CITATION: Schneeberg v. Talon International Development Inc., 2011 ONCA 687 |
DATE: 20111108 |
DOCKET: C52928 |
COURT OF APPEAL FOR ONTARIO |
Blair, Watt and Epstein JJ.A. |
BETWEEN |
Richard E. Schneeberg |
Applicant (Respondent) |
and |
Talon International Development Inc. |
Respondent (Appellant) |
David M. Goodman, for the respondent |
Mark A. Klaiman, for the appellant |
Heard: June 1, 2011 |
On appeal from the order of Justice Sandra Chapnik of the Superior Court of Justice dated October 12, 2010, with reasons reported at 2010 ONSC 5559. |
Epstein J.A.:
I. OVERVIEW
[1] This appeal concerns the interpretation of an agreement of purchase and sale whereby the respondent agreed to purchase a condominium unit from the appellant. The dispute involves whether the respondent is entitled to terminate the contract on the basis that the appellant failed to provide occupancy and close the transaction on the specific closing date set out in the agreement.
[2] On August 27, 2004, the appellant, Talon International Development Inc. (the “Vendor”), and the respondent, Richard E. Schneeberg (the “Purchaser”), entered into an agreement for the purchase of a condominium unit (the “Agreement”). The condominium – then yet to be constructed – is located in the Trump International Towers.
[3] Pursuant to the terms of the Agreement, the Purchaser paid deposits totalling $212,700 to the Vendor’s solicitors, in trust, to the credit of the purchase price of $709,000.
[4] The Agreement specified that the Purchaser would assume occupancy and the sale would close on the closing date of March 20, 2009, or such extended or accelerated date pursuant to the terms of the Agreement. The transaction did not close on March 20, 2009, as the unit was not ready for occupancy.
[5] On November 20, 2009, the Purchaser commenced an application for (1) a declaration that the Vendor had breached the Agreement by its failure to provide occupancy by the specified date, and (2) the return of all paid deposits, together with accrued statutory interest pursuant to the Condominium Act, 1998, S.O. 1998, c. 19.
[6] The application judge granted the relief requested.
[7] The Vendor appeals on the grounds that the application judge erred in holding that the Agreement, construed as a whole and in its commercial context, did not provide the Vendor with the right to extend the March 20, 2009 occupancy and closing date. The Vendor’s primary submission on this appeal is that the Agreement, properly interpreted, provides that closing shall take place March 20, 2009, subject to extensions necessary to bring the unit to the point where it is substantially completed and ready for occupancy.
[8] The Vendor also argues that the application judge erred by treating the closing date as a fundamental term of the Agreement, the breach of which allowed the Purchaser to terminate the transaction, and by failing to consider whether conduct on the Purchaser’s part constituted waiver in respect of the March 20, 2009 closing date.
[9] I would dismiss the appeal. I agree with the application judge that the Agreement does not provide the Vendor with what would amount to an unlimited unilateral right to delay closing. I further agree with the application judge’s conclusions that the Vendor’s failure to meet the closing date entitled the Purchaser to the relief sought, and that the facts do not substantiate a finding that the Purchaser had waived his right to terminate the Agreement.
II. THE AGREEMENT
[10] The Agreement contains several terms relevant to the closing date and any changes that may be made to it.
[11] Paragraph 2 of the Agreement defines the closing date:
2. (a) The Purchaser shall assume occupancy of the Unit, subject to the terms of the Hotel Use Maintenance Agreement described in sub-paragraph 4(b) herein on March 20, 2009, or such extended or accelerated date pursuant to the terms hereof that the Unit is substantially completed by the Vendor for occupancy by the Purchaser in accordance with Paragraph 13 hereof (the “Closing Date”);
(b) The transfer of title to the Unit shall be completed on the later of the Closing Date or a date established by the Vendor in accordance with Paragraph 13 hereof (the “Unit Transfer Date”);
[12] Paragraph 13 also contemplates extension or acceleration of the closing date:
13. (a) The transaction of purchase and sale shall be completed on the Closing Date or any extension thereof as may be permitted under this Agreement, at which time vacant possession of the unit will be given to the Purchaser. The Vendor shall be entitled upon giving at least sixty (60) days written notice to the Purchaser or his solicitor, to accelerate the Closing Date provided the Unit is substantially complete and fit for occupancy on such earlier date.
