



COURT OF APPEAL FOR ONTARIO

CITATION: 1724684 Ontario Limited v. Leafwood Investment Inc.,
 2013 ONCA 509

DATE: 20130808

DOCKET: C55893

MacFarland, Watt and
    Epstein JJ.A.

BETWEEN

1724684 Ontario Limited
and 2234223 Ontario Inc.

Applicant/Appellant

and

Leafwood Investment Inc.
and Goldman, Spring Kitchler & Sanders LLP

Respondent/Respondent

Leafwood Investments Inc.

Appellant/Respondent

and

1724684
    Ontario Limited and 2234223 Ontario Inc.,

Shahin Talaei, aka Sean
    Talaei, and Ahad Jafarpour, aka Jeff Jafarpour

Respondent/Appellant

Joseph Markin, for the appellant

D.R. Rothwell, for the respondents Leafwood Investment
    Inc.

Heard:  June 24, 2013

On appeal from the judgment of Justice E. P. Belobaba of
    the Superior Court of Justice, dated July 18, 2012.

ENDORSEMENT

[1]

The appellant (purchaser) and respondent (vendor) entered into an
    agreement of purchase and sale for certain lands located in Whitby, Ontario and
    for a quantity of structural steel. This agreement was subsequently amended
    (the Amending Agreement). The land are described in the agreement as draft
    plan approved under draft plan of subdivision: for a residential housing
    development that included a strip plaza. The respondent (vendor), had already
    purchased structural steel for the strip plaza, and, as part of the Amending Agreement,
    required this steel to also be purchased by the appellant (purchaser).

[2]

On the date scheduled for closing, the land transaction was completed,
    but the structural steel component was not as the Amending Agreement provided
    that the structural steel component of the deal be verified and verification
    had not taken place. The portion of the verification term and the disputed
    issue between the parties reads:

The Vendor shall use its best reasonable efforts to
    obtain an inspection of the fabricated steel by the Vendor and Purchaser jointly
    prior to closing date, and to assist the Purchaser in satisfying itself that
    the fabricated steel as per the Vendors purchase order and shop drawings for
    structural steel for Buildings A2, B1 to B6, C to D and E on structural
    drawings prepared by VGA Consultants is available for delivery to the site upon
    payment of the storage and transportation costs set out above (the Purchasers
    Steel Requirements) and that all monies owing to the steel company for steel
    fabrication only have been paid, in accordance with minutes of settlement
    between the Vendor and Skyhawk Steel. The Purchaser covenants to act reasonably
    and in good faith to satisfy itself as soon as possible as to compliance with
    the Purchasers Steel Requirements.

[3]

As verification had not taken place at the time of closing, the portion
    of the purchase money relating to the structural steel was place in trust, in
    accordance with paragraph 8 of the Amending Agreement.

[4]

Two issues interfered with the verification necessary to close the
    structural steel part of the transaction. One was whether the open web steel
    joists specified for the project were part of the structural steel that was
    the subject of the Amending Agreement. The purchaser took the position that the
    open web steel joists were part of the Amending Agreement, while the vendor
    took the position that they were not. The second was whether the purchaser made
    reasonable efforts to verify that the structural steel met its requirements.

[5]

There is no dispute between the parties that the open web steel joists
    were not available and could not be supplied by the vendor.

[6]

The trial judge concluded that the open web steel joists were not part
    of the structural steel that was the subject of the Amending Agreement. This
    conclusion was based on paragraph 6 of the original agreement of purchase and
    sale. The trial judge also held that the purchaser had not acted reasonably and
    in good faith to verify that the steel met its requirements. He therefore
    ordered that the money held in trust be provided to be vendor.

[7]

The purchaser submits that the trial judge erred in holding in favour of
    the vendor with respect to both issues.

[8]

We find it necessary to deal only with the first issue.

