



COURT OF APPEAL FOR ONTARIO

CITATION: Environs Wholesale Nursery LTD. v. Environs
    Landscape Contracting LTD., 2019 ONCA 547

DATE: 20190702

DOCKET: C65136

Feldman, Paciocco and Fairburn JJ.A.

BETWEEN

Environs Wholesale Nursery LTD., Walter Carey
    Grierson and Timothy Holmes

Plaintiffs
(Respondents)

and

Environs Landscape Contracting LTD., Robert
    George Everest
, Premium Business Brokers Inc., (O/A Sunbelt Business
    Brokers Premium) and Robert Lea Shawn Mitchell

Defendants
(
Appellants
)

AND BETWEEN

Environs Landscape Contracting LTD. and Robert
    George Everest

Plaintiffs by Counterclaim (Appellants)

and

Environs Wholesale Nursery LTD., Walter Carey
    Grierson and Timothy Holmes

Defendants to the Counterclaim (Respondents)

Chris G. Paliare and Tina H. Lie, for the appellants

Gavin MacKenzie and Brooke MacKenzie, for the
    respondents

Heard: May 14, 2019

On appeal from the order of Justice James W. Sloan of the
    Superior Court of Justice, dated February 22, 2018, with reasons reported at
    2018 ONSC 1130.

Paciocco J.A.:

OVERVIEW

[1]

The appellants, Environs Landscape Contracting Ltd., and its officer and
    director, Robert George Everest, appeal a partial summary judgment order that
    they are liable for breach of contractual warranty and/or negligent
    representation to the respondents, Environs Wholesale Nursery Ltd., and its
    officers and directors Walter Carey Grierson and Timothy Holmes. That liability
    finding arose from an Asset Purchase Agreement [the APA] relating to the sale
    of tree farm assets to the respondents. Attached to the APA was a tree
    inventory produced by the appellants, which contained inaccurate facts.

[2]

For the reasons that follow, I would allow the appeal and set aside the
    partial summary judgment on the liability issue. I would substitute an order
    dismissing the respondents action for breach of contract and negligent
    misrepresentation.

THE MATERIAL FACTS

A.

The ASSET purchase And the dispute

[3]

The corporate appellant operated a commercial tree farm [the business]
    in the vicinity of the Town of St. Williams in Norfolk County. Mr. Everest
    owned personally some of the land on which the business operated. The decision
    was made to sell the business assets, including the land owned by both appellants,
    as well as the buildings, tree inventory, equipment and goodwill.

[4]

The respondents expressed interest in acquiring the business assets that
    the appellants were selling.

[5]

On July 10, 2012, the appellants accepted a conditional offer from the respondents
    to purchase the business assets. The conditional offer provided for a due
    diligence period during which the respondents were entitled to inspect the
    business assets and declare the offer to be null and void if not satisfied. The
    parties agree that the respondents were provided with unlimited access to the
    business, for inspection.

[6]

To assist the respondents in their inspection, the appellants provided a
    tree inventory, dated July 16, 2012, setting out what the appellants believed
    to be the type, size and location of the saleable trees.

[7]

The respondents availed themselves of access to the business, attending
    with an arborist. The arborist could have spent as much time as he wished
    examining the plant stock, but only spent one and a half to two hours
    inspecting the trees.

[8]

Ultimately, through the APA dated October 5, 2012, the parties agreed to
    go ahead with the business asset sale. The total purchase price was $5,500,000.
    An Allocation of the Purchase Price had been prepared on August 30, 2012. The
    value of the land and buildings was allocated at $4,525,000, the Personal
    Property (Assets) at $295,000, and the Plant Inventory (In Ground) at
    $680,000.

[9]

The tree inventory was attached to the APA, and noted 236,341 saleable
    trees on the business property.

[10]

The
    $5,500,000 purchase closed pursuant to the APA, with all but $1,000,000 being
    paid on closing. A promissory note was provided for the balance to be paid with
    four instalments, each to be made on the anniversary of the APA.

