Docket: CACV2019 Jamel Metals Inc. , Melvin Lazareck v. Jacob Lazareck, 2012 SKCA 116

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2012 SKCA 116 Date: 2012-12-05 Between: Docket: CACV2019 Jamel Metals Inc. , Melvin Lazareck and Jacob Lazareck Appellants Respondents on Cross-Appeal (Defendants) - and - Evraz Inc. NA Canada and Evraz Recycling Inc., carrying on business as General Scrap Partnership and Genlando Inc. Respondents Appellants on Cross-Appeal (Plaintiffs) Coram: Vancise, Jackson and Herauf, JJ.A. Counsel: Gordon Kuski,Q.C. and Lindsay Wacholtz for the Appellant William Hood, Q.C. and Janet Stevens for the Respondents Appeal:

From: 2010 SKQB 405 Heard: May 24, 2012 Disposition: Appeal Dismissed Cross-Appeal Dismissed Written Reasons: December 5, 2012 By: The Honourable Madam Justice Jackson In Concurrence: The Honourable Mr. Justice Vancise The Honourable Mr. Justice Herauf Jackson J.A. I. Introduction [ 1 ] This appeal concerns the exercise of an option to purchase land. The landowner refused to transfer the land to the holder of the option on the footing that the option had not been exercised in accordance with the governing contracts.

In an action brought for that purpose, the trial judge interpreted the contracts and found that the option had been exercised appropriately and granted specific performance (see: 2010 SKQB 405 ). On an appeal by the landowner, I have concluded that the appeal should be dismissed. A cross- appeal, from a finding that the landowner and its principals had not breached their fiduciary duty to the holder of the option, is also dismissed. II. Background Facts [ 2 ] For some time prior to 1996, General Scrap and Car Shredder Ltd. had been selling scrap metal to IPSCO Recycling Inc.

At some point in 1996, it was decided that General Scrap would sell all of its personal property and fixtures, lease its land and grant an option to purchase to IPSCO Recycling. The issue was how to arrange the transactions to the mutual satisfaction of General Scrap and IPSCO Recycling. [ 3 ] While the original principals to the transactions were General Scrap and IPSCO Recycling, through a variety of name changes, reorganizations and amalgamations, IPSCO Recycling became Evraz Recycling Inc., and General Scrap became Jamel Metals Inc.

While these name changes occurred over time, for ease of reference, I will refer to Jamel and Evraz Recycling as though they were the principal contracting parties from the outset. [ 4 ] The mechanism chosen to arrange the transactions between Evraz Recycling and Jamel was to create a new entity, General Scrap Partnership, pursuant to which Evraz Recycling and Jamel would carry on business—in the name of the Partnership. [ 5 ] The Partnership purchased some of Jamel’s assets, including the buildings and equipment, but their employees were not hired by the Partnership, instead they remained employees of Jamel which provided services to the Partnership under a services agreement. [ 6 ] With respect to the lands, however, Jamel and the newly created Partnership entered into a Lands Use Agreement whereby the Partnership leased Jamel’s lands for the duration of the Partnership, which would be a term of 10 years.

Time was of the essence in the Lands Use Agreement. [ 7 ] In addition to creating the Partnership and executing the Lands Use Agreement, a new corporation was created, Genlandco Inc., a wholly owned entity of the Partnership, whose sole purpose would be to hold an option to purchase the lands upon which General Scrap had been carrying on business. To that end, the parties executed a Lands Option Agreement. Pursuant to the Lands Option Agreement, Jamel granted Genlandco the option to purchase, which was at the centre of the trial and this appeal.

[ 8 ] These sections, taken from the Lands Option Agreement, grant Genlandco the option to purchase the lands of Jamel: 1. Grant of Option For good and valuable consideration including the payment of $100 the receipt of which is hereby acknowledged by [Jamel], [Jamel] hereby grants to [Genlandco] an option to purchase (the "Option") all of the lands described in

Schedule A hereto (the "Lands"), or any of the 7 sites described in

Schedule A hereto (the "Sites") that [Genlandco] may designate, exercisable on April 1, 2007 or such earlier date as the parties may agree (the "Exercise Date "). 2. Method of Exercise To exercise the Option [Genlandco] shall provide notice to [Jamel] not less than 60 days prior to the Exercise Date which notice shall include: (

a) an identification of those Sites (the “Identified Sites”) in respect of which it has determined to exercise the Option; (

b) a confirmation of the Purchase Price, determined in accordance with

Section 3 hereof, for the Identified Sites; and (

c) any other mechanics with respect to the exercise of the Option and the consummation of the purchase of the Identified Sites on the Exercise Date that are not inconsistent with the provisions of this Agreement. 3. Purchase Price The parties agree that the purchase price (the “Purchase Price”) for the Identified Sites shall equal the fair market values of the Identified Sites determined as of the date of this Agreement, which the parties have agreed are as set out beside the Sites to which they relate in

