3869130 Canada Inc. et al. v. I.C.B. Distribution Inc. et al.,

• Jurisdiction: Ontario
• Judge: Blair, Juriansz and LaForme, JJ.A.
• Neutral Citation: 2008 ONCA 396
• Citation: (2008), 239 O.A.C. 137 (CA),2008 ONCA 396,45 BLR (4th) 1,[2008] OJ No 1947 (QL),167 ACWS (3d) 82,239 OAC 137,66 CCEL (3d) 89,(2008), 239 OAC 137 (CA),[2008] O.J. No 1947 (QL),239 O.A.C. 137
• Date: 20 May 2008
• Court: Court of Appeal (Ontario)

3869130 Can. v. ICB Distr. (2008), 239 O.A.C. 137 (CA)

MLB headnote and full text

Temp. Cite: [2008] O.A.C. TBEd. MY.061

3869130 Canada Inc. c.o.b. as I.C.B. Distribution 2001, and 2794201 Canada Inc. c.o.b. as C.Y.R. Distributions, and Pierre Cyr, personally (plaintiffs/appellants) v. I.C.B. Distribution Inc., Robert Chenier, and Ottawa Freezer Services Inc. (defendants/respondents)

Robert Chenier (plaintiff/respondent) v. 3869130 Canada Inc. c.o.b. as I.C.B. Distribution 2001 (defendant/appellant)

I.C.B. Distribution Inc. (plaintiff/respondent) v. 3869130 Canada Inc. c.o.b. as I.C.B. Distribution 2001, and 2794201 Canada Inc. c.o.b. as C.Y.R. Distributions (defendants/appellants)

(C43970; C43971; C43972; 2008 ONCA 396)

Indexed As: 3869130 Canada Inc. et al. v. I.C.B. Distribution Inc. et al.

Ontario Court of Appeal

Blair, Juriansz and LaForme, JJ.A.

May 20, 2008.

Summary:

Three lawsuits arose from a business deal involving the sale of two businesses owned by Chenier. Cyr, acting through his companies, was the intended purchaser. One of the transactions closed. The other did not. The first lawsuit (the loan action) involved a claim by one of the Chenier vendor companies for the balance of the purchase price on the sale of its assets. The second lawuit (the wrongful dismissal action) was brought by Chenier for monies owing under a management consultant agreement entered into with respect to that asset transaction. The third lawsuit (the Cyr action) was brought by Cyr and his companies claiming damages from Chenier and his companies for breach of contract, breach of fiduciary duty, breach of good faith, and breach of a duty to avoid conflict of interest.

The Ontario Superior Court, in a decision reported at [2005] O.T.C. Uned. 725, allowed the Chenier claims in the loan action and the wrongful dismissal action and dismissed the Cyr action. The Cyr parties appealed.

The Ontario Court of Appeal dismissed the appeals.