[11]

When
    the second instalment was about to fall due in October 2014, the respondents indicated
    that they were not going to pay. When the respondents conducted a post-closing count
    of saleable trees, they concluded that there were 83,106 fewer saleable trees
    than were represented in the tree inventory. The respondents contended that
    this shortfall was a breach of a material representation made by the appellants
    in the APA. On October 3, 2014, the respondents issued a Notice of Action. A Statement
    of Claim followed soon after, seeking $5,000,000 in damages. The bulk of the
    damages related to the tree shortfall.

[12]

The
    appellants defended the claim, and also counter-claimed against the respondents
    for breach of the promissory note for the remaining balance of $872,000. The
    individual respondents were sued in that counter-claim as personal guarantors
    of the promissory note.

[13]

This
    litigation came before a motion judge after each party moved for summary
    judgment.

[14]

On
    February 22, 2018, the motion judge granted summary judgment against the
    appellants on the issue of liability relating to their breach of contractual
    warranty and/or negligent representation arising from the tree shortfall. Although
    satisfied that there were significantly less trees sold than the Purchasers
    had bargained for, because the precise shortfall could not be ascertained in
    the summary judgment motion the motion judge ordered that the action would proceed
    on the damages issue. That trial has not yet been conducted.

[15]

The
    motion judge also granted summary judgment to the appellants for breach of the
    promissory note, but stayed that judgment pending final resolution of the
    respondents action in the event a set-off is required.

[16]

Initially
    in this appeal, the appellants challenged both the liability finding and the
    stay of the promissory note obtained through their counter-claim. The appeal of
    the stay has since been abandoned on consent, and only the appeal from the
    liability finding relating to the tree shortfall is now before us. I will
    therefore summarize only that part of the motion judges decision. Before doing
    so, I will set out the APA provisions that were the focus of the argument, as
    well as the parties arguments relating to the proper interpretation of that
    agreement.

B.

THE Material APA PROVISIONS

[17]

To
    begin, Article 3 contains Representations and Warranties provisions. The
    material sections from Article 3 are as follows:

3.1 Representations and Warranties of the
    Vendor.
As a material inducement to the Purchasers entering into this
    Agreement and completing the transactions contemplated by this Agreement and
    acknowledging that the Purchaser is entering into this Agreement in reliance
    upon the representations and warranties of the Vendors set out in this Section
    3.1, the Vendors, jointly and severally represent and warrant to the Purchaser
    as follows:



(10)
Personal Property
. Schedule 3.1(10)
    lists each item of Personal Property. No Personal Property is in the possession
    of a third party or is on consignment. The Purchaser acknowledges and agrees
    that it has satisfied themselves as to each item of Personal Property being in
    good operating condition and repair, ordinary wear and tear excepted, and is
    suitable and adequate for the purpose for which it is being used.



(13)
Inventories
. The Purchasers
    acknowledge and agree that through the due diligence process they have
    satisfied themselves as to the quantity and quality of all plant material,
    which has been inspected by the Purchasers own consultant.



(29)
Full Disclosure
. To the best of the
    Vendors knowledge and belief (i) none of the foregoing representations and
    warranties and no document furnished by or on behalf of the Vendors to the
    Purchaser in connection with the negotiation of the transactions contemplated
    by this Agreement contains any untrue statement of a material fact or omits to
    state any material fact necessary to make any such statement or representation
    not misleading to a prospective purchaser of the Business and the Purchased
    Assets seeking full information as to the Business and all of the Purchased
    Assets; and (ii) there are no facts not disclosed in this Agreement which, if
    learned by the Purchaser, might reasonably be expected to materially diminish
    the Purchasers evaluation of the value of the Purchased Assets or the Business
    or of the profitability of the Business or which, if learned by the Purchaser,
    might reasonably be expected to deter the Purchaser from completing the
    transactions contemplated by this Agreement on the terms of this Agreement.

3.2.

Representations and
    Warranties of the Purchaser
. The purchaser represents and warrants to
    the Vendors as follows:



(6)
Due Diligence Investigation
. The
    Purchaser has conducted and completed its investigation of the Vendors, the
    Business and the Purchased Assets and the Purchaser has been satisfied, in its
    sole discretion, in all respects with the results of such investigation and has
    determined, in its sole discretion, to proceed with the transactions contemplated
    by this Agreement.