Schedule A hereto. The Purchase Price shall be adjusted by any property tax, insurance and other applicable adjustments that are customary on sales of industrial property on the Exercise Date as agreed by counsel for the parties. The Purchase Price, so adjusted, shall be payable in cash, in its entirety, on the Exercise Date. 4. Closing The closing of the purchase and sale of any Identified Site shall, unless otherwise agreed by the parties, take place at 10:00 a.m. on the Exercise Date at the offices of counsel for [Genlandco].

At such closing [Jamel] shall deliver to [Genlandco] or its counsel duly executed transfers of title, or such other instruments as may be necessary to convey to [Genlandco] (or its designate) legal and beneficial title to the Identified Sites.

Such transfers and other instruments shall be delivered by [Jamel] concurrently with the payment to [Jamel] counsel, on whatever trust conditions as to registration of such transfers or instruments as are then customary, of the Purchase Price for the Identified Sites. [Emphasis added] The predetermined purchase price for the lands, no matter when the option would be exercised, was fixed by the parties in 1997 at $2,860,810. Time was not stated to be of the essence of the Lands Option Agreement. [ 9 ] A five-person management committee ran the Partnership.

According to the Partnership, Evraz Recycling appointed three members and Jamel appointed two. The Evraz Recycling members varied over time. Jamel always appointed its principals, Jacob and Melvin Lazareck. It is common ground that the Partnership flourished. [ 10 ] At the end of 2006, for reasons unassociated with any matter concerning this appeal, Evraz Recycling’s parent corporation required that the Partnership execute a guarantee for $1 billion.

Since Jamel would not agree to guarantee such an amount, Evraz Recycling proposed to Jamel that another Evraz entity would join the Partnership before Jamel left it, allowing the Partnership to sign the guarantee. [ 11 ] On December 11, 2006, Jamel agreed with this proposal. Effective December 28, 2006, IPSCO Saskatchewan Inc. (now Evraz Inc. NA Canada was added to the Partnership). Evraz Recycling did not simply purchase Jamel’s interest in the Partnership as this would have resulted in the dissolution of the Partnership with consequential adverse income tax consequences.

Effective December 29, 2006, Jamel was removed as a partner. [ 12 ] In order to accomplish the removal of Jamel from the Partnership, a Memorandum of Agreement was prepared and eventually executed. It contained this crucial clause: 4.

Lands Use Agreement Notwithstanding the surrender and termination of its Partnership Interest on December 29, 2006, Jamel agrees to thereafter continue to make available to the Partnership all of the Lands on the terms and for the consideration provided for in the Lands Use Agreement, until such time as [Genlandco] exercises its option to purchase such Lands pursuant to the Lands Option Agreement.

The Partnership and Jamel agree that they shall take all such steps as may be reasonably required to cause the exercise of such purchase options to be undertaken and completed by [Genlandco] as soon as reasonably practicable after March 1, 2007.

The principal issue at trial turned out to be whether the Memorandum of Agreement constituted the notice required by s. 2 of the Lands Option Agreement so as to permit Evraz Recycling to acquire the lands in 2007. [ 13 ] The Memorandum of Agreement was executed by the Partnership, Jamel, Evraz Recycling, and the new Evraz entity that was added to the Partnership, but Genlandco—the holder of the option to purchase—did not sign the Agreement in its own name. [ 14 ] In February 2007, counsel for Evraz Recycling attempted to complete a transfer of the lands with Jamel. On March 19, 2007,

however, Jamel formally advised the Partnership that it would not proceed with the land transfer because notice as required under s. 2 ofthe Lands Option Agreement had not been given. [15] By 2007, the value of the land had increased significantly from the originally agreed-upon purchase price, as set out in the LandsUse Agreement in 1997, from $2,860,810 to $14,619,690. [16] When Jamel refused to execute a transfer of the lands, the Partnership and Genlandco sued it for specific performance. Accordingto the claim, specific performance was justified on these alternative grounds: 1.

