COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Wookey, 2016 ONCA 611

DATE: 20160805

DOCKET: C58019

Gillese, Watt and Tulloch JJ.A.

BETWEEN

Her Majesty the Queen

Respondent

and

Adam Wookey

Appellant

Joseph S. Wilkinson, for the appellant

Kevin Wilson, for the respondent

Heard: February 4, 2016

On appeal from the convictions entered by Justice Leslie
    A.P. Chapin of the Ontario Court of Justice on July 10, 2013, with reasons
    reported at 2013 ONCJ 83 and 2013 ONCJ 825.

Tulloch J.A.:

A.

Introduction

[1]

The main issue in this appeal is whether the general definition of
    drug under the
Food and Drugs Act
, R.S.C. 1985, c. F-27 (
FDA
),
    applies to substances that were intended for recreational use, as opposed to
    medicinal or therapeutic uses.

[2]

Between March 2008 and January 2010, the appellant marketed and sold
    products that contained 1-Benzyl-Piperazine (BZP), a substance similar to an
    amphetamine. During that time period, BZP was not listed under any schedule in
    the
FDA
or the
Controlled Drugs and Substances Act
, S.C.
    1996, c. 19 (
CDSA
).

[3]

Health Canada repeatedly warned the appellant that it considered BZP to
    be a drug. It requested that he apply for the necessary licenses and approvals
    for such a substance. Eventually, the appellant, his company Purepillz
    Corporation, and his company Pure Principles Inc., were charged with numerous
    regulatory offences under the
FDA
and the
Food and Drugs
    Regulations
, C.R.C., c. 870. The charges against Pure Principles Inc. were
    ultimately dismissed.

[4]

At trial, the appellant and Purepillz Corporation were convicted of the
    following: (i) six counts of selling a drug in dosage form for which no drug
    identification number was assigned, (ii) six counts of selling and advertising
    a new drug without the manufacturer filing a new drug submission or abbreviated
    new drug submission and without the Minister of Health issuing to the
    manufacturer a notice of compliance, (iii) a single count of importing for sale
    drugs that violate the Act or Regulations; and (iv) a single count of
    advertising drugs to the general public as a treatment, preventative or cure
    for addiction. The six-count convictions were based on one count for each of
    the BZP products sold, which were called Peaq, Freq, Spun, Flow, Rush, and Rush
    2.

[5]

On appeal, the appellant challenges his convictions and submits that all
    of the verdicts were unreasonable. He argues that BZP was not a drug under
    the general definition of the term in the
FDA
because that definition
    does not apply to recreational substances.

[6]

If this court finds that BZP falls under the definition of drug, he
    seeks to challenge that definitions constitutionality on the basis that it is
    overbroad. This constitutional challenge was not raised at trial.

[7]

In addition, even if BZP was a drug, he submits that the verdict that it
    was sold as a preventative for addiction was unsupported by the evidence and
    thus unreasonable.

[8]

At the hearing, the appellant abandoned his argument that BZP could not
    fall under the new drug provisions of the Regulations.

[9]

For the reasons that follow, I conclude that BZP falls under the general
    definition of drug in the
FDA
. I also conclude that this is not an
    appropriate case for this court to exercise its discretion to hear a
    constitutional challenge not raised at trial. Finally, I conclude that the
    conviction for advertising BZP as a preventative for addiction was supported by
    the evidence and not based on an unreasonable verdict. Accordingly, I would
    dismiss the appeal.

B.

Issues on appeal

(1)

Is BZP a drug under the general definition in the
FDA
?

(a)

Overview

[10]

Although BZP is now a restricted drug under the schedule in Part J of
    the
FDA
, and under Schedule III of the
CDSA
, no such listing existed
    during the time period set out in the indictment.

[11]

Rather, the appellants liability was based on BZP falling under the
    general definition of drug in the
FDA
.

[12]

Drug is defined in that Act, as follows:

drug
includes any substance or mixture of substances manufactured,
    sold or represented for use in

(a)
the diagnosis, treatment,
    mitigation or prevention of a disease, disorder or abnormal physical state, or
    its symptoms, in human beings or animals,

(b)
restoring, correcting or
modifying organic functions in human beings
or animals,
    or

(c)
disinfection in premises in
    which food is manufactured, prepared or kept. [Emphasis added.]
[1]

[13]

The appellant was held liable on the basis that BZP was a substance or
    mixture of substances manufactured, sold or represented for use in modifying
    organic functions in human beings.
[2]

[14]

The trial judge found that BZP modified organic functions in human
    beings. That finding was well-supported by the expert evidence, and is not
    challenged on appeal. That expert evidence established the following:

·

BZP has an effect on the brain. It is perceived by experienced
    drug users as having an exciting effect, similar to amphetamine. In drug naive
    individuals there are also subjective effects such as changes in mood and
    perception.

·

BZP inhibits 3 enzymes in the liver which could have implications
    for interactions with other drugs.

·

BZP elevates the heart rate and blood pressure, increases pupil
    size and causes flushing of the skin and sweating.

·

BZP can cause severe anxiety, panic attacks, hallucinations, and
    severe headaches in some individuals.

·

BZP was found to be a substitute for amphetamine.

·

BZP in combination with alcohol in test subjects caused severe
    adverse reactions such as anxiety, agitation, hallucinations, panic attack and
    severe headache.

[15]

It was also uncontested that BZP was manufactured, sold or represented
    for use in modifying organic functions in human beings. There was ample
    evidence that the appellant, through his companys website, www.purepillz.ca,
    sold and represented BZP for use in modifying organic functions, in particular
    for its effect on the brain causing excitement similar to that produced by
    amphetamines. For example, the www.purepillz.ca website contained the following
    statements on each of the BZP products that formed the subject-matter of the
    appellants convictions:

Peaq:
Intensely Speedy and mildly Euphoric
    Effect

Peaq is a high level energy pill with moderate but satisfying
    euphoric effects. Great for parties and clubbing and guaranteed to keep you
    going hard all night.

Freq
: Psychedelic Sensual Stimulation

Freq provides a sensual buzz with more visuals and psychedelic
    effects as you increase the dosage. Great to just sit back, relax and enjoy the
    trip.

Spun
: Super-Psychedelic Stimulation

Great Psychedelec [sic] effect with a milder speedy feeling. A
    unique blend of four piperazines, organic compounds known for their mildly
    hallucinogenic and euphoric effects.

Flow

Moderate energy boost with a new blend of increased euphoric
    stimulation.

Rush
: E-sensory Stimulation

A higher than average speedy effect with a strong euphoric
    feeling which becomes psychedelic at higher doses. Gives you an extreme rush
    and leaves you saying whoa. The closest legal experience to MDMA/Ecstasy of
    any pill on the market.

Rush2

Lower energy boost then [sic] Peaq with a new blend of
    increased euphoric stimulation.

[16]

While this would seem to be conclusive of whether BZP fell under the
    definition of drug in this case, the appellant argues that this is not so.
    That is because, in his submission, the
FDA
was never meant to apply
    to recreational substances, but only to substances intended for medicinal or
    therapeutic uses. The
CDSA
, he says,

is the Act intended to
    cover substances intended for recreational uses.

[17]

In support of his claim, the appellant points out that the definition of
    drug in the
FDA
, which has more or less remained the same since
    1939, originally incorporated the words modifying organic functions through
    the defined term of medicine. This, he says, suggests that Parliament
    intended to restrict the term modifying organic functions to medicinal or
    therapeutic uses.

[18]

He also submits that the additions in the 1950s and 1960s of
    amphetamines, barbiturates, thalidomide, and LSD to the schedules of the
    since-repealed Parts III and IV of the
FDA
governing controlled,
    restricted, and prohibited drugs, provide further evidence that recreational
    drugs are not covered by the general drug definition. If these substances
    already fell within such a definition, he contends, there would have been no
    need to specifically list them in schedules to the Act.

