the same discount rate of 10% to account for the risk of negative contingencies and to present value the lost profit as of the date of breach.
[291] Andrade incorporated specific contingencies and a risk premium into the weighted cost of capital to ensure that the potential for delays were factored into his damage calculations. The construction timeline used by the plaintiff was created by Conway and PWI, in collaboration, and also used by Ross, who considered it reasonable.
[292] The two experts’ conclusions differed due mainly to:
the estimated costs to construct the projects at Dundas and River, and the resulting impact on the profitability of the projects, and
the appropriate construction period.
[293] The defendant expert, Leung, provided two present value scenarios for estimates of profit and loss, one according to the timeline estimated by Andrade for the plaintiff, and a second scenario calculating potential profits if construction were delayed by 12 months. In cross-examination, he admitted that he had no expertise in estimating pre-construction or construction timelines and further that he had selected 12 additional months as an arbitrary period.
[294] His selection of 12 months for delay was, as he conceded, subjective, and he stated that it could have been another figure. He apparently picked 12 months as it was midway between the periods of delay experienced by the current owners of the properties. He acknowledged that the period selected was imperfect and subjective.
[295] Based on the evidence in cross-examination, the 12-month arbitrary extension was based on assumptions that were not correct or validated by him. I am of the view that Leung’s report, Scenario 2, proffered an arbitrary opinion outside his expertise that, in the end, resulted in lowering the plaintiff’s damages, to his client’s benefit. I do not find it of assistance to the court. He further admitted that his mitigation report was tainted by the same concerns, namely that the report was beyond his expertise and he did not validate the figures.
[296] Having reviewed the expert reports of Messrs. Andrade and Leung, and having considered the evidence (documentary and viva voce), I find Andrade’s analysis to be more reliable and preferable.
[297] Further, I accept the analysis of construction timelines from the plaintiff’s experts, NBLC and PWI. These timelines were acknowledged to be reasonable by the defendant’s expert, Ross. With respect to the alternative construction timeline prepared by the defendant’s expert, Leung conceded in cross-examination that he did not have any qualifications regarding construction timelines and his estimate just added the arbitrary 12 months, which benefited his client.
[298] Leung further admitted that his mitigation report was tainted by the same concerns — the report was beyond his expertise, and he conceded that he did not validate his figures.
[299] I am satisfied that the calculations of lost profits as prepared by the plaintiff’s experts are reasonable and accurate.
[300] In my view, based on all of the above and the evidence adduced, the plaintiff’s expert reports and calculations are to be preferred to those of the defendant.
Mitigation
[301] While the plaintiff bears the burden of proving the fact that he or she has suffered a loss and the quantum of that loss or damage, the defendant bears the onus of proving, on a balance of probabilities, that:
The plaintiff has failed to make reasonable efforts to mitigate; and
That mitigation was possible: Asamera Oil Corp. v. Sea Oil & General Corp., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633, at p. 660. And see Red Deer College v. Michaels, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324, at p. 331; Janiack v. Ippolito, 1985 CanLII 62 (SCC), [1985] 1 S.C.R. 146, at pp. 163–65.
[302] It was the position of the defendant that all properties purchased by the plaintiff after November 5 to the time of trial were mitigating acquisitions, serving to reduce the plaintiff’s profit-loss claim.
[303] Brewers takes the position that Block was able to mitigate its damages arising from Brewers’ withdrawal from the deals by purchasing other development sites from 2016 to 2019. It is Block’s position that none of the purchases of development sites made from November 2016 to 2019 can be considered mitigating purchases. Block’s stated business purpose and plan was aggressive growth, to acquire as many properties for development as quickly as possible for profit. The plaintiff had substantial backing and no operational or financial constraints. Block had ample access to financing. Based on all of the evidence, viva voce, documentary and expert, I find that the acquisitions made by Block after the termination of the contracts by Brewers are not to be considered as mitigating transactions.
[304] In 2015, although Block bid on 10 properties, it was only successful in entering agreements of purchase and sale for the Brock, Dundas and River properties. Following the breach of contract in November, Block was unsuccessful in acquiring any other properties in 2015.
[305] Block did continue to acquire properties and would have continued to acquire properties even without the breach of contract. It was limited in its acquisitions only by the availability of lands for development. The availability of suitable sites for acquisition and development in Toronto and environs was challenging.
[306] It continued with its business model of aggressive growth in 2016 and made offers on dozens of other properties but was only successful in acquiring three development projects. None of those were for downtown mixed use condominiums comparable to Dundas and River, which properties are difficult to find.
[307] The defendant did not advance any evidence to establish that there were comparable development properties readily available for the purpose of “mitigation”. There was no evidence led by the defendants to establish that any of the subsequently acquired properties were acquired as replacements for the Dundas and River properties.
[308] The defendant’s mitigation analysis from Leung was based on assumptions that were stated as conclusions. They were not based on any analysis and were not reasonable. Some of the underlying assumptions were outside of Leung’s expertise, as he admitted in cross-examination.
[309] I find Leung’s opinions as regards his damage and mitigation calculations to be unreasonable and unjustifiable, straying outside his areas of expertise, based inter alia on arbitrary assumptions tending to assess the damage calculations of the defendant by lowering them, as he himself admitted. I do not find his expert evidence to be fair, objective or unbiased.
[310] I accept the expert evidence of Andrade of Deloitte, who concluded that Block had the operating and financial capacity to purchase the River and Dundas Properties as well as the properties subsequently purchased. I find that the acquisition of the subsequent properties fell within Block’s business plan for rapid, aggressive growth.
[311] I am of the view that the plaintiff’s purchases of properties from November 2016 onward are not to be considered as “mitigating” acquisitions, but rather as the continued activity in furtherance of its business plan.
[312] I am satisfied, based on the evidence, that the properties purchased by Block in 2015 and thereafter should not be considered to be mitigating properties or replacements for the Dundas and River Properties. I accept that they would have been purchased in any event, whether the subject properties had been acquired or not. Block’s business model was to acquire as many developable sites in Toronto as quickly as possible (i.e. aggressive growth) and they were not impeded in their goals by financial constraints given Block’s financial backing. I find that the properties acquired in 2015 and thereafter were acquired in the normal course of their business and not as mitigating properties.
Summary
[313] Based on all of the foregoing, I make the following findings.
I find that Brewers was not entitled to conduct itself as it did from October 29 to November 5, and then terminate the transaction.
I find that Brewers was in breach of its contractual obligations. In its actions, it failed to act honestly and in good faith in its commercial transactions with Block and failed to take all reasonable steps to fulfil conditions.
I further find Brewers liable for misrepresentation arising from Lucas’ misstatements to Block, to Block’s principals and its lawyers, which Block relied on to its detriment.
I find that Brewers is estopped from relying on the strict legal rights set forth in the APSs, based on its words and conduct on and after October 29 and on the principle of promissory estoppel.
[314] I find, based on all the evidence, documentary and viva voce, that the plaintiff is entitled to its damages in the amount of $15.5 million plus prejudgment interest from November 5, 2015, and to post judgment interest.
Costs
[315] I strongly urge the parties to agree upon costs. Should they be unable to do so, the parties are to provide me with their Bills of Costs of no more than three pages within 60 days of the release of this decision.
C.J. Brown J.
Released: April 2, 2024
COURT FILE NO.: CV-15-541652
DATE: 20240402
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Block Developments Inc.
Plaintiff
– and –
Brewers Retail Inc.
Defendant
AMENDED REASONS FOR DECISION
C.J. Brown J.
Released: April 2, 2024