COURT OF APPEAL FOR ONTARIO

CITATION: Steen v. Gibson, 2016 ONCA 285

DATE: 20160420

DOCKET: C60947

Sharpe, LaForme and van Rensburg JJ.A.

BETWEEN

Robert
    Steen and Robert Steen as Executor

of the Estate
    of Gwendolin Cuttance Steen

Applicant/Client (Respondent)

and

D. Kenneth Gibson and Gibson & MacLaren LLP

Respondents/Solicitors (Appellants)

John Parr Telfer, for the appellants

Miriam Vale Peters, for the respondent

Heard and released orally: April 18, 2016

On appeal from the order of Justice Charles T. Hackland
    of the Superior Court of Justice, dated August 18, 2015.

ENDORSEMENT

[1]

The appellant solicitors raise three grounds of appeal from an
    assessment ordering them to repay $73,000 and costs to the respondent, their
    former client.

(1)

Expert report

[2]

The appellants submit that the trial judge erred by considering and
    relying on an expert report which he ruled to be inadmissible. We do not accept
    that submission. The central issue on this assessment of the solicitors
    accounts was whether the appellants had acted with skill and competence. As the
    judicial officer conducting the assessment, the trial judge was entitled to
    make his own independent evaluation of the skill and competence demonstrated by
    the solicitors. We do not agree that in making that evaluation, he made
    improper use of the expert report.

[3]

In oral argument it became clear that the appellants real concern is
    the contention that the trial judge erred in law in concluding that a passing
    of accounts, and not an action was the appropriate procedure. As the trial
    judge only reduced the appellants account for the fees charged for the Rule 45
    motion and did not reduce the fees for the action proper, this argument has no
    bearing on the outcome of this appeal.

(2)

Delay

[4]

The appellants submit that the trial judge erred by failing to dismiss
    the assessment on the grounds of delay pursuant to Rule 48.15(6)2. We see no
    merit in that submission. Rule 48.15(6)2, now repealed, applied to actions. We
    do not agree with the contention that this assessment was in pith and
    substance a negligence action. The matter was a reference pursuant to the
Solicitors
    Act
, not an action. Moreover, that issue was determined by Justice
    Beaudoins August 2012 endorsement from which no appeal had been taken.

(3)

Reference to Mediation

[5]

While the trial judge did refer to the mediation, he did not violate the
    confidentiality provisions of Rule 24.1.14. The mediation was one step in the
    overall conduct of the disputed proceedings and, as between the appellants and
    the respondent, their client, there was no violation of the confidentiality
    that protects settlement discussions between the parties. Moreover, we agree
    with the respondent that any reference to the mediation had no material effect
    on the substance of the trial judges decision.

[6]

The respondent cross-appeals raising two grounds.

(1)

Further reduction of the appellants accounts

[7]

We see no basis to interfere with the trial judges decision to limit
    the reduction in the appellants accounts to the fees charged for the Rule 45
    motion. In our view, it was open to the trial judge to conclude that there was
    a live issue, to be resolved in the action, as to whether the payments to the
    brothers were valid
inter vivos
gifts or a resulting trust with tax consequences.
    The trial judge found as a fact that there was value to the respondent in
    bringing the action and as a result he refused to reduce the account for
    services rendered for the action. Moreover, as the trial judge noted, the
    respondent was a challenging client, distrustful of his brothers and reluctant
    to give any ground.

(2)

Interest

[8]

Interest is a discretionary matter pursuant to s.33(4) of the
Solicitors
    Act
. We see no error of law or principle on the part of the trial judge in
    ordering interest at the rate prescribed by the
Courts of Justice Act
rather than the rate specified in the appellants invoices and from a date one
    year prior to the hearing. The assessment was commenced in 2009 and not heard
    until six years later. The trial judge was entitled to consider the fact that
    the respondent contributed to the delay in fixing the date for interest.

[9]

Accordingly, both the appeal and the cross-appeal are dismissed. As
    there has been divided success, there will be no order as to costs.

Robert J. Sharpe
    J.A.

H.S.
    LaForme J.A.

K. van Rensburg
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Toronto-Dominion Bank v. Hagey, 2016 ONCA 270

DATE: 20160414

DOCKET: M46265 (C61842)

van Rensburg J.A. (In Chambers)

BETWEEN

The Toronto-Dominion Bank

Plaintiff (Respondent)

and

Betty
    Hagey also known as Betty Mae Hagey,

Kevin Hagey also known as
    Kevin Scott Hagey

Defendants (Appellants)

Allan Rouben, for the appellants

Eric Golden, for the respondent

Heard: April 5, 2016

ENDORSEMENT

[1]

This is a motion for a stay pending appeal under rule 63.02(1)(b) of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194. The judgment under
    appeal was made in a summary judgment motion by Gordon R.S.J. He granted the
    Banks motion to rectify two mortgages that are registered against adjacent
    properties owned by the appellants. The first property, which consists of 97
    acres, contains their home. This property is registered in the Registry system
    (the Registry Part). The second, a parcel of 100 acres, is vacant, and is
    registered in Land Titles (the Land Titles Part).