[19]

Along similar lines, the appellant argues that the enactment of the
CDSA
,

in place of the repealed
Narcotic Control Act
and Parts III and
    IV of the
FDA
, would be redundant if the definition of drug is as
    broad as the trial judges interpretation suggests. That is because, absent
    language limiting that definition to therapeutic or medicinal uses, all of the
    substances specifically listed in the
CDSA
would be covered by the
FDA
.
    This could not be, he says, because Parliament is not redundant.

[20]

Finally, he asserts that if not limited to therapeutic or health uses,
    the definition of drug would be essentially limitless. The appellant says
    that the Canadian approach to drug control is that substances must be
    specifically listed in a schedule to prohibit individuals from dealing with them.

[21]

I disagree with these submissions.

[22]

In my view, based on an application of the modern principle of statutory
    interpretation, the definition of drug in the
FDA
applies to all
    substances manufactured, sold, or represented for use in modifying organic
    functions, regardless of whether the substance is intended for a medicinal,
    therapeutic, or recreational use. For the following reasons, I would dismiss
    this ground of appeal.

(b)

Analysis

[23]

The modern principle of statutory interpretation is that the words of
    an Act are to be read in their entire context and in their grammatical and
    ordinary sense harmoniously with the scheme of the Act, the object of the Act,
    and the intention of Parliament:
Re Rizzo & Rizzo Shoes Ltd.
,
    [1998] 1 S.C.R. 27, at para. 21.

[24]

The starting point for statutory interpretation under the modern
    principle is to determine the ordinary meaning of the text: Ruth Sullivan,
Sullivan
    on the Construction of Statutes,
6th ed. (Markham, Ont.: LexisNexis
    Canada, 2014) at paras. 3.5-3.8 (Sullivan).

[25]

Ordinary meaning refers to the readers first impression meaning, the
    understanding that spontaneously comes to mind when words are read in their
    immediate context: Sullivan, at para. 3.9, cited in
Pharmascience Inc. v.
    Binet
, 2006 SCC 48, [2006] 2 S.C.R. 513, at para. 30. Another way of
    describing ordinary meaning is as the natural meaning which appears when the
    provision is simply read through:
Canadian Pacific Air Lines Ltd. v.
    Canadian Air Line Pilots Assn.
, [1993] 3 S.C.R. 724, at p. 735;
Pharmascience
    Inc. v. Binet,
at para. 30; Sullivan, at para. 3.9.

[26]

In my view, the natural meaning that appears after reading through the
    relevant portion of the definition of drug under the
FDA

    particularly the portion that reads
drug
includes any substance or
    mixture of substances manufactured, sold or represented for use in .. modifying
    organic functions  does not in any way restrict itself to substances intended
    for medicinal or therapeutic use. Nor does it preclude the definitions
    application to substances intended for recreational uses. It simply provides
    that a substance or mixture of substances, such as BZP, is a drug if it is
    manufactured for use in modifying organic functions, sold for use in modifying
    organic functions, or represented for use in modifying organic functions in
    human beings.

[27]

However, the interpretive exercise does not end here. The modern
    principle indicates that statutory interpretation cannot be founded on ordinary
    meaning alone, but must be analyzed in context together with the purpose of the
    legislation, the greater statutory scheme, and the intention of the
    legislature: Sullivan, at para. 3.7.

[28]

The appellants submissions, essentially, are that the greater statutory
    scheme, which includes the
CDSA
, and the intention of the legislature
    revealed through the legislative history of regulating drugs, demonstrate that
    the meaning of drug under the
FDA
should be interpreted
    restrictively.

[29]

Yet, neither the greater statutory scheme, nor the intention of the
    legislature, either together or individually, provide any reason to depart from
    the ordinary meaning. Rather, in my view, they reinforce its inclusive
    interpretation. So, too, does the purpose of the legislation.

[30]

First, the legislative history and the relevant Hansard evidence suggest
    that the intention of the legislature was that the definition of drug would
    extend beyond merely therapeutic or medicinal uses.

[31]

As mentioned above, the current definition traces back to the 1939
    amendments to the
FDA
.

[32]

Before that time, drug was defined as follows in the
Food and
    Drugs Act
, R.S.C. 1927, c. C-27, s. 2(c):

drug includes all medicine for internal or external use for
    man or animal, and any substance or mixture of substances intended to be used
    for the treatment, mitigation or prevention of disease in man or animal.

[33]

The 1939 amendment,
An Act to amend the Food and Drug Act
, S.C.
    1939, c. 3, s.1, expanded the definition of drug to include cosmetics and
    disinfectants. It also defined the term medicine as follows:

medicine means any substances or mixture of substances that
    may be used in restoring, correcting or modifying organic functions.

[34]

The word means indicates that the definition is exhaustive. When a
    term is defined exhaustively, the definition completely displace[s] whatever
    meanings the defined term might otherwise bear in ordinary or technical usage:
    Sullivan, at para. 4.34; see also
R. v. A.D.H.
, 2013 SCC 28, [2013] 2
    S.C.R. 269, at para. 43;
Yellow Cab Ltd. v. Alberta (Industrial Relations
    Board)
, [1980] 2 S.C.R. 761, at pp. 768-69.

[35]

Far from incorporating a therapeutic sense of the word medicine into
    the definition of drug then, as the appellant contends, Parliament
    specifically overrode the ordinary meaning of medicine by statutorily
    defining the term in this manner.

[36]

When the exhaustive definition of medicine is incorporated into the
    definition of drug that existed at the time, it would read as follows:

drug
includes all [substances or
    mixture of substances that may be used in restoring, correcting or modifying
    organic functions]
; any substance, mixture of substances and any article
    that may be used for the diagnosis, treatment, mitigation or prevention of
    disease in man or animal; any cosmetic; any material that may be used for
    disinfection in premises in which food is manufactured, prepared or kept or for
    the control of vermin in such premises. [Emphasis added.]

[37]

The result is a neutral expression that does not necessarily incorporate
    a therapeutic or medical sense, but rather focuses on the potential use of the
    substance or mixture of substances.

[38]

The definition of drug from the 1939 version of the Act, was then moderately
    revised in 1953, to become, essentially, the modern version of that definition.
    The 1953 revision, in the
Food and Drugs Act,
R.S.C. 1952-53, c. C-38
    s. 2(f), provided the following:

drug includes any substance or mixture of substances
    manufactured, sold, or represented for use in:

(i) the diagnosis, treatment, mitigation or prevention of a
    disease, disorder or abnormal physical state, or its symptoms, in man or
    animals;

(ii) restoring, correcting, or modifying organic functions in
    man or animals; or

(iii) disinfection in premises in which food is manufactured,
    prepared or kept.

[39]

The responsible Ministers introductory statement for the bill that
    resulted in the 1939 amendment further confirms that it was meant to expand the
    scope of the definition of drug. The Hon. C.G. Power, Minister of Pensions
    and National Health, explained the bills objective, as follows in the
House
    of Commons Debates
, 18th Parl., 4th Sess., Vol. 1 (26 January 1939) at pp.
    331-32:

The object of this bill is to amend the Food and Drugs Act, to
    broaden its scope and clarify certain features with a view to increasing its
    usefulness.

...

It is the intention to extend the definition of drugs to
    include certain substances for which no medicinal claims are made but which may
    be injurious to human health.

[40]

I note that the appellant claims that the trial judge erred in relying
    on this evidence. He says that, given the absence of the term medicine from
    the current version, this statement of intention cannot offer interpretive
    value. He also submits that the context and structure of the
FDA
was
    far different then.

