



COURT OF APPEAL FOR ONTARIO

CITATION: Glen Schnarr & Associates Inc. v. Vector
    (Georgetown) Limited, 2019 ONCA 1012

DATE: 20191223

DOCKET: C66557

MacPherson, Pepall and Lauwers JJ.A.

BETWEEN

Glen Schnarr & Associates Inc. and Herbert T.
    Arnold

Plaintiffs (Appellants)

and

Vector (Georgetown) Limited, William Alfred James
    Allison, Robert Thomas Allison, The Estate of Isla Raymonde Allison, Deceased,
Lormel Developments (Eighth Line)
    Ltd.
,
Lormel Developments (Georgetown) Ltd.

and Shelson Properties Limited

Defendants (
Respondents
)

Thomas M. Arnold, for the appellants

Michael Simaan, for the respondents

Heard: October 24, 2019

On appeal from the judgment of Justice Michael R. Gibson
    of the Superior Court of Justice, dated January 18, 2019, with reasons reported
    at 2019 ONSC 519.

Pepall J.A.:

A.

Background

[1]

William Alfred James Allison, Robert Thomas Allison, and the Estate of Isla
    Raymonde Allison, (the Allisons), owned 121.4 acres of land in the Town of Halton
    Hills (the Allison lands), and Vector (Georgetown) Limited (Vector) owned
    103.6 acres (the Vector lands). They and four other landowners retained the
    appellants, Glenn Schnarr & Associates Inc. (GSAA) and Herbert T. Arnold (Arnold),
    as consultants to assist in obtaining government approval so that their land
    could be developed for urban use. GSAA provides land-use planning services and
    Arnold is a lawyer who specializes in the practice of land development.


(i)

The Agreement

[2]

On January 31, 2002, the landowners and the appellants entered into a Cost
    Sharing Agreement (the Agreement) relating to approximately 1,000 acres of
    land.

[3]

The Agreement provided:

-

that the landowners wished to engage the consultants to assist in
    obtaining necessary approvals for the land to be developed for urban use;

-

the Allisons, Vector, four other landowners, the appellants, and
    a trustee were identified as parties of the First to Seventh parts. In the preamble,
    parties of the First to Seventh parts were defined as the Owners or Owner
    of the lands and, in Article 4.1, the Owners were described as those parties
    referenced in the recitals of this Agreement as the parties of the first-part
    to the seventh-part;

-

the cost of the consultants services would be charged to the Owners
    based on prevailing hourly rates, such rates to be adjusted annually;

-

a bonus payment of $3,000 per developable acre approved would be
    paid to the consultants when land was approved, meaning that a report
    recommending inclusion of the lands in the Georgetown Urban Area had been
    adopted by the Regional Council. However, the bonus would only be due and
    payable upon the formal adoption of the Applicable Regional Office Plan
    Amendment, all appeal processes having been exhausted. Specifically, Article 5.1
    of the Agreement stated:

The bonus shall be earned upon the formal adoption of such
    report but shall be due and payable only upon the formal adoption of the
    Applicable Regional Official Plan Amendment, all appeal processes having been
    exhausted.

-

the costs of the consultant services and the payment of the bonus
    were to be shared by the Owners on a pro-rata basis, with each Owners
    proportionate share being determined based on its net developable area. The
    obligation of any Owner was limited to each Owners proportionate share;

-

the consultants covenanted and agreed that during the term of the
    Agreement, they would not act for any party seeking to add any lands to the
    Georgetown Urban Area. That said, other landowners could be added as parties to
    the Agreement and the consultants could then act for them;

-

Article 9.1 stated that all matters in difference between or
    among all or any of the parties in relation to the Agreement were to be
    referred to arbitration. It stated:

All matters in difference between or among all or any of the
    parties in relation to this Agreement shall be referred to the arbitration of a
    single arbitrator, if such parties agree on one, otherwise to three
    arbitrators, one to be appointed by each party and a third to be chosen by the
    first two named before they enter upon the business of the arbitration. The
    award and determination of the arbitrator or arbitrators or any two of the
    three arbitrators shall be binding upon such parties and their respective
    heirs, executors, administrators and assigns.