[2]

In January 2011, the appellants borrowed $269,250 from the Bank. The Bank
    took as security for the loan a mortgage over each of the two parcels of land,
    and mortgage documents were executed and registered. The terms of the mortgages
    are identical. The mortgages, however, breach s. 50(3)(b) of the
Planning
    Act
, R.S.O. 1990, c. P.13. The breach is a result of the mortgages not
    being registered simultaneously, and not having the Land Titles mortgage
    reference the Registry Part and the Registry mortgage reference the Land Titles
    Part. The Bank moved for summary judgment to rectify the mortgages to accord
    with the parties intention.

[3]

The motion judge concluded that the common intention of the parties was
    that both parcels were mortgaged as security for the Banks loan to the
    appellants. He set out Mr. Hageys explanation for why the mortgage was to
    attach only to the Registry Part (at para. 17), and his reasons for rejecting
    this explanation and for concluding that there was in fact a common intention
    to mortgage both properties (at paras. 21 to 26). This was a finding of fact
    that was open to the judge on the evidence. Indeed, the available evidence overwhelmingly
    supported that conclusion.

[4]

The test for a stay has three parts. The appellants must establish that
    (a) there is a serious question to be determined in the appeal; (b) they would
    suffer irreparable harm if the stay is refused; and (c) the balance of convenience
    favours the granting of the stay:
Circuit World Corp. v. Lesperance
(1997), 33 O.R. (3d) 674 (C.A.), at 676 -677.

[5]

The appellants do not meet the test for a stay.

[6]

First, I see little merit in their appeal. The appellants assert that
    rectification was not available in this case because this was a situation where
    the
Planning Act
was violated when the mortgages were registered on
    different days. The application judge stated at para. 5: the mortgages were
    not registered simultaneously, nor did they contain terms cross-referencing one
    another to indicate that they were, in effect, a single mortgage being
    registered separately under the Land Registry and Land Titles systems. The
    judgment he granted amends each mortgage to refer to the other, and to state
    that it is the intention of the chargor to charge the lands simultaneously. The
    judgment declares that the two mortgages collectively comprise, and have always
    comprised, a single charge of the whole of both parts together. The motion
    judge did not, as argued by the appellants, alter the dates of registration of
    the mortgages. He ordered rectification of the mortgage documents, so that it
    was clear that both parts were mortgaged to the Bank as part of a single
    transaction. The motion judge applied settled principles in granting the
    rectification requested. He ordered rectification of the documents that was
    consistent with the mutual intention of the parties.

[7]

The motion judge made a finding of fact with respect to the parties shared
    intention. He rejected the contrary evidence of Mr. Hagey, which was not
    corroborated by any evidence of his wife in response to the Banks motion.
    Importantly, the motion judge relied on documents the appellants themselves had
    executed, which indicated their intention to mortgage the entire 197 acres as
    security. The decision of a judge ordering rectification, made on proper
    principles, is entitled to deference:
McLean v. McLean
, 2013 ONCA 788,
    118 O.R. (3d) 217, at para. 44.

[8]

There is no merit to the appellants argument that relief ought to have
    been denied because the Bank neglected to notice the violation of the
Planning
    Act
when it originally sought enforcement of the mortgages. The record
    indicates that the mistake occurred through an oversight  the loan was provided
    by the Bank to refinance a loan with another financial institution. This is not
    a case where one party knew or ought to have known of the others mistake and
    sought to take advantage of it. It would be inequitable to refuse rectification
    where the appellants had the benefit of the Bank loan and the parties shared
    intention was that both parcels would stand as security for the loan.

[9]

The appellants counsel also asserts that the summary judgment motion was
    premature in the absence of documentary discovery. I disagree. The record was
    such that the motion judge could make the necessary findings of fact to
    determine the rectification remedy.

[10]

Second,
    the appellants have not established irreparable harm. The appellants counsel
    argues that without a stay their ability to pursue the appeal will be thwarted (relying
    on
Re Regal Constellation Hotel Ltd.
, (2004), 71 O.R. (3d) 355 (C.A.)).
    That case involved the appeal of a vesting order that, in the absence of a
    stay, effected a conveyance of property. The appeal was quashed. Here, it is
    the power of sale proceedings, that have been commenced, and will continue as a
    result of the rectification of the mortgages, that may well result in the
    transfer of the subject properties before the appeal is heard. The right to
    appeal however will not be lost; rather the question is whether the appellants
    would suffer irreparable harm (harm that cannot be compensated for in money).