[41]

I disagree. It is well-established that such statements may be relied on
    as evidence of legislative purpose: see e.g.
Canadian National Railway Co.
    v. Canada (A.G.)
, 2014 SCC 40, [2014] 2 S.C.R. 135, at para. 47. And, as
    explained above, the use of the word medicine when exhaustively defined had
    no impact itself. In any event, I fail to see how the absence of the word medicine
    from later versions supports the appellant or meaningfully distinguishes the Ministers
    statement. The statement of intention here, in my view, provides cogent
    evidence of legislative purpose.

[42]

Second, the greater statutory context and its legislative history do not
    support the appellants restrictive interpretation.

[43]

Contrary to what the appellant submits, the
CDSA
is not
    redundant. Nor was the addition of certain substances to schedules of the
FDA
redundant if the general definition of drug already applied to them. By
    listing substances in the schedules to the
CDSA
or in the former Parts
    III and IV of the
FDA
, Parliament simply provides for differential,
    more restrictive and punitive treatment of known, dangerous substances such as
    amphetamines and LSD, compared to unknown substances and substances such as
    acetaminophen, energy drinks and herbal medicines.

[44]

As Laskin C.J.C. explained in
R. v. Wetmore
, [1983] 2 S.C.R.
    284, at p. 288, the provisions of the since-repealed Part III of the
FDA
concerning controlled drugs served a different objective than the rest of the Act.
    While the other parts of the Act, to which the general definition would apply,
    were aimed at promoting the physical health and safety of the public and proper
    marketing of food and drug products, the controlled drug provisions were aimed
    at protecting the moral health of the public.

[45]

Finally, the purpose of the Act supports an inclusive, rather than
    restrictive interpretation of the definition of drug. Courts have
    consistently interpreted the
FDA
as being principally concerned with
    the protection of public health and public safety in relation to food and drug
    products:
Saputo Inc. v. Canada (A.G.)
, 2011 FCA 69, 414 N.R. 45, at
    para. 71; see also
R. v. Wetmore
;
Jamieson & Co. (Dominion) v.
    Canada (A.G.)
, [1988] 1 F.C. 590 (T.D.), at pp. 614, 623.

[46]

Restricting the application of drug under the
FDA
to
    substances intended for medicinal or therapeutic uses, or to those substances
    listed in schedules to the Act, would thwart, and not serve this purpose. It
    would remove the onus from manufacturers and vendors to demonstrate the safety
    of their product before selling or marketing to the public. Instead, it would
    leave the public vulnerable to any newly-developed recreational drug until the
    risk such a drug presents is brought to the states attention, at which time
    the state would have to formulate and enact an actual criminal prohibition.

[47]

I note that the appellant argues that the trial judge erred by relying
    on evidence of civil servants to come to her conclusion on the purpose of the Act.
    While in her reasons she states that she had accepted a civil servants
    evidence on the Acts purpose, she only did so after holding that it was
    abundantly clear that the
Food and Drugs Act
is public welfare
    legislation designed to protect Canadians by enforcing certain standards and
    regulations regarding foods, drugs, devices, etc., based on her own review of
    the Act. In any event, I agree with her interpretation of legislative purpose,
    which accords with how the purpose of that Act has been consistently
    interpreted. The trial judge did not otherwise err or abdicate her
    responsibility by noting Health Canadas view that BZP was a drug or that two
    prior applications for a Drug Identification Number had been refused, as the
    appellant claims she did.

[48]

I also disagree that, without requiring that recreational substances be
    specifically listed in a schedule or limiting the definition of drug to
    medicinal or therapeutic uses, the interpretation leads to the absurd result of
    being virtually limitless. The definition is broad, but that would simply seem
    to be responsive to the endlessly variable nature of the subject-matter being
    regulated and the need to protect the public from the dangers presented by
    substances that are offered for correcting, restoring or modifying organic
    functions. The breadth of this interpretation does not lead me to question
    whether Parliament intended for it to be restricted to medicinal or therapeutic
    substances.

[49]

Nor is there any merit to the appellants submission that the Canadian
    approach is only to prohibit or regulate those substances that have been
    specifically listed. This argument lacks evidential support and simply begs the
    question.

[50]

In my view, had Parliament intended to restrict the application of the
    term drug to therapeutic and medicinal uses, or required that specific
    substances be listed in schedules to the Act, it could easily have said so in
    the legislative text. Instead, the appellant suggests that this intention was
    manifested through subtle hints over decades of amendments to this Act and
    through the enactment of the
CDSA
. I do not agree. The purpose of the
    legislation, the evidence of legislative intent, and the greater statutory
    scheme all support the ordinary meaning of the text, which does not exclude
    recreational substances as drugs.

[51]

Thus, the BZP that the appellant sold and represented for use in
    modifying organic functions falls under the definition of drug in the
FDA
.

[52]

Accordingly, I would dismiss this ground of appeal.

(2)

Is the definition of drug an unjustifiable limit of s. 7 of the
Canadian
    Charter of Rights and Freedoms
?

[53]

In the event that BZP is found to fall under the general definition of drug
    under the
FDA
, the appellant asks this court to strike or read down
    that definition under s. 52 of the
Constitution Act, 1982.
That is
    because, he submits, the potential imprisonment that flows from provisions based
    on this definition presents an unjustifiable limit on liberty that is contrary
    to the principles of fundamental justice under s. 7 of the
Charter
.

[54]

The appellants main argument is that the definition is overbroad
    because it could extend to placebos that, despite having no capability of
    modifying organic functions, are represented to the public for use in doing so.

[55]

The appellant raises this constitutional challenge for the first time on
    appeal.

[56]

As the Supreme Court recently explained in
Guindon v. Canada
,
    2015 SCC 41, [2015] 3 S.C.R. 3, at paras. 20-22, while appellate courts can
    hear and decide new issues not raised at trial, whether or not to do so is a
    matter for the courts discretion. This discretion is exceptional; it should
    not be exercised routinely or lightly. When determining whether to exercise its
    discretion, a court should take into account all of the circumstances,
    including the following:

·

the state of the record,

·

fairness to all parties,

·

the importance of having the issue resolved by
    the court,

·

its suitability for decision, and

·

the broader interests of the administration of
    justice.

[57]

The court should not exercise its discretion unless convinced that doing
    so would cause no prejudice to the parties or that failing to do so would risk
    injustice:
Guindon
, at paras. 22-23;
Performance Industries Ltd.
    v. Sylvan Lake Golf & Tennis Club Ltd.,
2002 SCC 19, [2002] 1 S.C.R.
    678, at para. 33.

[58]

The appellant argues that this court should exercise its discretion in
    this case because, in his submission, essentially the same arguments were made
    under the heading of statutory interpretation at trial. He claims that this is
    really just a variation of his argument that an interpretation of drug that
    was not limited to medicinal or therapeutic uses would be virtually limitless.

[59]

In my view, after considering all of the circumstances, this is not an
    appropriate case for the court to exercise its discretion to decide this issue
    raised on appeal. The appellant has made no submissions on why it is important
    to have this issue about a long-existing definition resolved by this court now.
    Nor has he presented any argument that failing to do so would risk injustice,
    except perhaps to others such as vendors of placebos who represent their
    product for use in modifying organic functions. There is no question that the
    legislation achieves its purpose by regulating harmful substances such as BZP.

[60]

Nor is the record ideal for determining this issue. I note that despite
    its importance to the appellants argument, there is no evidence addressing
    whether representing placebos for use in modifying organic functions does or
    does not endanger public health or safety. And the appellant has not sought to
    adduce any fresh evidence for the determination of this constitutional issue.