Notice of intention had been given by virtue of the Memorandum of Agreement itself or by earlier email communication or, sincetime was not of the essence in the Lands Option Agreement, by a later notice given on April 3, 2007; 2. the Memorandum of Agreement amended the terms of the Lands Option Agreement such that no notice was required to exercise theoption to purchase the Lands; 3. if the Memorandum of Agreement did not amend the Lands Option Agreement, waiving the requirement of notice, theMemorandum of Agreement should be rectified to effect that purpose; 4.

Jamel, by its conduct, waived the requirement for notice to exercise the option under the Lands Option Agreement; 5. Jamel is estopped from requiring strict compliance with the Lands Option Agreement; 6. the Memorandum of Agreement operated to extend the terms of the Lands Use Agreement, such that notice could be given at a laterdate. In addition, and in any event, the Partnership and Genlandco sued the Lazareck brothers for breach of their fiduciary duty to thePartnership.

If the Court did not grant specific performance of the Lands Option Agreement, they claimed as damages the cost ofmoving its fixtures and relocating its business. One expert report estimated those costs, based on Evraz’s evidence, at $98 million. III. Decision of the Trial Judge [17] In the result, the trial judge concluded that the Memorandum of Agreement was itself written notice of Genlandco’s intention topurchase the lands.

He concluded that s. 4 of the Memorandum of Agreement met the technical requirements for the notice required in s.2 of the Lands Option Agreement (i.e., the selection or identification of the lands being purchased).

He found that any other conclusionwould be unacceptable. [18] Since the trial judge concluded that the Memorandum of Agreement was itself written notice of Genlandco’s intention to purchasethe lands, he did not need to consider any of the other arguments in support of an order for specific performance, including waiver,estoppel, mistake, rectification or whether the Memorandum of Agreement actually amended the requirements of the Lands UseAgreement and the Lands Option Agreement. [19] He granted the Partnership and Genlandco the remedy that they sought: specific performance.

He ordered that upon payment ofthe purchase price for the lands, namely the sum of $2,860,810, together with all required adjustments, if any, the lands shall vest in thename of Evraz Recycling. [20] Finally, the trial judge found that the Lazarecks owed a fiduciary duty to the Partnership but that they did not breach it. He foundthat no evidence existed that Jamel or the Lazarecks knew of the Partnership’s belief that no notice was required. [21] Jamel appeals from the decision granting specific performance.

The Partnership and Genlandco cross-appeal from the conclusionrefusing to find a breach of fiduciary duty. IV. Positions of the Parties [22] Jamel advocates for a strict construction approach to contractual

interpretation based on a reading of Eli Lilly & Co. v. NovopharmLtd., (SCC), [1998] 2 S.C.R. 129 and the law pertaining to option agreements. With these authorities as the basis of itsapproach, Jamel asserts that the Memorandum of Agreement is not ambiguous and that the trial judge relied inappropriately on extrinsic

evidence to interpret it. Without extrinsic evidence, so the submission goes, the Memorandum of Agreement cannot be construed asconstituting the required notice under the Lands Option Agreement, which had to be strictly followed. According to Jamel, the LandsOption Agreement was nothing more than a standard option agreement which gave Genlandco the option to purchase the lands, butwhich outcome was not an absolute eventuality.

Further, even when all of the evidence of the parties’ intentions is reviewed, it is notclear that the parties turned their minds in 2006 to the question of notice under the Lands Option Agreement when the Memorandum ofAgreement was drafted let alone executed.

Finally, Jamel asserts that the trial judge should have construed the agreement strictly againstEvraz, as the drafter of the Memorandum of Agreement, having regard for the doctrine contra proferentem. [23] For its part, the Partnership and Genlandco, the respondents on this appeal, assert that the trial judge made no error in hisassessment of the law or its application to the facts.

Further, the respondents submit that the result could have been achieved by relyingupon other evidence that notice had been given or by the application of any number of equitable doctrines, including rectification,waiver, estoppel and substantial performance of contractual terms. Finally, the respondents assert that the trial judge’s findings of fact,regarding the claim for a breach of fiduciary duty, are not supported by the evidence. V.