[11]

While
    the loss of their home might well occasion irreparable harm, the unfortunate
    reality is that the appellants are bankrupt. Even if they were successful in
    their appeal, the properties would vest in their trustee, and only their
    unsecured creditors (of which the Bank would represent 68%) would stand to
    gain. The trustee has not taken any position in the litigation. The appellants
    assert that, if they were successful in the appeal, they would be able to
    negotiate with the trustee to buy back their properties. On the basis of the
    evidence before the court concerning the appellants debts and incomes and the
    value of the properties and their other assets, the prospect of the appellants
    ending up with the properties is entirely speculative and doubtful.

[12]

The
    motion for a stay pending appeal is accordingly dismissed. Costs to the
    respondents. If the parties are unable to agree on the amount, they may provide
    written submissions to the court, limited to five pages each side, within 15
    days.

K. van Rensburg J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Wilson v. Northwest Value Partners Inc., 2016 ONCA
    253

DATE: 20160406

DOCKET: C60943

Sharpe, Juriansz and Roberts JJ.A.

BETWEEN

Brian Wilson

Plaintiff (Respondent)

and

Northwest
    Value Partners Inc. and Northwest International Healthcare

Properties
    Real Estate Investment Trust

Defendants (Appellants)

Jonathan Cocker, for the appellants

Jeff C. Hopkins and Justin Tetreault, for the respondent

Heard and released orally: April 4, 2016

On appeal from the judgment of Justice M.D. Faieta of the
    Superior Court of Justice, dated July 23, 2015.

ENDORSEMENT

[1]

The appellants have failed to demonstrate any ground on which this court
    could interfere with the motion judges order enforcing the terms of the
    settlement agreement.

[2]

There was clear evidence to support the finding that the parties settled
    the respondents claim for payment of amounts owed to him upon his termination
    of employment.

[3]

We do not agree with the submission that the motion judge erred by enforcing
    the settlement in the face of the respondents alleged post-termination breach
    of the non-compete clause in his employment contract.

[4]

The motion judges determination that the settlement did not include any
    claim by the appellants for that alleged breach was entirely reasonable. The
    alleged breach of the non-compete clause was simply not on the table at the
    mediation. The motion judge did not err by finding that the boiler-plate
    preamble clause reference that the agreement fully and finally settled all
    matters among the parties could not reasonably be interpreted to embrace the
    appellants subsequent claim for breach of the non-compete clause. Moreover, as
    the motion judge pointed out, as the non-compete clause had 11 months to run at
    the time of the settlement, it makes no sense to suggest that the appellants
    could have intended to relieve the respondent of his non-compete obligation.

[5]

The motion judges decision as to costs attracts deference on appeal and
    the appellants have failed to persuade us that leave to appeal costs should be
    granted.

[6]

For these reasons, the appeal is dismissed with costs to the respondent fixed
    in the amount of $15,000, inclusive of taxes and disbursements.

Robert
    J. Sharpe J.A.

R.G.
    Juriansz J.A.

L.B.
    Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: 1702108 Ontario Inc. v. 3283313 Canada Inc., 2016
    ONCA 420

DATE: 20160531

DOCKET: C61393

Juriansz, Brown and Roberts JJ.A.

BETWEEN

1702108 Ontario Inc. o/a Al Pinto Sales &
    Services Ltd.

Plaintiff (Appellant)

and

3283313 Canada Inc. o/a Federal Auction Service
    Inc., Amir Durani and Salim Khan

Defendants (Respondents)

Avy Ben-zvi, for the appellant

Rajneesh K. Sharda, for the respondent Salim Khan

Jean-Claude Killey, for the respondents Amir Durrani and
    3283313 Canada Inc. o/a Federal Auction Service Inc.

Heard: May 26, 2016

On appeal from the order of Justice David L. Edwards of
    the Superior Court of Justice, dated November 9, 2015.

ENDORSEMENT

[1]

On December 4, 2013, the appellant commenced an
    action seeking the sum of $500,000 for jewelry it had consigned to the
    respondent, 3283313 Canada Inc. (Federal Auction), but which had been stolen
    in 2008. The motion judge granted summary judgment dismissing the appellants
    action against the respondents, Federal Auction and its principal, Amir Durrani,
    on the ground that the claim was statute-barred. The appellant appeals. It
    submits the motion judge committed two errors in reaching that conclusion.

[2]

First, the appellant contends the motion judge
    erred in failing to find that a March 14, 2013 email sent by Mr. Durrani, when
    read in the context of payments made by the respondent following the
    appellants 2009 demand letter, was an acknowledgement of liability within the
    meaning of s. 13(1) of the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B (the Act)
. That sub-section provides, in part: If a person acknowledges
    liability in respect of a claim for payment of a liquidated sum the act on
    which the claim is based shall be deemed to have taken place on the day on
    which the acknowledgement was made.