[61]

Arguing the interpretation of a statute is much different than arguing
    its constitutional validity. The record below was tailored to prove that BZP, a
    recreational substance similar to an amphetamine, fell within the definition of
    drug. The evidence led by the Crown was, understandably, not focussed on
    exploring whether the interpretation would extend to certain substances for
    which there would be no connection to the legislations purpose. Nor did it
    focus on whether any lack of connection could be justified. The fact that the
    appellant made submissions that the breadth of the provision may be virtually
    limitless is no substitute for a timely notice of constitutional question and a
    properly developed record.

[62]

Accordingly, I will not address the constitutional issue.

(3)

Was it unreasonable to find that BZP was marketed as a preventative for
    addiction?

[63]

The trial judge found that the appellant advertised BZP to the general
    public as a preventative for addiction contrary to s. 3(1) of the
FDA
.

[64]

That finding was based on the following statement from the appellants
    website:

More importantly, in the absence of abstinence, it is
    imperative that individuals are given a choice to use safer alternatives,
    rather than their more harmful counterparts. All of our products are of the
    highest quality and have been specifically designed to have a significantly
    reduced potential for harm and addiction.

[65]

The appellant challenges this verdict as unreasonable. In support, he
    relies on an agreed statement of fact that states the following:

The products sold on www.purepillz.ca were represented for
    recreational purposes  this was the general and overarching theme of the
    websites claims in relation to the products that form the substance of these
    charges. The specific claims of the sites individual product descriptions (of
    the products that form the substance of these charges) were recreational in
    nature only.

[66]

According to the appellant, the isolated reference to addiction relied
    upon by the trial judge cannot amount to evidence BZP was advertised as a
    treatment, preventative, or cure for addiction. It cannot be, he says, that the
    very thing that is the potential target of addiction (BZP in this case, he
    submits), can also be the treatment, prevention or cure for itself.

[67]

I disagree. BZP was advertised as preventing addiction to other more
    harmful substances. The website statement says that individuals should be given
    a safer alternative to more harmful counterparts, and then goes on to market
    that BZP has been designed to have a significantly reduced potential for
    addiction. This statement implies that by using BZP instead of a more harmful
    alternative, an individual will have a reduced potential to develop an
    addiction. In other words, by taking BZP instead of that more harmful
    counterpart, an individual could prevent developing an addiction.

[68]

The statement falls squarely within the offence set out in s. 3. The
    trial judges verdict is not unreasonable.

[69]

And such a verdict was not precluded in any way by the agreed statement
    of fact referred to above. The fact that the general, overarching theme of the
    websites claims was recreational does not foreclose that there were also more
    specific claims that the products could prevent addiction. Nor does the fact
    that the specific claims that particular BZP products were recreational in
    nature only (those products being Peaq, Freq, Spun, Flow, Rush, Rush 2, Flow
    whose claims are reproduced above) negate that there was a claim that the
    general product prevented addiction.

C.

DISPOSITION

[70]

For these reasons, I would dismiss the appeal.

Released: EEG AUG 5 2016

M. Tulloch J.A.

I agree. E.E. Gillese J.A.

"I agree. David Watt J.A."

[1]
The French version
    of the text reads as follows:

drogue
Sont
    compris parmi les drogues les substances ou mélanges de substances fabriqués,
    vendus ou présentés comme pouvant servir :

a)
au
    diagnostic, au traitement, à latténuation ou à la prévention dune maladie,
    dun désordre, dun état physique anormal ou de leurs symptômes, chez lêtre
    humain ou les animaux;

b)
à la
    restauration, à la correction ou à la modification des fonctions organiques
    chez lêtre humain ou les animaux;

c)
à la
    désinfection des locaux où des aliments sont gardés.

[2]
I note that, given the trial judges finding that the appellant marketed BZP as
    a preventative, it may be that BZP would also be a drug under paragraph (a).
    However, as this was not argued at trial or on appeal, and given my conclusion
    that BZP was a drug under paragraph (b), I will not consider this further.


COURT OF APPEAL FOR
    ONTARIO

CITATION: Richcraft Homes Ltd. v. Urbandale Corporation, 2016
    ONCA 622

DATE: 20160811

DOCKET: C60910

Laskin, Lauwers and Roberts JJ.A.

BETWEEN

Richcraft Homes Ltd
.

Applicant (Respondent)

and

Urbandale Corporation
,
    Urbandale Construction Limited and

Riverside South Development Corp.

Respondents (
Appellant
)

Benjamin Zarnett and Peter Kolla, for the appellant

K. Scott McLean and D. Elliott, for the respondent

Heard: May 30, 2016

On appeal from the judgment of Justice T.D. Ray of the Superior
    Court of Justice, dated July 24, 2015, with reasons reported at 2015 ONSC 4725.

Lauwers J.A.:

[1]

Urbandale Corporation, the appellant, and Richcraft Homes Ltd., the respondent,
    entered into a limited partnership agreement (LPA), with Riverside South
    Development Corp. as the general partner, on October 23, 2001. On May 9, 2005,
    the principals of Urbandale and Richcraft signed a document related to the LPA
    (the 2005 document).

[2]

Urbandale is a property developer, and is related to homebuilder Urbandale
    Construction Limited, which is mentioned in the LPA. Richcraft is both a
    homebuilder and a property developer. The partnerships purpose is to develop
    some 3,000 acres of development land in the Riverside south area of Ottawa.

[3]

This case is about the extent of Urbandales control of the partnership.
    Urbandale owns two-thirds of the partnership and Richcraft owns one-third. Issues
    arose between the limited partners about the interpretation of the LPA and the
    legal effect of the 2005 document, and this application was brought on a
    cooperative basis.

[4]

After a hearing that included some live evidence, the application judge
    made two declarations in the judgment now under appeal. First, he declared the
    2005 document is enforceable and affects the way in which the homebuilders
    Urbandale Construction and Richcraft get access to the building lots that become
    available through the partnerships land development activities.

[5]

Second, the application judge declared that actions to be taken by the
    partnership under Article 8.2 of the LPA, which sets out the consequences of a
    partner failing to advance funds to the partnership, must be approved by the
    unanimous consent of both Richcraft and Urbandale, as contended by Richcraft,
    not merely by an Ordinary Resolution, as contended by Urbandale.

[6]

The two declarations frame the two issues on this appeal: first, whether
    the 2005 document is enforceable; and second, whether partnership decisions
    under Article 8.2 of the LPA require unanimous consent.

[7]

I would affirm the application judges judgment that the 2005 document
    is enforceable. However, I would allow the appeal on the second issue; Article
    8.2 of the LPA does not require unanimous consent.

Issue 1: The Validity of the 2005 Document

[8]

This issue is the heart of this appeal, since its outcome will affect
    the future dealings of the partners, the operation of the partnership, and the
    progress of their land development project.

[9]

The 2005 document was signed on May 9, 2005 by the principal of
    Urbandale, Mr. Herbert Nadolny, and the principal of Richcraft, Mr. Krishnan Singhal.
    Mr. Nadolny died a few months after the document was signed. The evidence is
    that his partner Mr. Lyon Sachs learned of the 2005 document within days of it
    being signed, but raised no concerns about its meaning or application for many
    years.

[10]

The 2005 document is very brief:

The above parties agree as follows:

- The above parties have entered into joint agreements, October
    23, 2001 for Riverside South and September 6, 2000 the Kanata Lakes lands.

- Richcraft and Urbandale will have first right to purchase
    available lots in the above projects and will be divided equally at the same
    price.

- In the event that lots in the above two projects are sold to
    other builders and in return Urbandale and/or Richcraft have the right to
    purchase lots in other projects belonging to the other builders then any lot(s)
    acquired by either Urbandale or Richcraft will be shared equally between them
    if agreeable to both parties.

