



COURT OF APPEAL FOR ONTARIO

CITATION:
Ruparell v. J.H. Cochrane Investments Inc., 2021 ONCA 880

DATE: 20211210

DOCKET: C68960

Doherty, Benotto and Huscroft
    JJ.A.

BETWEEN

Deepak Ruparell

Plaintiff (Respondent)

and

J.H. Cochrane Investments Inc.,
    2117105 Ontario Inc., 2122192 Ontario Inc., dba Town + Country Volkswagen and 1788289
    Ontario Inc.

Defendants (Appellants)

James Doris and Abhishek Vaidyanathan,
    for the appellants

Paul Fruitman and Vlad A. Calina, for the
    respondent

Heard: November 30, 2021

On appeal from the judgment of Justice Janet
    Leiper of the Superior Court of Justice, dated December 7, 2020.

REASONS FOR DECISION

[1]

The appellants were negotiating the sale of their
    car dealership to the respondent. Negotiations continued over several months
    and agreement was reached on a number of terms. The appellants then received an
    unsolicited offer from a third party for more money, which they accepted. The
    respondent sued for breach of contract, seeking specific performance.

[2]

The appellants argue that the trial judge erred
    in finding that the parties had reached an agreement and erred in her
    calculation of damages, which she awarded in lieu of specific performance.

[3]

We do not accept these arguments. The appeal is
    dismissed for the reasons that follow.

[4]

It is not unusual for contracts to be made by
    agreement on the essential terms, which are later incorporated into a formal
    written document. Whether the parties reached a binding contract depends on the
    circumstances of the case, and in particular on the intention of the parties.

[5]

The trial judge considered the history of the
    parties negotiations, noting that they had two distinct phases. The parties
    had been negotiating pursuant to the terms of a non-binding letter of intent that
    described the terms of engagement for a due diligence and financial information
    review, expectations on closing, purchase price, and a deposit of $1 million. The
    letter required share purchase agreements and contained an exclusivity clause
    preventing the appellants from negotiating with other parties, but that clause
    expired on April 15, 2020.

[6]

The trial judge found that the second phase of
    the parties negotiations began with the expiry of the exclusivity period, by
    which time the global COVID-19 pandemic was adversely affecting the appellants
    business. The respondent made a new, lower offer to the appellants on April 16,
    which included a vendor take-back mortgage. The parties continued negotiations
    from April 16 to April 24, 2020. The appellants counter-offered a higher price but
    this was rejected by the respondent.

[7]

The trial judge found that the commercial
    purposes of the letter of intent were spent after April 15 and that a new deal
    was contemplated. The essential terms of the new transaction were price, share
    sale, financing, security, timing of payment, asset valuation and post-closing
    adjustment and retaining the general manager to work for the new company. The
    trial judge found that the parties agreed to these terms on April 24, 2020,
    when Peter Hatges, a KPMG adviser engaged by the appellants and authorized to
    represent them, told the respondent in a voicemail message: we have a deal.
    The trial judge found, further, that the parties acted as though they had a
    deal. Between April 26-28, 2020, counsel for the parties revised the share
    purchase agreements in accordance with the April conversations and the term sheet.

[8]

The appellants press this courts decision in
Bawitko
    Investments Ltd. v. Kernels Popcorn Ltd.
(1991)
,
    79 D.L.R. (4th) 97 (Ont. C.A.), which they submit governs the outcome in this
    case. But the trial judge properly distinguished
Bawitko
, which
    concerned a franchise agreement. The court found that the parties agreement in
    that case did not encompass essential aspects of the intended formal
    agreement and did not satisfy the standards of certainty the law requires.

[9]

In this case, the trial judge found that the
    parties agreed on the essential terms of their deal. This finding was open on
    the record before her and is entitled to deference. We do not accept the
    appellants submission that the trial judge misapprehended the evidence or
    otherwise made a palpable and overriding error. Nor do we accept any of the
    appellants arguments that the contract was not sufficiently certain or that
    the parties did not intend to be bound. These arguments were considered and
    rejected by the trial judge at paragraphs 63-71 of her decision. We agree with
    her treatment of these arguments and see no error requiring intervention.

[10]

The trial judge did not err in dismissing the appellants
    counterclaim that the respondent breached the terms of the letter of intent by
    commencing the action and seeking specific performance. Dismissal of the
    counterclaim follows from her finding that the commercial purposes of the
    letter of intent were spent by April 15 and that a new deal was contemplated,
    and there is no basis to interfere with that finding.

[11]

The trial judge declined to exercise her
    discretion to order specific performance and
awarded
    the
respondent $5 million in damages (exclusive of pre-judgment
    and post-judgment interest), reflecting their lost opportunity. This amount was
    the difference between the $19 million the respondent offered and the $24
    million offer from the third party the appellants accepted.

[12]

There is no basis to interfere with the trial
    judges award of damages. The third-party offer came at essentially the same
    time as the respondents offer, and as a result established a proxy for the
    value of the business the respondent had agreed to purchase. The difference
    between what the third party was willing to pay and the amount the respondent
    had agreed to pay demonstrates that the respondent would have realized surplus
    value had the sale been completed as required, and the trial judge did not err
    in awarding this amount as damages.

[13]

The appeal is dismissed. The respondent is
    entitled to costs in the agreed amount of $40,000, all inclusive.

Doherty J.A.

M.L. Benotto
    J.A.

Grant Huscroft
    J.A.


