UBS Securities v. Sands Bros.,

• Jurisdiction: Ontario
• Judge: Gillese, MacFarland and LaForme, JJ.A.
• Neutral Citation: 2009 ONCA 328
• Citation: 2009 ONCA 328,(2009), 248 O.A.C. 146 (CA),95 OR (3d) 93,58 BLR (4th) 60,[2009] OJ No 1606 (QL),248 OAC 146,248 O.A.C. 146,[2009] O.J. No 1606 (QL),(2009), 248 OAC 146 (CA),95 O.R. (3d) 93
• Date: 29 January 2009
• Court: Court of Appeal (Ontario)

UBS Securities v. Sands Bros. (2009), 248 O.A.C. 146 (CA)

MLB headnote and full text

Temp. Cite: [2009] O.A.C. TBEd. AP.072

UBS Securities Canada Inc. (applicant/respondent) v. Sands Brothers Canada Ltd. (respondent/appellant)

(C48839; 2009 ONCA 328)

Indexed As: UBS Securities Canada Inc. v. Sands Brothers Canada Ltd.

Ontario Court of Appeal

Gillese, MacFarland and LaForme, JJ.A.

April 22, 2009.

Summary:

UBS Securities Canada Inc. (UBS) asserted that Sands Brothers Canada Ltd. (Sands) breached an agreement to sell 100,000 shares of the Montreal stock exchange to UBS. UBS applied for declaratory and injunctive relief and specific performance.

The Ontario Superior Court, in a decision reported at [2008] O.T.C. Uned. 927, found that the parties had reached an agreement to complete the purchase and sale of the shares and found an anticipatory breach of the agreement on the part of Sands. The court ordered specific performance of the agreement. Sands appealed.

The Ontario Court of Appeal dismissed the appeal.

Contracts - Topic 1461

Formation of contract - Intention - General - UBS Securities Canada Inc. (UBS) asserted that Sands Brothers Canada Ltd. (Sands) breached an agreement to sell 100,000 shares of the Montreal stock exchange to UBS - UBS applied for declaratory and injunctive relief and specific performance - The trial judge found that the parties had reached an agreement to complete the purchase and sale of the shares and found an anticipatory breach of the agreement on the part of Sands - The trial judge ordered specific performance of the agreement - Sands appealed, asserting that the trial judge erred in using evidence that it was customary in the securities industry to consummate trades by verbal agreement as objective evidence of an intention to contract - The Ontario Court of Appeal dismissed the appeal - The trial judge properly relied on the uncontradicted evidence of UBS that it was customary in the securities industry to make binding agreements orally and that without this custom, the securities industry could not operate effectively - That evidence formed a necessary part of the context of the parties' communications and was relevant to determining whether the parties had concluded the agreement in November 2006 or whether they had merely reached an agreement to agree - See paragraphs 77 to 79.

Contracts - Topic 1465

Formation of contract - Intention - Intention to create a legal relationship - [See Contracts - Topic 1500 ].

Contracts - Topic 1500

Formation of contract - Consensus or agreement - General - UBS Securities Canada Inc. (UBS) asserted that Sands Brothers Canada Ltd. (Sands) breached an agreement to sell 100,000 shares of the Montreal stock exchange to UBS - UBS applied for declaratory and injunctive relief and specific performance - The trial judge found that the parties had reached an agreement to complete the purchase and sale of the shares and found an anticipatory breach of the agreement on the part of Sands - The trial judge ordered specific performance of the agreement - Sands appealed, asserting that the trial judge erred by taking a subjective approach to the issue of whether the parties had reached an agreement - The Ontario Court of Appeal dismissed the appeal - The trial judge did not err in the statement of the objective test for whether the parties intended to contract - The trial judge was alive to the fact that the test for consensus ad idem was objective - The trial judge did not apply a subjective test - Rather, she considered the totality of the evidence before concluding that the objective test had been met and that the parties had agreed to a contract on the essential terms - See paragraphs 82 to 89.