3.4. No Waiver
. Except where in this
    Agreement the Purchaser has expressly acknowledged and/or agreed to a
    limitation or qualification, no investigations, inspections, surveys or tests
    made by or on behalf of the Purchaser at any time shall affect, mitigate,
    waive, diminish the scope of or otherwise affect any representation or warranty
    made by the Vendors in or pursuant to this Agreement.

[18]

Section
    1.7 of Article 1 defines the vendors knowledge as follows:

1.7 Knowledge
. Where any
    representation, warranty or other statement in this Agreement is expressed to
    be made by the Vendors to its knowledge or is otherwise expressed to be limited
    in scope to facts or matters known to the Vendors or of which the Vendors is
    aware, it shall mean such knowledge as is actually known to Everest or which
    would have or should have come to the attention of Everest and/or the officers
    of Environs who have overall responsibility for or knowledge of the matters
    relevant to such statement.

[19]

Section
    6.2.(a) of Article 6, addressing Indemnification, states:

6.2 Indemnity by the Vendors.
The Vendors shall jointly and severally indemnify
    the Purchasers Indemnified Parties and save them fully harmless against, and
    will reimburse or compensate them for, any Damages arising from, in connection
    with or related in any manner whatsoever to:

(a) any incorrectness in or breach of any
    representation or warranty of the Vendors contained in this Agreement or in any
    other agreement, certificate or instrument executed and delivered pursuant to
    this Agreement.



For greater certainty and without limiting the
    generality of the provisions of Sections 6.2(a) and (b), the indemnity provided
    for in Sections 6.2(b) through (h) shall extend to any Damages arising from any
    act, omission or state of facts that occurred or existed prior to the Closing
    Time, and whether or not disclosed in any Schedule to this Agreement. Except
    where in this Agreement the Purchaser has expressly acknowledged and/or agreed
    to a limitation or qualification, the rights to indemnification of the
    Purchasers Indemnified Parties under this Section 6.2 shall apply
    notwithstanding any inspection or inquiries made by or on behalf of any of the
    Purchasers Indemnified Parties, or any knowledge acquired or capable of being
    acquired by any of the Purchasers Indemnified Parties or facts actually known
    to any of the Purchasers Indemnified Parties (whether before or after the
    execution and delivery of this Agreement and whether before or after Closing).
    The waiver of any condition based upon the accuracy of any representation and
    warranty or the performance of any covenant shall not affect the right to
    indemnification, reimbursement or other remedy based upon such representation,
    warranty or covenant.

[20]

Article
    7 contains Covenants provisions. The following is of relevance:

7.1 Investigation.
During the Interim Period, the Vendors shall give,
    or cause to be given, to the Purchaser and its Representatives including
    representatives of the Purchasers lenders full access during normal business
    hours to the Business and the Purchased Assets, including the Books and
    Records, the Contracts, the Property Documents and the Real Property to conduct
    such investigations, inspections, surveys or tests thereof and of the financial
    and legal condition of the Business and the Purchased Assets as the Purchaser
    deems necessary or desirable to familiarize itself with the Business and the
    Purchased Assets. Without limiting the generality of the foregoing, the
    Purchaser shall be permitted complete access during normal business hours to
    all documents relating to information scheduled or required to be disclosed under
    this Agreement and to the Employees. Such investigations, inspections, surveys
    and tests shall be carried out during normal business hours and without undue
    interference with the operations of the Business and the Vendors shall
    co-operate fully in facilitating such investigations, inspections, surveys and
    tests and shall furnish copies of all such documents and materials relating to
    such matters as may be reasonably requested by or on behalf of the Purchaser.
    The Vendors shall execute and deliver any authorizations required to permit
    such investigations, inspections, surveys and tests.