Upon registration of the Condominium, the Vendor’s solicitor shall not less than ten (10) days after registration of the Creating Documents[1] designate a date as the Unit Transfer Date by delivery of written notice of such date to the Purchaser or his/her solicitor.
[13] Paragraph 20 outlines a right to terminate the Agreement:
20. If the Vendor shall be unable to complete the Unit for occupancy by the Closing Date, as may be extended from time to time pursuant to this Agreement, then, unless the parties hereto otherwise agree in writing, the Purchaser shall have the right to terminate this Agreement by notice in writing to the Vendor or the Vendor’s Solicitor and all monies to the extent provided for in Paragraph 19 hereof, shall be returned to the Purchaser and this Agreement shall be terminated and the Vendor shall not be liable to the Purchaser for any damages arising as a result thereof and shall have no further obligation hereunder. If the Unit is substantially completed for occupancy by the Closing Date, or any acceleration/extension thereof in accordance with this Agreement, this transaction shall be completed on such date notwithstanding that the Vendor has not fully completed the Unit or the common elements and the Vendor shall complete such outstanding work required by this Agreement within a reasonable time after the Closing Date, having regard to weather conditions and the availability of labour and materials. The Unit shall be deemed to be substantially completed when the interior work has been finished to permit occupancy. The Purchaser acknowledges that failure to complete the common elements on or before the Closing Date shall not be deemed to be a failure to complete the Unit.
[14] Paragraph 23 defines what is meant by substantial completion for the purposes of the Purchaser assuming occupancy:
23. (a) The Unit shall be deemed to be substantially completed when the interior work has been finished to the minimum standards allowed by the Municipality so that the Unit may be lawfully occupied notwithstanding that there remains other work within the Unit and/or the common elements to be completed. The Purchaser shall not occupy the Unit until the Municipality has permitted same or consented thereto, if such consent is required and the Closing Date shall be postponed until such required consent is given. The Purchaser shall not require the Vendor to provide or produce an occupancy permit, certificate or authorization from the Municipality, and the Purchaser shall satisfy himself/herself in this regard. The Purchaser acknowledges that the failure to complete the common elements before the Closing Date shall not be deemed to be failure to complete the Unit, and the Purchaser agrees to complete this transaction notwithstanding any claim submitted to the Vendor and/or to the Warranty Program in respect of apparent deficiencies or incomplete work provided, always, that such incomplete work does not prevent occupancy of the Unit as, otherwise, permitted by the Municipality.
(b) If the Unit is substantially complete and fit for occupancy on the Closing Date, as provided for in subparagraph (a) above, but the Creating Documents have not been registered, (or in the event the Condominium is registered prior to the Closing Date and sale documentation has yet to be prepared, the Purchaser shall pay to the Vendor a further amount on account of the Purchase Price specified in paragraph 1(b) hereof without adjustment save for any pro-rated portion of the Occupancy Fee described and calculated in Schedule “C” and the Purchaser shall occupy the Unit on the Closing Date pursuant to the Occupancy Licence attached hereto as Schedule “C”.
[15] The Agreement contains no other provision that relates to any extension to the closing date or the terms that govern the right of one party to impose any extension on the other.
[16] The Agreement also does not contain a “time of the essence” clause.
III. FACTUAL BACKGROUND
[17] The Vendor wrote to the Purchaser on November 15, 2006, some 26 months after the Agreement was entered into, advising that the unit would be available for occupancy no later than December 31, 2010 and, in any event, no later than 24 months from the closing date of March 20, 2009.
[18] The letter included a proposed amendment to the Agreement – the Vendor asked the Purchaser to agree to the insertion of the following provision, after the first sentence of para. 13(a):
If the Vendor shall be unable to provide occupancy on the Closing Date for any reason whatsoever, the Vendor may extend the Closing Date one or more times as may be required by the Vendor, all extensions in the aggregate not to exceed twenty-four (24) months.