[3]

The motion judge held that Mr. Durranis email
    of March 14, 2013 did not constitute an acknowledgement of liability for the
    purposes of s. 13 of the Act. The motion judge held that although the email
    acknowledged an outstanding amount, it did not contain an acknowledgement or
    concession of the amount owing and, therefore, was not an acknowledgement of
    the debt.

[4]

The appellant submits the motion judge applied
    the wrong legal test for identifying an acknowledgement in reaching that
    conclusion. It contends the respondents statement in the email that he could
    not make any payments until he had settled the dispute with his ex-partner
    amounted to an acknowledgement for the purposes of s. 13(1) of the Act.

[5]

The language of the statute sets out the
    applicable test: s. 13(1) is engaged when a person acknowledges liability in
    respect of a claim for payment of a liquidated amount. In
Middleton
    v. Aboutown Enterprises Inc.
, 2009 ONCA 466, this court
    held, at para. 1, that s. 13(1) requires a clear and unequivocal acknowledgement
    of the debt claimed. In that case, the court upheld the motion judges finding
    that a mere offer to settle a claim, without acknowledging that any amount
    remained owing, did not amount to an acknowledgement of liability for the
    purposes of s. 13(1).

[6]

In the present case, Mr. Durranis March 14
    email did not acknowledge liability for the liquidated sum of $296,700 demanded
    by the appellant in its March 14 correspondence. At most, the respondents
    March 14 email proposed negotiating a settlement plan, without acknowledging
    that any amount remained owing. When the appellant subsequently pressed for an
    acknowledgement of liability for the liquidated sum, the respondent refused to
    give one. Accordingly, we see no basis to interfere with the motion judges
    conclusion that the March 14, 2013 email was not an acknowledgement. We would
    not give effect to this ground of appeal.

[7]

In its factum, the appellant advances a second
    ground of appeal. It submits the motion judge erred in failing to find the
    doctrine of promissory estoppel prevented the respondents from relying on the
    limitation period. The motion judge noted that the appellant first raised the
    issue of promissory estoppel during oral argument on the summary judgment
    motions, and had not raised it in any documents. The motion judge concluded
    that there is nothing in the words or conduct of the defendants that there was
    a promise to not rely upon the limitation period. The record supports the
    motion judges conclusion. We see no basis upon which to interfere.

[8]

Accordingly, we dismiss the appeal. The
    appellant shall pay the respondents their costs of the appeal fixed in the
    following amounts: $7,000 payable to Federal Auction and Mr. Durrani, and
    $1,000 payable to Mr. Khan.

R.G.
    Juriansz J.A.

David Brown
    J.A.

L.B.
    Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA
    409

DATE: 20160527

DOCKET: C60033

Laskin, Pardu and Roberts JJ.A.

BETWEEN

2123201 Ontario Inc.

Applicant (Appellant)

and

The Estate of Harold Israel by his Estate
    Trustee, Ken Israel

Respondent (Respondent)

Randell K. Thomson, for the appellant

Steven W. Pettipiere, for the respondent

Heard: November 27, 2015

On appeal from the judgment of Justice Patrick J. Flynn
    of the Superior Court of Justice, dated January 23, 2015, with reasons reported
    at 2015 ONSC 538, [2015] O.J. No. 369.

Laskin
    J.A.:

A.

Introduction

[1]

A sells land to B. At the same time, A and B enter into an agreement
    that A can repurchase the land if a condition under Bs control is met. Does
    the agreement give A an interest in the land, or only a personal contractual
    right? This appeal turns on the answer to that question.

[2]

In 1931, Harold Israel conveyed land he owned in Waterloo County to two
    individuals, D.M. Bowman and Seranus Martin. The land contained a gravel pit,
    and the purchasers bought the land to obtain the gravel, sand, and stone on it
    (collectively the gravel). Contemporaneously with the conveyance, the parties
    signed an Agreement giving Israel the first option to purchase the land for
    $1 once the gravel has been removed from it. But the Agreement gave Bowman and
    Martin the discretion and authority to state when all the gravel had been
    removed.

[3]

The appellant, 2123201 Ontario Inc., is the current owner of the land
    and continues to extract gravel from it. Harold Israel died in 1980, and his
    rights under the Agreement have passed to his Estate, the respondent in this appeal.
    The Estate has registered two notices of claim against the land and in May 2009
    demanded that the land be conveyed to it for $1.

[4]

2123201 then brought an application for an order declaring the Agreement
    void and deleting it from title. The resolution of the application turned on
    how to characterize Israels first option to purchase under the Agreement.

[5]

2123201 contended that the Agreement was an option agreement, which gave
    Israel an immediate, equitable interest in the land. Because his interest in the
    land had not vested, the Agreement was void and unenforceable under the rule
    against perpetuities.