[21]

Section
    10.8 of Article 10 is an Entire Agreement clause:

10.8 Entire Agreement.
This
    Agreement constitutes the entire agreement between the Parties pertaining to
    the subject matter of this Agreement and supersedes all prior agreements,
    understandings, negotiations and discussions, whether oral or written,
    (including that letter of intent between the Parties dated July 10, 2012, as
    amended). There are no conditions, representations, warranties, obligations or
    other agreements between the Parties in connection with the subject matter of
    this Agreement (whether oral or written, express or implied, statutory or
    otherwise) except as explicitly set out in this Agreement.

[22]

There
    are also two definitions in s. 1.1 of Article 1 that are material:

Purchased Assets
means the
    following properties, assets, interests and rights of the vendors which are
    Related to the Business, and which, for greater certainty excludes the Excluded
    Assets:

(a)     the Real Property;

(b)     the Personal Property;

(c)      the Inventories;



Inventories
means all inventories
    of stock-in-trade and merchandise including materials, supplies  and including
    those inventories set out in Schedule 3.1(10)

[23]

Finally,
    s. 1.10 of Article 1 provides that the Schedules and Exhibits [are] attached
    to and incorporated in this Agreement by reference and deemed to be part
    hereof. Listed within the Schedules is 3.1(10) Personal Property. .

[24]

In
    fact, there are two schedules to the APA that are titled 3.1(10) Personal
    Property. The first is a four page list of computers and equipment, under the
    heading Schedule 3.1(10) Personal Property, prepared July 9, 2012. The second
    is the tree inventory already introduced, titled Schedule 3.1(10) Personal
    Property and sub-titled Environs Wholesale Nursery Plant Inventory Prepared
    July 16, 2012.

C.

THe Material Arguments Summarized

[25]

The
    heart of the respondents claim is that the tree inventory, having been
    attached as Schedule 3.1(10), is a s. 3.1 representation or warranty that there
    were 236,341 saleable trees included in the business assets. They say they
    relied on that representation by the appellants, as the recital in s. 3.1
    confirms. Since the appellants agreed in s. 6.2 to indemnify the respondents for
    any incorrectness in or breach of any representation or warranty, they are
    liable for the shortfall in the represented number of saleable trees.

[26]

The
    respondents also argue that either the delivery of the inaccurate tree
    inventory during the due diligence period, or its inclusion as Schedule 3.1(10)
    in the APA, or both, constituted actionable negligent misrepresentation.

[27]

The
    appellants argue that no representation or warranty about the number of trees
    was made. Schedule 3.1(10) contains no representations or warranties. It simply
    describes the trees that the appellants believed to be included in the asset
    sale, as contemplated by the s. 1.1 purchased assets definition. The
    representation or warranty that is described in s. 3.1(10) relates solely to
    the operating condition and repair of the equipment listed within the July 9,
    2012 Schedule.

[28]

The
    appellants argue that if the parties intended to include a representation or warranty
    relating to the quality and quantity of the tree inventory, that would have
    been done in s. 3.1(13), the provision that deals directly with the the
    quantity and quality of all plant material. Yet there is no representation or warranty
    expressed there, and no schedule attached to this provision where such a representation
    or warranty could be found.

[29]

The
    appellants further contend that to manufacture an unstated representation or
    warranty relating to the quantity and quality of trees would render s. 3.1(13)
    meaningless. This provision represents the respondents acknowledgement and
    agreement that they used the due diligence process, with the assistance of their
    own consultant, to satisfy themselves as to the quantity and quality of all
    plant material. The respondents also represented in s. 3.2(6) that they
    conducted and completed the due diligence investigation that was agreed to, and
    ha[ve] been satisfied in [their] sole discretion  to proceed with the
    transaction.

[30]

The
    appellants also contend that a representation or warranty of the number of
    trees on the business property could not reasonably have been contemplated by
    the parties, because it is practically impossible to physically count all of
    the trees, and saleability is too subjective an evaluation to permit objectively
    accurate counts to be conducted.