Contracts - Topic 7406

Interpretation - General principles - Interpretation by context - Chenier owned a food distribution company (I.C.B.) and a freezer and cold storage business (O.F.S.) - Cyr owned a food distribution company (C.Y.R. Distributions) - Chenier and Cyr negotiated a deal for the purchase of the assets of I.C.B. by I.C.B. 2001 (a company incorporated by Cyr for the purpose of the purchase) and for the purchase of the shares of O.F.S. by C.Y.R. Distributions - The parties entered into an Asset Purchase Agreement, which contained (i) a covenant by I.C.B. and Chenier not to compete with the purchased business; and (ii) an undertaking by I.C.B. and Chenier to obtain the commitment of O.F.S. to continue to use the services of the purchaser for distribution services in respect of O.F.S.'s customers - They also entered into a Management Consulting Agreement pursuant to which Chenier was to provide consulting services - Prior to the asset purchase closing, the parties signed a Mutual Undertaking whereby O.F.S. agreed to provide to I.C.B. 2001 a right of first refusal for its customers' distribution contracts - The I.C.B. asset purchase closed, but the O.F.S share purchase transaction never closed - Chenier negotiated a storage and distribution contract between O.F.S. and Giant Tiger - I.C.B. 2001 was offered a first right of refusal with respect to the delivery services arising out of the contract and a distribution agreement was executed between O.F.S. and I.C.B. 2001 at a delivery rate lower than that charged by O.F.S. to Giant Tiger - Cyr contended that it was not open to Chenier and O.F.S. to take a profit on the distribution end of the Giant Tiger contract - Cyr and his companies sued Chenier and his companies for, inter alia, breach of contract - The Ontario Court of Appeal affirmed a dismissal of the action - The trial judge's interpretation of the contractual documentation, and particularly of the interplay between the Mutual Undertaking and the Asset Purchase Agreement, was proper - The two documents were to be interpreted together - The parties' conduct in giving effect to the Mutual Undertaking in relation to the Giant Tiger contract bore out the trial judge's interpretation of the agreements - There was nothing in the contractual documents requiring O.F.S. "to continue to use the services" of the purchaser in accordance with the same arrangements that were in place when O.F.S. and I.C.B. were sister companies - It would make no commercial sense that that would be the case in circumstances where, as everyone recognized might happen, the O.F.S share purchase transaction failed to close and I.C.B. 2001 and O.F.S. were operating at arm's length - Further, when the non-competition covenant was read and construed in the context of the various agreements as a whole, the trial judge's finding that the Chenier parties were not in breach of the non-competition covenant was supported on the record - See paragraphs 30 to 76.

Contracts - Topic 7409

Interpretation - General principles - Subsequent conduct of parties - [See Contracts - Topic 7406 ].

Contracts - Topic 7416

Interpretation - General principles - Most commercially reasonable interpretation - [See Contracts - Topic 7406 ].

Contracts - Topic 7526

Interpretation - Surrounding circumstances - Commercial setting - [See Contracts - Topic 7406 ].

Equity - Topic 3607

Fiduciary or confidential relationships - General principles - Relationships which are not fiduciary - Chenier owned a food distribution company (I.C.B.) and a freezer and cold storage business (O.F.S.) - Cyr owned a food distribution company (C.Y.R. Distributions) - Chenier and Cyr negotiated a deal for the purchase of the assets of I.C.B. by I.C.B. 2001 (a company incorporated by Cyr for the purpose of the purchase) and the purchase of the shares of O.F.S. by C.Y.R. Distributions - The parties entered into an Asset Purchase Agreement, which contained a non-competition covenant - They also entered into a Management Consulting Agreement pursuant to which Chenier was to provide consulting services during a transition period - The asset purchase closed, but the share purchase never closed - Chenier negotiated a storage and distribution contract with Giant Tiger - A distribution agreement was executed between O.F.S. and I.C.B. 2001 at a delivery rate lower than that charged by O.F.S. to Giant Tiger - Cyr and his companies sued Chenier, arguing that he was disqualified from competing with I.C.B. 2001 by causing O.F.S. to take a profit on the distribution component of the Giant Tiger contract by reason of a fiduciary obligation, a duty of loyalty and good faith, and a duty to avoid putting himself in a position where his interests conflicted with those of I.C.B. 2001 - The Ontario Court of Appeal affirmed a dismissal of the action - The trial judge concluded that the relationship between Chenier and the Cyr parties did not meet the criteria for a fiduciary relationship - The trial judge found that the parties to the commercial transaction were of equal strength and expertise and there was no imbalance, dependency, or vulnerability in the relationship between them - The trial judge also found that Chenier was not part of I.C.B. 2001's senior management as a result of the consulting agreement and that the duties he was retained to perform did not place him in a fiduciary relationship with the Cyr parties - The trial judge's findings disposed of the arguments regarding breach of fiduciary duty, the duty to avoid conflicts and bad faith - See paragraphs 77 to 89.

Equity - Topic 3711

Fiduciary or confidential relationships - Commercial relationships - [See Equity - Topic 3607 ].