Contracts - Topic 2280

Terms - Conditions precedent - General - UBS Securities Canada Inc. (UBS) asserted that Sands Brothers Canada Ltd. (Sands) breached an agreement to sell 100,000 shares of the Montreal stock exchange to UBS - UBS applied for declaratory and injunctive relief and specific performance - The trial judge found that the parties had reached an agreement to complete the purchase and sale of the shares and found an anticipatory breach of the agreement on the part of Sands - The trial judge found that there was no agreement between the parties that the Montreal stock exchange's approval of the transfer of shares was a condition to be satisfied in order for a binding agreement to be effective - On the contrary, the trial judge found that the agreement reached by the parties was unconditional - The trial judge ordered specific performance of the agreement - Sands appealed - The Ontario Court of Appeal dismissed the appeal - Sands and UBS were both aware of the stock exchange's role in the transfer of shares - There was nothing in the record to suggest that either party made stock exchange approval a condition precedent to the agreement - The evidence was to the contrary - UBS's conduct indicated that it assumed any risk associated with a failure to obtain stock exchange approval - In any event, Sands could not rely on the lack of stock exchange approval to avoid performing under the agreement - Even where a third party consent was a condition of performance of a contract, each party was obliged to perform the contract pending the necessary third party consent - Sands could not avoid its bargain by arguing that there was an unfulfilled condition precedent of stock exchange approval when stock exchange approval was never sought because Sands refused to tender the shares or provide the required trade execution information to the stock exchange - Sands could not rely on its own failures to take the necessary steps to obtain stock exchange approval to deny the enforceability of the agreement - See paragraphs 90 to 95.

Contracts - Topic 4106

Remedies for breach - Specific performance - When available - General - UBS Securities Canada Inc. (UBS) asserted that Sands Brothers Canada Ltd. (Sands) breached an agreement to sell 100,000 shares of the Montreal stock exchange to UBS - UBS applied for declaratory and injunctive relief and specific performance - The trial judge found that the parties had reached an agreement to complete the purchase and sale of the shares and found an anticipatory breach of the agreement on the part of Sands - The trial judge ordered specific performance of the agreement - Sands appealed, asserting that the trial judge erred in ordering specific performance - There was nothing unique about the shares which would warrant an order for specific performance - There was no evidence to suggest that UBS could not prove damages or that damages would be inadequate - The Ontario Court of Appeal dismissed the appeal - The shares were unique - During the relevant time frame (i.e. prior to the public listing of the shares in March 2007) there was no readily available substitute for the shares - Further, the shares were unique because of the special value they had for UBS - Finally, the value and availability of the shares at the time of breach was not certain - See paragraphs 97 to 101.

Contracts - Topic 4106

Remedies for breach - Specific performance - When available - General - UBS Securities Canada Inc. (UBS) asserted that Sands Brothers Canada Ltd. (Sands) breached an agreement to sell 100,000 shares of the Montreal stock exchange to UBS - UBS applied for declaratory and injunctive relief and specific performance - The trial judge found that the parties had reached an agreement to complete the purchase and sale of the shares and found an anticipatory breach of the agreement on the part of Sands - The trial judge ordered specific performance of the agreement - Sands appealed, asserting that the trial judge erred in ordering specific performance - The trial judge was improperly influenced by two factual matters: the fact that Sands had no assets in Ontario and a finding that UBS's reputation would suffer if it failed to complete the Third Party Sale (in which UBS agreed to sell shares to a third party, conditional on the closing of the agreement with Sands) - The Ontario Court of Appeal dismissed the appeal - There was no error in the trial judge considering Sands' financial position when deciding the matter of remedy - Whether a defendant was in a position to pay damages, and thus, whether the plaintiff was likely to recover them, was relevant to the issue of the adequacy of damages - Similarly, there was no reason to question the trial judge's consideration of the reputational aspects of a failure by UBS to conclude the third party sale - See paragraphs 97, 102 to 104.

