Fluid Pro Oilfield Services Ltd v Diamond Cut Industrial Park Ltd, 2017 ABQB 630

Court of Queen’s Bench of Alberta Citation: Fluid Pro Oilfield Services Ltd v Diamond Cut Industrial Park Ltd, 2017 ABQB 630 Date: 20171018 Docket: 1603 14314 Registry: Edmonton Between: Fluid Pro Oilfield Services Ltd Plaintiff - and - Diamond Cut Industrial Park Ltd Defendant/Plaintiff by Counterclaim - and - Fluid Pro Oilfield Services Ltd and Chad Brent McFarland Defendants by Counterclaim Corrected judgment: A corrigendum was issued on October 18, 2017; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Decision of W.S.

Schlosser , Master, Court of Queen's Bench of Alberta _______________________________________________________

[1] This is the Plaintiff’s application for

Summary Judgment on a contract, with a cross-application to amend the Defence andCounterclaim. The Plaintiff also seeks dismissal of the Counterclaim. [2] The central issue for the cross-application is whether the questions about the admissibility of evidence render the proposedamendments hopeless. List of Authorities By the Court 1. Manji v Prasad, 2016 ABQB 273; 2. Terwillegar Towne Residents Association v Brookfield Residential (Alberta) LP, 2015 ABQB 14; 3. Stewart v Timber Bear Developments Ltd, 2017 ABQB 594; 4. “The Path of the Law”,

(1897) Harvard Law Rev. 457, 469; 5. IFP Technologies (Canada) Inc v EnCana Midstream and Marketing, 2017 ABCA 157. By the Parties 1. Gainers Inc v Pocklington Financial Corporation, 2000 ABCA 151, at paras 15-23; 2. Statute of Frauds, 1677 29 Car II c3,

Section 4; 3. Eli Lilly & Co v Novopharm Ltd, (SCC), [1998] 2 SCR 129 at paras 54-59; 4. Statement of Claim, Diamond Cut Industrial Park Ltd v Jeffrey FM Donald et al, Edmonton Court File Number 1603 11710: 5. Rules of Court, AR 124/2010, r 7.3; 6. P(

W) v Alberta, 2014 ABCA 404, 588 AR 110; 7. Rai v 1294477 Alberta Ltd (Vinyl Retro Dance Lounge), 2015 ABQB 349, 2015 CarswellAlta 971; 8. Windsor v Canadian Pacific Railway Ltd, 2014 ABCA 108, 572 AR 317; 9. Beier v Proper Cat Construction, 2013 ABQB 351, 2013 CarswellAlta 1141; 10. Access Mortgage Corporation

(2014) Limited v Arres Capital Inc, 2014 ABCA 280 at para 45, 2014 CarswellAlta 1662; 11. 1214777 Alberta Ltd v 480955 Alberta Ltd, 2014 ABQB 301, 2014 CarswellAlta 821; 12. Fletcher v Davidson & Williams LLP, 2015 ABQB 244, 2015 CarswellAlta 667 aff'd at 2015 ABQB 783, 2015 CarswellAlta 2265; 13. Owners: Condominium Plan No 0125764 v Amber Equities Inc, 2015 ABQB 235, 2015 CarswellAlta 616; 14. R Floden Services Ltd v Solomon, 2015 ABQB 450, 2015 CarswellAlta 1274; 15. Nafie v Badawy, 2015 ABCA 36, 2015 CarswellAlta 106; 16. Gayton v Lacasse, 2010 ABCA 123, 482 AR 179; 17.

Environmental Metal Words Ltd v Murray, Faber & Associates Inc, 2013 ABQB 479, 2013 CarswellAlta 1579; 18. Infante v Dzogov, 2016 ABQB 41, 2016 CarswellAlta 89; 19. Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53, [2014] 2 SCR 633; 20. S.M. Waddams, The Law of Contracts, 7th ed (Toronto: Thomson Reuters, 2017) 21. Pyramid Construction (Calgary) Ltd v Feil (1957), (AB KB), 11 DLR (2d) 140, 1957 CarswellAlta 54 (CA); 22. Guaranty Properties Ltd v Edmonton (City), 2000 ABCA 215, 261 AR 376 23.

