



COURT OF APPEAL FOR ONTARIO

CITATION: Manorgate Estates Inc. v. Kirkor Architects and
    Planners, 2018 ONCA 617

DATE: 20180706

DOCKET: C64764

Epstein, Lauwers and van Rensburg JJ.A.

BETWEEN

Manorgate Estates Inc. and Manorgate Estates
    Kingston Road Inc.

Plaintiffs (Appellants)

and

Kirkor Architects and Planners

Defendant (Respondent)

Michael Simaan, for the appellants

Charles Simco and Matthew Urback, for the respondent

Heard: June 28, 2018

On appeal from the order of Justice Lise G. Favreau of
    the Superior Court of Justice, dated November 29, 2017, with reasons reported
    at 2017 ONSC 7154.

REASONS FOR DECISION

[1]

The appellants (Manorgate) build residential
    homes. The respondent (Kirkor) is an architectural consulting firm retained by
    Manorgate to assist with a construction project. On September 23, 2011, Manorgate
    entered into an agreement (the First Agreement) with Kirkor under which
    Kirkor agreed to provide design services for a project involving the
    construction of 12 townhouses with above grade parking at a location in Toronto
    (the smaller project).

[2]

After the First Agreement was executed the City
    of Toronto advised Manorgate that it would prefer a higher density development
    at the planned location. The proposed project was then changed to 24 townhomes
    with below grade parking (the larger project). Manorgates principal met with
    a senior partner of Kirkor on September 28, 2011 to discuss this new concept. After
    this meeting, on November 18, 2011, the parties entered into a design agreement
    with respect to the larger project (the Second Agreement).

[3]

Both agreements contained a clause precluding
    Manorgate from suing Kirkor based on any pre-contractual representations (the
    Entire Agreement Clause).

[4]

Manorgate says that at the September 28, 2011
    meeting Kirkors representative represented to Manorgates representative that
    the larger project would cost approximately $130 per square foot  the same
    price per square foot that Manorgate had originally estimated for the smaller
    project (the Alleged Negligent Misrepresentation). Manorgate alleges that the
    actual cost per square foot of the larger project turned out to be
    significantly higher than $130, such that the larger project was no longer
    financially viable. Manorgate eventually reverted back to its original plan for
    the smaller project.

[5]

Manorgate claimed that it entered into the
    Second Agreement in reliance on the Alleged Negligent Misrepresentation. It
    therefore brought this proceeding based on the Alleged Negligent
    Misrepresentation for approximately $530,000  the amount Manorgate claims are
    the unrecoverable costs associated with having to abandon the larger project,
    including fees it paid to Kirkor.

[6]

Kirkor denied the representation. In the
    alternative, Kirkor relied on the Entire Agreement Clause in the Second
    Agreement to preclude liability for any pre-contractual representations.

[7]

Kirkor moved for summary judgment.

[8]

The motion judge found that it was not necessary
    to decide whether Kirkor made the Alleged Negligent Misrepresentation. She
    granted summary judgment dismissing the action, concluding that the Entire
    Agreement Clause in the Second Agreement operated as a complete defence to
    Manorgates claim.

[9]

Critical to the motion judges conclusion was
    her finding that the Second Agreement was not a continuation of the First
    Agreement but an entirely new agreement. It followed that the Entire Agreement
    Clause contained in the Second Agreement superseded the Alleged Negligent
    Misrepresentation, with the effect that Manorgate was not entitled to rely on the
    representation even if it
had
been made by
    Kirkor.

[10]

Manorgate appeals primarily on the basis that
    the motion judge erred in giving effect to the Entire Agreement Clause.

[11]

We do not accept Manorgates submission that the
    motion judge erred in finding that the Second Agreement was a separate
    agreement rather than a revision of the First Agreement, and accordingly that the
    Alleged Negligent Misrepresentation was excluded by the Entire Agreement
    Clause. The motion judge rejected that argument and reasoned that the change in
    the scope and terms of the project in the Second Agreement were so fundamental
    that they amounted to a new agreement.