[19] On April 24, 2008, the Purchaser wrote to the Vendor seeking to terminate the Agreement due to financial difficulties.
[20] Several months later, in November 2008, the Vendor sent the Purchaser notification of an extension of the “tentative closing date” of March 20, 2009 to November 1, 2010.
[21] On August 14, 2009, the Purchaser wrote to the Vendor, questioned the Vendor’s right to extend the closing date, unilaterally, and advised the Vendor that he was rejecting the proposed extension.
[22] The Purchaser then commenced this application.
IV. THE DECISION OF THE APPLICATION JUDGE
[23] The application judge’s analysis of the key issue – whether the Vendor has a right to extend closing in these circumstances – begins with the observation that the Agreement, in a number of places, contemplates extensions to the closing date, “as may be permitted by the Agreement.” But the Agreement contains no terms pertaining to the “granting of or process involved in extending the closing date.” The application judge describes this as “common ground”.
[24] After noting that the Agreement must be construed according to its terms, the application judge, in keeping with the shared position of counsel, herself observes that the Agreement contains no term that specifically permits the occupancy closing date to be extended in the event of construction delays: “[t]he Agreement simply allows extensions pursuant to these terms’ and there are none.”
[25] In paras. 22 and 23, the application judge makes further observations about the terms of the parties’ agreement:
Not only does the Agreement in the within case not give the [Vendor] a unilateral right to extend the occupancy date, but paragraph 20 gives the [P]urchaser a right to terminate the Agreement if the [V]endor is unable to complete the unit for occupancy by the original closing date of March 20, 2009. The right is not absolute since the provision also contains the words “as may be extended from time to time pursuant to the Agreement.” As above noted, however, these words are somewhat inane as nothing in the Agreement permits or describes an extension procedure. There are no means of extending the closing date in the event of unforeseeable delay.
Upon reviewing the provisions of the particular contract before me in their entirety, I find that while the parties contemplated some extensions, they also specifically gave the [P]urchaser a right to terminate the Agreement, absent written consent of the parties to extend the closing. The [Vendor] could not unilaterally extend after March 20, 2009. This conclusion gains some support from the fact that the [Vendor] attempted to have the [Purchaser] agree to amend the Agreement to make time of the essence and to permit it to extend the closing date.
[26] After explaining her clear path to the conclusion that, according to the Agreement, the Vendor was not permitted to extend the closing date unilaterally, the application judge goes on to hold that even if it were determined that the Agreement was ambiguous in this respect, the Agreement must be construed against the interests of the Vendor on the basis of the contra proferentem rule.
[27] In the light of these conclusions and her rejection of the Vendor’s arguments relating to the nature of the breach and to waiver, the application judge granted the relief sought by the Purchaser.
V. THE ISSUES
[28] The issues raised on this appeal are:
i) whether the application judge erred in finding that the Agreement allowed the Purchaser to terminate the transaction based on the Vendor’s failure to close on March 20, 2009; and
ii) whether the application judge erred by failing to consider the issue of waiver.
VI. ANALYSIS
i) Interpretation of the Agreement
[29] The first issue – whether the Purchaser is entitled to terminate the Agreement and claim relief under s. 20 – turns on whether the Agreement permitted the Vendor to unilaterally extend the closing date.
[30] As the application judge noted, the parties contemplated extensions to the closing of the transaction. It is clear they therefore intended that the Agreement would provide the Vendor with the right to extend the closing date. However, there were to be terms governing the exercise of that right.
[31] These observations bring into focus the divide between the parties: whether the Agreement, in fact, contains a provision setting out the circumstances under which the Vendor was entitled to extend closing.
[32] The Purchaser submits that the application judge correctly proceeded on the basis that the Agreement contained no conditions governing the Vendor’s right to extend closing. This deficiency, says the Purchaser, means that the Vendor’s failure to close the transaction by March 20, 2009 triggered his right under para. 20 to terminate the Agreement and have his deposits returned.
