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Contracts - Interpretation - Officious BystanderBrian Huber Holdings Ltd. v. West Perth (Regional Municipality)
In Brian Huber Holdings Ltd. v. West Perth (Regional Municipality) (Ont CA, 2023) the Court of Appeal supported the application judge when they felt the need to add/clarify a contractual term, reminiscent of a requirement for consideration:[12] Relying on principles of contractual interpretation summarized in Prism Resources Inc. v. Detour Gold Corporation, 2022 ONCA 326, 162 O.R. (3d) 200, the application judge found that any developer expected to pay West Perth under the Agreement would have to derive a benefit from the infrastructure installed in Huber’s subdivision. He based this conclusion on his interpretation of the words “cost sharing” and “their share” in the provision. He concluded that where no benefit is conferred upon abutting lands, there should be no cost sharing. He rejected the literal reading proposed by Huber as “divorced from commercial sense”: para. 66.
[13] The application judge concluded, in the alternative, that there was a gap in the contract. He applied the “officious bystander” test from Canadian Pacific Hotels Ltd. v. Bank of Montreal, 1987 CanLII 55 (SCC), [1987] 1 S.C.R. 711 to imply a term, based on the presumed intentions of the parties, clarifying that, if abutting lands derived no benefit from the existing subdivision, they would not trigger cost-sharing obligations.
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[16] In summary, the application judge found: West Perth only had to seek reimbursement from a developer or builder on the lands adjacent to the subdivision if the developer or builder derived a benefit from the improvements installed by Huber; that obligation was not triggered by the proposed subdivision because there was no benefit to be derived. Accordingly, West Perth did not breach the Agreement.
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[18] We see no error in the application judge’s analysis. He identified the applicable principles of contractual interpretation, as discussed in Prism. In applying these principles, he considered the Agreement as a whole. ...
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[21] The appellant submits that the application judge erred in his conclusion that Huber’s interpretation of the Agreement was “divorced from commercial sense” and that it made “no sense in the context of the purpose of the agreement and does not make good business sense”: at para. 66. The appellant submits that the application judge erred in making this assessment from a subjective perspective, rather than looking at the matter objectively. We disagree. The application judge’s analysis of this issue was sound and fair, and construed the Agreement in a reasonable manner.
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[23] In all of the circumstances, we see no error in the manner that the application judge construed the Agreement. In light of this conclusion, it is not necessary to consider the application of the “officious bystander” test and the implied term.
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