Issues [24] The primary issue on this appeal is whether the trial judge erred when he held that the Memorandum of Agreement constitutednotice of the exercise of the option to purchase. That issue depends on answers to these questions: (

i) did the trial judge err by misstatingthe principles of contract

interpretation as applied to option contracts; (ii) if the trial judge did not err in his statement of the law, did hemisapply it by making unsupportable findings of fact or basing his

interpretation on the subjective intention of the parties orinappropriately relying on extrinsic evidence? [25] If the Court were to find that the trial judge erred by finding that the Memorandum of Agreement served as the notice that theoption would be exercised, a second broad issue arises: whether the result is sustainable on the other grounds raised by the respondents,i.e., waiver, estoppel, etc.? [26] With respect to the cross-appeal, the Court must consider whether the trial judge erred by holding that Jamel and the Lazarecks didnot breach their fiduciary duty to the Partnership. VI. Analysis 1.

Did the trial judge err by holding that the Memorandum of Agreement servedas the notice that the option would be exercised? [27] The trial judge began by referring to Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., (SCC), [1980] 1 S.C.R. 888 (at p. 901) where the Court made these comments, regarding contract

interpretation: Even apart from the doctrine of contra proferentem as it may be applied in the construction of contracts, the normal rules ofconstruction lead a court to search for an

interpretation which, from the whole of the contract, would appear to promote or advance thetrue intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so wouldbring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance wascontracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be takenas the

interpretation which would promote the intention of the parties. Similarly, an

interpretation which defeats the intentions of theparties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an

interpretationof the policy which promotes a sensible commercial result. ... [Emphasis added] From this, the trial judge concluded that he was required to interpret s. 4 of the Memorandum of Agreement “in light of the intention ofthe parties” (at para. 62). [28] At para. 64, the trial judge then referred to this passage from Eli Lilly: [56] ... Admittedly, it would be absurd to adopt an

interpretation which is clearly inconsistent with the commercial interests of theparties, if the goal is to ascertain their true contractual intent. However, to interpret a plainly worded document in accordance with thetrue contractual intent of the parties is not difficult, if it is presumed that the parties intended the legal consequences of their words. ...[Emphasis added] In keeping with these words from Eli Lilly, the trial judge found that the intention of the parties is not clear “based on the wording of theMemorandum of Agreement” (para. 65).

[29] The trial judge also referred to Prairie Pulse Inc. v. Lacasse, 2005 SKCA 80, [2005] S.J. No. 395 (QL) at para. 3 and wrote: “[i]tmay be necessary to examine evidence outside the contract to determine the true intentions of the parties” (para. 63). [30] In my view, the trial judge has stated the law briefly but accurately. At one point, Canadian courts and commentators questionedwhether the Supreme Court of Canada had changed the general principles of contract

interpretation by its decision in Eli Lilly from thoseexpressed in Consolidated-Bathurst. Subsequent decisions of appellate courts, including this Court, tend to emphasize the passage fromEli Lilly where Iacobucci J. states “[t]he contractual intent of the parties is to be determined by reference to the words they used indrafting the document, possibly read in light of the surrounding circumstances which were prevalent at the time” (para. 54) as well as theneed to avoid

interpretations that would be “clearly inconsistent with the commercial interests of the parties” (para. 56). See: Eco-ZoneEngineering Ltd. v. Grand Falls-Windsor (Town), 2000 NFCA 21 at para. 10; Hi-Tech Group Inc. v. Sears Canada Inc. (2001), (ON CA), 52 O.R. (3d) 97 (C.A.) at para. 23; Jacobsen v. Bergman, 2002 BCCA 102, 163 B.C.A.C. 266 at paras. 3-4 and10; Kingsway General Insurance Co. v. Lougheed Enterprises Ltd., 2004 BCCA 421, [2004] 11 W.W.R. 527 at para. 10); SaskPowerInternational Inc. v. UMA/B&V Ltd., 2007 SKCA 40, [2007] 6 W.W.R. 277 at paras. 23-28; Dumbrell v.

Regional Group of Companies,2007 ONCA 59, 85 O.R. (3d) 616 at para. 54. Invariably, these decisions refer to British authority such as Prenn v. Simmonds [1971] 1W.L.R. 1381 (H.L.) where Lord Wilberforce stated at pp. 1383-84: “[T]he time has long since passed when agreements...were isolatedfrom the matrix of facts in which they were set and interpreted purely on internal linguistic considerations.” See, generally, Geoff R.Hall, Canadian Contractual

Interpretation Law, 2nd ed. (Markham, ON: LexisNexis Canada, 2012) at 24-25 wherein many of the aboveauthorities are cited. [31] Based on these authorities, I conclude, as other appellate courts have done, that Eli Lilly did not overturn Consolidated-Bathurst. Itis generally understood that Eli Lilly clarified when a court may have recourse to the surrounding circumstances or, in other words, thefactual matrix. It also reaffirmed that a court should not adopt a literal

interpretation of contract language, which results in acommercially inconsistent outcome or absurdity. [32] Counsel for Jamel suggested that different principles of

interpretation should be applied in this case because strict conformity withthe terms of an option contract is essential (see: J. Victor Di Castri, in Law of Vendor and Purchaser, looseleaf, 3rd ed., vol. 1 (updatedSeptember, 2005, Rel.10) (Toronto: Carswell, 1989) at §214 and §222). Speaking generally, that is a correct statement of the law, butbefore the principle of strict conformity can be applied, the Court must still determine what the parties’ intended with respect to the termsof the option agreement.