[31]

The
    appellants also argue that any representations or warranties in the APA are
    satisfied by the qualifier in s. 3.1(29): they are made to the best of the
    Vendors knowledge and belief. The appellants honestly believed that the
    estimate in the tree inventory was as accurate as possible. This should prevent
    a finding of liability for any innocent misrepresentation that may have
    occurred, under the authority of
Beatty v. Wei
, 2018 ONCA 479, 429
    D.L.R. (4th) 63, at para. 55.

[32]

Finally,
    the appellants argue that the law of negligent misrepresentation cannot
    properly be relied upon. Any pre-contractual representations have little role
    to play. The terms of the contract set out the material representations. The
    entire agreement clause also prevents reliance on representations not contained
    in the contract:
Beatty
, at paras 34-36.

[33]

In
    reply, the respondents argue that s. 3.4 provides that no investigation or
    inspection is to be construed as a waiver of representations made in the
    agreement.

[34]

In
    any event, pursuant to the authority of
Golden Hill

Ventures Ltd.
    v. Kemess Mines Inc.
, 2002 BCSC 1460, 7 B.C.L.R. (4th) 1, and
Opron
    Construction Co. v. Alberta
(1994), 151 A.R. 241 (Q.B.), a full
    investigation clause cannot be relied upon to defeat a representation where the
    investigation provided for is not practical or economically feasible. That was
    true in this case. The representation as to the number of trees could not
    practically or economically be fully investigated.

D.

THE SUMMARY JUDGMENT DECISION

[35]

The
    motion judge concluded that it is difficult to see how [Schedule 3.1(10)] could
    not be at least a representation if not a warranty, and that the number of
    trees represented was inaccurate. He described a warranty as a promise to
    indemnify a promisee if a proposition of fact that the promisor has made is not
    true. A warranty therefore relieves the promisee of the duty to ascertain that
    fact for themselves. A representation is an express or implied statement of
    fact which is influential in bringing about the agreement:
Anne of Green
    Gables Licencing Authority Inc. v. Avonlea Traditions
, [2000] O.T.C. 133
    (S.C.), at para. 203.

[36]

Presumably
    since liability would follow from characterizing the tree inventory as either a
    warranty or representation, and a statement of fact cannot realistically be a
    warranty unless it amounts to a representation, the motion judge rested content
    with finding that this was a lesser form of factual assurance. It was at least
    a representation if not a warranty.

[37]

Technically,
    his order finding the appellants liable for breach of contractual warranty is
    not supported by his findings, as he did not make a breach of warranty finding,
    only that there was at least a representation. But this is of no moment. As I
    say, the same outcome would have followed had he worded the order to base liability
    on the breach of the representation he found.

[38]

The
    motion judges reasoning supporting this contractual liability conclusion is
    simple. He offered six reasons that led him there:

(1)

The appellants position that the
    plant inventory is not a representation would render Schedule 3.1(10)
    essentially meaningless;

(2)

Since Schedule 3.1(10) is part of
    the APA, it is difficult to see how it could not be at least a representation;

(3)

The most important information
    for the Purchasers to receive, before deciding whether or not to purchase the
    nursery, would have been the number of saleable trees contained on the farms;

(4)

The only reason that the
    information with respect to the number of trees and their in-ground value were
    given to the Purchasers by the Vendors, was to induce the Purchasers to buy the
    nursery;

(5)

The respondents were not put on
    notice of two material facts, contrary to s. 3.1(29), that it was difficult
    and likely practically impossible to get an accurate number of trees, and that
    they should spend the time and/or money to do a much more thorough assessment;
    and

(6)

A full investigation would not be
    practical or economically feasible, making it inappropriate to rely on the full
    investigation clause in s. 3.2(6).

[39]

On
    this basis, the motion judge granted summary judgment against the appellants on
    the issue of liability for breach of contractual warranty and/or negligent
    representation.

ISSUES

[40]

The
    appellants raise three grounds of appeal:

A.

The motion judge erred
    in finding that the APA contained at least a representation respecting the
    number of saleable trees;

B.

The motion judge erred
    in finding liability despite the qualifier in s. 3.1(29) that any representations
    or warranties are to the best of [the appellants] knowledge and belief; and

C.

The motion judge erred
    in finding liability for negligent misrepresentation.