[11]

It is common ground that Urbandale in the 2005 document refers to
    Urbandale Construction Limited, an entity that is not a party to the LPA, but is
    identified in the LPA as the related company to which the partnership shall
    sell residential building lots.

[12]

Until this dispute arose, only about 500 lots had been released by the
    partnership for homebuilding. They were shared equally between Richcraft and
    Urbandale Construction.

[13]

The practical issue is whether the LPA, together with the 2005 document,
    permits Richcraft to take up to half of the building lots released by the
    partnership as the land development process unfolds. Richcraft asserts that it
    has that legal right under the LPA and the 2005 document. Urbandale denies the
    LPA gave Richcraft that right and takes the position that, to the extent the
    2005 document gave such a right to Richcraft, it is unenforceable, for three
    reasons: Richcraft gave no consideration for the 2005 document; the document
    does not meet the legal requirements for an enforceable option; and the terms
    of the 2005 document are fatally uncertain.

(1)

Is the 2005 document unenforceable because Richcraft did not give
    consideration?

[14]

The appellant argues Richcraft gave no consideration for the 2005
    Agreement. It is accordingly not a true bargain, and therefore not enforceable:
    see John D. McCamus,
The Law of Contracts
, 2d ed. (Toronto: Irwin Law,
    2012), at p. 215; G.H.L. Fridman,
The Law of Contract in Canada
, 6th ed.
    (Toronto, Carswell, 2011), at p. 81-82. The appellant also relies on the
    proposition of Ontario law that a subsequent agreement that purports to alter
    the terms of an existing agreement also requires consideration to be
    enforceable: see
Gilbert Steel Ltd. v. University Construction Ltd
.
    (1976), 12 O.R. (2d) 19 (C.A.), at p. 24.

[15]

I begin by setting the context for this issue, next I set out the
    application judges holding, then consider the parties arguments, and finally address
    the legal analysis.

(a)

Context

[16]

The dispute is over the future allocation of lots. The application judge
    identified the provoking incident for this application, at para. 20:

In 2013, Mr. Weinstein, Mr. Nadolny's son-in-law asked Mr.
    Singhal for lots to be sold to his company HN Homes. Mr. Singhal said he told
    Mr. Weinstein to look to Urbandale's share not his. It seems that was the
    triggering point for this application. Urbandale has since taken the position
    that it can make the decisions itself under the agreement without the need for
    Richcraft's agreement.

[17]

Mr. Sachs is the President of Urbandale. He was in the office when the
    2005 agreement was negotiated and signed, and saw it a short time later. The
    application judge recorded his evidence, at para. 25:

Lyon Sachs is President of Urbandale. He has no role in the
    Respondent, Urbandale Construction which is controlled by his son. He said that
    Urbandale had been patient with Richcraft up until now because Richcraft has
    not disturbed the development of the project or the functioning of RSLP. However,
    now that they are about to get into serious development, they need to settle
    the 'lots' and 'control' issues. He did note that in his view the overall
    success of the RSLP is best served when the owners work collaboratively and
    cooperate together. He said he interprets the LPA to permit the sale of lots to
    others because it uses the language "inter alia". He also thought
    that the "needs" of Richcraft for lots as per the LPA should be given
    a flexible definition; not necessarily 50-50. He admitted that to date there
    had been a 50-50 distribution but was of the view that market conditions would
    soon require sales to others. He thought that at the time of the 2005
    agreement, Mr. Nadolny was in failing health and was unable to clearly express
    his intentions.

[18]

Mr. Sachs was relying on his interpretation of Article 3.4 of the LPA:

3.4 Sale of Lots.
The Partnership shall sell
    residential building lots to,
inter alia
,
    Urbandale Construction Limited (Urbandale Construction). The partnership will
    at all times allow Richcraft to purchase from it such residential house lots to
    meet Richcrafts needs at the same price, and upon the same terms and
    conditions, as the partnership sells such residential building lots to
    Urbandale Construction. All other homebuilders in Riverside South will purchase
    such residential house lots at prevailing market rates and upon builders
    terms.

[19]

The appellants Notice of Appeal highlights a problem with the drafting
    of Article 3.4. It states that the application judge erred in failing to order
    that:

i.        the definition of Richcrafts needs in Article 3.4
    of the LPA is to be based on
objective evidence of
    Richcrafts need
for building lots at the time of each allocation of
    building lots by the Riverside South Limited Partnership (the Partnership),
    and

ii.       if there is a dispute between the Limited Partners in
    the Partnership as to Richcrafts needs at the time of any particular
    allocation of building lots,
the number of lots to meet
    Richcrafts needs at that allocation is to be determined by the Limited
    Partners by way of the passage of an Ordinary Resolution.
[Emphasis
    added.]

[20]

Richcrafts position is that it was entitled, under Article 3.4, to take
    as many lots as it wanted at the time of an allocation, and its assertion of
    its needs is determinative. The appellants response is that the determination
    of Richcrafts needs must be objective. This is inconsistent with the
    appellants other assertion that the number of lots to be allocated to
    Richcraft is to be determined by Ordinary Resolution of the partnership, which
    the appellant controls.

[21]

On this controversy, the wording of Article 3.4 of the LPA is not entirely
    clear. The appellants interpretation, as set out in the Notice of Appeal,
    would leave the determination of Richcrafts entitlement of lots entirely up to
    an Ordinary Resolution of the partnership, which the appellant controls.
    Subject to arguments about good faith, the appellant could shut out Richcraft
    from an allocation of lots using its superior power in the partnership. This
    prospect is precisely what, accordingly to the evidence, drove Mr. Singhal to
    seek clarity through the 2005 agreement, as the application judge found, at
    paras. 31 and 32. Given the 2013 triggering controversy over the request for an
    allocation by HN Homes, Mr. Singhal was prescient.

(b)

The application judges holding

[22]

The application judge, after setting out the evidence, concluded, at
    paras. 36-37:

The agreement of May, 2005 explicitly provides the parties will
    divide the lots equally. There is no evidence that Mr. Nadolny was not
    competent to sign the agreement. In addition the distribution of lots to date
    has been consistent with that agreement.

I find the conduct of the parties to date to be consistent with
    the language of the various agreements.

[23]

The judgment contains the application judges explanation of the result:

3.       In answer to the question Pursuant to Article 3.4 of
    the LPA can the partnership take a decision to sell residential building lots
    to entities other than Urbandale Construction Limited (Urbandale
    Construction) and/or Richcraft and if so, under what conditions or
    circumstances? the answer is: Yes, but Richcraft is entitled to 50% of
    residential lots made available. It may decline to exercise its option to
    purchase these lots however. In other words, if residential lots are to be sold
    to HN Homes, then in accordance with the May 9, 2005 Agreement, those lots
    would come from Urbandales share and from Richcrafts share to the extent that
    it declined to exercise its option, unless the parties agree otherwise. Sales
    to third parties, including HN Homes would be at the prevailing market value.

[24]

Paragraph 3 of the judgment effectively amends Article 3.4 of the LPA,
    to provide:

3.4 Sale of Lots. The Partnership shall sell residential
    building lots to,
inter alia
,
    Urbandale Construction Limited (Urbandale Construction). The partnership will
    at all times allow Richcraft to purchase from it
up to
    50% of such residential lots
at the same price, and upon the same terms
    and conditions, as the Partnership sells such residential building lots to
    Urbandale Construction. All other homebuilders in Riverside South will purchase
    such residential house lots at prevailing market rates and upon builders
    terms.

[25]

The appellant attacks this result.