In this case, the trial judge had to construe the Memorandum of Agreement to determine what the partiesintended with respect to its terms and their effect. [33] The trial judge found that s. 4 of the Memorandum of Agreement is not clearly worded and that it is not free of ambiguity. Lack ofclarity comes from the conflict among the various sentences within s.

Section 4 refers to Jamel agreeing to “continue to makeavailable to the Partnership all of the Lands … until such time as Landco exercises its option to purchase such Lands pursuant to theLands Option Agreement.” This implies that the option will be exercised strictly in accordance with the Lands Option Agreement, whichis not being exercised by the Memorandum of Agreement but will be exercised sometime in the future. Other parts of the Memorandumof Agreement, however, are difficult to reconcile with the proposition that the option will be exercised in strict conformity with theLands Option Agreement. [34]

Section 4 of the Memorandum of Agreement goes on to provide the following: (

a) the Lands Option Agreement is amended by changing the “Date of Exercise” from April 1, 2007 to sometime “soon … after” March1, 2007; (

b) the Partnership and Jamel “agree” that “they shall take all steps as may be reasonably required to cause the exercise of such purchaseoptions to be undertaken and completed by Landco as soon as reasonably practicable after March 1, 2007.” These clauses appear to assume that notice is not necessary or that it has already been given or that s. 4 is itself the required notice. [35] If “exercise” in this context means “opt to exercise by the giving of notice,” as Jamel suggests, Genlandco could not cause the“exercise” of such purchase options “to be undertaken and completed” as soon as reasonably practicable after March 1, 2007 and alsocomplete the transaction, if 60 days’ notice must be given.

It would be impossible unless either the Memorandum of Agreement is itselfthe notice or Genlandco were to give the 60-day notice shortly after the effective date of the Memorandum of Agreement—in order tomeet the obligation to close shortly after March 1, 2007. Further, how does one “undertake and complete” the exercise of a purchaseoption of land other than by exercising the option and then going on to acquire the asset that is the subject matter of the option? [36] Reconciliation of the clauses could come by interpreting “to exercise” as meaning “to close,” rather than to give notice.

Section 2of the Lands Option Agreement states that “to exercise” the option Genlandco “shall provide notice” to Jamel not less than 60 days prior

“to the Exercise Date,” but s. 4 of the Lands Option Agreement describes the “closing” of the purchase and sale of any lands identified for the sale on the “Exercise Date” which is, by s. 4 of the Memorandum of Agreement, April 1, 2007. And, of course, the Memorandum of Agreement modifies the Exercise Date, to be “as soon as reasonably practicable after March 1, 2007” rather than April 1, 2007, as contemplated by the Lands Option Agreement.

At such closing , Jamel would be required to deliver to Genlandco executed transfers of title, or such other instruments as may be necessary to convey legal and beneficial title to the lands. Thus, s. 2 of the Lands Option Agreement provides some context that would allow the Court to read the word “exercise” in s. 4 of the Memorandum of Agreement as referring to the closing of the transaction.

The issue, of course, is did the parties intend this meaning? [ 37 ] The trial judge referred to the following evidence to support the conclusion that the parties intended in 1997 that the lands would be purchased at some point: (

a) Donald Wilson, secretary to the Management Committee of the Partnership, testified that in 1997: (

i) Evraz Recycling wanted to buy Jamel’s business, land and assets, but the offer was not what Jamel was willing to accept; (ii) Evraz Recycling then proposed a complex partnership proposal, including an option to purchase, that would be a tax-effective way of getting Jamel the money it required for the business—and Jamel accepted that option; (

b) Todd Rosenberg, a lawyer who represented Evraz Recycling, testified that the option had to be held by a separate corporation so as to ensure that the 1997 transaction would not appear to be a “delayed sale” or some of the tax benefit could be lost; and (