Contracts - Topic 4106

Remedies for breach - Specific performance - When available - General - UBS Securities Canada Inc. (UBS) asserted that Sands Brothers Canada Ltd. (Sands) breached an agreement to sell 100,000 shares of the Montreal stock exchange to UBS - UBS applied for declaratory and injunctive relief and specific performance - The trial judge found that the parties had reached an agreement to complete the purchase and sale of the shares and found an anticipatory breach of the agreement on the part of Sands - The trial judge ordered specific performance of the agreement - Sands appealed, asserting that the trial judge erred in ordering specific performance - The initial error in ordering specific performance was compounded by maintaining that order after the shares no longer existed following their conversion into Toronto Stock Exchange shares and cash - This, Sands submitted, resulted in a windfall for UBS - The Ontario Court of Appeal dismissed the appeal - By ordering specific performance, UBS was placed in the position that it would have been had the agreement been performed - UBS did not receive a windfall, despite what had occurred as a result of the merger of the Montreal stock exchange and the Toronto Stock Exchange - See paragraphs 97, 105 to 107.

Securities Regulation - Topic 5201

Trading in securities - General - [See Contracts - Topic 1461 ].

Specific Performance - Topic 506

When available - General principles - Contractual obligations - [See all Contracts - Topic 4106 ].

Cases Noticed:

W.C. Pitfield & Co. Ltd. v. Jomac Gold Syndicate Ltd., [1938] O.R. 427 (C.A.), refd to. [para. 53].

Asamera Oil Corp. v. Sea Oil and General Corp. - see Baud Corp., N.V. v. Brook.

Baud Corp., N.V. v. Brook, [1979] 1 S.C.R. 633; 23 N.R. 181; 12 A.R. 271, refd to. [para. 54].

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. 57].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1, refd to. [para. 57].

MacDougall v. MacDougall (2005), 205 O.A.C. 216; 262 D.L.R.(4th) 120 (C.A.), refd to. [para. 61].

Double N Earthmovers Ltd. v. Edmonton (City) et al., [2005] 10 W.W.R. 1; 363 A.R. 201; 343 W.A.C. 201; 2005 ABCA 104, affd. [2007] 1 S.C.R. 116; 356 N.R. 211; 401 A.R. 329; 391 W.A.C. 329; 2007 SCC 3, refd to. [para. 61].

Soulos v. Korkontzilas et al., [1997] 2 S.C.R. 217; 212 N.R. 1; 100 O.A.C. 241, refd to. [para. 62].

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. 71].

Klemke Mining Corp. v. Shell Canada Ltd. et al. (2007) 419 A.R.1; 2007 ABQB 176, affd. (2008), 433 A.R. 172; 429 W.A.C. 172; 2008 ABCA 257, refd to. [para. 80].

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

Turney v. Zhilka, [1959] S.C.R. 578, refd to. [para. 90].

Wu Estate v. Zurich Life Insurance Co. et al. (2006), 211 O.A.C. 133; 268 D.L.R.(4th) 670 (C.A.), leave to appeal refused (2006), 362 N.R. 399; 228 O.A.C. 398 (S.C.C.), refd to. [para. 90].

Kempling v. Hearthstone Manor Corp. (1996), 184 A.R. 321; 122 W.A.C. 321 (C.A.), refd to. [para. 90].

Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072; 20 N.R. 500; 9 A.R. 308, refd to. [para. 94].

McCauley v. McVey and MacFarlane, [1980] 1 S.C.R. 165; 27 N.R. 604, refd to. [para. 94].

Dodge (John E.) Holdings Ltd. v. 805062 Ontario Ltd. (2003), 168 O.A.C. 252; 63 O.R.(3d) 304 (C.A.), refd to. [para. 100].

Authors and Works Noticed:

Sharpe, Robert J., Injunctions and Specific Performance (2007 Looseleaf Supp.), para. 7.260 [para. 103].

Waddams, Stephen M., The Law of Contracts (4th Ed. 1999), p. 42 [para. 93].

Waddams, Stephen M., The Law of Contracts (5th Ed. 2005), p. 40 [para. 93, footnote 1].

Counsel:

Tom Curry and Anne Posno, for the appellant;

John Fabello and Emily Head, for the respondent.

This appeal was heard on January 29, 2009, by Gillese, MacFarland and LaForme, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Gillese, J.A., on April 22, 2009.