Michael Hanuschuk Drugs Ltd v Keith, 2015 ABQB 537, 2015 CarswellAlta 1569, aff'd at 2016 ABCA 13, 2016 CarswellAlta 53; 24. Kempling v Hearthstone Manor Corp (1996), 1996 ABCA 254 , 137 DLR (4th) 12, 184 AR 321 (CA); 25. Colonial Investments Co v Borland (1911), (BC SC), 1 WWR 171 at 189, 1911 CarswellAlta 72 (QB), affirmedat (1912), (AB CA), 5 Alta LR 71, 6 DLR 211 (CA);

26. Montreal Trust Co v Maley (1992), (SK CA), 99 DLR (4th) 257, 105 Sask R 195 (CA) 27. McMaster University v Wilchar Construction Ltd, (ON SC), [1971] 3 OR 801, 22 DLR (3d) 9 (Ont HCJ), aff'd at(1973), (ON SC), 12 OR (2d) 512 (Note), 69 DLR (3d) 400 (Note) (Ont CA); 28. Sylvan Lake Golf & Tennis Club Ltd v Performance Industries Ltd, 2002 SCC 9, [2002] 1 SCR 678; 29. Bank of Montreal v Vancouver Professional Soccer Ltd (1987), (BC CA), 15 BCLR (2d) 34, 1978 CarswellBC174 (CA); 30. Aim Funds Management Inc v Aim Trimark Corporate Class Inc (2009), 64 BLR (4th) 261, 2009 CarswellOnt 7006 (Ont Sup CtJ); 31.

Peter Pan Drive-In Ltd v Flambro Realty Ltd (1978), (ON SC), 22 OR (2d) 291, 93 DLR (3d) 221 (Ont HCJ)aff'd at (1980), (ON CA), 26 OR (2d) 746, 106 DLR (3d) 576 (ONCA), leave to appeal to SCC refused at [1980] 1SCR xi; 32. Johnson Investments Ltd v Pagratide, (AB CA), [1923] 2 DLR 985, 1923 CarswellAlta 27 (CA); 33. Shelanu Inc v Print Three Franchising Corp (2003), (ON CA), 226 DLR (4th) 577, 64 OR (3d) 533 (CA); 34. Bhasin v Hrynew, 2014 SCC 71, [2014] 3 SCR 494; 35. Saskatchewan River Bungalows Ltd v Maritime Life Assurance Co, (SCC), [1994] 2 SCR 490, 15 DLR (4th)478; 36.

Canadian Superior Oil Ltd v Hambly, (SCC), [1970] SCR 932, 12 DLR (3d) 247; 37. Solara Exploration Ltd v Richmount Petroleum Ltd, 2008 ABQB 596, 98 Alta LR (4th) 78; 38. Bruce MacDougall, Estoppel (Markham: LexisNexis, 2012); 39. Ryan v Moore, 2005 SCC 38, [2005] 2 SCR 53; 40. Maracle v Travellers Indemnity Co of Canada, (SCC), [1991] 2 SCR 50, 80 DLR (4th) 652; 41. Tudale Explorations Ltd v Bruce (1978), (ON SC), 20 OR (2d) 593, 88 DLR (3d) 584 (Ont Div Ct); 42. Angela Swan & Jakub Adamski, Canadian Contract Law, 3rd ed (Markham: LexisNexis, 2012); 43. Judicature Act, RSA 2000, c J-2, s 10; 44.

Canpar Holdings Ltd v Petrobank Energy & Resources Ltd, 2011 ABCA 62, 505 AR 102; 45. Bruno Appliance and Furniture Inc v Hyrniak, 2014 SCC 8, [2014] 1 SCR 126; 46. Queen v Cognos Incorporated, (SCC), [1993] 1 SCR 87, 1993 CarswellOnt 801; 47. Klar, et al, Remedies in Tort, Vol 1 (looseleaf: consulted on June 30, 2017) (Toronto: Thomson Reuters, 2017) at 5-22.2; 48. Alberta Rules of Court, AR 124/2010, rr 3.62, 3.65, 3.66, 3.67; 49. Hur v 726913 Alberta Ltd, 2013 ABQB 208, 240 ACWS (3d) 334; 50. Powder Creek Farms Ltd v CNH America LLC, 2013 ABQB 622, 96 Alta LR (5th) 356; 51.

