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Contracts - Interpretation - Sattva (2)

. WED Investments Limited v. Showcase

In WED Investments Limited v. Showcase (Ont CA, 2022) the Court of Appeal considered whether an intentional variation of the standard form APS regarding notice overrode the standard form. Unsurprisingly, it did:
[25] The trial judge noted the importance of looking at the Agreement as a whole, the genesis of the transaction, the background, the context, and the market in which the parties are operating: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47.

[26] He noted that paragraph 26 of the Agreement provides that a provision added to the agreement governs to the extent it conflicts with or causes a discrepancy with any provision of the standard pre-set portion.

[27] He held that,
[65] In my view, there is a “conflict or discrepancy” between Schedule A and the pre-printed standard form. The due diligence condition and notice of waiver are found in Schedule A, which contains many terms and conditions that were negotiated by the parties, including provisions addressing notice.
[66] The paragraph in Schedule A dealing with the waiver says that there must be “delivery of written notice to the Seller.” It does not say how that written notice is to be delivered, but the requirement that the notice be “to the Seller” is different than the notice provision in paragraph 3 of the pre-printed portion of the APS, and therefore the Schedule should prevail. [Emphasis in original.]

[28] The trial judge applied the reasoning of this court in McKee v. Montemarano, 2009 ONCA 359, 251 O.A.C. 156. He noted that in both cases, there was a conflict between standard form wording requiring delivery of notices to a specific address, and a due diligence condition in a schedule that required waiver to be delivered to the Seller. In McKee, this court found that a specific notice provision was intended to prevail over a contradictory standard form notice provision, since it would have been unnecessary to include had the parties intended it to be overridden by the standard form provision. Moreover, in both cases, in all matters of substance, the parties dealt with one another directly. In McKee, as in this case, Schedule A governed the delivery of the waiver notice based on the language of the specific provision in Schedule A and the surrounding circumstances.

[29] The trial judge concluded that:
i. The negotiated, specific provision in Schedule A that communications could be made by email prevails over the more general provision in the standard form Agreement requiring personal delivery;

ii. The surrounding circumstances, including that the parties specifically included a clause in Schedule A providing for the use of email, supports an intention to communicate by email on all issues and a practice of so doing; and

iii. Counsel for the appellant admits that he received the waiver by email.
[30] The trial judge concluded that it would be inconsistent with the practical common sense approach described in Sattva to read the contract as disallowing email communication, in light of the surrounding circumstances. His conclusion reveals no palpable or overriding error and is entitled to deference

[31] He also considered the appellant’s argument that a notice should not be treated as an amendment to an agreement because a notice is unilateral and does not involve the consent of both parties. However, he concluded that where both parties are sophisticated and there is a past practice of sending all communications by email, and the circumstances of the agreement involve collaboration and cooperation, “that difference is not significant, and in my view it is unduly technical and contrary to the parties’ expectations to suddenly hold one party to a strict reading of the APS on one particular communication.”

[32] The trial judge also correctly distinguished High Tower Homes Corporation v. Stevens, 2014 ONCA 911, 123 O.R. (3d) 81. In High Tower, unlike in this case, there was no “clear practice” of the parties “communicating by email on all issues.” Moreover, as noted by the trial judge at paragraphs 79 to 80 of his judgment, unlike in this case:
[79] High Tower Homes dealt with two parties of somewhat unequal bargaining power in which the purchaser had not disclosed changes it had made to an agreement, and then sought to take advantage of those changes by giving notice of the waiving of a condition by fax. In this case, however, the parties were on an equal footing that included collaborating with one another on the development proposal, and there was a clear practice of communicating by email on all issues. As Walker testified, and which the communications corroborate, it was clear that Kirshenbaum’s preferred method of communication was by email. As Walker said, the fact that Kirshenbaum had not put his email address under paragraph 3 of the APS did not trouble him as he had Kirshenbaum’s email address and they were acting openly and in good faith with one another.

[80] Further, unlike High Tower Homes (at para. 49), the APS did contain separate provisions calling for “delivery of notice in writing to the Seller” and for transmission of documents by email.
[33] In sum, we see no error in the trial judge’s conclusion that Showcase wrongfully terminated the Agreement, as WED waived the conditions of purchase by email in accordance with the Agreement, and at that point Showcase was bound to proceed with the sale.


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