Royer v. Dominion International Inc., 2013 ABQB 707

Court of Queen ’ s Bench of Alberta Citation: Royer v. Dominion International Inc., 2013 ABQB 707 Date: 20131203 Docket: 1303 05063 Registry: Edmonton Between: Gerald Royer Plaintiff - and - Dominion International Inc. Defendant _ ________________________________________ ______________ Reasons for Judgment of L. A. Smart , Master in Chambers _________________________________________ ______________ Introduction [ 1 ] The Plaintiff Gerald Royer (Royer) granted a right of first refusal to Dominion International Inc. (Dominion) over certain lands in Beaumont, Alberta described as the “Option Lands”.

The provision in their agreement reads in part as follows: 3.2 The Vendor agrees that it will not, while the Purchaser continues to hold title to the Lands, sell or agree to sell any less than its total interest in the Option Lands and ... (emphasis added) [ 2 ] Royer has accepted an offer triggering the right of first refusal and the requirements of Dominion in the agreement have been

met entitling Dominion to have title to the Option Lands. [3] Under the terms of the agreement between Royer and Dominion, Royer is to receive a lease over the residential dwelling andother buildings on the Option Lands.

The provisions in their agreement reads as follows: 3.15 The Purchaser shall lease to the Vendor and the Vendor shall lease from the Purchaser the residential dwelling with allbuildings located on the Option Lands on the following conditions: 3.1.5.1 The annual rental shall be $1.00 per year. 3.1.5.2 The lease shall continue a minimum of six years following the Option Closing Date and shall continue thereafter on a year toyear basis until such time as the Vendor no longer desires to occupy the residential dwelling or until such time as the portion of theOption Lands upon which the residential dwelling (the “Premises”) is situated is required for development and is within the boundariesof the Plan of Subdivision for which the Purchaser has entered into an agreement with the municipality for the installation of municipalimprovements.

The Vendor may elect to surrender possession of the Premises at any time. (emphasis added) 3.1.5.3 The Vendor may remove from the Option Lands at any time and from time to time any buildings, other than the residentialdwelling, located upon the Option Lands and shall not be liable for committing waste to the Option Lands. 3.1.5.4 The Vendor shall be responsible for the cost of water, heat, telephone and all other utilities to the Premises. 3.1.5.5 The Vendor hereby agrees to take good care of the Premises and to keep them in reasonably clean condition. 3.1.5.6 It shall be the responsibility of the Vendor to insure the Vendor’s Lands on the Premises against damage or loss to suchLands occasioned by fire, theft and any other perils which may cause such damage or loss.

The Purchaser shall be responsible to pay realLands taxes assessed or levied against the Lands. 3.1.5.7 The Vendor shall not have the right to assign or sublet the Premises to another person or persons without the prior writtenconsent of the Purchaser. 3.1.5.8 Should the Vendor abandon the Premises before the termination of this Agreement, the Purchaser may take possessionwithout notice or demand. 3.1.5.9 The Purchaser hereby grants the Vendor full use and occupation and quiet enjoyment of the Premises with such security oftenure as is provided pursuant to this Agreement. 3.1.6 The provisions of this paragraph shall not merge on Closing nor shall the provisions of paragraph 3.1.5 merge upon Closingon the Option Closing Date.

The Issue [4] Dominion takes the position that the acceptance of an offer by Royer that gave his total interest in the Option Landsamounted to an election to surrender possession as contemplated by the last sentence of para 3.1.5.2, alternatively, waived his rightsunder the paragraph or, in the further alternative, committed

an act which estops him from asserting those rights and therefore there is noentitlement to a lease. Discussion [5] In my view this is a matter of contractual

interpretation at the most basic level. A fundamental precept of contractualinterpretation is that the contract must be examined as a whole and the specific words and phrases considered in the context of the entireagreement. The corollary of this principle is that meaning must be given to all of the words in a contract. The Ontario Court of Appeal inScanlon v. Castlepoint Development Corp., (ON CA), [1992] O.J.

No. 2692 said: To the extent that it is possible to do so, [a contract] should be construed as a whole and effect should be given to all of its provisions.The provisions should be read, not as standing alone, but in light of the agreement as a whole and the other provisions thereof: Hillis Oil & Sales Ltd. v. Wynn’s Canada Ltd. (SCC), [1986] 1 S.C.R. 57 at p. 66, D.L.R. (4th) 649 at p. 655. The court shouldstrive to give meaning to the agreement and “reject an

interpretation that would render one of its terms ineffective”: National Trust Co. v. Mead, (SCC), [1990] 2 S.C.R. 410 at p. 425, 71 D.L.R. (4th) 488 and p. 499. [6] Parties are certainly free to contract as they chose but the

interpretation must have a character of commercial reasonablenessin the context of the surrounding circumstances or now as often referred to in the context of the factual matrix. In that light, words andagreements must be construed in a business fashion applying common sense so as to avoid a commercial absurdity. [7] The Right of First Refusal requires Royer to divest himself of all of his interest in the Option Lands which must include anyright to possession. Anything less would be contrary to the agreement.

Indeed that was the very position previously taken by Dominionwhen an offer had been accepted by Royer which contemplated a leaseback to him until the Option Lands were to be developed.Regardless, now Dominion says that upon accepting an offer in the form and substance required under the agreement it amounts to anelection to surrender the Lease as contemplated in the last sentence of paragraph 3.1.5.2. [8] In my view, to accept Dominion’s

interpretation of the agreement would have the affect of rendering paragraph 3.1.5 and itsnine subparagraphs other than the ability to elect to surrender possession completely meaningless. Whether it is characterized as an

election, waiver or as giving rise to an estoppel as argued by Dominion, the result is the same. Royer says that the election is in reference to the Lease which would not come in to existence until the exercise of the Right of First Refusal and the conveyance to Dominion. This gives rise to a plain and ordinary

interpretation of the words in the commercial context giving efficacy to the agreement reached between Royer and Dominion. The

interpretation by Royer is bolstered by paragraph 3.1.6 which states that the obligation to lease does not merge upon the closing of the Option (Right of First Refusal). Decision [ 9 ] To accept the

interpretation and arguments put forward by Dominion would result in a commercial absurdity. The right of Royer to lease the lands could never arise. The acceptance of a third party offer which provided for vacant possession by Royer is not an election to surrender possession within the meaning of paragraph 3.1.5, nor a waiver of rights under that paragraph, nor

an act which would estop Royer from asserting his rights. [ 10 ] Royer shall have his costs of the application. Heard on the 14 th day of November, 2013. Dated at the City of Edmonton, Alberta this 3rd day of December, 2013. L. A. Smart M.C.C.Q.B.A. Appearances: James Cregan, Q.C. Ackroyd LLP for the Plaintiff Jonathan Hillson Dentons Canada LLP for the Defendant