c) the price for the lands was fixed in 1997 at 1997 values for a deal that would potentially result in the lands being acquired in 2007 —or earlier. [ 38 ] The trial judge then reviewed the following evidence to support a conclusion that Genlandco maintained its intention to buy the land in 2007: (

a) the minutes of the management committee meeting in January of 2006 stated, in part: “... It was recognized that the land currently owned by Jamel Metals would be purchased pursuant to the existing land purchase option agreements”; (b) “a proposal was made to purchase the Lands in conjunction with the early retirement of Jamel from the Partnership on December 29, 2006, but Jamel, for tax reasons, did not wish to dispose of the Lands until 2007”; (

c) Blair Waldvogel, president of the Partnership, reported to Donald Wilson in an email of December 8, 2006 that Bill Ratuski, a trusted advisor to the Lazarecks, suggested that “a simple way to look after the land use issue” would be to get “a letter advising of our intent to exercise the land options”; (

d) Todd Rosenberg and Donald Wilson testified that they held a telephone meeting with Bill Ratuski, and others, on December 11, 2006, wherein it was agreed between the parties that the Partnership would purchase the Lands and that Jamel would sell them; (

e) Mel Lazareck, at question 847 in his examination for discovery, acknowledged that it was common ground that the Partnership, through Evraz, would buy the lands and that Jamel would sell them. [ 39 ] Based on this evidence, the trial judge then made two critical findings of fact. First, he found that “[t]he evidence is unequivocal that all parties intended that the Partnership would acquire the Lands at the end of the Partnership term. How else would the Partnership be able to continue its business? It already owned the buildings and some very expensive equipment on the Lands” (at para. 68).

Second, the trial judge found that the Lands Option Agreement and the Lands Use Agreement were put in place to allow Evraz Recycling to purchase the land without it being deemed a delayed sale by the Canada Revenue Agency with all of the attendant tax considerations (paras. 17, 34 and 35). Having stated this finding, the trial judge concluded that the Memorandum of Agreement “must be read in the context of this intention” (para. 70). [ 40 ] Counsel for Jamel challenges these findings, saying they are the product of palpable and overriding error or an incorrect application of the law to the facts.

First, he submits that the Memorandum of Agreement cannot constitute notice because it is not signed by Genlandco—the corporation that holds the option under the Lands Option Agreement. Second, he submits that s. 4 of the Memorandum of Agreement simply cannot serve as notice. It makes no specific reference to giving notice as a condition to the exercise of the option under s. 2 of the Lands Option Agreement and only obliquely identifies the lands by referring to all of the lands.

Finally, he asserts that the trial judge should have applied the principle of contra proferentem and construed the Memorandum of Agreement strictly against the Partnership as its principal drafter. [ 41 ] These are strong arguments, but the trial judge correctly did not accept them. [ 42 ] The trial judge noted that Genlandco is a wholly owned subsidiary of the Partnership whose only purpose was to hold the option pursuant to the Lands Option Agreement. The Partnership is not a party to the Memorandum of Agreement, but nonetheless the Partnership signed it.

Section 13 of the Lands Option Agreement provides that it “shall not be modified or amended except pursuant to

an instrument in writing duly executed by an authorized representative or agent of each of the parties.” The trial judge concluded that thePartnership signed as agent or authorized representative of Genlandco. [43] It is clear that the Memorandum of Agreement does amend the Lands Option Agreement. Indeed, the Memorandum of Agreementamends the Lands Option Agreement to change the Exercise Date from April 1, 2007 to “as soon as reasonably practicable” after March1, 2007—and this change was made at the request of Jamel.

If the Lands Option Agreement is effectively signed by Genlandco to effectone change, it is effectively signed for all purposes.

It is important to note as well that Genlandco assumes an obligation under theMemorandum of Agreement, i.e., to complete the exercise of the purchase options, and further that the effectiveness of the agreement isbeing considered in the context of an action brought in the name of the Partnership and Genlandco. [44] Jamel’s arguments, as to whether the Memorandum of Agreement can fulfill the requirements of notice under the Lands OptionAgreement, could carry the day, but only if one looks at the Memorandum of Agreement alone.

But when the evidence of the context inwhich the Lands Option Agreement and the Memorandum of Agreement were executed, one can come to only one conclusion and that isthe one reached by the trial judge. [45] Counsel for Jamel challenges the consideration of this evidence, saying that it is evidence of subjective intention or extrinsicevidence to explain a false ambiguity. In my view, however, the trial judge considered this evidence as part of what has come to becalled the “factual matrix” and is neither evidence of subjective intention nor “extrinsic” evidence.