-

Article 11.1 addressed termination of the Agreement. It provided:

It is agreed that the Owners may terminate this Agreement on 30
    days written notice to the Consultants. Notwithstanding such termination, the
    payment of bonus provisions contained in Article 5 herein shall continue to
    apply on the following basis:

(a)

if a report shall have been adopted by Regional Council recommending
    inclusion of the such lands in the Georgetown Urban Area within one (1) year
    from such termination  100% of the bonus shall be due and payable on the terms
    set out in Article 5;

(b)

if a report shall have been adopted by Regional Council recommending
    inclusion of the such lands in the Georgetown Urban Area within two (2) years
    from such termination  75% of the bonus shall be due and payable on the terms
    set out in Article 5;

(c)

if a report shall have been adopted by Regional Council recommending
    inclusion of such lands in the Georgetown Urban Area within three (3) years
    from such termination  50% of the bonus shall be due and payable on the terms
    set out in Article 5; and

(d)

If a report shall have been adopted by Regional Council recommending
    inclusion of the such lands in the Georgetown Urban Area within four (4) years
    from such termination  25% of the bonus shall be due and payable on the terms
    set out in Article 5.

(e)

if a report is
    not adopted by Regional Council recommending inclusion of the subject lands in
    the Georgetown Urban Area within four (4) years from such termination, no bonus
    shall be due and payable
.

-

budgets were to be prepared by the consultants annually for
    approval of the Owners;

-

the Agreement was binding on successors and assigns and also
    included an entire agreement provision.


(ii)

Subsequent Events

[4]

The Allison lands were transferred to the respondents Lormel
    Developments (Georgetown) Ltd. (LDGL) and Lormel Developments (Eighth Line)
    Ltd. (Eighth Line) in 2003 and 2015 respectively. The Vector lands were
    transferred to Shelson Properties Limited (Shelson) in 2005. At issue on this
    appeal is LDGLs portion of the Allison lands.

[5]

On October 8, 2004, counsel for
LDGL
wrote to Arnold in connection
    with the Agreement. Counsel advised that LDGL had purchased property from the Allisons
    and while the Allisons were parties to the Agreement, there had been no
    assignment of that Agreement to LDGL. As a result, counsel claimed that LDGL
    was not a party to or bound by the Agreement. Counsel went on to state that as
    a courtesy to the other landowners, they were advising that
LDGL
was
    terminating their involvement with the costs sharing group.

[6]

On October 27, 2004, Arnold wrote back confirming that it was the
    consultants view that the Agreement clearly affected and ran with the lands
    and that
LDGL
had taken title with full notice of the Agreement. He stated that he would
    discuss the matter further with the other consultants and landowners and
    provide a further and more detailed response.

[7]

Arnold wrote to counsel for LDGL again on December 12, 2004, advising
    that he had made inquiries of the affected landowners. He wrote that
LDGL
had
    agreed to assume the Agreement and to make all the future payments thereunder
    from the closing date. He asked counsel for LDGL to advise if their position
    remained as stated in the October 8, 2004 letter. Thereafter, the parties had
    no further contact.

[8]

Before this court and the court below, all parties took the position
    that the correspondence of October 8, 2004 from
LDGLs
counsel amounted to notice of
    termination of the Agreement by the respondents. The issue was whether an
    individual owner could terminate the Agreement or whether the owners had to act
    collectively for a termination to be effective.

[9]

The Regional Official Plan Amendment which expanded the Georgetown Urban
    Area to include the Owners lands was adopted in December 2009 and subsequently
    appealed by several parties. All appeal processes were exhausted following the
    Ontario Municipal Board's (OMB) decision of March 17, 2015.