Elbow River Marketing v Canada Clean Fuels Inc, 2011 ABCA 258, 513 AR 315; 52. Hunka v Degner, 2012 ABQB 207, 214 ACWS (3d) 78 ; 53. 869120 Alberta Ltd v B&G Energy Ltd, 2011 ABQB 209, 2011 CarswellAlta 512; 54. Newel Post Developments Ltd v 1402801 Alberta Ltd, 2010 ABQB 660, 503 AR 334; 55. Deuruneft Deutsche-Russische Mineralol Handelsgesellschaft mbH v Bullen, 2002 ABQB 304, 310 AR 164, aff'd at 2003 ABCA132, 327 AR 400; 56. Balm v 3512061 Canada Ltd, 2003 ABCA 98, 327 AR 149; 57. Atilla Dogan Construction v AMEC Americas Limited, 2013 ABQB 525, 565 AR 1, aff'd at 2014 ABCA 74, 569 AR 308; 58.

John Barlot Architect Ltd v 973189 Alberta Ltd, 2008 ABQB 458, 73 CLR (3d) 44, aff'd at 2009 ABCA 307, 450 AR 393; 59. Castledowns Law Office Management Ltd v FastTrack Technologies Inc, 2012 ABCA 219, 533 AR 287; 60. Alberta Teachers' Association v Alberta (Information and Privacy Commissioner), 2013 ABQB 106, 558 AR 14;

61. Ignition Energy Ltd v Direct Energy Marketing Ltd, 2011 ABQB 90, 2011 CarswellAlta 195; 62. Mikisew Cree First Nation v Canada, 2002 ABCA 110, 2 Alta LR (4th) 1; 63. Clapperton Estate v Davey, 2009 ABQB 63, 468 AR 81; 64. ET v Rocky Mountain Play Therapy Institute Inc, 2015 ABQB 396, 2015 CarswellAlta 1193 (

M) aff'd at 2016 ABQB 108,2016 CarswellAlta 217; 65. Dow Chemical Canada Inc v Nova Chemicals Corp, 2010 ABQB 524, 495 AR 338; 66. Manson Insulation Products Ltd v Crossroads C & I Distributors, 2011 ABQB 51, 2011 CarswellAlta 108; 67. Wrzesien v Arnett & Burgess Pipeliners Ltd, 2013 ABQB 59, 555 AR 288; 68. Stolk v 382779 Alberta Inc, 2005 ABQB 440, 383 AR 203; 69. Limitations Act, RSA 2000, c L-12, ss 3, 6; 70. Provalcid Inc v Graff, 2015 ABQB 574, 2015 CarswellAlta 1676; 71. Kappe v Garneau Lofts Inc, 2005 ABQB 727, 385 AR 265; 72. Composite Technologies Inc v Shawcor Ltd, 2017 ABCA 160; 73.

Hryniak v Mauldin, 2014 SCC 7; 74. McDonald v Brookfield Asset Management Ltd, 2016 ABCA 375; 75. Hawrish v Bank of Montreal, (SCC), [1969] SCR 515; 76. Bauer v Bank of Montreal, (SCC), [1980] 2 SCR 102; 77. Turney v Zhilka, (SCC), [1959] S.C.R. 578; 78. Barnett v Harrison, (SCC), [1976] 2 S.C.R. 531; 79. Guarantees Acknowledgment Act, RSA 2000, c G-11. Facts [3] First, the amendment application. [4] The facts are not really in dispute. The proposed amendments are extensive and really amount to a substantial rebuild. [5] The story told by the Defendants (from their Brief) is as follows: 4.

Angie and Joe Knobloch (“Angie” and “Joe”, respectively) are the sole shareholders and operators of Diamond Cut, which ownsan industrial park near Grand Prairie, Alberta (the “Industrial Park”). At the start of 2014, [Chad] McFarland, the sole shareholder anddirector of Fluid Pro, negotiated with Angie and Joe for the purchase of Lot 2 on Diamond Cut’s Industrial Park, but was unable tosecure the financing required to complete the sale.