Further, this Court cannot overlookthe fact that Jamel proffered no evidence. An allegation that someone else’s evidence is that of subjective intent is difficult to sustainwhen no evidence is offered to contradict it. [46] Geoff Hall in his text on contract

interpretation asserts that “[t]he scope of what may be considered within the rubric ‘factualmatrix’ is quite broad. It always involves a highly contextual analysis, and can amount to a very detailed examination of the factsdepending upon the particular circumstances of the case” (see: Hall, supra at 25-27). In support of this proposition, he relies upon anumber of appellate authorities, including Canada Deposit Insurance Corp. v. Commonwealth Trust Co. (in Liquidation), (BC CA), [1998] 1 W.W.R. 484 (B.C.C.A.) and Glaswegian Enterprises Ltd. v. B.C.

Tel Mobility (1997), (BCCA), 49 B.C.L.R. (3d) 317 (B.C.C.A). [47] In Glaswegian Enterprises Ltd, the Court gave these meanings to the phrase “factual matrix” (at 323-24): [18] … The factual matrix is the background of relevant facts that the parties must clearly have been taken to have known and to havehad in mind when they composed the written text of their agreement.

It can throw light on what the parties must have meant by thewords they chose to express their intention. … … [20] … The factual matrix is the background which may deepen an understanding of what the parties meant by the language theyused, but the Court cannot make a new agreement.

Our search is always for the meaning intended by the parties as expressed in theagreement. … Other authorities could be cited to further define what is meant by the “factual matrix.” It is sufficient to note for the purposes of thewithin appeal that the trial judge did not err by considering “the background of relevant facts that the parties must clearly have beentaken to have known and to have had in mind when they composed the written text of their agreement.” [48] In the case before us, the trial judge considered evidence from which he concluded that it was always the intention of all parties thatthe Partnership was a mechanism or a device by which Evraz Recycling, as the potential delegate of Genlandco, would acquire Jamel’sinterest in the business, including the land that the buildings and equipment were situated on, at the expiration of the Partnership term.

The trial judge also considered evidence that Evraz Recycling had attempted to purchase the lands in 2006 when the partnershiprestructuring occurred, but that this was deferred given the tax consequences for Jamel.

Finally, the trial judge considered that thenegotiation and execution of the Memorandum of Agreement occurred within the space of a few days after the Partnership receivednotice that it was required to sign a billion dollar guarantee. [49] All of the evidence, referred to above, falls within the scope of the factual matrix and establishes the background under which theparties entered into and executed the contracts in question.

While none of this evidence is derived from a strict reading of theMemorandum of Agreement, it is evidence of the background of relevant facts and is not evidence of subjective intention on the part ofthe Partnership, Genlandco and Evraz Recycling. The only evidence that might be considered subjective evidence of the parties’intention was some of the evidence pertaining to the telephone conference call of December 11, 2006, and the trial judge carefullylimited the use of this evidence.

[50] Granted, Evraz presented the trial judge with other evidence that would have been relevant to the Partnership’s alternative claimsfor equitable relief (see: for example, Sail Labrador Ltd. v.

Challenge One, (SCC), [1999] 1 S.C.R. 265), but nothingin the reasons supports the allegation that the trial judge considered that evidence to arrive at a conclusion regarding the intentions of theparties when they executed the Memorandum of Agreement. [51] Thus, I conclude that the trial judge did not err by considering the evidence that he did when he interpreted the Memorandum ofAgreement. [52] Finally, Jamel’s counsel asserted that the principle of contra proferentem should have been applied so as to construe theMemorandum of Agreement against the Partnership.

In my view, the principle does not apply in this case for two reasons. First, theprinciple should only be invoked as a last resort, when all the other principles of construction have failed to ascertain the correct meaningof the contract in question (see: Hall, supra at 67 and Stevenson v. Reliance Petroleum Ltd., (SCC), [1956] S.C.R. 936at 953 (per Cartwright J. in concurring reasons) and Consolidated-Bathurst, supra at 901). Secondly, the principle should not apply ifthe parties have had the opportunity to engage in real and meaningful negotiations (see: Ironside v.

