Friday, December 19, 2014

So much for substantial compliance

Canadian courts usually now waive technicalities and focus on substantive rights. But not always. In High Tower Homes Corporation v. Stevens, 2014 ONCA 911 the Court insisted that a failure to make waiver precisely as set out in a contract, despite dealings between counsel being accepted to that point, made the waiver void. So what to do?  Try to follow terms precisely but recognize sometimes the Court will insist on precise compliance and sometimes not:

[43]       In Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, 354 D.L.R. (4th) 516, at para. 63, Gillese J.A., writing for the court, summarized the essentials of waiver as set out by the Supreme Court of Canada in  Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490:

Waiver occurs when one party to a contract (or proceeding) takes steps that amount to foregoing reliance on some known right or defect in the performance of the other party. It will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of the deficiency that might be relied on and (2) an unequivocal and conscious intention to abandon the right to rely on it. The intention to relinquish the right must be communicated. Communication can be formal or informal and it may be inferred from conduct. The overriding consideration in each case is whether one party communicated a clear intention to waive a right to the other party. 

[44]       The Purchaser argues that negotiations had always or almost always been conducted through counsel and that through this course of conduct the Vendor waived his right to insist upon the prescribed method of notice.

[45]       The Purchaser points to the fact that the parties made offers and counter-offers by fax to their respective lawyers in the course of their negotiation of the Agreement and that the Vendor accepted the offer resulting in the Agreement by fax to the Purchaser's solicitor. 

[46]       The Purchaser also points to correspondence exchanged between its counsel and the Vendor's counsel on February 20 and 21, 2013. The Purchaser's lawyer faxed a letter to the Vendor's lawyer on February 20, 2013 requesting confirmation that the $50,000 deposit had been received and that the conditional period expired on February 23, 2013. On or about February 21, 2013, the Vendor's lawyer responded by fax, acknowledging receipt of the deposit and confirming that the conditional date was February 22, 2013 (February 23 landed on a Saturday). 

[47]       In my view, the evidence does not demonstrate that the Vendor had an "unequivocal and conscious intention" to abandon his right to insist on strict compliance with the requirement that the Purchaser give notice in writing of its waiver of notice of conditions personally to the Vendor. I conclude this for several reasons. 

[48]       First, it is important to recall that the Agreement contained two provisions governing the giving of notice of waiver of conditions for the benefit of the Purchaser: clause 7 of Schedule A and clause 3 of the standard terms. Clause 7 is a separate and specific obligation to give "notice in writing to the [Vendor]" in the case of a waiver of conditions for the benefit of the Purchaser. There is no equivalent stand-alone provision in respect of the delivery of offers or counter-offers, or communications regarding the deposit, or the condition waiver date. Any waiver resulting from the conduct that the Purchaser relies on could only be with respect to clause 3 of the standard terms – as that was the only clause applicable to such conduct – and not the independent requirement in clause 7 of Schedule A. It therefore cannot be said that the conduct relied on by the Purchaser demonstrates that the Vendor had an unequivocal and conscious intention to abandon his right to rely on the specific notice of waiver of conditions provision in clause 7. 

[49]       Second, not only did the Agreement not contain a separate provision requiring "notice in writing to the [Vendor]" in the instances that the Purchaser seeks to rely on (i.e. the making of offers and counter-offers, the delivery of the deposit, and the discussion of the condition waiver date), in two of those instances the Agreement actually contemplated communication with a person other than the Vendor. The Agreement required the Purchaser to deliver the deposit to the Vendor's solicitor within 2 business days of the acceptance of the Agreement. It did not require notice to the Purchaser confirming receipt of the deposit. Given that the deposit was to be paid to the Vendor's solicitor, it is logical that the Purchaser's lawyer would seek confirmation from the Vendor's solicitor that it had been received. Similarly, in the case of the communication between counsel regarding the date when the conditional period expired, clause 20 of the Agreement permitted the Vendor's and the Purchaser's respective counsel to extend or abridge time on their behalf. 

[50]       Third, the notice at issue is specifically required by clause 7 of Schedule A and is of critical importance. If the conditions in clause 7 were not waived "by notice in writing to the [Vendor]" within the applicable time period, the agreement would become null and void. 

[51]       Fourth, this is not a case where a particular kind of notice (such as a notice of renewal of a lease[4]) had always been given in a particular manner, and accepted by the other party as having been validly given, despite not conforming to the notice provisions of the governing agreement.  

[52]       Finally, the Purchaser's lawyer did not seem to be of the view that sending a fax to the Vendor's lawyer satisfied the requirement that notice in writing be given to the Vendor. According to Mr. Curic, the Purchaser's lawyer instructed him to deliver the notice to Blue Water as well.

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