[33] Before this court, counsel for the Vendor takes a different tack than that taken before the application judge. Now, rather than concede that the Agreement contains no terms governing the circumstances under which the Vendor can delay closing, the Vendor’s argument is that the application judge erred in not appreciating that the terms governing its right to extend the closing date are found in para. 2(a); the wording of which specifically links the Vendor’s right to delay closing to the readiness of the unit for occupancy.
[34] In support of its position the Vendor now takes before this court, it makes two main arguments.
[35] First, the Vendor submits that on a plain reading of para. 2(a), the parties agreed that closing would take place on March 20, 2009, or on another date, conditional on the unit’s being substantially completed for occupancy as defined in para. 23. Put more simply, the submission is that the parties agreed to set March 20, 2009 as the target date for closing. However, if the transaction could not close on that date (because it was not fit for occupancy), the Vendor would have an ongoing right to extend the closing date pending the unit’s being suitable for the Purchaser to occupy.
[36] Second, the Vendor asserts that by interpreting the Agreement in a way that did not allow for closing date extensions, the application judge failed to take into account the delays inherent in the business of buying and selling newly-built condominium units. She thereby erred in failing to apply one of the basic principles of contractual interpretation: that when parties have reduced their accord to writing, in order to understand their intent, the document must be construed in a manner that takes into account its commercial context.
[37] I cannot accept the interpretation that the Vendor now seeks to advance. I come to this conclusion based on the following analysis.
[38] This court has set about explaining the approach to interpreting contracts in a number of recent decisions. In Dumbrell v. Regional Group of Companies Inc., 2007 ONCA 59, 85 O.R. (3d) 616, a case involving the interpretation of an employment agreement, Doherty J.A. offered the following approach, at para. 53:
The text of the written agreement must be read as a whole and in the context of the circumstances as they existed when the agreement was created. The circumstances include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement: see BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12 at 23-24, H.W. Liebig & Co. v. Leading Investments Ltd., [1986] 1 S.C.R. 70 at 80-81, La Forest J.; Prenn v. Simmonds, [1971] 1 W.L.R. 1381 at 1383-84 (H.L.); Staughton, “How Do the Courts Interpret Commercial Contracts?”, [(1998) 58 Cambridge L.J. 303], at 307-308.
[39] In his discussion of the applicable legal principles, at para. 54, Doherty J.A. highlights his view that this contextual consideration is not dependent on a finding that the words themselves suggest some ambiguity, but is an integral part of the interpretive process:
A consideration of the context in which the written agreement was made is an integral part of the interpretative process and is not something that is resorted to only where the words viewed in isolation suggest some ambiguity. To find ambiguity, one must come to certain conclusions as to the meaning of the words used. A conclusion as to the meaning of words used in a written contract can only be properly reached if the contract is considered in the context in which it was made: see McCamus, The Law of Contracts (Toronto: Irwin Law, 2005) at 710-11.
[40] Doherty J.A. acknowledged, at para. 55, that “[t]here is some controversy as to how expansively context should be examined for the purposes of contractual interpretation”, but clarified that “[i]nsofar as written agreements are concerned, the context, or as it is sometimes called the factual matrix’, clearly extends to the genesis of the agreement, its purpose, and the commercial context in which the agreement was made”.
[41] In Commercial Alcohols Inc. v. Suncor Energy Products Inc., 2008 ONCA 261, 165 A.C.W.S. (3d) 448, at para. 33, Laskin J.A. specifically endorsed the Dumbrell approach to contractual interpretation in describing the process as follows:
The goal of contractual interpretation is to determine the intent of the parties when the contract was made. To do so, the court looks at the words the parties used and the context in which the contract was signed. Goudge J.A. concisely summarized the proper approach to contractual interpretation in his reasons in Kentucky Fried Chicken Canada v. Scott's Food Services Inc., [1998] O.J. No. 4368 at para. 25 (C.A.):
While the task of interpretation must begin with the words of the document and their ordinary meaning, the general context that gave birth to the document or its "factual matrix" will also provide the court with useful assistance.