(c)

Discussion

[26]

The appellant submits Richcraft gave no consideration for the 2005 document,
    so it is not a true bargain, and is therefore unenforceable. The only
    enforceable contract between the parties is the original LPA. The appellant
    relies on three decisions of this court to argue the law of Ontario precludes
    enforcement of the 2005 agreement:
Gilbert Steel
;
Gregorio v.
    Intrans-Corp
(1994), 18 O.R. (3d) 527 (C.A.); and
Holland v.
    Hostopia.com Inc.
, 2015 ONCA 762, 392 D.L.R. (4th) 650.

[27]

The facts of
Gilbert Steel
bear repeating
.
The
    plaintiff contracted with the defendant to supply fabricated steel at a fixed
    price per ton for the construction of apartment buildings. Steel for the first
    two of three projects was delivered and paid for at the prices set by the
    contract. Before construction on the third project started, the plaintiff was
    notified by the steel mill that the price of unfabricated steel was about to
    increase, and warned that the price would increase again in the near future.
    The plaintiff approached the defendant about this price increase, the parties
    entered a new written agreement for the supply of fabricated steel at a higher
    price, and construction on the third project commenced.

[28]

The steel mill then notified the plaintiff of another price increase.
    The plaintiff again approached the defendant about the price increase, and the defendant
    agreed orally to pay higher prices. Following this discussion, the plaintiff
    submitted a written contract containing these higher prices to the defendant,
    but the agreement was never executed. The defendant accepted delivery of the
    fabricated steel and was invoiced at the higher prices, but paid in rounded
    amounts that left an amount owing equal to the difference between the prices
    agreed to orally and the prices set out in the previous written agreement.

[29]

The plaintiff sued to recover the difference. The trial judge found that
    the defendants promise to pay higher prices was unenforceable due to a lack of
    consideration, given that the plaintiff was already obligated to deliver steel
    at the prices agreed to in the previous written agreement. This court, relying
    on the rule set out by Ellenborough L.J. in
Stilk v. Myrick
(1809),
    170 E.R. 1168 (K.B), that a promise to perform a pre-existing duty is not
    consideration for a contractual variation, upheld that finding on appeal.

[30]

The results were similar in both
Gregorio
and
Holland
.
    In
Gregorio
, this court held that a warranty agreement signed by a
    purchaser failed for lack of consideration, since the purchase agreement had
    been executed on a previous occasion and the warranty agreement was unsupported
    by fresh consideration. In
Holland
, this court held that an employment
    agreement limiting an employees entitlement to notice on termination to the
    statutory minimums was unenforceable; it was entered into almost nine months
    after the employee originally signed an offer letter that was silent on the
    issue of reasonable notice, and there was no fresh consideration. The court
    noted, at para. 52: [i]t is well-settled that a promise to perform an existing
    contract is not consideration.

[31]

When
Gilbert Steel
was issued, it attracted much commentary
    from academics critical of this courts application of the doctrine of
    consideration to the facts of the case: see e.g. J. Swan, Consideration and
    the Reasons for Enforcing Contracts (1976) 15 U.W. Ontario L. Rev. 83; B.J.
    Reiter, Courts, Consideration, and Common Sense (1977) 27 U.T.L.J. 439; S.M.
    Waddams, Variations of Contracts and the Requirement of Consideration: Gilbert
    Steel Ltd. v. University Construction Ltd. (1977) 2 Can. Bus. L.J. 232. The
    basic point was made by Professor Reiter, at p. 452, who questioned this
    courts rejection of the arguments advanced in favour of enforcing the
    agreement to pay higher prices: The effect  was to refuse enforcement to a
    business promise apparently made for valid commercial reasons, a surprising and
    seemingly undesirable result. Professor Swan observed, at p. 91, that,

[T]he doctrine of consideration is a most unsatisfactory tool
    for deciding what promises are going to be enforced by the courts. There may
    have been a good reason for refusing to enforce the contract in
Gilbert
    Steel v. University Construction
, but the finding of the trial judge that
    there was no duress would tend to show the contrary and, far more importantly,
    the justification given for the decision by both courts is quite irrelevant to
    any valid reason for refusing enforcement.

[32]

Professor McCamus, in
The Law of Contracts
, at p. 250, comments
    that the doctrine established in
Stilk v. Myrick
produces reasonable
    outcomes in cases where the promise to provide additional consideration is
    extracted by a promisee who is exploiting the promisors vulnerability but,
    referring specifically to
Gilbert Steel
, also notes that [t]he
    doctrine is also applicable  to what appear to be voluntary arrangements
    entered into by commercial parties with relatively equal bargaining power. He
    then argues that [i]t is thus over-inclusive in the sense that it captures and
    renders unenforceable many agreements that do not result from an unfair
    exploitation of vulnerability.

[33]

The respondent submits that the common law world has moved on since
Gilbert
    Steel
. For example, in
Williams v. Roffey Bros. & Nicholls
    (Contractors) Ltd
., [1990] 1 All E.R. 512 (C.A.), Russell L.J. stated:

A gratuitous promise, pure and simple, remains unenforceable unless
    given under seal. But where, as in this case, a party undertakes to make a
    payment because by so doing it will gain an advantage arising out of the
    continuing relationship with the promisee the new bargain will not fail for
    want of consideration.

See also
MWB Business Exchange Centres Ltd v Rock
    Advertising Ltd
, [2016] EWCA Civ 553.

[34]

The respondent also points out that the New Zealand Court of Appeal built
    upon the reasoning in
Williams v. Roffey Bros
. in
Antons Trawling Co.
    Ltd. v. Smith
, [2003] 2 N.Z.L.R. 23 (C.A.). In that case the court held,
    at para. 93:

We are satisfied that
Stilk v Myrick
can no longer be
    taken to control such cases as
Roffi Bros
[
sic
],  and the
    present case where there is no element of duress or other policy factor
    suggesting that an agreement, duly performed, should not attract the legal
    consequences that each party must reasonably be taken to have expected. On the
    contrary, a result that deprived Mr. Smith of the benefit of what Antons
    promised he should receive would be inconsistent with the essential principle
    underlying the law of contract, that the law will seek to give effect to freely
    accepted reciprocal undertakings.
The importance of
    consideration is as a valuable signal that the parties intend to be bound by
    their agreement, rather than an end in itself. Where the parties who have
    already made such intention clear by entering legal relations have acted upon
    an agreement to a variation, in the absence of policy reasons to the contrary
    they should be bound by their agreement.
[Emphasis added.]

[35]

And recently, in
Teat v. Willcocks
, [2013] NZCA 162, [2014] 3
    N.Z.L.R. 129, at para. 54, that same court, upholding the reasoning in
Antons
    Trawling
, observed:

[W]e are attracted to the alternative view expressed by this
    Court in
Antons Trawling Co Ltd v Smith
that no consideration at all
    may be required provided the variation is agreed voluntarily and without
    illegitimate pressure.
This seems to us to reflect the
    reality of what happened in the present case  a variation was proposed and
    willingly accepted, and the parties proceeded on that basis. In the context of
    an existing agreement supported by consideration, that seems to us to be
    sufficient to constitute a binding variation.
[Emphasis added, citation
    omitted.]

[36]

The respondent relies most heavily on
Greater Fredericton Airport
    Authority v. NAV Canada
, 2008 NBCA 28, 229 N.B.R. (2d) 238, where the
    court held, at para. 31, that a post-contractual modification, unsupported by
    consideration, may be enforceable so long as it is established that the
    variation was not procured under economic duress. The court observed, at para.
    28, that existing contracts are often varied and modified in response to
    contingencies not covered by the original agreement and in the interests of
    commercial efficacy such agreements should be enforceable with the
    modifications and variations. At para. 30, the court declared that [t]he
    doctrine of consideration and the concept of bargain and exchange should not be
    frozen in time so as to reflect only the commercial realities of another era.