Insistent that his business was growing quickly and required more industrial space,McFarland immediately resumed negotiations with Angie and Joe regarding the possibility of Diamond Cut constructing a custombuilding on Lot 6 of its Industrial Park (the “Building”) for Fluid Pro to lease. Accordingly, McFarland obtained three design options,with estimated costs between roughly $3.1 million and $3.5 million, for the proposed Building from Environment Builders in March of2014. 5.

On or around July 7, 2014, the parties met at Diamond Cut’s offices and came to a verbal agreement concerning the lease; namely,Diamond Cut agreed to construct a custom Building pursuant to Fluid Pro’s specifications on a subdivided portion of the industrial Park,and Fluid Pro would enter into a triple-net lease for a 7-year term, with a monthly base rent of $40,000 and a lease commencement andpossession date of July 1, 2015 (the “Lease”). That same day, Angie and Joe provided instructions to their lawyer, Jeffrey Donald(“Donald”), to prepare a written agreement codifying the agreed-upon terms of the Lease.

In reliance on Fluid Pro’s verbal agreement tothe Lease, Diamond Cut paid for the Building plans and provided Environmental Builders with a deposit for construction at the end ofAugust, 2014. 6. In October of 2014, Fluid Pro requested a number of changes to the Building plans, such as adding to the height of the Building toaccommodate its crane, increasing the amount of land leased, and adding a number of customized improvements to the Building to fit itsspecific needs.

Given the additional costs associated with these requests, the parties met again at Diamond Cut’s offices on October 2,2014 and agreed on a number of additional or amended essential terms for the Lease, including: (

a) An increase of base rent to $45,000 per month for the 7-year term. (

b) McFarland would provide a $400,000 personal guarantee for the payment of rent (the “McFarland Guarantee”). (

c) A 2-year option would be granted to Fluid Pro for the purchase of the lot and Building for the cost of the land and cost of the

building plus a 10% markup. (

d) The $100,000 deposit Fluid Pro had previously provided towards the purchase price of Lot 2 before the sale failed to close would be retained by Diamond Cut as a deposit for the first and last months’ rent under the Lease, less $5,500 that would be returned to Fluid Pro (being the difference between the initial deposit and first and last months’ rent plus GST) (the “Deposit”). (

e) The written lease agreement would show a commencement or possession date of May 1, 2015 for the sole purpose of exerting pressure on Environment Builders to complete the construction of the Building as soon as possible; however, Fluid Pro did not want or need to take possession until July 1, 2015, in accordance with the originally planned and agreed upon date.

Accordingly, the parties agreed that notwithstanding the May 1 st commencement date that would be inserted into the written agreement, the actual possession date would remain as July 1 st , and rent would not become due and owing until the at time. (the “October 2 nd Agreement”). 7. In particular, McFarland’s stated reasons for not needing or wanting possession of the new Building until July of 2015 included that: (

i) May is typically a busy month for his business and not an ideal time to relocate, (ii) Fluid Pro had just moved into a different building that provided adequate space in the interim until July 2015, and (iii) he wanted to give himself until July to sub-lease Fluid Pro’s current rental premises so as not to be stuck paying two leases at once. [6] The written lease included the following term:

(1.1) The Lessor does hereby demise and lease unto the Lessee the Demised Premises upon and subject to the terms, conditions and provisions of this Lease. This lease is specifically conditional on the substantial completion of construction of the Building by the Lessor or its agents on the Lands on or before the commencement of the Term. The Building to be constructed is as outlined in the attached

Schedule “B”. Upon substantial completion of the Building as described, the Lessor shall deliver notice to the Lessee in writing that the condition herein is satisfied.

Failure to deliver such notice to the Lessee on or before April 30, 2015 shall render this lease and all terms herein null, void, and of no force or effect. (emphasis added) [7] The Knoblochs say that clause 1.1 was inserted only to put pressure on the builder to complete construction early, and, contrary to the wording of the contract, that the May 1 st date was not to be relied on by either party. [8] The project was not substantially complete by the deadline specified by the contract. No written notice, as required by the lease, was delivered.