[6]

The Estate contended that the Agreement gave Israel a right of first
    refusal, which was not an interest in land, but was merely a personal right. As
    the Agreement did not give Israel an interest in land, the rule against
    perpetuities did not apply and the Estate may still enforce Israels first option
    to purchase under the Agreement.

[7]

The application judge dismissed 2123201s application. He held that the
    Agreement was not an option agreement that created an interest in land. It was,
    instead, something akin to a right of first refusal  which does not create
    any interest in land.

[8]

On appeal, each party renews the position it took before the application
    judge. For the reasons that follow, I would allow the appeal.

B.

Did the Agreement Give Israel an Interest
    in the Land?

(1)

Ownership of
    the Land

[9]

I will summarize briefly the history of the ownership of the land.

·

1931: Harold Israel conveys the land to Bowman and Martin.

·

1950: A small part of the land is transferred to the County of
    Waterloo Public School Board to expand its school property. Harold Israel
    together with Bowman and Martin are the named grantors on the deed transferring
    the land to the school board.

·

1965: The land is sold to William Sittler and immediately
    transferred for no consideration to his solicitor, Robert Sutherland.

·

2002: The land is transferred into the Land Titles system.

·

2004: The land is transferred from Sutherland to 3239501 Canada
    Ltd., a company controlled by William Sittler, for $75,000.

·

2009: The land is transferred to Sittler Excavating Limited, and
    in turn to the appellant 2123201 Ontario Inc., for $325,000. 2123201 is
    operated by Rick Sittler.

[10]

This brief history shows that the Sittler family has owned the land for over
    50 years. Although the application judge expressed some concern about whether
    2123201 is the current owner, the Estate conceded that it is. Ownership of the
    land is not in issue on this appeal.

(2)

The 1931
    Agreement

[11]

On the same day Israel conveyed the land to Bowman and Martin  January
    7, 1931  the parties entered into the Agreement, which is the subject of this
    appeal. The Agreement recites that Bowman and Martin purchased the land solely
    to acquire the gravel, sand and stone etc., thereon. The Agreement then
    contains seven paragraphs said to be conditions agreed on by the parties. On
    this appeal, the important paragraphs are 1, 4 and 6.

[12]

Paragraph 1 gives Israel the first option to purchase the land once
    the gravel has been removed, and gives Bowman and Martin the discretion to
    state when that has occurred.

The parties hereto of the First Part [Bowman and Martin] hereby
    in consideration of the sum of One Dollar now paid to them by the party of the
    Second Part [Israel], the receipt whereof is hereby by them acknowledged, the
    said parties of the First Part give to the party of the Second Part, the first
    option to purchase the said lands at the sum of One Dollar which option is
    exercisable when the gravel, sand and stone, etc., are removed from the said
    lands. It is at the discretion and within the authority of the Parties of the
    First Part to state the time that the gravel, sand, and stone, etc., are removed
    and the said option exercisable.

[13]

Under paragraph 4, Bowman and Martin are not required to remove the
    gravel by any fixed date. They may remove it at their own pleasure, but may
    not excavate below the level of the road adjoining the land.

It is understood that the parties of the First Part have
    purchased the lands to acquire the property in the gravel, sand and stone,
    etc., thereon. They may remove the gravel, sand and stone, etc. at their own
    pleasure and there is no stated or agreed time within which the said gravel,
    sand and stone, etc., must be removed. They covenant and agree with the party
    of the Second Part that they will leave the surface of the property reasonably
    level when the gravel, sand and stone, etc., have been removed and that no excavation
    within the boundaries of the said lands will be at a lower level than the
    travelled surface of the roadway of highway at its lowest point adjoining the
    property.

[14]

Under paragraph 6, Israel agrees to execute any quitclaim deed needed
    for widening or altering the adjoining road.

The Party of the Second Part agrees to execute when requested
    and for a consideration of One Dollar, a quit claim deed of a part of the said
    lands required in the near future for widening, improving or altering the
    course of the road now adjoining the property.

[15]

In 1974, Harold Israel registered an assignment on the title to the
    land, in which he assigned to himself, his heirs, executors, and administrators
    his rights under the Agreement. Because of this assignment, his Estate may now
    assert whatever rights Israel had under the Agreement. Then, in 1987, and again
    in 1997, the Estate registered a notice of claim under the Agreement on the
    title to the land.

(3)

Options to
    Purchase and Rights of First Refusal

[16]

This appeal raises one issue: when the Agreement was made, did it give
    Israel an interest in the land? 2123201 says that the Agreement gave Israel an
    option to purchase  or perhaps more accurately, an option to repurchase
    which created an immediate interest in the land. The Estate says that the
    Agreement gave Israel only a right of first refusal, a personal right, which
    did not create any immediate interest in the land.

[17]

Both parties agree that if the Agreement did give Israel an immediate
    interest in the land, then the Agreement is void and unenforceable because it
    offends the rule against perpetuities. The parties also agree that if the
    Agreement merely gave Israel a personal contractual right and not an interest
    in the land, then the Estate may still enforce its rights under the Agreement.