(iii)

Statement
    of Claim and Statement of Defence

[10]

Relying
    on Article 5.1 of the Agreement that provided for the payment of a bonus on the
    formal adoption of the applicable Regional Official Plan Amendment, and all
    appeal processes having been exhausted, the appellants commenced an action
    claiming damages for breach of contract and unjust enrichment against the
    respondents and other owners. The action was commenced on November 5, 2015. The
    claim against LDGL, Eighth Line, and the Allison parties amounts to $327,600, and
    the claim against Vector and Shelson amounts to $297,600.
[1]

[11]

The
    respondents defended the claim on the basis that they had provided 30 days
    written notice of termination of the Agreement in October 2004, and as such,
    their involvement with the Agreement terminated in November 2004. Pursuant to Article
    11.1(e) of the Agreement, as no report was adopted by Regional Council within
    four years of termination of the Agreement, no bonus was payable, and all
    obligations under the Agreement ceased in November 2008. The respondents relied
    on the
Limitations Act
, 2002
, S.O. 2002, c. 24, Sched. B, as
    amended. They also pleaded that they derived no value or benefit from the
    Agreement.


(iv)

Motions

[12]

The
    respondent LDGL moved for determination of a question of law pursuant to Rule
    21.01(1)(a) of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, or
    in the alternative for summary judgment, to dismiss the appellants action on
    the basis that the limitation period for bringing the action had expired.

[13]

The
    appellants countered with a motion for a stay so that the parties could proceed
    to arbitration. In their notice of motion, they relied on s.7(1) of the
Arbitration
    Act,

1991
, R.S.O. 1991, c.17, and s. 106 of the
Courts of Justice
    Act
, R.S.O. 1990, c. c.43 (
CJA
).

[14]

The
    motions judge granted the respondents motion and dismissed that of the
    appellants. He found that the appellants did not reject the termination, bring
    a claim asserting breach of contract, or otherwise seek to prevent the
    respondents from terminating the Agreement. He held that the appellants had
    failed to bring a claim in time. Moreover, if the respondent LDGL had
    improperly terminated the Agreement, the appellants ought to have commenced
    proceedings. Rather, the appellants allowed LDGL to proceed as if the Agreement
    had been terminated. The appellants were also estopped by their conduct and by
    laches. The motions judge also declined to exercise his discretion under s. 106
    of the
CJA
to stay the proceedings.

B.

Appeal


(i)

Grounds Advanced

[15]

On
    appeal, the appellants raise two grounds of appeal. First, they submit that the
    motions judge erred in failing to exercise his discretion under s. 106 of the
CJA
to stay the proceedings and direct the parties to arbitration as required by
    the terms of the Agreement. Second, they submit that the motions judge erred in
    law by failing to determine whether LDGL had an individual right to terminate
    the Agreement, and thus erred in his limitation and laches analysis.


(ii)

Analysis

(a)

Stay of Proceedings

[16]

Section
    7(1) of the
Arbitration Act, 1991
, provides that if a party to an
    arbitration agreement commences a proceeding in respect of a matter to be
    submitted to arbitration under the agreement, the court shall, on the motion of
    another party to the arbitration agreement, stay the proceeding. Before this
    court, both parties agreed that s. 7(1) is inapplicable because it was the
    appellants who commenced court proceedings, and therefore it was not open to
    them to seek relief under s. 7(1).

[17]

The
    appellants also relied on s. 106 of the
CJA
in support of their request
    for a stay of their action in favour of arbitration. That section provides that
    a court, on its own initiative or on motion by any person, whether or not a
    party, may stay any proceeding in the court on such terms as are considered
    just.

[18]

The
    respondents submit that this court must first consider the threshold issue of
    the limitation period to determine whether a stay of proceedings is
    appropriate. I agree.

[19]

In
Haas
    v. Gunasekaram
, 2016 ONCA 744, 62 B.L.R. (5th) 1, at para. 10, Lauwers J.A.
    wrote that the law favours giving effect to arbitration agreements and this is
    evident from both the applicable legislation and jurisprudence.