[9]

Paragraph 6 of the original agreement of purchase and sale (that
    remained the same in the Amending Agreement) provides:

The Vendor shall use its best reasonable efforts to
    obtain an inspection of the fabricated steel by the Vendor and Purchaser
    jointly prior to the closing date and to assist the Purchaser in satisfying
    itself that the
fabricated steel as per the Vendors purchase order and
    shop drawings for structural steel for Buildings A2, B1-B6, C and D to E on
    structural drawings prepared by VGA Consultants
is available for delivery
    to the site upon payment of storage and transportation costs ... and that all
    monies owing to the steel company for steel fabrication only have been paid, in
    accordance with the Minutes of Settlement between the Vendor and Skyhawk
    Steel.  (Emphasis added.)

[10]

In
    our view the documents that must be considered in interpreting the meaning of the
    parties bargain are the Amending Agreement itself and the documents referenced
    in it that describe the structural steel. These additional referenced documents
    are the vendors purchase order and shop drawings for structural steel prepared
    by the projects architects, VGA Consultants. VGA retained Lor Eng Construction
    Services Inc. for the structural design.

[11]

The
    purchase order from the vendor to Skyhawk provides in part:

Please Supply the Following Goods subject to the Conditions
    Specified Below

1      1.00   Supply and Install Structural Steel for  Building
      A2, B1-B6, C, D and E


1.     Work under this contract to
        include but not limited to the supply of labour, material and equipment for
        complete scope for structural steel and open web steel joists for Buildings A2,
        B1-B6, C, D and E;


4.       Supply and installation of structural steel, open web steel joists etc.

[12]

Further,
    the structural drawings identified as GN-1 bear a heading for open web steel
    joists and specify their technical structural requirements.  As well, the
    drawing identified as S-3 notes the presence of open web steel joists in
    several locations.

[13]

In
    our view, the trial judge erred in basing his interpretation of the Amending
    Agreement on documents that were extraneous to it in circumstances where it was
    unnecessary to do so.

[14]

The
    Amending Agreement specified that it was the structural steel identified in the
    purchase order and that document specified open web steel joists.  Similarly
    the structural drawings refer to open web steel joists.

[15]

In
    our view, properly interpreted, using the language of the Amending Agreement
    and the documents specifically referenced in it, the open web steel joists were
    part of the structural steel that the purchaser contracted to buy and the vendor
    contracted to sell.

[16]

As
    previously indicated, the parties agree that the open web steel joists were not
    made available to the purchaser. The vendor therefore breached the Amending
    Agreement and on this basis, the money held in trust should be returned to the
    purchaser.

[17]

It
    follows, therefore, that the appeal must be allowed on this basis alone and there
    is no need to deal with the second issue raised.

[18]

The
    appeal is therefore allowed and the judgment is set aside. The funds held in
    trust by Messrs. Golden, Spring, Kitchler and Sanders LLP, plus accrued
    interest are to be returned to the purchaser.

[19]

The
    purchaser also seeks the costs of the trial.

[20]

The
    trial judge awarded no costs on the basis that success had been divided. This
    division arose from the fact that at trial the vendor had argued that the application
    should be dismissed as the parties had settled the matter. The trial judge
    found that there had been no settlement. On the basis of the vendors loss on
    this point and the purchasers loss regarding which party had breached the
    Amending Agreement, the trial judge held that success was divided and concluded
    there should be no order as to costs.

[21]

No
    issue was taken in this court with the trial judges finding that there had
    been no settlement.

[22]

However,
    the purchaser has been successful in this court. In the usual circumstances,
    where an appeal is allowed and the judgment below is set aside, the costs order
    made is also set aside.  We see no reason why that should not be the case here.

[23]

In
    their costs outline in relation to the trial costs, the purchaser sought
    $59,321.00 on a partial indemnity scale while the vendor sought the sum of
    $53,796.74, both figures inclusive of disbursements and HST.

[24]

We
    order the costs of the trial to the purchaser fixed in the amount of $50,000.00
    and of the appeal to the purchaser, fixed in the amount of $15,000. Both
    amounts are inclusive of disbursements and HST.

J. MacFarland J.A.

David Watt J.A.

Gloria Epstein J.A.