[18]

The difference between options to purchase and rights of first refusal has
    been discussed extensively in the jurisprudence of the Supreme Court of Canada
    and this court, although the jurisprudence has been the subject of some
    criticism: see
Irving Industries (Irving Wire Products Division) Ltd. v.
    Canadian Long Island Petroleums Ltd.
, [1975] 2 S.C.R. 715;
McFarland
    v. Hauser
, [1979] 1 S.C.R. 337;
Metropolitan Homes Ltd. v. Politzer
,
    [1976] 1 S.C.R. 363;
Benzie v. Kunin
, 2012 ONCA 766, 112 O.R. (3d) 481;
    and
Harris v. McNeely
(2000)
,
    47 O.R. (3d) 361. For a critique of the early jurisprudence, see the excellent
    article by Paul Perell (now Perell J. of the Ontario Superior Court of Justice):
    Options, Rights of Repurchase and Rights of First Refusal as Contracts and as
    Interests in Land, (1991) 70 Can. Bar Review 1, at pp. 17-27.

(a)

Options to
    Purchase

[19]

An option to purchase gives the option holder the right but not the
    obligation to purchase land. In
Canadian Long Island Petroleums
, Martland J. succinctly defined an option to
    purchase and emphasized the option holders control over the exercise of the option.
    In his words at p. 732
: the essence of an option to purchase is
    that, forthwith upon the granting of the option, the optionee upon the
    occurrence of certain events solely within his control can compel a conveyance
    of the property to him. An option holder has an equitable interest in the
    land, contingent on the holders election to exercise the option. Because an
    option to purchase creates an interest in land, it is specifically enforceable
    at the time the option is granted. But to remain valid the option must be
    exercised within the perpetuity period.

[20]

The perpetuity period is not later than twenty-one years after some
    life in being at the creation of the interest: see, for example,
Sutherland
    Estate v. Dyer
(1991)
, 4
    O.R. (3d) 168 (Gen. Div.), at p. 171. An interest that vests outside this
    period is void. As Killeen J. explained in
Sutherland Estate
, at p. 172
, the rule against
    perpetuities is a rule invalidating interests that vest too remotely. And it is
    a rule that applies not just to owners of land, but also to holders of
    contingent interests, such as options to purchase.

It is stating the obvious to say that the central purpose of
    the rule was to prevent owners of property from exercising control over their
    property for too long a time after they ceased to be owners. However, the rule
    does not implement this purpose by restricting the duration of interests in
    trusts or other interest in property. Rather, the rule restricts the length of
    the interval which may elapse between the creation of a contingent interest and
    the vesting of that interest. Thus, the rule applies only to contingent
    interests and, to that extent, it has been said by many commentators that the
    rule should be really characterized as a rule against remoteness of vesting.

[21]

In the present case, the perpetuity period ended in 1952 (21 years after
    the Agreement was signed) or 2001 (21 years after Harold Israel died). It is
    unnecessary to decide which date is appropriate. If the Agreement is an option
    to purchase, which creates an interest in land, that interest still has not
    vested; therefore even if 2001 is the appropriate date, the option to purchase
    is void.
[1]

(b)

Rights of First
    Refusal

[22]

A right of first refusal is a commitment by the owner of land to give
    the holder of the right the first chance to buy the land should the owner
    decide to sell. Typically, where a land owner is prepared to accept an offer to
    purchase from a third party, the holder of the right of first refusal will be
    given an opportunity to match the offer; or, when an owner of land decides to
    sell and fixes the sale price, the holder of the right of first refusal will be
    given the first chance to buy at the fixed price. In these typical right of
    first refusal scenarios, the owner has an unfettered discretion whether to sell
    and when to sell.

[23]

Importantly, the right of first refusal is a personal right. It does not
    create an immediate interest in land:
Canadian Long Island Petroleums
, at
    p. 735. Thus, it is not immediately enforceable by an action for specific
    performance. If, however, an owner of land receives an offer to purchase that
    it is prepared to accept, then the right of first refusal is converted into an
    option to purchase. At that point, the holder of the right of first refusal has
    an interest in the land, which can be specifically enforced:
Harris
, at
    para. 12.

(c)

Summary

[24]

As the discussion above shows, the jurisprudence establishes that
    options to purchase create immediate interests in land; rights of first refusal
    do not. Options to purchase are specifically enforceable; rights of first
    refusal are not. And options to purchase are subject to the rule against
    perpetuities; rights of first refusal are not. Finally, according to
Canadian
    Long Island Petroleums
, options to purchase give the option holder control
    over the decision to effect a conveyance. Rights of first refusal give the land
    owner control over the decision to convey. But, as I will discuss, other case
    law shows that in some circumstances control over the exercise of the option is
    not determinative.