On May 1, Fluid Pro’s lawyer summarized the incomplete status of construction and why it was not suitable for occupancy. Fluid Pro then backed out of the deal. [9] Fluid Pro seeks return of its deposit ($94,500) plus interest. Diamond Cut seeks its mitigated damages in return. [10] I note that the proposed amendments raise estoppel and waiver, but do not specifically seek rectification, or relief from forfeiture (under s 10 of the Judicature Act ).

Plaintiff’s counsel indicated that he was not truly surprised by such claims for equitable relief but, as a matter of pleading, the equitable remedies should be specifically pleaded; relief from forfeiture should as well (Rules 13.6(2) and 13.6(3) and Manji v Prasad , per Pentelechuk J).

The proposed amendments also raise express or implied amendment of the written agreement and breach of the duty of performance of a contract in good faith (the Bhasin duties). [11] The eight pages of proposed amendments (much of it evidence) are a thesaurus of remedies all amounting to one thing: that the Knobloch’s do not want to be bound by clause 1.1 of the contract and that Fluid Pro should be responsible for their loss – which is really the opposite of what the written agreement says.

Angie and Joe describe clause 1.1 as a “false term” and that Chad and Fluid Pro are scoundrels; acting in bad faith by purporting to rely on clause 1.1 and terminating. Analysis [12] The test for amendment is well established: [13] ... Generally, any pleading may be amended, no matter how careless or late the party seeking the amendment, subject to four major exceptions, which are: (

a) The amendment would cause serious prejudice to the opposing party, not compensable in costs; (

b) The amendment requested is hopeless; (

c) Unless permitted by statute, the amendment seeks to add a new party or new cause of action after the expiry of a limitation period; and (

d) There is an element of bad faith associated with the failure to plead the amendment in the first instance. [14] The evidentiary threshold for allowing amendments to pleadings is generally low. Where the proposed amendment is purely ancillary, no evidence will be required. However, a proposed amendment that alleges new substantive facts must be supported by evidence. As Hughes J. concluded in Canadian Natural Resources Ltd. v. Arcelormittal Tubular Products Roman S.A., 2012 ABQB 679 (Alta Q.B.), at para.53, “Although only modest evidence need be provided, it must have some foundation in fact.” Attila Dogan, paras 13, 14 per Wittmann CJ., aff’d 2014 ABCA 74 1. The Statute of Frauds

[13] An oral lease for a term of more than a year is rendered unenforceable by s 4 of the Statute of Frauds, so the Court can’tsimply enforce a seven year oral lease. The writing would have to be rectified to match the agreement. 2. The Written Word [14] Contracts are often said to be a ‘meeting of the minds’. The gist of the Defendant’s argument is that the writing does notreflect the true meeting of the minds because they had been ad idem on other terms. [15] The difficulty is that unless equitable relief can be given, this hopeful position is not generally in line with contract law.

Toquote the great American jurist, Oliver Wendell Holmes: ... In my opinion no one will understand the true theory of contract or be able even to discuss some fundamental questions intelligentlyuntil he has understood that all contracts are formal, that the making of a contract depends not on the agreement of two minds in oneintention, but on the agreement of two sets of external signs, - not on the parties’ having meant the same thing but on their having saidthe same thing. ...

The Path of the Law at 469 (emphasis added) Because it is not possible to know exactly what is (or was) in the mind of another person[1], or to hold them to it, contract law andcommercial certainty depend on outward signs of assent; the most plain here being the words of the written contract. What somebodythought when they signed is not determinative.