[12]

While correctly identifying the substantive
    requirements for the formation of a valid contract is an issue of law, applying
    those requirements to a given fact scenario and interpreting the language of
    two apparent agreements (as the motion judge did here) raises questions of
    mixed law and fact:
Sattva Capital Corp. v. Creston Moly Corp.
,
2014 SCC 53, [2014] 2 S.C.R. 633, at
    paras. 49-51, 53. The motion judges determination that the First Agreement and
    Second Agreement were two separate contracts was a finding of mixed law and fact
    based on the record before her. It is entitled to deference on appeal.

[13]

Manorgate has identified no extricable error of
    law in the motion judges determination of this critical issue. The motion
    judge proceeded correctly by applying principles that govern contractual
    interpretation and giving the parties words their ordinary and grammatical
    meaning, consistent with the surrounding circumstances known to the parties at
    the time they entered into the contracts:
Sattva
, at para. 47. As the motion judge found, the fundamental terms of
    the Second Agreement were different than the First Agreement. Moreover, we note
    that Manorgates representatives evidence on discovery was that the Second Agreement
    was a new contract for a new design.

[14]

We also do not accept Manorgates argument that
    the motion judge erred in determining that the Entire Agreement Clause was
    broad enough to exclude the Alleged Negligent Misrepresentation. Manorgates
    argument hinges on its position that the two agreements are standard form
    contracts and therefore the motion judges finding is to be reviewed on a
    standard of correctness.

[15]

Although the agreements were not amended prior
    to signature, they were not standard form agreements of the nature contemplated
    by the Supreme Court of Canada in
Ledcor Construction Ltd. v.
    Northbridge Indemnity Insurance Co
.,
2016 SCC 37, [2016] 2 S.C.R. 23. On Manorgates evidence the
    agreements were open to being amended prior to signing. The motion judges
    interpretation that the Second Agreement, specifically the Entire Agreement
    Clause, was broad enough to apply to the Alleged Negligent Misrepresentation is
    accordingly an exercise in contractual interpretation entitled to deference:
Ledcor
,
at para. 21. Among other things, we
    note that a plain reading of the Second Agreement makes it clear that Kirkor
    did not agree to provide any costing services. As the motion judge
    acknowledged, the contract specifically states that [d]etailed estimates of
    construction costs, quantify surveys or life cycle cost studies are not part
    of the services to be provided by Kirkor pursuant to the agreement.

[16]

In the light of all of the circumstances, the
    Entire Agreement Clause was broad enough to exclude the Alleged Negligent
    Misrepresentation. The motion judges finding to this effect was supported by
    the record and is entitled to deference.

[17]

We do not accept the additional submission
    Manorgate made before this court that the motion judge erred in her
    interpretation of the provision in the Second Agreement excluding detailed
    estimates of construction costs from the services provided. The motion judge
    referred to this provision in rejecting the argument made before her that
    preliminary costing was part of the services Kirkor was to perform. She stated,
    at para 44:

I reject the plaintiff's argument that the use of the word
    "detailed" implies that preliminary or high level costing forms part
    of the contract. Nothing else in the contract supports such an interpretation.

We see no error.

[18]

The motion judge also made no error in failing
    to find a triable issue as to whether the Entire Agreement Clause should be
    unenforceable on the basis that it was unconscionable and against public
    policy.

[19]

The motion judge reasonably found there to be no
    legally relevant disparity in bargaining power or any other basis for finding
    that Kirkor took advantage of Manorgate. In coming to this conclusion the
    motion judge considered the level of industry experience of the two parties and
    found that Kirkor did not improperly induce Manorgate to enter into the Second
    Agreement. On this record, we see no reason to interfere with this conclusion.

[20]

We would also reject Manorgates argument
    concerning the motion judges failure to enforce a duty of good faith between
    the parties, as it is not properly raised at first instance on appeal.

[21]

The appeal is therefore dismissed. Kirkor is
    entitled to its costs of the appeal fixed in the amount of $10,000, inclusive
    of HST and disbursements.

Gloria Epstein J.A.

P. Lauwers J.A.

K. van Rensburg J.A.