(4)

Analysis

[25]

The first option to purchase the land given to Harold Israel under the
    1931 Agreement does not fit precisely into either the definition of an option
    to purchase or the definition of a right of first refusal established in the
    jurisprudence.

[26]

It is not precisely a simple option to purchase or repurchase as defined
    in
Canadian Long Island Petroleums
because the event triggering the
    ability to exercise the option  the removal of all the gravel from the land
    is not within the control of the holder of the option, now Israels Estate. Thus
    the Estate cannot immediately exercise its option. Its ability to do so depends
    on 2123201s determination that the gravel has been removed.
[2]

[27]

And Israels first option to purchase the land is not precisely a
    simple right of first refusal. No third party is involved, and more
    importantly, 2123201 does not have an unfettered discretion to decide if and
    when it will sell the land. It must offer to sell the land to the Estate when
    all the gravel is removed. Although 2123201 may remove the gravel at any pace
    it chooses and has the discretion to decide when all of it has been removed,
    that discretion is not open-ended. It must be exercised reasonably.

[28]

That a discretion given to a contracting party must be exercised
    reasonably is clear from the authorities. For example, in
Nareerux Import
    Co. Ltd. v. Canadian Imperial Bank of Commerce
, 2009 ONCA 764,
97 O.R. (3d) 481,
at para. 71, Blair J.A. wrote:

Contracts in which performance is dependent upon the exercise
    of discretion on the part of one of the parties are contracts that are
    particularly characterized by the implied duty of good faith
    performance. In such circumstances, the discretion must be exercised
    reasonably and in good faith. [Citations omitted.]

[29]

Professor John McCamus makes the same point in his text, The Law of
    Contracts (Toronto: Irwin Law, 2012), at p. 849 and 865-6:

In sum, these cases establish the proposition that where
    discretionary powers are conferred by agreement, it is implicitly understood
    that the powers are to be exercised reasonably.

In the control of contractual discretion cases, for example, it
    may be more realistic to suggest that the implied limitation on the exercise of
    the discretion is intended to give effect to the reasonable expectations of
    the parties.

[30]

The application judge recognized that Israels option did not fit
    exactly into the definition of a right of first refusal. He characterized it as
    akin to a right of first refusal. But he concluded that the option was not
    really an option to purchase because Israel did not control the exercise of the
    option, and thus could not specifically enforce it at the time the Agreement
    was made.

[31]

I take a different view. Israels and now the Estates inability to
    control the exercise of the option is not, in this case, decisive. Instead, I
    focus on what the parties intended by their Agreement. In my opinion, the true
    intent of the parties was to give Israel an interest in the land at the time
    the Agreement was made.

(a) Control

[32]

Israels lack of control over the exercise of his option figured
    prominently in the parties submissions. The Estate, relying on Martland J.s
    definition of an option to purchase in
Canadian Long Island Petroleums
,
    submits that Israel had only a personal right to repurchase the land. 2123201,
    on the other hand, submits that control is not determinative and, even in its
    absence, Israel still had an equitable interest in the land. I agree with
    2123201s submission.

[33]

The case law in the Supreme Court of Canada on the relevance of control
    has not been uniform. And this court has said that control over the exercise of
    an option does not always resolve whether the option gives rise to an interest
    in land:
Jain v. Nepean
(1992), 9 O.R. (3d) 11 (C.A.), leave to appeal
    refused, [1992] S.C.C.A. 473.

[34]

Canadian Long Island Petroleums
makes no mention of two earlier
    Supreme Court of Canada decisions
City of Halifax v. Vaughan Construction
    Co. Ltd.
, [1961] S.C.R. 715, and
Weinblatt v. City of Kitchener
,
    [1969] S.C.R. 157  each of which reached a different conclusion. In both those
    cases, a city sold land to a developer but retained an option to demand a reconveyance
    should the developer not build within a specified time. In other words, the
    citys right to demand a reconveyance, like Israels option to purchase, was
    not within the citys control. It depended on the developers decision whether
    or not to build. Yet in both cases the Supreme Court of Canada concluded that
    the covenant to demand a reconveyance gave the City an equitable interest in
    the land.

[35]

Then, in
Jain
, this court considered the issue afresh in the
    light of the Supreme Courts jurisprudence. In
Jain
, as in
Vaughan
and
Weinblatt
, the City of Nepean sold property to a developer under
    an agreement that gave it the right to repurchase the property if the developer
    did not construct a building of a specified minimum size within a specified
    time. This court had to decide whether the agreement gave Nepean an interest in
    the property or merely a personal right of first refusal. This court held that
    the agreement gave Nepean an interest in the property.