ANALYSIS

A.

THE MOTION JUDGE ERRED IN FINDING THAT THE APA CONTAINED A
    REPRESENTATION RESPECTING THE NUMBER OF SALEABLE TREES

[41]

In
    my view, the motion judges conclusion that the APA contained a representation
    as to the number of saleable trees cannot stand, notwithstanding the principles
    in
Sattva Capital Corp
. v.
Creston Moly Corp.
, 2014 SCC 53,
    [2014] 2 S.C.R. 633, and the reticence that is called for in finding extricable
    errors of law on appeal. With respect, the motion judges finding is predicated
    on an extricable legal error, and is tainted by palpable and overriding error.
    This makes it inappropriate to accept the respondents invitation to defer to
    the motion judges interpretation of the APA.

[42]

As
    I will explain, the motion judge committed an extricable error of law by
    failing to apply the principles of contractual interpretation to s. 3.1(13). I
    will reproduce that provision here to assist in that explanation:

3.1(13)
Inventories
. The Purchasers
    acknowledge and agree that through the due diligence process they have
    satisfied themselves as to the quantity and quality of all plant material,
    which has been inspected by the Purchasers own consultant.

[43]

It
    is apparent that, on its face, the sole subject that s. 3.1(13) addresses is
    the quantity and quality of all plant material. In other words, s. 3.1(13)
    pertains to the tree inventory  the very dispute at issue. It was the
    centrepiece of the appellants submissions. Although the motion judge
    recognized that s. 3.1(13) was the subject of argument, nowhere did he address
    those arguments. He should have done so.

[44]

To
    be clear, I do not rest my conclusion that the motion judge committed
    extricable legal error on the inadequacy of his reasons
per se
. As I
    say, the extricable legal error arising from the failure to contend with s. 3.1(13)
    is that the motion judge failed to apply the principles of contractual
    interpretation. He did not determine what this material provision meant in the
    contract as a whole, and assigned it no meaning. In discharging the
    responsibility to interpret a contract, a judge must interpret a contract as a
    whole and  accord an interpretation to the contested provisions that assigns
    meaning to each and avoids rendering one or more of them ineffective:
Deslaurier
    Custom Cabinets Inc. v. 1728106 Ontario Inc.
, 2016 ONCA 246, 130 O.R. (3d)
    418, at para. 54, leave to appeal refused, [2016] S.C.C.A. No. 249;
Trade
    Finance Solutions Inc. v Equinox Global Ltd.
, 2018 ONCA 12, 420 D.L.R.
    (4th) 273, at paras. 34-49;
Actuate Canada Corp. v. Symcor Services Inc.
,
    2016 ONCA 217, 347 O.A.C. 155, at para. 51. Here, the motion judge did not do
    so.

[45]

The
    respondents submit that the APA is inherently contradictory, requiring some
    provisions to prevail over others. In my view, this is no answer to the motion
    judges failure to assign s. 3.1(13) meaning. The motion judge should have grappled
    with the meaning of s. 3.1(13). Had he done so, it may have become apparent to
    him that there is an available and sensible way to read the provisions together,
    while giving meaning to the tree inventory as well as meaning to all other
    terms.

[46]

Specifically,
    the tree inventory is included in the APA to serve the Inventories and
    Purchased Assets definitions in s. 1.1. The latter offers a list of purchased
    assets including the Inventories; the former is defined as including those
    inventories set out in Schedule 3.1(10). The tree inventory therefore has
    meaning in further defining the Inventories and Purchased Assets, whether or
    not it amounts to a representation or warranty.

[47]

Although
    the tree inventory is specific as to the number, location and species of trees
    that are listed as purchased assets, when the tree inventory is read with the
    APA as a whole, it is clear that it is not a representation or warranty.
    Instead, the mechanism contemplated to protect the respondents expectations
    regarding the number of trees is the due diligence inspection.

