PDM Entertainment Inc. v. Three Pines Creations Inc. et al., (2015) 336 O.A.C. 156 (CA)

• Judge: MacPherson, Epstein and Roberts, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 12, 2015
• Jurisdiction: Ontario
• Citations: (2015), 336 O.A.C. 156 (CA);2015 ONCA 488

PDM Entertainment v. Three Pines (2015), 336 O.A.C. 156 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. JN.047

PDM Entertainment Inc. (applicant/respondent) v. Three Pines Creations Inc. and Louise Penny (respondents/appellants)

(C60024; 2015 ONCA 488)

Indexed As: PDM Entertainment Inc. v. Three Pines Creations Inc. et al.

Ontario Court of Appeal

MacPherson, Epstein and Roberts, JJ.A.

June 29, 2015.

Summary:

An author (Penny), through her company, Three Pines Creations Inc., granted PDM Entertainment Inc. the option to purchase the rights to her works for the purpose of producing made-for-television movies. The option agreement had an initial two-year term and provided for extensions. PDM paid $4000 to extend the agreement for a third year. When PDM gave notice that it was invoking the extension clause for a second time (i.e., for a fourth year), Penny and Three Pines asserted that PDM's rights under the agreement had ended. PDM applied for a declaration that the option agreement remained in effect. Three Pines applied for a declaration that any rights PDM might have pursuant to the option agreement, except for with respect to one book that had already been exercised, had ended.

The Ontario Superior Court (applications judge) accepted PDM's interpretation of the option agreement and concluded that "the option agreement allows for an extension of a fourth year by the clearest language and which makes the most commercial sense." The applications judge also held that PDM had underpaid Three Pines by $4,000 on the first extension by relying on the wrong clause (i.e., PDM should have paid $8,000 to maintain its right to a further extension). The applications judge, however, granted PDM relief from forfeiture and permitted PDM to pay the additional $4,000 to comply with the extension clause. Penny and Three Pines appealed. At issue was whether the applications judge gave adequate reasons for judgment, whether the applications judge erred in finding that the option agreement provided for two one year extensions on the "initial first set option period", and whether the applications judge exceeded his jurisdiction or otherwise erred in granting PDM relief from forfeiture.

The Ontario Court of Appeal dismissed the appeal.

Contracts - Topic 2103

Terms - Express terms - Options and rights of first refusal - An author (Penny), through her company, Three Pines Creations Inc., granted PDM Entertainment Inc. the option to purchase the rights to her works for the purpose of producing made-for-television movies - The option agreement had an initial two-year term and provided for extensions - A dispute arose over the extension provisions - At issue on appeal was whether an applications judge erred in interpreting two clauses in the option agreement as allowing an extension under both provisions cumulatively (as opposed to alternatively) - The Ontario Court of Appeal interpreted the provisions, holding that the applications judge was correct in holding that the provisions allowed PDM to extend the option agreement pursuant to both provisions cumulatively - See paragraphs 40 to 59.

Courts - Topic 583

Judges - Duties - Re reasons for decisions - An applications judge heard duelling applications involving contractual interpretation and a forfeiture issue and released brief reasons (11 paragraphs) the next day - The losing parties (appellants) appealed, claiming that the applications judge's reasons were inadequate - The Ontario Court of Appeal dismissed the appeal - The court acknowledged that the applications judge's reasons on the contract issue were conclusory and that his reasons on the relief from the forfeiture issue were terse - They did not, however, cross the line and fall into the category of 'insufficient' as described in the leading cases - The court noted that the applications were heard on an urgent basis - The appellants did not object to the opposing party's request that the decision be issued quickly - See paragraphs 28 to 39.

Equity - Topic 1068

Equitable relief - Relief from forfeiture - Grounds for relief - An author granted PDM Entertainment Inc. a two-year option for television movie rights respecting her books - A dispute arose over the extension provisions in the option agreement - An applications judge held that PDM had underpaid by $4,000 by relying on clause 2.3B on the first extension, rather than on clause 2.3, thereby losing its extension right a year earlier than if it had extended the option under s. 2.3 - However, the judge granted relief from forfeiture, permitting PDM to pay the $4,000 and exercise a further extension - The author appealed, arguing that relief from forfeiture could not be granted where there was no breach of the option agreement, only the loss of a right - The Ontario Court of Appeal rejected the author's argument - The court had a broad discretion to award relief from forfeiture - The applications judge's decision was entitled to considerable deference - There was no basis to interfere - See paragraphs 60 to 67.

Equity - Topic 1101

Equitable relief - Contracts - General - [See Equity - Topic 1068 ].

Practice - Topic 8808

Appeals - General principles - Duty of appellate court respecting conclusions or interpretation of trial judge - At issue was whether an applications judge erred in interpreting two clauses in an option agreement as allowing an extension under both provisions cumulatively (as opposed to alternatively) - The losing parties (appellants) appealed - The respondent argued that the appeal involved a question of mixed fact and law and accordingly the general rule in favour of deference to first instance decision-makers on points of contractual interpretation applied - The Ontario Court of Appeal disagreed, stating that it was appropriate to review the decision under appeal on a correctness standard - See paragraphs 42 and 43.

Words and Phrases

Notwithstanding the foregoing - The Ontario Court of Appeal interpreted this phrase as it appeared in the extension provisions of an option agreement - See paragraphs 47 and 48.

Words and Phrases

Or - The Ontario Court of Appeal interpreted the word "or" as it appeared in the extension provisions of an option agreement - See paragraphs 45 and 46.

Cases Noticed:

R. v. Sheppard (C.) (2002), 284 N.R. 342; 211 Nfld. & P.E.I.R. 50; 633 A.P.R. 50; 2002 SCC 26, refd to. [para. 31].

Hill et al. v. Hamilton-Wentworth Regional Police Services Board et al., [2007] 3 S.C.R. 129; 368 N.R. 1; 230 O.A.C. 260; 2007 SCC 41, refd to. [para. 31].

R. v. R.E.M. (2008), 380 N.R. 47; 260 B.C.A.C. 40; 439 W.A.C. 40; 2008 SCC 51, refd to. [para. 31].

F.H. v. McDougall (2008), 380 N.R. 82; 260 B.C.A.C. 74; 439 W.A.C. 74; 297 D.L.R.(4th) 193; 2008 SCC 53, refd to. [para. 31].

Creston Moly Corp. v. Sattva Capital Corp. (2014), 461 N.R. 335; 358 B.C.A.C. 1; 614 W.A.C. 1; 2014 SCC 53, refd to. [para. 42].

120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., [1993] O.J. No. 2801 (C.A.), refd to. [para. 63].

1383421 Ontario Inc. v. Old Miss Place Inc. (2003), 177 O.A.C. 40; 67 O.R.(3d) 161 (C.A.), refd to. [para. 64].

Kozel v. Personal Insurance Co. (2014), 315 O.A.C. 378; 2014 ONCA 130, consd. [para. 65].

Counsel:

Kenneth Prehogan and Hilary Book, for the appellants;

M. Scott Martin, for the respondent.

This appeal was heard on June 12, 2015, before MacPherson, Epstein and Roberts, JJ.A., of the Ontario Court of Appeal. The following decision was delivered for the court by MacPherson, J.A., on June 29, 2015.