Hoban Construction Ltd. et al. v. Alexander, (2012) 317 B.C.A.C. 116 (CA)

• Judge: Donald, D. Smith and Bennett, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: October 17, 2011
• Jurisdiction: British Columbia
• Citations: (2012), 317 B.C.A.C. 116 (CA);2012 BCCA 75

Hoban Constr. Ltd. v. Alexander (2012), 317 B.C.A.C. 116 (CA);

    540 W.A.C. 116

MLB headnote and full text

Temp. Cite: [2012] B.C.A.C. TBEd. FE.030

Hoban Construction Ltd. and Darrell G. Trouton (appellants/plaintiffs) v. Robert William Stanley Alexander (respondent/defendant)

(CA038637; 2012 BCCA 75)

Indexed As: Hoban Construction Ltd. et al. v. Alexander

British Columbia Court of Appeal

Donald, D. Smith and Bennett, JJ.A.

February 16, 2012.

Summary:

At issue in this case was whether a handwritten document for the purchase of shares, hastily drafted and signed in a gravel pit, constituted a legally binding contract. Also at issue was the validity and enforceability of a second contract, similar to the first, which was reduced to typewritten form before execution.

The British Columbia Supreme Court, in a decision reported at [2010] B.C.T.C. Uned. 1558, held that the contracts were unenforceable. The plaintiffs appealed.

The British Columbia Court of Appeal allowed the appeal, holding that the trial judge incorrectly framed the pertinent legal issues and did not consider or apply the relevant principles of contract formation.

Contracts - Topic 2021

Terms - Essential terms - General - At issue was whether a handwritten document for the purchase of shares, hastily drafted and signed in a gravel pit, constituted a legally binding contract - Also at issue was the validity and enforceability of a second contract, similar to the first, which was reduced to typewritten form before execution - The trial judge held that the contracts were unenforceable - The plaintiffs appealed - The British Columbia Court of Appeal allowed the appeal, holding that the trial judge incorrectly framed the pertinent legal issues and did not consider or apply the relevant principles of contract formation - The court stated, inter alia, that "the trial judge referred to the vagueness of the phrase 'all sums of owings for adjustments' and the unspecified nature of the adjustments as features that undermine the validity of the contracts. With respect, adjustments are the type of details that are commonly sorted out after an agreement has been reached. The fact that the adjustments had to be resolved at a later date would not render the agreement 'meaningless'. The quantifying of the adjustments was not a condition precedent to give effect to the agreement, nor was it an essential element of these contracts" - See paragraph 54.

Contracts - Topic 2021

Terms - Essential terms - General - [See second Contracts - Topic 7400 ].

Contracts - Topic 2267

Contracts - Terms - Conditions and warranties - Condition precedent - [See first Contracts - Topic 2021 ].

Contracts - Topic 7400

Interpretation - General principles - General - At issue was whether a handwritten document for the purchase of shares, hastily drafted and signed in a gravel pit, constituted a legally binding contract - Also at issue was the validity and enforceability of a second contract, similar to the first, which was reduced to typewritten form before execution - The trial judge held that the contracts were unenforceable - The British Columbia Court of Appeal allowed the plaintiffs' appeal - The court held that "The trial judge did not correctly frame the legal issues pertinent to the question of whether the contracts at issue are legally enforceable. The legal issues she ought to have considered are whether the parties effectively agreed to enter into binding legal relations, and, if so, whether the essential terms of their contracts are so vague and uncertain as to be incapable of reasonable interpretation and, consequently, meaningless. Furthermore, the trial judge did not apply the appropriate legal test to the first question, namely whether a reasonable third-party observer would conclude from all of the circumstances, including the documents themselves, the circumstances under which they were executed, and the parties' subsequent conduct, that the parties intended to enter into binding legal relations. Finally, the trial judge relied upon defects as to the form of the contracts and inartistic language to find the essential terms of the contracts vague and uncertain, when the applicable legal principles required her to seek out the intention of the parties as to the substantive content of their agreements, to ascribe meaning where possible in the contractual language the parties used, and to resolve inconsistencies or ambiguities with reference to extrinsic evidence. The trial judge's failure to apply these principles of contractual interpretation led her to incorrectly conclude that the parties' contracts are not legally enforceable." - See paragraphs 58 to 61.