Cases Noticed:

Ventas Inc. et al. v. Sunrise Senior Living Real Estate Investment Trust et al. (2007), 222 O.A.C. 102; 85 O.R.(3d) 254 (C.A.), refd to. [para. 31].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 31, footnote 3].

Scanlon v. Castlepoint Development Corp. et al. (1992), 59 O.A.C. 191; 11 O.R.(3d) 744 (C.A.), refd to. [para. 31, footnote 3].

Toronto-Dominion Bank v. Leigh Instruments Ltd. (Bankrupt) et al. (1998), 63 O.T.C. 1; 40 B.L.R.(2d) 1 (Gen. Div.), affd. (1999), 124 O.A.C. 87; 45 O.R.(3d) 417 (C.A.), refd to. [para. 31, footnote 4].

Venture Capital USA Inc. v. Yorkton Securities Inc. (2005), 197 O.A.C. 264; 75 O.R. (3d) 325 (C.A.), refd to. [para. 31, footnote 4].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 31, footnote 4].

Kentucky Fried Chicken Canada v. Scott's Food Services Inc. et al. (1998), 114 O.A.C. 357 (C.A.), refd to. [para. 31, footnote 5].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 31, footnote 6].

SimEx Inc. v. IMAX Corp. et al. (2005), 206 O.A.C. 3; 11 B.L.R.(4th) 214 (C.A.), refd to. [para. 31].

Dumbrell v. Regional Group of Companies Inc. et al. (2007), 220 O.A.C. 64; 85 O.R.(3d) 616 (C.A.), refd to. [para. 31].

Hawrish v. Bank of Montreal, [1969] S.C.R. 515, refd to. [para. 32].

Mechanical Pin Resetter Co. v. Canadian Acme Screw & Gear Ltd., [1971] S.C.R. 628, refd to. [para. 32].

Bradscot (MCL) Ltd. v. Board of Education (Roman Catholic Separate) of Hamilton-Wentworth et al. (1999), 116 O.A.C. 257; 42 O.R.(3d) 723 (C.A.), refd to. [para. 39].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1, refd to. [para. 40, footnote 7].

MacDougall v. MacDougall (2005), 205 O.A.C. 216; 262 D.L.R.(4th) 120 (C.A.), refd to. [para. 40].

Montreal Trust Co. of Canada v. Birmingham Lodge Ltd. et al. (1995), 82 O.A.C. 25; 24 O.R.(3d) 97 (C.A.), refd to. [para. 55].

Andersen (Arthur) Inc. v. Toronto-Dominion Bank et al. (1994), 71 O.A.C. 1; 17 O.R.(3d) 363 (C.A.), refd to. [para. 55].

Read v. Cole (1915), 52 S.C.R. 176, refd to. [para. 71].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 79].

Cadbury Schweppes Inc. et al. v. FBI Foods Ltd. et al., [1999] 1 S.C.R. 142; 235 N.R. 30; 117 B.C.A.C. 161; 191 W.A.C. 161, refd to. [para. 79].

Canadian Aero Service Ltd. v. O'Malley, [1974] S.C.R. 592, refd to. [para. 80].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 81].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57, refd to. [para. 81].

Authors and Works Noticed:

Fridman, Gerald Henry Louis, The Law of Contract in Canada (5th Ed. 2006), pp. 443, 444 [para. 32].

McCamus, John D., The Law of Contracts (2005), p. 715 [para. 33].

Counsel:

Richard R. Marks and Bruce D. Marks, for the appellants, I.C.B. Distribution 2001, C.Y.R. Distributions and Pierre Cyr;

Douglas G. Menzies, for the respondents, I.C.B. Distribution Inc., Ottawa Freezer Services Inc., and Robert Chenier.

These appeals were heard on November 26 and 27, 2007, before Blair, Juriansz and LaForme, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Blair, J.A., and was released on May 20, 2008.