A subjective intent may have no more relevance than what the party was wearing at thetime. [16] These considerations have developed into what is essentially a set of rules and limits to the Court’s ability to receive extrinsicevidence in the face of what might be described as a clear outward sign of assent. If there were no clearly defined limits to receiving thistype of evidence, there would be little point in writing down any agreements. [17] The rules, as I see them, are as follows (borrowing from my earlier

summary in Terwillegar Town): [8] The starting point is that evidence of subjective intent is irrelevant and inadmissible as an aid to

interpretation. The Court looks to thewording of the agreement and reads the agreement as a whole to determine the objective intent. The words are given their plain meaning: Hillis Oil and Sales Limited v Wynn’s Canada Ltd. (SCC), 1986 CarswellNS 147, [1986] 1 S.C.R. 57, 65 N.R. 23, 71N.S.R. (2d) 353, 171 A.P.R. 353, 25 D.L.R. (4th) 649, J.E. 86-281, EYB 1986-67371; Kothke v Ekblad, 1999 ABCA 176 , 1999 CarswellAlta 488, 237 A.R. 119, 197 W.A.C. 119, 11 C.C.L.I. (3d) 225, [1999] A.J.No. 664; Gainers Inc. v Pocklington Holdings Inc., 2000 CarswellAlta 508, 81 Alta.

L.R. (3d) 17, 255 A.R. 373, 220 W.A.C. 373, [2000] A.J.No. 626, 2000 ABCA 151; Innovative Insurance Corp. v E.P.A. Ultimate Concepts Inc., 2007 CarswellAlta 1523, 2007 ABCA 358, [2008] I.L.R.

I-4657, 55C.C.L.I. (4th) 183, [2008] A.W.L.D. 208, [2008] A.W.L.D. 141, [2008] A.W.L.D. 179, 417 A.R. 273, 410 W.A.C. 273, 162 A.C.W.S.(3d) 942 Dow Chemical Canada Inc. v Shell Chemical Canada Ltd., 2010 ABCA 126; Omers Energy Inc. v Alberta (Energy Resources Conservation Board,. 2010 ABCA 251; Benfield Corporate Risk Canada Limited v Beaufort International Insurance Inc., 2013 ABCA 200 Nexxtep Resources Ltd. v Talisman Energy Inc., 2013 ABCA 40 [9] Evidence of negotiations is also not admissible: Keephills Aggregate Company v Riverview Properties Inc., 2011 ABCA 101.

Thesame goes for opinion evidence, expert or otherwise. (Dow (above) paras. 17, 18). [10] If a contract is ambiguous, the Court can look at extrinsic evidence, such as circumstances surrounding the formation of the contractand its commercial context but only at the time of signing. Otherwise, a party could come to court to excuse what, with hindsight, provedto be a bad bargain. (Dow, paras. 18, 20; Omers, para 33). [11] There is a technical exception for terms of art (Dow again, para. 19). [18] Terwillegar Town came shortly after the Sattva decision in the Supreme Court of Canada.

The state of the law has beenconsidered and reviewed more recently in IFP Technologies (Canada) Inc v EnCana Midstream and Marketing. The current state ofthe law was summarized by Wacowich M. in Stewart v Timber Bear. The learned Master tells us: [9] According to Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53 at para 47, [2014] 2 SCR 633 contract

interpretation has“evolved towards a practical common sense approach, not dominated by technical rules of construction.” [10]Contractual terms that are in dispute “must be interpreted, not in isolation, but in light of the contract as a whole”: IFP Technologies(Canada) Inc v EnCana Midstream and Marketing, 2017 ABCA 157 at para 79, 53 Alta LR (6th) 96. As stated (at para 89): [C]ontractual

interpretation is not an exercise in second guessing what could have been included in a contract while discounting ordismissing relevant terms of a contract and uncontradicted contextual information. It is instead an exercise in determining what the

parties objectively intended having regard to the entire written text, relevant contextual background and commercial context.

As such, courts are permitted, subject to the parol evidence rule, to consider the circumstances surrounding the formation of the contract(i.e. the “factual matrix”). [11] The parol evidence rule “precludes admission of evidence outside the words of the written contract that would add to, subtract from,vary, or contradict a contract that has been wholly reduced to writing”: Sattva at para 59. [12] There are two main circumstances where the parol evidence rule applies. [13] First, it precludes evidence of the parties’ subjective intent.