Contracts - Topic 7400

Interpretation - General principles - General - At issue was whether a handwritten document for the purchase of shares, hastily drafted and signed in a gravel pit, constituted a legally binding contract - Also at issue was the validity and enforceability of a second contract, similar to the first, which was reduced to typewritten form before execution - The trial judge held that the contracts were unenforceable - The British Columbia Court of Appeal allowed the plaintiffs' appeal, holding that the trial judge incorrectly framed the pertinent legal issues and did not consider or apply the relevant principles of contract formation - The trial judge concluded that the documents were directions to lawyers to draft agreements, and the parties did not consider themselves bound by the documents until the formal agreements were prepared - However, the content of the documents, the circumstances under which they were signed, and the defendant's subsequent conduct all belied his position that they were merely agreements to agree - An application of the appropriate legal principles to the factual matrix as the trial judge determined it, led the court to conclude that the documents were intended by all parties to be binding and were treated as such - A reasonable third-party observer would have concluded that they were legally binding and enforceable contracts - While the form of the contracts and the offers from which they arose did not strictly comply with the Unanimous Shareholders' Agreement's specifications, the inquiry was not whether the contracts were competently drafted, but rather whether they disclosed the parties' intentions as to the substance of their agreement - Each purported contract set out with sufficient clarity the parties, the subject matter of the share purchase agreement, the effective date of the agreement, and the purchase price - The trial judge found that the agreements lacked a closing date and opined that this was an essential term - The court disagreed - Whether or not a specific closing date was an essential term in a share purchase agreement depended on the circumstances - The completion date would be resolved when the funds were paid - The trial judge did not make every effort to give effect to the parties' intentions by looking at substance and not mere form - Rather than attempting to extract meaning from the parties' expression of their contractual intention as case law required, she applied an overly formalistic and literal approach to interpreting the document - When this approach produced ambiguity and inconsistencies with undisputed facts, she failed to attempt to resolve them by looking to extrinsic evidence, and thereby erred.

Contracts - Topic 7401

Interpretation - General principles - Intention of parties (incl. reasonable expectations) - [See both Contracts - Topic 7400 ].

Contracts - Topic 7409

Interpretation - General principles - Subsequent conduct of parties - [See second Contracts - Topic 7400 ].

Contracts - Topic 7430

Interpretation - Ambiguity - Admissibility of extrinsic evidence - [See both Contracts - Topic 7400 ].

Practice - Topic 8800.2

Appeals - General principles - Duty of appellate court regarding findings of law - The British Columbia Court of Appeal stated that "The authorities are clear that the failure to apply the appropriate principles of contractual interpretation is an extricable legal error reviewable on a standard of correctness" - See paragraph 56.

Cases Noticed:

Smith v. Hughes (1871), L.R. 6 Q.B. 597, refd to. [para. 34].

Kernwood Ltd. v. Renegade Capital Corp. (1997), 97 O.A.C. 3 (C.A.), refd to. [para. 36].

Langley Lo-Cost Builders Ltd. v. 474835 B.C. Ltd. et al., [2000] 7 W.W.R. 46; 140 B.C.A.C. 182; 229 W.A.C. 182; 2000 BCCA 365, appld. [para. 36].

Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 53 O.A.C. 314; 79 D.L.R.(4th) 97 (C.A.), refd to. [para. 38].

Calvin Consolidated Oil & Gas Co. v. Manning, [1959] S.C.R. 253, refd to. [para. 41].

Marquest Industries Ltd. v. Willows Poultry Farms Ltd. (1968), 1 D.L.R.(3d) 513 (B.C.C.A.), appld. [para. 47].

UBS Securities Canada Inc. v. Sands Brothers Canada Ltd. (2009), 248 O.A.C. 146; 95 O.R.(3d) 93; 2009 ONCA 328, refd to. [para. 51].

MacDougall v. MacDougall (2005), 205 O.A.C. 216; 262 D.L.R.(4th) 120 (C.A.), refd to. [para. 56].

Hayes Forest Services Ltd. v. Weyerhaeuser Co. (2008), 250 B.C.A.C. 286; 416 W.A.C. 286; 2008 BCCA 31, refd to. [para. 56].

Keefer Laundry Ltd. v. Pellerin Milnor Corp. et al. (2009), 271 B.C.A.C. 307; 458 W.A.C. 307; 57 B.L.R.(4th) 161; 2009 BCCA 273, refd to. [para. 56].

JEL Investments Ltd. v. Boxer Capital Corp. et al. (2011), 303 B.C.A.C. 79; 512 W.A.C. 79; 2011 BCCA 142 , refd to. [para. 56].

Roberts v. Heavy Metal Marine Ltd. (2011), 313 B.C.A.C. 48; 533 W.A.C. 48; 2011 BCCA 435, refd to. [para. 56].

Authors and Works Noticed:

Fridman, G.H.L., The Law of Contract in Canada (5th Ed. 2006), p. 15 [para. 35].

Hall, G.H., Two Unsettled Questions in the Law of Contractual Interpretation: a Call to the Supreme Court of Canada (2010), 50 Can. Bus. L.J. 434, generally [para. 56].

Counsel:

C. Elkin, for the appellants;

D. Zachernuk, for the respondent.

This appeal was heard on October 17, 2011, at Kamloops, B.C., by Donald, D. Smith and Bennett, JJ.A., of the British Columbia Court of Appeal. Bennett, J.A., delivered the following decision for the court on February 16, 2012.