[36]

Carthy J.A., writing for the panel, pointed to the apparent
    inconsistencies in the reasoning of the courts in
Vaughan
,
Weinblatt
,
and
Canadian Long Island Petroleums
.
    And he noted that the latter case did not refer to the two earlier cases. He
    followed
Vaughan
and
Weinblatt
and concluded, at p. 19, that
    control was not determinative:

A person who acquires property with notice of a third party's
    right of purchase in the event of failure to construct a building takes subject
    to that option. Control of the exercise of the option is not a factor.

[37]

In both
Jain
and the case before us, the right to repurchase
    was not within the control of the holder of the right. In
Jain
, Carthy
    J.A. concluded that control was not decisive. By their agreement, the parties
    still intended that Nepean maintain an interest in the land. Similarly, in the
    appeal before us, control over the exercise of the option does not resolve
    whether the Agreement gave Israel an immediate interest in the land. That issue
    can only be resolved by looking at what the parties intended.

(b) The Intent of the Parties

[38]

Instead of focusing on the question of control, I view the issue as one
    of contract interpretation: to determine the true intent of the parties at the
    time the Agreement was made. In my opinion, the purpose of the Agreement, the
    context in which it was made, its terms, and the conduct of the parties under
    it, show an intention to give Israel an option to repurchase the land, which gave
    rise to an immediate, equitable interest in the land.

[39]

Bowman and Martin bought the land from Israel for one purpose only: to
    extract the gravel from it. They had no other interest in the land. Once the
    gravel was removed, Israel could have his land back for $1. The purpose of the
    Agreement and the underlying context in which it was made suggest Israel was
    being given not a mere personal right of first refusal but an option to
    repurchase, which created an immediate interest in the land.

[40]

The terms of the Agreement bolster this conclusion. In paragraph 1 of
    the Agreement, Israels right is termed a first option to purchase, not a
    right of first refusal. Although the label by itself is not determinative,
    paragraph 6 also shows that the parties intended that Israel have an immediate
    interest in the land. Under that paragraph, Israel agreed to execute a
    quitclaim if part of the land was needed to widen or alter the road adjoining
    the land. If all Israel had was a right of first refusal, he would not have had
    to quitclaim anything. But if he had an equitable interest in the land created
    by an option to purchase, he would have had to give a quitclaim.

[41]

Any doubt, however, about the parties intention when they signed the
    Agreement has been resolved by how the parties have acted under the Agreement.
    The way parties act under an Agreement may be helpful in determining its
    intended meaning when there is doubt about the appropriate interpretation. The
    parties later conduct may show what meaning they gave to the Agreement after
    it was made, which in turn may show the parties intent when the Agreement was
    made:
Montreal Trust Co. of Canada v. Birmingham Lodge Ltd.
(1995), 24
    O.R. (3d) 97 (C.A.), at p. 108.

[42]

Here, the parties later conduct shows that they viewed the Agreement as
    creating an immediate interest in land. In 1950, when a portion of the land was
    conveyed to the school board, Israel joined Bowman and Martin in the deed as a
    grantor. He would not have had to do so if he only had a personal contractual
    right of first refusal.

[43]

The purpose of the Agreement and the context in which it was made, its
    terms, and the later conduct of the parties under the Agreement, together show
    that the intent of the Agreement was to give Israel an immediate, equitable
    interest in the land. The interest was contingent on the exercise of the option
    to purchase. As the option has not been exercised, the interest has not vested
    within the perpetuity period and is now void.

[44]

My view of the parties rights under the Agreement differs from that of
    the application judge. Since the Supreme Court of Canadas decision in
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, ordinarily
    a trial or application judges interpretation of an agreement is entitled to
    deference from an appellate court. Here, I doubt deference is warranted. The
    application judge did not interpret the Agreement. He looked only at the
    question of control over the exercise of the option. But even if deference is
    warranted, this court is entitled to intervene. The application judges
    conclusion that Israel had only something akin to a right of first refusal was
    an unreasonable conclusion, justifying appellate intervention.

C.

Conclusion

[45]

I would allow the appeal, set aside the judgment of the application
    judge, and in its place grant the relief sought by 2123201 Ontario Inc.,
    together with costs in the agreed on amount of $15,000 inclusive of
    disbursements and applicable taxes. 2123201 Ontario Inc. is also entitled to
    the costs of the application in the amount ordered by the application judge,
    $15,000.

Released: May 27, 2016 (J.L.)

John Laskin J.A.

I agree. G. Pardu J.A.

I agree. L.B. Roberts J.A.

[1]
It is void both at common law and under the
Perpetuities Act
, R.S.O. 1990, c. P .9.
    Section 4 of the Act prescribes that every contingent interest is presumptively
    valid, and establishes a wait and see rule. Even under this rule, Israels option
    to purchase would be void, as it did not vest within the perpetuity period.

[2]
Perell terms rights of repurchase accompanying a sale of land, but dependent on
    the decision of the owner of the land, a complex right of repurchase: at p. 7.