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REMEDIES - Equitable remedies - Specific performance - Estoppel

Thursday, May 27, 2021 @ 5:57 AM  

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Appeals by Fram and Kerbel from a judgment interpreting multiple contracts with Romandale in respect of lands earmarked for residential development. Romandale owned two neighbouring farms comprised of 275 acres of undeveloped land. In 2003, Romandale sold an undivided five per cent interest in the lands to Fram. The intention was for Fram to build homes, sell them and share the profits with Romandale. Romandale and Fram entered into additional agreements, including co-owner’s agreements (COAs). The COAs contained a buy-sell mechanism that was not available until secondary planning approval (SPA) required for development was obtained. In 2005, Romandale entered into an agreement with Kerbel for the sale of Romandale’s 95 per cent interest in the subject lands. The transaction involved a first step of sale of five per cent of Romandale’s interest and a second step of sale of Romandale’s remaining interest to Kerbel. The second step was conditional on either Fram’s consent or Romandale’s exercise of the buy-sell provisions in the COAs. Prior to completion of the second step, litigation ensued. In 2007, Fram sued Romandale and Kerbel claiming that the 2005 agreement involved an impermissible disposition of Romandale’s interest in the lands. In 2008, Fram and the development manager sued Romandale and Kerbel on the basis the 2005 agreement breached construction management agreements. In 2010, a mediation agreement contemplated the sale of Romandale’s remaining interest to Kerbel after the lands obtained SPA. Romandale subsequently withdrew from the settlement. In addition, Fram and Kerbel settled matters between them. In 2014, Romandale sued Kerbel alleging a breach of their 2005 agreement. In 2016, Kerbel sued Romandale to compel performance of the 2005 agreement. In 2019, Romandale was successful following a trial of the actions. The trial judge found Kerbel repudiated the 2005 agreement by entering into the 2010 settlement, and that Romandale accepted the repudiation. Romandale was excused from performing the 2005 agreement. Fram and Kerbel appealed.

HELD: Appeals allowed. Fram and Kerbel failed to establish a representation by Romandale intended to induce a course of conduct for the purpose of establishing estoppel by representation. Knowledge of Romandale’s position on the validity of the 2005 agreement post-mediation was not tantamount to a representation that such position would remain unchanged. The trial judge did not address the parties’ submissions on the issue of estoppel by convention requiring consideration of the issue de novo. During the 2010 mediation, the parties communicated a common belief in shared assumptions that were reflected in preliminary and ensuing draft settlement agreements, and in the final agreement. The shared assumptions were that the buy-sell under the COAs could not be triggered until SPA was achieved, and that under the 2005 agreement, Kerbel could not cause Romandale to trigger the buy-sell until after SPA. At no point did Romandale dispute the validity of the shared assumptions, often reiterating them in communications with Fram and Kerbel. Fram and Kerbel entered into the final settlement in reliance on an unqualified understanding of the shared assumptions, thus altering their respective legal positions. Allowing Romandale to resile from the shared assumptions years later would cause detriment to both Fram and Kerbel. Romandale was thus estopped by convention from resiling from the shared assumptions underlying the 2010 settlement. It followed that the trial judge’s interpretation of the 2005 agreement allowing the buy-sell provision to be exercised prior to SPA, and the finding that Kerbel repudiated the 2005 agreement, could not stand. In addition, the trial judge erred in concluding that the 2005 agreement was frustrated by planning changes that changed the development timeline but did not alter the parties’ obligations under the agreement. For similar reasons, it could not be concluded that the 2005 agreement was void under the doctrine of mistake. Kerbel’s 2016 action was not statue-barred, as Romandale’s anticipatory repudiation occurred in 2015. The trial judge erred in failing to find that Kerbel was entitled to specific performance of the 2005 agreement given the uniqueness of the lands to Kerbel and the absence of available substitute properties or other remedies. Fram’s request for damages was dismissed.

Fram Elgin Mills 90 Inc. v. Romandale Farms Ltd., [2021] O.J. No. 1703, Ontario Court of Appeal, E.E. Gillese, P.D. Lauwers and M.L. Benotto JJ.A., April 1, 2021. Digest No. TLD-May242021005