See also a more extensive discussion of this approach by Doherty J.A. in Dumbrell v. Regional Group of Companies (2007), 85 O.R. (3d) 616 at paras. 47-56 (C.A.).
This approach has been relied on in many other post-Dumbrell decisions of this court: see Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254; 3869130 Canada Inc. v. I.C.B. Distribution Inc., 2008 ONCA 396, 167 A.C.W.S. (3d) 82; RF Real Estate Inc. v. Rogers Telecom Holdings Inc., 2009 ONCA 899, 265 O.A.C. 329; Hawley v. North Shore Mercantile Group, 2009 ONCA 679, 255 O.A.C. 143; Zeubear Investments Ltd. v. Magi Seal Corp., 2010 ONCA 825, 103 O.R. (3d) 578; and SeaWorld Parks and Entertainment LLC v. Marineland of Canada Inc., 2011 ONCA 616.
[42] I find further support for this approach in the comment of Cromwell J. in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at para. 64, where he stated that a key principle of contractual interpretation “is that the words of one provision must not be read in isolation but should be considered in harmony with the rest of the contract and in light of its purpose and commercial context.”
[43] I therefore begin with the words the parties used to record their agreement.
[44] It is clear from the language used in paras. 2(a), 13, and 20 of the Agreement that the parties intended that there would be terms governing the Vendor’s right to extend the date for closing. It is equally clear that there is a gap in the Agreement; no such terms can be found in the document.
[45] The wording contained in paras. 13 and 20, that contains general references to the Vendor’s entitlement to extend the closing date as “...permitted under this Agreement...” or “...pursuant to this Agreement...” neither creates a right to extend the closing date nor grants a unilateral right to the Vendor to extend the closing date. All it does is reinforce the conclusion that there is a deficiency in the wording of the Agreement.
[46] However, I agree with counsel for the Vendor that para. 2(a) is distinguishable from paras. 13 and 20 in that its language identifies the Purchaser’s right to occupancy with the unit’s readiness. As I have said, it is this connection that the Vendor relies on in its submission that the need for the unit to be ready for occupancy is, in fact, the condition that governs the Vendor’s right to extend the closing date.
[47] In my view, there are several reasons why this interpretation cannot stand.
[48] First, a reading of the contract as a whole leads to the conclusion that the wording of para. 2(a) cannot be interpreted so as to provide the Vendor with the right to extend closing until the unit is substantially fit for the Purchaser’s occupancy. If that were the intention, the words and the structure of the paragraph would be much different. The paragraph would clearly set out that the Vendor’s right to extend closing was limited to the existence of an incomplete unit. And it does not. To suggest it does, is, with respect, a stretch.
[49] Furthermore, the Vendor’s position runs afoul of the basic legal principle that, where possible, all words in an agreement must be given meaning: see Ventas, at para. 24.
[50] Here lies the Vendor’s chief problem: to interpret the Agreement as providing it with what would amount to a unilateral right to delay the closing would render meaningless the term contained in para. 20 of the Agreement. As previously indicated, this paragraph gives the Purchaser the right to terminate the Agreement – unless the parties agree otherwise in writing – “[i]f the Vendor shall be unable to complete the Unit for occupancy by the Closing Date, as extended from time to time, pursuant to this agreement”. Under the interpretation the Vendor advances, if on March 20, 2009 the unit was not substantially completed for occupancy, then the closing date would become the date the unit is substantially completed for occupancy. Were this the case, it would be impossible for the closing date to precede the date of unit’s substantial completion, and the Purchaser’s right of termination in para. 20 could never be triggered.
[51] Second, when the proposed transaction is considered in its commercial context, the Vendor’s suggested interpretation cannot, as I see it, be what the parties intended.
[52] There is no dispute over the fact that purchases and sales of condominiums are commercial transactions within an industry uniquely plagued by delays. These delays are caused by the market, as the sale of units in a new development dictates the availability of financing, by the vagaries in the construction process, and by the complexities associated with the registration process required by the Condominium Act. Delays in the closing of condominium units are expected. They are part of the business of developing condominium projects and, it follows, part of purchasing a newly-constructed unit.