[48]

The
    plain language of s. 3.1(13) drives this conclusion. It communicates without
    ambiguity the agreement of the respondents that they are satisfied with the
    quantity and quality of all plant material. It reconfirms that the respondents used
    the due diligence process they represented in s. 3.2(6) to having conducted and
    completed, and that they had the assistance of their own consultant. In my
    view, this leaves the respondents no room for subsequent claims, such as the one
    advanced here, that they relied on or were influenced into entering the
    agreement by the details of the tree inventory.

[49]

Indeed,
    in the face of the ordinary and clear meaning of s. 3.1(13), it is not possible,
    in my view, to divine an implied representation from either s. 3.1(10) itself,
    or from the listing of trees found in Schedule 3.1(10). Such an implied
    representation would hopelessly conflict with s. 3.1(13).

[50]

I
    do not accept the respondents argument that s. 3.4 removes any potential
    conflict, by stating that no investigation or inspection is to be construed as
    a waiver of representations made in the agreement. This argument begs the
    question of whether there was a representation in the first place. There was
    not.

[51]

Moreover,
    s. 3.4 opens with the phrase, Except where in this Agreement the Purchaser has
    expressly acknowledged and or agreed to a limitation or qualification. In s.
    3.1(13), the respondents expressly agreed that they had satisfied themselves as
    to the quantity and quality of all plant material. This would take s. 3.1(13)
    out of s. 3.4, in any event.

[52]

The
    only way to arrive at the conclusion reached by the motion judge is to ignore
    s. 3.1(13) and fail to give it meaning. In my view, in doing so the motion
    judge committed an extricable legal error.

[53]

The
    appellants also submit that the motion judge again erred in law in relying upon
Golden Hill
and
Opron
to hold that the inspection provisions
    - ss. 3.1(10) and 3.1(13) - could not be relied upon, because there was no
    practical or economically feasible means for the Purchasers to conduct an
    independent examination.  I agree that the motion judge erred in relying on
    this line of authority.

[54]

These
    decisions hold that full investigation clauses in
construction
    contracts
 including terms acknowledging that full inspection has been
    done  cannot be relied upon against a tenderer to defeat a representation, unless
    there is a practical reality to the independent investigation that is
    contemplated. These cases do not purport to hold that full investigation
    clauses must be treated the same way in simple agreements of purchase and sale.

[55]

However,
    we need not consider whether the same principles nonetheless apply to simple
    agreements of purchase and sale, because the motion judge committed palpable
    and overriding error in finding inspection to be impractical or economically unfeasible
    in this case.

[56]

The
    only evidence presented by the respondents relating to the practicality of
    conducting an inspection was the singular statement in Mr. Griersons and Mr.
    Holmes affidavit: [i]t was not practical to investigate all 500 acres of farm
    land or perform a count of the individual trees for the purpose of performing
    our due diligence. Even assuming it to be true that it is not possible to
    count all of the individual trees, this does not establish that it was not
    practical or economically feasible for the respondents to conduct their
    inspection. The independent examination contemplated by the parties was the respondents
    entitlement to investigate the quantity and quality of all plant material, and
    walk away from the transaction if not satisfied. There was no evidence that the
    respondents could not use means
other than an individual
    tree count
to determine this.

[57]

Indeed,
    the conclusion that an inability to count the trees makes it impractical and
    economically unfeasible to conduct an independent examination creates an intolerable
    paradox in the logic of the decision. The respondents entire action was
    predicated upon their claim that the tree inventory in Schedule 3.1(10) is a
    literal representation of the number of saleable trees. A finding that it is not
    practical to achieve such a count is inconsistent with the integrity of this claim,
    and supports the appellants argument that a warranty or representation of the
    number of saleable trees could not reasonably have been intended.

[58]

The
    respondents also came to the motion judge with a tree count of their own,
    purporting to identify the specific number of trees actually on the property,
    which they were clearly representing to be accurate enough to ground the
    damages award they were seeking. Although no satisfactory evidence was
    presented as to how this was achieved, it did not lie in the respondents mouths
    to contend that there was no practical way to conduct the very investigation
    they ultimately claimed to have conducted.