[20]

However,
    there are exceptions. In
Dell Computer Corp. v. Union des consommateurs
,
    2007 SCC 34, [2007] 2 S.C.R. 801, at paras. 84-85, Deschamps J. stated that as a
    general rule in cases involving an arbitration clause, a challenge to the
    arbitrators jurisdiction must be resolved first by the arbitrator. An
    exception arises if the challenge is based solely on a question of law or one
    of mixed fact and law where the question of law requires for its disposition only
    superficial consideration of the documentary evidence in the record.
[2]

[21]

And
    in
Jean Estate v. Wires Jolley LLP
, 2009 ONCA 339, 96 O.R. (3d) 171, this
    court stated at para. 99:

Only where it is clear that the dispute is outside the terms of
    the arbitration agreement, or that a party is not a party to the arbitration
    agreement, or that
the application is out of time
should the court reach any final determination in respect of such matters on an
    application for a stay of proceedings. [Emphasis in original omitted, emphasis added.]

[22]

Here
    the motions judge found that the appellants action was out of time, and that
    they were estopped by conduct and by laches. He dismissed the action on these
    grounds and declined to exercise his discretion under s. 106 of the
CJA
.
    It follows that if his decision that the action was out of time is correct, there
    is no need to address the stay request. Thus, the real issue is whether the
    motions judge was correct in his conclusion that the appellants action was out
    of time, the issue to which I now turn.

(b)

Limitations Act

[23]

The
    appellants argue that the motions judge failed to decide whether LDGL had an independent
    right to terminate the Agreement when it purported to do so. If it did not have
    such a right, its purported termination was ineffective and any limitation
    period would only begin to run once the appeal to the OMB had been resolved. As
    such, they submit that the motions judge erred in dismissing their action based
    on a limitation defence.

[24]

There
    are two elements to consider in addressing this argument. First, was the
    purported termination ineffective because any termination had to be done
    collectively rather than on an individual basis? Second, even if the
    termination was flawed, were the appellants nonetheless out of time in asserting
    their claim against the respondents?

[25]

The
    motions judge did not provide any detail on the ability of one owner to terminate
    the Agreement independent of the other owners but did conclude that even if it
    was considered that [LDGL] improperly terminated the contract when it was not
    permitted to do so, the [appellants] should have advised of their position then,
    and commenced proceedings. The [appellants] took no steps to complain or to
    prevent termination of the contract, and allowed [LDGL] to proceed as if the
    agreement had been terminated.

[26]

I
    agree with the appellants that Owners and Owner are treated separately in
    the Agreement. For example, Article 1.1 speaks of land uses which are
    supported by a majority of the Owners. Article 4.1 permits the addition of
    other landowners as cost sharing Owners subject to consent of a simple
    majority of the then Owners under the agreement at that time and such consent
    shall be based on a weighted vote based on net developable acres of each Owner
    under the Agreement. Article 7.1 states that the costs of the consultants services
    and the payment of the bonus were to be shared by the Owners on a pro-rata
    basis, with each Owners proportionate share being determined based on its net
    developable area. The obligation of any Owner shall be limited to such Owners
    proportionate share. Then, Article 11.1 provides that the Owners may
    terminate on 30 days written notice.

[27]

Reading
    these provisions and the Agreement as a whole, it would appear that the parties
    to the Agreement made a deliberate distinction between Owners and Owner and
    their respective rights and obligations. The definitions, the treatment of the
    addition of other landowners to the Agreement, and the language of termination
    all support the conclusion that an individual owner such as LDGL did not have
    an independent right to terminate the Agreement. The Agreement had to be
    terminated collectively.

[28]

However,
    that is not the end of the matter. Having determined that LDGL could not independently
    terminate the Agreement, I must then consider whether the appellants could do
    nothing for approximately 11 years after the purported termination or whether they
    were required to take action when confronted with LDGLs purported termination.
    This turns on whether the respondents anticipatorily repudiated the Agreement, how
    the appellants responded, and the applicable limitation period.