This evidence is irrelevant and generally inadmissible as an aid tointerpretation, except “perhaps in the limited cases where such evidence is necessary to resolve a latent ambiguity”: Geoff R Hall, Canadian Contractual

Interpretation Law, 3rd ed (Toronto: LexisNexis, 2016) at 85 [Hall]; Sattva at para 59; IFP Technologies(Canada) at para 87; Gainers Inc v Pocklington Financial Corporation, 2000 ABCA 151 at paras 19-20, 23-24, 255 AR 373.Furthermore, such evidence should not be used to try and evade an entire agreement clause and using it “to create ambiguities isbackwards”: Gainers at para 23. [14] Second, evidence (such as the surrounding circumstances) must never be allowed to overwhelm or contradict the express terms of the agreement: Sattva at para 57, citing Hayes Forest Services Ltd v Weyerhaeuser Co, 2008 BCCA 31 at para 14, 42 BLR (4th) 1; Hallat 85. [15] The rule generally does not apply to preclude evidence of the factual matrix or if there is ambiguity in the contract: Sattva at para60; IFP Technologies (Canada) at para 86; United Brotherhood of Carpenters and Joiners of America, Local 579 v BradcoConstruction Ltd, (SCC), [1993] 2 SCR 316 at para 44, [1993] SCJ No 56.

The distinction between factual matrix andambiguity arises because “in interpreting a contract, a trial judge must consider the relevant surrounding circumstances even in theabsence of ambiguity”: IFP Technologies (Canada) at para 82. Furthermore, the Ontario Court of Appeal has held that the conclusionthat the contract is ambiguous cannot be made without first considering the factual matrix: Arthur Andersen Inc v Toronto DominionBank (1994), (ON CA), 17 OR (3d) 363 at para 18, [1994] OJ No 427 (ONCA), leave to appeal refused.

Factual Matrix [16] The factual matrix must be considered in every case and “constitutes an essential element of contractual

interpretation in all cases,even when there is no ambiguity in the language”: Hall at 24. The focus should be on the words of the contract with the factual matrixsomewhat in the background, not a split approach where the words are considered first and then the factual matrix: Hall at 34. In thisregard, the Court looks to the wording of the agreement and reads the agreement as a whole to determine the objective intent.

The wordsare given their ordinary and grammatical meaning: Sattva at para 47. [17] The scope and nature of the factual matrix depends on the case, but can include “absolutely anything which would have affected theway in which the language of the document would have been understood by a reasonable man”: Sattva at para 58 citing Lord Hoffman inInvestors Compensation Scheme Ltd v West Bromwich Building Society (1997), [1998] 1 WLR 896 (UK HL) at 913; IFPTechnologies (Canada) at para 83.

But, it can only include facts “objectively known to both parties at the time of contracting”: Hall at27; IFP Technologies (Canada) at para 79.

Furthermore, the goal of examining extrinsic evidence of the surrounding circumstancesleading up to the contract is to “deepen a decision-maker’s understanding of the mutual and objective intentions of the parties asexpressed in the words of the contract”: Sattva at para 57. [18] As such, parties to a contract cannot provide evidence of negotiations, except perhaps in the most general terms: IFP Technologies(Canada) at para 85; Keephills Aggregate Company v Riverview Properties Inc, 2011 ABCA 101, 200 ACWS (3d) 1186; Hall at 30.The same inadmissibility applies to opinion evidence provided by a third party (even if a knowledgeable member of the industry) orexpert evidence on the meaning of the contract: Dow Chemical Canada Inc v Shell Chemical Canada Ltd, 2010 ABCA 126 at paras17-18, 477 AR 112. [19] Finally, prior drafts of an agreement are also generally not admissible: IFP Technologies (Canada) at para 85, citing WesbellNetworks Inc (Receiver of) v Bell Canada, 2015 ONCA 33 at para 13, [2015] OJ No 279. [19] The rule is evolving.

What the foregoing (perhaps, overly long)

summary shows, is that there is no single exclusionary rulewhen it comes to extrinsic evidence. Extrinsic evidence is almost always admissible so long as it fits one of the permitted purposes. [20] If I apply this to the present case and assume, for the sake of argument, that all of the facts in the proposed amended pleadingare capable of being proved: 1. Oral evidence of a prior agreement that conflicts with the subsequent written agreement is generally not admissible (eg Gainers paras 15-23, Hawrish (1969 SCC), Bauer (1980 SCC) and Sattva). 2. The contractual term sought to be impugned is not ambiguous.