[59]

The
    motion judge therefore committed palpable error in finding that there was no
    practical or economically feasible means for the Purchasers to conduct an
    independent examination. There was no evidence to support that finding, and
    this holding is inconsistent with the case the respondents presented. This
    error was clearly overriding, since it was the motion judges only available
    explanation for disregarding the inspection provisions of the APA.

[60]

In
    my view, the motion judges additional finding, that the appellants should have
    told the respondents it was impossible to generate an accurate number of
    saleable trees, is also problematic. The respondents agreed in the APA to
    satisfy themselves with respect to the tree inventory, and represented in the
    APA that they had investigated and were prepared to close. Indeed, the
    respondents acknowledge that they knew before closing that it was impractical
    for them to count all of the individual trees during the three month due
    diligence period. If the risk of a discrepancy between the precise number of
    trees and the tree inventory mattered to the respondents, their remedy was to
    walk way, not to close and then seek damages for misrepresentation.

[61]

I
    am also troubled by the motion judges conclusion that the quality and quantity
    of saleable trees would be the most important information for the respondents to
    have received. That conclusion may find some abstract, intuitive support in the
    fact that this was the purchase of a working tree farm. However, I have
    significant reservations about whether that conclusion can reasonably be
    squared with the fact that in the agreed upon Allocation of the Purchase Price,
    the trees were valued at only $680,000, and the fact that the respondents arborist
    was only on site for a single afternoon of the protracted due diligence period.
    Since it is unnecessary to the resolution of this case, I need not decide
    whether this finding is a palpable and overriding error.

[62]

In
    sum, the motion judge committed an extricable error of law and palpable and
    overriding error in finding that the appellants breached a representation made
    in the tree inventory. There was no such representation.

B.

THE MOTION JUDGE ERRED IN FINDING LIABILITY DESPITE THE BEST OF [THE
    APPELLANTS] KNOWLEDGE AND BELIEF CLAUSE

[63]

The
    appellants submit that s. 3.1(29) and the definition of Knowledge in s. 1.7
    make clear that a contractual breach cannot be based on an inaccurate
    representation made to the best of [the appellants] knowledge and belief. The
    respondents argue, to the contrary, that s. 6.2(a) provides a right of
    indemnification for any incorrect representation, even if innocently made. Given
    the findings I have just made, it is unnecessary to resolve this issue.

C.

THE MOTION JUDGE ERRED IN FINDING A NEGLIGENT MISPREPRESENTATION

[64]

The
    respondents did not resist the appeal of the motion judges alternate finding
    of liability based on negligent misrepresentation. This was appropriate. With
    respect, it is clear that the motion judge erred.

[65]

First,
    the motion judges negligent misrepresentation finding is accompanied by no
    analysis. It is not clear whether that finding is premised on pre-contractual representations
    made during the negotiations, or arises from a belief that breach of a
    contractual representation automatically sustains a negligent misrepresentation
    tort claim.

[66]

Second,
    neither theory of liability can succeed. The respondents cannot do an end run
    around a finding that the tree inventory is not a contractual representation by
    contending that the tree inventory contained in the contract is nonetheless a
    tortious misrepresentation. The entire agreement clause in s. 10.8 ensures that
    the same is true of any pre-contractual misrepresentations that may have been
    made.

[67]

I
    would therefore set aside the finding of negligent misrepresentation.

HOLDING

[68]

In
    my view, the motion judges summary judgment that the appellants are liable for
    breach of contractual warranty and/or negligent representation must be set
    aside. I would allow the appeal from that order.

[69]

I
    would substitute an order dismissing the respondents action. In my view, we
    are equipped to make that determination, and it is the only proper outcome.

[70]

I
    would award combined costs on the appeal to the appellants in the agreed upon
    amount of $18,000, inclusive of HST and disbursements.

[71]

I
    would also reverse the March 16, 2018 costs order made by the motion judge, and
    award combined costs in the summary judgment motion to Landscape and Everest in
    the amount of $81,469.10 inclusive of HST and disbursements.

Released: KF July 2, 2019

David
    M. Paciocco J.A.

I agree.
K. Feldman
    J.A.

I agree. Fairburn J.A.