[29]

Anticipatory
    repudiation occurs when a contracting party, by express language or conduct,
    or as a matter of implication from what he has said or done, repudiates his
    contractual obligations before they fall due: G.H.L. Fridman,
The Law of
    Contract in Canada
, 6th ed. (Toronto: Carswell, 2011), at p. 585. The
    parties concede that LDGL by its correspondence of October 2004 did just that.

[30]

However,
    an anticipatory repudiation of a contract does not, in itself, terminate or
    discharge a contract; it depends on the election made by the non-repudiating
    party:
Guarantee Co. of North America v. Gordon Capital Corp.
, [1999] 3
    S.C.R. 423, at p. 440;
Brown v. Belleville (City)
, 2013 ONCA 148, 114
    O.R. (3d) 561, at para. 42. As Cronk J.A. stated in the latter decision at
    para. 45:

It appears to be settled law in Canada that where
    the innocent party to a repudiatory breach or an anticipatory repudiation
    wishes to be discharged from the contract, the election to disaffirm the
    contract must be clearly and unequivocally communicated to the repudiating
    party within a reasonable time. Communication of the election to disaffirm or
    terminate the contract may be accomplished directly, by either oral or written
    words,
or may be inferred from the conduct of the innocent party in the
    particular circumstances of the case
: McCamus, at pp. 659-61. [Emphasis
    added.]

[31]

In
Chitty
    on Contracts
, 28th ed. (London: Sweet and Maxwell, 1999), Vol. 1, at p.
    25-012, the authors write:

Acceptance of a repudiation must be clear and unequivocal and
    mere inactivity or acquiescence will generally not be regarded as acceptance
    for this purpose. But there may be circumstances in which a continuing failure
    to perform will be sufficiently unequivocal to constitute acceptance of a
    repudiation. It all depends on the particular contractual relationship and the
    particular circumstances of the case.

[32]

This
    commentary was accepted by this court in
Brown v. Belleville
, at para.
    48,

and by the Nova Scotia Court of Appeal in
White v. E.B.F.
    Manufacturing Ltd.
, 2005 NSCA 167, 239 N.S.R. (2d) 270, at para. 91.

[33]

The
    limitation period then depends on the election that is made in response to an
    anticipatory repudiation:
Ali v. O-Two Medical Technologies Inc.
, 2013
    ONCA 733, 118 O.R. (3d) 321, at para. 22-27;
Hurst v. Hancock
, 2019 ONCA
    483, at para. 19.

[34]

After
    receipt of the correspondence of December 12, 2004, the respondents heard nothing
    from the appellants for 11 years when they were suddenly served with the
    appellants statement of claim. Based on the evidence, it is fair to infer that
    quite apart from the bonus, which is the subject matter of the lawsuit, no budgets
    for annual services as referenced in Article 12.1 of the Agreement were ever
    remitted by the appellants to LDGL. The respondents evidence was that they
    received no benefit from the consulting services and that they performed all of
    the services required under the Agreement themselves as they believed the
    Agreement had been terminated as of 2004. There is no evidence to the contrary
    or that the appellants did anything in that intervening time period. In these
    circumstances, by their conduct, the appellants accepted the anticipatory
    repudiation by LDGL. As a result, by 2015 when the action was started, the
    limitation period had long expired. As such, the motions judges conclusion that
    the appellants action was out of time was correct.

C.

Disposition

[35]

For
    these reasons, I would dismiss the appeal. There is no need to consider the
    alternative arguments based on estoppel and the doctrine of laches. I would
    order the appellants to pay the respondents costs fixed in the amount of $5,000
    inclusive of disbursements and applicable tax.

Released: December 23, 2019 (J.C.M.)

S.E. Pepall J.A.

I agree. J.C. MacPherson J.A.

I agree. P. Lauwers J.A.





[1]

These parties and the appellants have agreed to attend at
    arbitration.



[2]

Although this case involved a Quebec arbitration,
Haas
treated the holding as a principle of general application.