[37]

The appellant submitted that the court should accept that
Gilbert
    Steel
, whatever the doctrinal fate of its premises might be in other
    jurisdictions, was settled Ontario law and applies squarely to preclude
    enforcement of the 2005 document.

(d)

Analysis

[38]

I first consider and dismiss a procedural argument made by the respondent,
    and then address the substantive argument about consideration.

Consideration was a live issue before the application judge

[39]

The respondent objects that the issue of consideration was not addressed
    by the application judge in his reasons because it was not a live issue before
    him.

[40]

However, the appellant notes the general issue of the 2005 documents
    enforceability was raised in the Notice of Application. Further, in Urbandales
    factum before the application judge the issue was raised, albeit somewhat
    obliquely:

93.     One needs to understand or characterize what the May 9,
    2005 document is. According to Mr. Singhal it was to be a reconfirmation of
    Richcrafts entitlement to building lots from the KNL and RSDC projects. It
    accordingly was not intended to create new rights but to confirm rights that
    have purportedly already existed. There was no consideration passing between
    the parties as no new rights or benefits were created or intended to be
    created. As such, one ought not to view this as a stand-alone agreement.

[41]

The respondent points out that it did not address the issue of
    consideration in affidavits or examination-in-chief and that the appellant asked
    no questions in cross-examination about the issue. This explains the statement
    in Richcrafts factum before this court: there is no evidence of fresh
    consideration supporting the 2005 agreement.

[42]

I would reject the respondents argument that this is a new issue on
    appeal. While it may not have been pursued vigorously, it was raised below and
    there is sufficient information on the record for this court to dispose of it.

There was consideration for the 2005 document

[43]

While the developing case law outside Ontario suggests that the time might
    be ripe for this court to re-consider the role that consideration plays in the
    enforceability of contractual variations, in my view,
Gilbert Steel
was a fundamentally different case on the facts and its holding has no
    application to this case.

[44]

The 2005 document lacks the formality of the LPA. As the application
    judge found, it was intended by Mr. Nadolny and Mr. Singhal to clarify the
    terms of the LPA. The potential for a dispute between the parties was plain
    enough on the language of Article 3.4 LPA to cause Mr. Singhal anxiety. On the
    facts, Richcraft was in no position to exert any kind of pressure on its senior
    partner, and Urbandale was not in a vulnerable position. The 2005 agreement was
    not, in my view, entirely one-sided in Richcrafts favour.

[45]

The observations of Angela Swan & Jakub Adamski, in
Canadian
    Contract Law
, 3d ed. (Markham: LexisNexis Canada, 2012), at para. 2.31,
    have merit here:

What is common to each type [of commercial exchange] is that
    the parties are exchanging commercial equivalents and that the reliance of each
    on the other permits needs to be satisfied and plans made. Because these
    relations are commercial exchanges, each party can obtain a benefit from the
    others performance and each may incur a detriment from its own performance.

[46]

Certainty in a long-term, ongoing business relationship is of value to the
    contracting parties because it avoids disputes and allows the parties to plan both
    their own affairs and also the orderly and reasonable unfolding of their business
    relationship. In
Gilbert Steel
,

the respective obligations of
    each of the contracting parties were already clear: Gilbert Steel was supplying
    fabricated steel; University Construction was purchasing it at an agreed-upon
    price. Therefore, it was also clear to see that when University Construction
    promised to pay a higher price than it had previously agreed, it received
    nothing in return over and above the steel to which it was already entitled
    under the contract.

[47]

The appellants assertion that the 2005 document represented a
    compromise of its entitlement to a greater than equal share of the lots, or in
    other words, a promise for which it received no consideration, assumes that it
    was in fact originally entitled to a greater than equal share. However, in my
    view, under the original terms of the LPA it was far from clear how many lots Urbandale
    Construction and Richcraft were each entitled to under Article 3.4. That
    article entitled Richcraft to such residential house lots to meet Richcrafts
    needs, with no limitation. The 2005 document clarified the issue of quantum:
    Richcraft was entitled to share equally in the available lots with Urbandale
    Construction. Clarifying an unclear term in a long-term contract, in order to create
    certainty and to avoid future costly disputes, enures to the parties mutual
    benefit, and is something of value that flows from and to each contracting party.
    It thus serves as a functional form of consideration.

(2)

The 2005 document is not an option agreement

[48]

The appellant submits that the 2005 agreement is no more than an option agreement
    and does not meet the legal requirements to be enforceable. This argument builds
    on the language of para. 3 of the judgment, excerpted more fully above, which
    states in part: Richcraft  may decline to
exercise its
    option
to purchase those lots, and that lots sold to third parties
    would come from Urbandales share and from Richcrafts share to the extent
    that it declined to
exercise its option
 (emphasis
    added).

[49]

The appellant argues that an option agreement is required by law to have
    certain elements, none of which are found in the 2005 document: see
Mitsui
    & Co. (Canada) Ltd. v. Royal Bank
, [1995] 2 S.C.R. 187, at paras. 26-27.

[50]

I would reject this submission. The application judge did not formally characterize
    the 2005 document as an option agreement, but only used the term to point out
    that Richcraft could decide to take up to half of the lots available on any
    particular allocation of lots by the partnership. Richcraft could take no lots
    or as many as half; that is the choice the application judge referred to as an
    option in a non-technical sense. In my view, the law relating to option
    agreements does not apply on these facts.

(3)

The terms of the 2005 document are not fatally uncertain

[51]

The appellant argues the 2005 agreement does not specify certain
    essential terms, including: how long Richcraft has to decide whether it will
    take up lots before the partnership can sell them to a third party builder; the
    terms on which Richcraft would purchase lots it decided to take; and, particularly,
    how such terms would relate to those available from a third party builder.

[52]

I would reject this argument. The trial judge did not see the 2005
    agreement as a stand-alone agreement, but as clarifying the LPA, in particular
    Article 3.4, as discussed above.

[53]

The issue of the timing of a response by Richcraft as to how many lots
    it would need out of any given allocation was not addressed in the original
    version of Article 3.4 of the LPA. In this regard it should be noted that among
    the items to be discussed at regular meetings of the partnership under Article
    7.2 of the LPA are the following:

a.       the entering into of any agreements for the sale of
    residential building lots on the Partnership Lands;

...

f.        all other issues relating to the development and sale
    of residential building lots on the Partnership Lands.

[54]

Under the LPA, as clarified by the 2005 agreement, the partnership would
    make an allocation of lots available at a particular time by Ordinary Resolution.
    Section 7.2 authorizes the partnership, by way of Ordinary Resolution, to make
    an allocation of lots and offer it to Urbandale Construction and to Richcraft.
    There is no reason why such a resolution could not establish a reasonable time
    frame within which both Urbandale Construction and Richcraft must identify the
    number of lots each wishes to take up. Once that is done, and the period
    expires without the lots being taken up by either Urbandale Construction or Richcraft,
    then the allocation could be offered on the open market. The terms upon which
    Urbandale Construction and Richcraft can acquire lots are to be the same.
    Whether these terms are advantageous, as compared to prevailing market rates
    and upon builders terms on which Article 3.4 obliges the partnership to offer
    lots to other homebuilders in Riverside South, is for the partnership to
    decide.

[55]

There is, in my view, no difficulty in applying the LPA as clarified by
    the 2005 document. There is, in other words, no lack of certainty in the 2005
    document.

Issue 2: Does Article 8.2 of the LPA require unanimous
    consent?

