



COURT OF APPEAL FOR ONTARIO

CITATION: Best Source Inc. v. International Industries
    Corporation, 2017 ONCA 411

DATE: 20170523

DOCKET: C62484

Strathy C.J.O., Cronk and Pepall JJ.A.

BETWEEN

Best Source Inc.

Plaintiff
(Appellant)

and

International Industries Corporation
and David Cloer

Defendants
(Respondents)

Ryan Wozniak and Carmine Scalzi, for the appellant

Michael F. Smith, for the respondents

Heard: May 11, 2017

On appeal from the order of Justice Robert F. Goldstein
    of the Superior Court of Justice, dated July 5, 2016.

REASONS FOR DECISION

[1]

The motion judge stayed this action for breach
    of contract because he found that the contract required disputes to be resolved
    by arbitration in South Carolina.

[2]

The central issue was whether the contractual
    rights and obligations assigned to the appellant were limited to those set out
    in a Joint Venture Marketing Agreement (JVMA), which said nothing about
    arbitration, or whether they included the terms of an International Sales
    Agency Agreement (ISAA), which contained the arbitration clause.

[3]

The background giving rise to this issue is, in
    brief, as follows. Headwaters Inc. (Headwaters) was the exclusive sales agent
    in Canada for the respondent International Industries Corporation (IIC) with
    respect to several products, including one called Mean Green. The respondent
    David Cloer is the principal of IIC.

[4]

Headwaters had two operative agreements with IIC
     the JVMA and the ISAA.

[5]

In February 2009, the appellant offered to
    purchase from Headwaters the exclusive right to sell Mean Green in Canada.
    Negotiations culminated in the execution of a letter agreement dated March 10,
    2009, whereby Headwaters, with IICs consent, assigned its rights and
    obligations with respect to Mean Green under the JVMA to the appellant.

[6]

The assignment agreement contemplated that the
    parties would negotiate an agency agreement and that 
in
    the interim
and ultimately upon completion of a satisfactory agency
    agreement with IIC [the appellant]
will now stand in the
    position of [Headwaters] under the [JVMA] with respect to the Mean Green
    product only

[The appellant] will represent Mean
    Green products as sales agents for [IIC] being the vendor
 (emphasis
    added).

[7]

This agency agreement was never finalized, but
    the motion judge found that the parties conducted themselves as if the sales
    agency agreement were in place.

[8]

The issue before the motion judge was whether
    the contractual rights assigned to the appellant were limited to those set out
    in the JVMA, or whether they included those under the ISAA.

[9]

On the motion, and in this court, the appellant
    claimed that the only contract assigned to it was the JVMA. The appellants
    principal, Mr. Calabrese, said that he was unaware of the ISAA until after the
    litigation was commenced.

[10]

The determination of the issue before the motion
    judge called for an examination and assessment of the parties evidence given
    by way of affidavit and cross-examination, and in various documents and written
    communications.

[11]

In resolving the conflicting evidence, the
    motion judge found that, contrary to the appellants submission, the evidence
    supported the existence of the ISAA. Prior to the assignment, the ISAA was in
    force between Headwaters and IIC.

[12]

The motion judge rejected Mr. Calabreses
    evidence that he was unaware of the ISAA until the commencement of the
    litigation. He found as a fact that Mr. Calabrese was not only aware of the
    ISAA, but that he had received a copy of it. The motion judge noted that, while
    the assignment agreement was being negotiated, Mr. Calabreses lawyer advised Mr.
    Calabrese that he had spoken to Mr. Cloer, who told him that IIC had a written
    brokerage/sales agency agreement with Headwaters, covering a number of different
    products, and was prepared to consent to the assignment of the agreement with
    respect to Mean Green.

[13]

The motion judge also found that the reasonable
    interpretation of the assignment agreement was that the parties intended that
    the appellant would step into the shoes of Headwaters as IICs sales agent. In
    so doing, the appellant took on all the obligations of the ISAA, including the
    arbitration clause, and the parties conducted themselves in accordance with the
    ISAA.

[14]

Moreover, as the motion judge found, the JVMA,
    which the appellant claimed was the only contractual document, did not cover
    any of the usual mechanics of a sales agency agreement. Those were set out in
    the ISAA.

[15]

The appellant argues, however, that the
    assignment agreement makes no reference to the ISAA and only refers to the JVMA.

[16]

While that is true, the assignment agreement
    contemplated that pending the negotiation of an agency agreement, the appellant
    would stand in the position of Headwaters in relation to the Mean Green
    product. In order to stand in the position of Headwaters, the appellant
    required an assignment of the ISAA, which set out the essential business terms
    of the sales agency arrangement.

[17]

The appellant refers to a letter from IICs lawyer,
    written in response to a letter from the appellants lawyer protesting IICs
    decision not to renew the agreement. The lawyers letter made reference to the
    sales agency agreement with Headwaters and took the position that the agency agreement
    expired in 2010, and any rights inherent in the agency terminated with the
    lapse of the agreement.

[18]

While the motion judge did not address this
    issue directly, he found as a fact that the appellant and IIC conducted
    themselves as if the sales agreement were in place. The appellant operated
    under the sales agreement and had the benefit of it. The parties conduct did
    not constitute a waiver of the sales agreement or the arbitration clause in it.
    In our view, the lawyers letter does not undermine the motion judges
    conclusion that the ISAA was assigned to the appellant and that the parties
    acted in accordance with its terms.

[19]

The motion judges findings of fact are entitled
    to deference, as is his interpretation of the contractual documents, which is
    grounded in his appreciation of the factual matrix. Those findings support the
    conclusion that the bundle of rights possessed by Headwaters included those
    under both the JVMA and the ISAA, that both agreements were necessary to enable
    the appellant to act as the sales agent for Mean Green in Canada, and that
    both agreements were assigned to the appellant.

[20]

The appellant has demonstrated no palpable and
    overriding error in the motion judges assessment of the evidence. Nor has it
    demonstrated an extricable error of law in his interpretation of the
    agreements.

[21]

The appeal is dismissed, with costs to the
    respondents in the amount of $9,000, inclusive of disbursements and all
    applicable taxes.

G.R.
    Strathy C.J.O.

E.A.
    Cronk J.A.

S.E.
    Pepall J.A.


