Bhasin and Beyond: Ontario Court of Appeal Dismisses Contracts Appeal in High Tower v Stevens

In High Tower Homes Corporation v Stevens, 2014 ONCA 911, the Court of Appeal for Ontario applied numerous contract law topics in disposing of an appeal regarding an agreement of purchase and sale in relation to two properties.

Facts

Two properties, “Blue Water” and “Avondale,” were being sold by the respondent, Mr. Stevens. Mr. Stevens and his spouse wished to sell the properties together to obtain the most revenue, but for tax purposes wanted most of the sale to be attributed to Avondale. The appellant purchaser, High Tower, submitted offers to purchase both properties. In addition to the standard Ontario Real Estate Association form, the purchaser added a “Schedule A.”

While Schedule A for the offer for Blue Water initially contained a clause stating that closing was conditional on the sale of Avondale, the appellant changed this (to Blue Water only) without informing the respondent. The selling price for Blue Water remained at $1 million (below the initial acquisition price), while the price offered for Avondale increased.

Further, one of the clauses of Schedule A outlined conditions for the purchaser’s benefit that could be waived by notice in writing to the seller. If not waived, the agreement would be void. Additionally, one of the clauses of the agreement provided that notice could be delivered personally, or to an address for service, or through fax or e-mail if such contact information was provided. However, no address for service was specified, nor was there a fax or e-mail provided.

The purchaser’s lawyer provided notice to the seller’s lawyer by fax, wishing to waive the conditions with respect to Avondale. Additionally, the purchaser asserted that notice was delivered to Blue Water, but nothing was found and the notice was not given to the vendor personally.

The vendor soon learned of the irregularity and the attempt to purchase Blue Water at a price much below market value. The vendor argued that the agreement was null and void as the purchaser did not give proper notice, while the purchaser sued for specific performance and breach of contract. The purchaser’s motion for summary judgement was dismissed, with the judge holding that the agreement was clear that notice was required personally. The vendor’s request for rectification of the document was also dismissed. The purchaser appeals the dismissal of that motion.

Analysis

Associate Chief Justice Hoy begins by outlining the standard of review applicable to issues of contractual interpretation. As stated by the Supreme Court of Canada in Sattva Capital Corp v Creston Molly Corp, 2014 SCC 53, such issues engage questions of mixed fact and law and deference should be owed to lower courts. While questions of law can arise in some factual scenarios, this will be rare.

Notice

Justice Hoy quickly dismissed arguments regarding the notice provided by the purchaser to the vendor. In essence, given the terms of the contract, faxing notice to the vendor’s lawyer did not fulfil the notice requirement. Additionally, the Court found no reason to interfere with the motion judge’s finding that notice was not delivered to Blue Water. Justice Hoy distinguishes between the facts in this case and that of 1376273 Ontario Inc v Knob Hill Farm Ltd, (2003) 34 BLR (3d) 95 (Ont SC), where notice was left at a specific address where it “surely would have been found.”

Business Efficacy and Implied Terms

The Court of Appeal also refused to imply further notice terms into the contract, showing deference for the motion judge’s findings. Citing the recent Supreme Court’s recent decision in Bhasin v Hrynew, 2014 SCC 71, Justice Hoy notes that the duty of good faith should not be seen as an implied term. Rather, it is a duty to perform contractual obligations honestly independent of the parties’ intentions. As such, she reads CivicLife.com Inc v Canada (Attorney General), (2006) 215 OAC 43 (CA), cited by the parties, in light of Bhasin, to hold that the case stands for the proposition that it is important to act in good faith in undertaking a contract, not about implying terms generally.

All in all, Justice Hoy refused to imply a term that notice could be given by fax or delivered to Blue Water. She cites G Ford Homes Ltd v Draft Masonry (York) Co (1983), 43 OR (2d) 401 (CA), for the proposition that, “no term will be implied that is inconsistent with the contract.” Here, the agreement was clear that notice was to be given personally.

Waiver by Conduct

The motion judge held that the purchaser could not succeed in this claim due to the express terms of the agreement. While Justice Hoy disagreed that the agreement itself prohibited a claim of waiver, even if the motion judge was wrong, it would not change the disposition of the appeal. As per River Bungalows Ltd v Maritime Life Assurance Co, [1994] 2 SCR 490, waiver requires: “(1) a full knowledge of the deficiency that might be relied on and (2) an unequivocal and conscious intention to abandon the right to rely on it…. The overriding consideration in each case is whether one party communicated a clear intention to waive a right to the other party.”

In this case, the purchaser argued that since communication had always occurred through lawyers and through fax, the notice requirements were waived. In short, Justice Hoy holds that the “unequivocal and conscious intention” standard was not met. For instance, the notice requirements were paramount as failure to waive them would nullify the agreement, and not one type of notice was used consistently throughout the contractual relationship.

Promissory Estoppel

Finally, the Appellants argued that the sellers were estopped from requiring personal written notice. Citing the Supreme Court in Maracle v Travelers Indemnity Co of Canada, [1991] 2 SCR 50: “The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance, which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position.”

Justice Hoy notes that the doctrine of promissory estoppel is an equitable remedy and as such, one cannot successfully obtain the remedy without coming with clean hands. Here, the Court found that there was no clear and unambiguous promise and in any case, the buyer’s actions were not laudable and it would be inappropriate to grant equitable relief.

Conclusion

All in all, contracts may become a bit easier for future first year students, with the Court of Appeal clearly applying various doctrines to this scenario. This decision not only provides analysis of older jurisprudence, but also provides an example of the impact of the Supreme Court’s recent decision in Bhasin.