[53] Against this background, it is quite understandable that the parties expressed their accord in such a way as to contemplate extensions to the closing date. However, it would be absurd to interpret the Agreement as giving the Vendor the right to extend closing on a basis that is not only unilateral, but also unlimited. Among other problems, such a right would be open to manipulation and abuse.
[54] Since the Agreement, read as a whole and in its commercial context, cannot bear the interpretation suggested by the Vendor, this ground of appeal must fail.
[55] Finally, I would add that, like the application judge, I do not see this as a case involving an ambiguous contract. I see an unambiguous contract that contains a gap – an obvious lack of a term to provide guidance to the parties in the event that an extension to the closing date is sought. However, if this gap could be said to create an ambiguity, then the principle of contra proferentem would resolve that ambiguity in favour of the Purchaser: see Hillis Oil and Sales Ltd. v. Wynn’s Canada, Ltd., [1986] 1 S.C.R. 57, at pp. 68-69.
“Time of the Essence” Clause
[56] The Vendor submits that the absence of a “time of the essence” clause is relevant to the issue of the nature of the breach, if any, and therefore, to the remedy available to the Purchaser. The contention is that, since the Agreement contains no such clause, a time stipulation operates as a warranty rather than a condition. Therefore, while the Vendor’s failure to perform in a timely manner may entitle the Purchaser to damages, it does not release him from his obligations under the contract. It follows that the failure to close on March 20, 2009 constitutes the breach of a warranty only; the Agreement still exists and is subject to completion within a reasonable time.
[57] I reject this argument. While the Agreement contains no “time of the essence” clause, para. 20 specifically provides the Purchaser with a right to terminate the transaction should there be a delay in the unit’s completion for occupancy beyond March 20, 2009. In my view, the absence of a “time of the essence” clause is irrelevant as the Purchaser is invoking an enumerated contractual right.
ii) Waiver
[58] The Vendor also submits that the application judge did not consider the issue of waiver.
[59] In my opinion, this argument too has no merit.
[60] At para. 25 of her reasons, the application judge addresses the issue of waiver, saying that “[t]he factual circumstances do not substantiate a finding of anticipatory breach of contract or waiver by the [Purchaser] of his right to terminate the Agreement.”
[61] In my view, this finding accords with the application of the legal principles to the facts. In Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, at p. 500, it was held that “[w]aiver will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them.” Here, the Purchaser’s refusal to agree with the Vendor’s proposed amendment to the Agreement supports a finding quite opposite to the notion that the Purchaser consciously abandoned his entitlement to rely on his rights under the Agreement. Any delay in the Purchaser’s communicating his decision to exercise his right to terminate the Agreement does not change the clear position he took and does not afford the Vendor an opportunity to rely on waiver.
[62] I see no reason to disturb the application judge’s conclusion on the issue of waiver.
VII. CONCLUSION
[63] The proper functioning of the complex and rapidly growing condominium industry depends on agreements that set out all rights and obligations of the parties in a clear fashion. Unfortunately, the wording of the Agreement failed to do this. And in these circumstances I see no basis for imposing on the Purchaser a term that was not in the Agreement.
[64] The consequences of the Vendor’s failure to provide occupancy and close the transaction in accordance with the provisions of the Agreement are set out in para. 20 of the Agreement. Since, in my view, the Purchaser did nothing to disentitle him to the remedies provided in the Agreement, he is entitled to the relief sought.
VIII. DISPOSITION
[65] I would therefore dismiss the appeal.
[66] I would award the Purchaser his costs of this appeal in the amount of $7,500.00 inclusive of disbursements and applicable taxes.
RELEASED:
“NOV -8 2011” “G.J. Epstein J.A.”
“RAB ” “I agree R.A. Blair J.A.”
“I agree David Watt J.A.”
[1] The application judge misquoted the Agreement in her reasons, referring to “Condominium Documents.” The actual wording of the Agreement references “Creating Documents.” This misstatement has no bearing on the merits of the appeal.