Nor is it a term of art. It is notable that it is not ‘hidden in the fineprint’ but is front and center as clause 1.1. Accordingly, the proposed new facts are not admissible on this basis. 3. Extrinsic evidence (or facts) are not necessary here as an ‘aid to

interpretation’. There is an entire agreement clause (clause 19.14).Much of the proposed amendments are an invitation to the Court to go far astray (Ko v Hillview Homes Ltd, 2012 ABCA 245 eg para 8). 4. The facts as proposed are inadmissible and irrelevant if they are intended to add to, subtract from, or vary clause 1.1; as would bethe case if we were to add the words: “but this was only to put pressure on the contractor and otherwise is of no force and effect” wereadded. Angie and Joe’s subjective intention with respect to clause 1.1 is irrelevant unless it matched Chad’s intention (which it plainlydid not) and the Court could rectify the written agreement to match a common understanding.

5. The July and October negotiations are irrelevant and inadmissible unless tendered for the same purpose. 6.

The contract itself is against waiver by conduct (eg clause 13.8), and it may be unavailable as a matter of law if clause 1.1 is itself a true condition precedent (eg Barnett v Harrison ). [21] That makes most of the proposed amendments presumptively inadmissible unless they go to equitable relief relating to the enforceability of the agreement. [22] The discretionary threshold for amendments is low (eg Atilla at para 24, Newel at para 19); as is the evidentiary threshold (eg Atilla at para 14; Clappetton at para 24, Balon at paras 25, 29). [23] The Knoblochs’ position in this lawsuit is optimistic given the clear written contract.

The hurdle they face is made somewhat higher by the fact that they were represented by counsel and multiple drafts were exchanged before the contract was signed. [24] The proposed amendments fall into the category of highly optimistic but perhaps not hopeless. On this basis, the amendments are allowed subject to the direction that follows. 3.

Summary Judgment [25] There is nothing in the contract that speaks to the disposition of the deposit if the lease does not go ahead.

Article 13 (the default provision) does not require that the deposit be forfeit. Nothing in the agreement permits Diamond Cut to retain the deposit as liquidated damages, or otherwise. [26] In order for the Knoblochs to succeed they will have to convince the Court that their understanding of the deal was a joint understanding and a mutual objective which, as indicated, is a tall order because it is contrary to the written words of the contract, and contrary to the position taken by Fluid Pro.

Specific performance is no longer available. [27] This puts the Knoblochs’ somewhat optimistic bid to rewrite the contract, and their claim for damages as the only impediment to the return of the deposit. Based solely on the written words of the contract, Fluid Pro’s claim for the return of the deposit is unassailable and uncontroverted. Angie and Joe cannot (and have not) justified keeping the deposit in the interim either as security for their claim, or as a pre-judgment attachment. Accordingly, the deposit plus interest is to be returned. This is without prejudice to their claim for damages.

This decision obviates the need for both a claim and a counterclaim. Disposition [28] The proposed amendments are allowed. However, if rectification or relief from forfeiture are intended to be claimed, they should be specifically pleaded. Revised pleadings should be issued within 30 days from the date of the Order. The Defendant by Counterclaim may file an amended Defence to Counterclaim. [29] Costs of the application to amend are allowed but are to be set off against the costs of the successful claim for the return of the deposit. Rule 3.66 applies.

Diamond Cut is to bear the costs consequent to the amendment (which may be spoken to if necessary), starting with the costs of an amended Defence to Counterclaim. Heard on the 17 th day of July, 2017. Written Submissions filed July 24 and 31, 2017. Dated at the City of Edmonton, Alberta this 18 th day of October, 2017. W.S. Schlosser M.C.Q.B.A. Appearances: James Nielson, Q.C.

Parlee McLaws LLP for the Plaintiff and Defendants by Counterclaim Brian Kaliel, Q.C. and Monique Petrin Nicholson Miller Thomson LLP for the Defendant/Plaintiff by Counterclaim _______________________________________________________ Corrigendum of the Reasons for Decision of W.S. Schlosser, Master, Court of Queen's Bench of Alberta _______________________________________________________ Corrected paragraph numbers from page 10 through page 12 of the original Decision.