[56]

Article 8.2 comes into active force only if one of the partners has
    failed to advance funds to the partnership. No such instance has arisen in the
    many years of the partnerships operation. The issue is whether the application
    judge was correct in deciding that the partnership could not take action
    against a defaulting partner under Article 8.2 without unanimous consent.

[57]

I begin with a brief overview of the governing principles of law, next
    summarize the application judges reasons, and then apply the principles.

(1)

The Governing Principles

[58]

This court summarized the principles applicable to the interpretation of
    commercial contracts in
Ventas, Inc. v. Sunrise Senior Living Real Estate
    Investment Trust
(2007), 85 O.R. (3d) 254 (C.A.), at para. 24:

Broadly stated ... a commercial contract is to be interpreted,

(a) as a whole, in a manner that gives
    meaning to all of its terms and avoids an interpretation that would render one
    or more of its terms ineffective;

(b) by determining the intention of the
    parties in accordance with the language they have used in the written document
    and based upon the "cardinal presumption" that they have intended
    what they have said;

(c) with regard to objective evidence
    of the factual matrix underlying the negotiation of the contract, but without
    reference to the subjective intention of the parties; and (to the extent there
    is any ambiguity in the contract),

(d) in a fashion that accords with
    sound commercial principles and good business sense, and that avoids a
    commercial absurdity. [Citations omitted.]

See also
SimEx Inc. v. IMAX Corp.
(2005), 11
    B.L.R. (4th) 214 (Ont. C.A.), at paras. 19-23;
Dumbrell v. The Regional
    Group of Companies Inc.
, 2007 ONCA 59, 85 O.R. (3d) 616, at paras. 51-56;
    and
3869130 Canada Inc. v. I.C.B. Distribution Inc.
, 2008 ONCA 396, 45
    B.L.R. (4th) 1, at para. 31;
and
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at
    para. 64.

[59]

This court has recognized that it is an extricable error of law to read
    a provision of a contract in isolation rather than construe the contract as a
    whole: see
1298417 Ontario Ltd. v. Lakeshore (Town)
, 2014 ONCA 802, 122
    O.R. (3d) 401, at paras. 7-8, leave to appeal refused, 2015 CarswellOnt 10068,
    2015 CarswellOnt 10069; see also
Sattva
, at para. 64.

(2)

The Application Judges Reasons

[60]

The relevant provisions of the LPA set the context for the application
    judges analysis.

(a)

The relevant contractual provisions

[61]

As noted earlier, the LPA defines Ordinary Resolution to mean a
    resolution passed by more than 50% of the votes cast at a duly constituted
    meaning of Limited Partners or a written resolution signed in one or more
    counterparts by Limited Partners holding more than 50% of the outstanding Units
    entitled to vote at a meeting. Since Article 2.2 gives Urbandale 66.66% of
    partnership interest and Richcraft 33.33%, the parties intended Urbandale to
    have control of the partnership in relation to matters that could be addressed
    by Ordinary Resolution.

[62]

Section 8.2 provides:

8.2 Failure to Advance Funds.

If at anytime the Partners agree, by way of Ordinary Resolution
,
    that they shall advance funds to the Partnership and thereafter any Limited Partner
    (the Defaulting Limited Partner) fails to advance its portion of such funds
    (the Defaulted Advance), then the other Limited Partner (the Non-Defaulting
    Limited Partner) shall be entitled to advance to the Partnership the Defaulted
    Advance on behalf of the Default Limiting Partner and thereafter [is entitled
    to certain remedies]. [Emphasis added.]

(b)

The application judges interpretation of Article 8.2

[63]

The application judge explained his interpretation of Article 8.2 at
    para. 46:

What is the meaning and application of Article 8 of the LPA?

Answer: The provision speaks for itself. Neither party has
    taken the position that there are or have been irreconcilable differences
    between the parties. In the event either party takes the position that the
    facts or factual matrix exists such as to come within Article 8, the provision
    sets out a procedure to follow. If necessary at that time, then judicial
    intervention may be sought on the facts as they may exist at that time; and
    after the parties have complied with the provision in Article 8 so there is a
    Record for the court to consider. I do note however, that article 8.2
    contemplates that the parties
agree by ordinary resolution
(emphasis
    added [by application judge]). That is a departure from an ordinary resolution
    that does not require the agreement of the parties, and is similar to Article
    9.1.

[64]

Article 9.1 of the LPA provides:

9.1 Amendments.
This Agreement may be amended
    only in writing and only with the written consent of both of the Limited
    Partners given by Ordinary Resolution.

(1)

The Principles Applied

[65]

The application judges logic for interpreting Article 8.2 to require
    unanimous consent depends on his finding that the language in Article 8.2 was
    unique, in his words, a departure, when it used the words: If at anytime,
    the Partners agree, by way of Ordinary Resolution.

[66]

With respect, this is not an accurate description of the LPAs use of
    language. The same phrasing is used in Article 7.1 dealing with a general
    meeting of the partners, which provides: At such meetings all matters will be
    discussed and
agreed to by the Partners by way of
    Ordinary Resolution
(emphasis added). In addition, Article 7.2 provides
    for regular meetings and states: At such meetings the following matters will be
    discussed and
agreed to by the Partners by way of
    Ordinary Resolution
 (emphasis added). There is nothing unique about the
    language of Article 8.2 that compels a different approach to the concept of
    Ordinary Resolution so as to require unanimity in taking steps against a
    defaulting partner.

[67]

Moreover, the LPA contemplates disagreement. Article 7.4 provides: All
    Ordinary Resolutions shall be binding on all Partners and whether or not such
    Partner voted against such resolution. But, if the phrase, agree, by way of
    Ordinary Resolution, in Article 8.2 requires there to be unanimous consent as
    the application judge found, then resolutions at general meetings of the
    partners, and at their regular meetings would also require unanimous consent.
    In short, Article 7.4 would have no meaning or purpose.

[68]

Finally, I note Article 9.1, which the application judge pointed to as being
    similar to Article 8.2, applies in an entirely different context and performs a
    very different function. It is concerned with amendments to the LPA. Without
    the requirement in Article 9.1 for the written consent of both of the Limited
    Partners, Urbandale could unilaterally amend the LPA to its advantage by
    Ordinary Resolution, which is what the Article seeks to prohibit.

(2)

Conclusion on the Interpretation of Article 8.2

[69]

While the application judge instructed himself properly, at para. 30, on
    the obligation to interpret individual provisions in light of the entire contract,
    he failed to do so. It is an error in principle to adopt an interpretation that
    renders meaningless a provision of an agreement, in this case Article 7.4.
    Further, if the application judges interpretation was correct, then Richcraft
    could resist a partnership capital call under Article 8.2 with impunity. Such
    an outcome would not be commercially reasonable. The application judges
    interpretation of Article 8.2 of the LPA is contrary to both commercial
    principles and good business sense.

Disposition

[70]

I would affirm the application judges judgment that the 2005 document
    is enforceable. However, I would allow the appeal on the second issue. In light
    of the errors made by the application judge in interpreting Article 8.2 of the
    LPA, I would delete the last two sentences of para. 8 of his judgment, so that
    para. 8 would instead read:

8. In answer to the question What is the meaning and
    application of Article 8 of the LPA the answer is: The provision speaks for
    itself.

The parties agreed that the successful party would be
    entitled to costs in the amount of $30,000 inclusive of disbursements and
    applicable taxes. The respondent was successful on the main issue, but not on
    the secondary issue. I would leave it to the parties to resolve costs. If they
    are unable to do so, then cost submissions limited to five pages should be
    filed within 10 days of the date of release of these reasons, followed by reply
    submissions within an additional 10 days.

Released: August 11, 2016 PL

P.
    Lauwers J.A.

I
    agree John Laskin J.A.

I
    agree L.B. Roberts J.A.