Smith, 1998 ABCA 366 ,[1999] 6 W.W.R. 256 (Alta. C.A.) at paras. 66-68). In the within matter, the principles of construction lead to a correct

interpretation ofthe contract. Moreover, the evidence is clear that Evraz’s counsel held the pen in the drafting of the Memorandum of Agreement, butJamel and its counsel and advisors had every opportunity to negotiate the underlying deal and participate in the drafting. [53] A final word is required regarding the application of the standard of appellate review. While the standard of review does not figureprominently in this appeal, it is clear that two of the trial judge’s findings shape fundamentally the outcome of this appeal: (

i) that thearrangements of 1997 were put in place to avoid the tax consequences of a delayed sale; and (ii) that the parties always intended that thePartnership, through Genlandco, would buy the lands and that Jamel would sell them. These are findings of fact and unassailable as suchbased on a review for palpable and overriding error. Whether the trial judge could consider the evidence, giving rise to those findings, inthe

interpretation of the contracts in question, is a question of law, which the trial judge correctly answered. And finally, it is notnecessary to determine whether the trial judge’s construction of the contracts, based on this evidence, is reviewable as a matter of fact orlaw because the trial judge’s conclusion is clearly correct. [54] In the result, the appeal is dismissed. 2. The Cross-Appeal [55] The Partnership and Genlandco pursued a claim for breach of fiduciary duty against Jamel and the Lazarecks for two reasons.

First, in the event that the Court had allowed the appeal from the primary finding that notice had not been given, they claimed damagesfor breach of fiduciary duty in an amount equal to the costs of moving the business: some $98,000,000. Second, in the event that theCourt dismissed the appeal, they sought the equivalent of a declaration of a breach of fiduciary duty for the purpose of recovering thecosts of the expert’s report fixing the damages at $98,000,000.

Given my conclusion that the trial judge’s primary finding is sustainable,the only purpose for the cross-appeal is to assist the Partnership and Genlandco to recover the cost of the expert’s report. [56] In its Statement of Claim, the Partnership and Genlandco claimed that the Lazarecks, as members of the Management Committee ofthe Partnership, “owed a fiduciary duty to the Partnership, in that they could unilaterally exercise discretion or power to affect thePartnership’s legal or practical interests” (see para. 21(

l) of the Claim). The Statement of Claim also stated that the “Partnership waspeculiarly vulnerable to such exercise of discretion or power in that it had retained no residual power to make any such decisions foritself” (see para. 21(

l) of the Claim). [57] The Partnership claimed that the Lazarecks breached their fiduciary duty and provided these particulars of that breach: 21(m). The Plaintiffs state that the Lazareck Brothers breached their fiduciary duty to the Partnership, the particulars of which includeone or more of the following: (

a) failure to advance properly or to protect the interests of the Plaintiffs; (

b) failure to act loyally in the best interests of the Plaintiffs; (

c) failure to place the Plaintiffs’ interests ahead of their own; (

d) failure to disclose material information to the Plaintiffs;

(

e) failure to act with due diligence and the utmost candour. At trial, the basis of the breach became further particularized. The question became “whether the Lazarecks' failure to notify IPSCO about its belief about the notice requirement was a breach of their fiduciary obligation to the Partnership” (para. 84). [ 58 ] The trial judge answered the question by finding that there is no evidence: (

i) that Evraz Recycling knew of Jamel’s and the Lazarecks’ belief that notice was required; or (ii) that Jamel and the Lazarecks knew of Evraz Recycling’s belief that no notice was required. He wrote to that effect: [85] …However, in this case, the evidence discloses that IPSCO believed that no notice was required and Jamel and the Lazareck Brothers believed that notice was required. There is no evidence that Jamel or the Lazareck Brothers knew of IPSCO's belief. Neither, for that matter, was there any evidence that IPSCO knew of Jamel or the Lazarecks' belief that notice was required.

Therefore, it cannot be said that Jamel or the Lazareck Brothers failed to subordinate their own interests in favour of the interests of the Partnership, and consequently did not breach their fiduciary obligation to the Partnership. [ 59 ] The trial judge’s finding that Evraz Recycling did not know about Jamel’s and the Lazarecks’ belief that notice was required is clearly correct, but his second finding about what Jamel and the Lazarecks knew is problematic. [ 60 ] As I have noted, the Lazarecks did not testify and no one else testified on behalf of Jamel. Indeed, the defence called no evidence.

The only evidence before the trial judge was that submitted on behalf of the Partnership and Genlandco, including questions read in as part of their case from the Examination for Discovery of the Lazarecks. According to that evidence, Jacob Lazareck attended the January 11, 2007 Management Committee meeting of the Partnership and, at that time, it is beyond question that he was still a member of the Management Committee.

As a result of what transpired at that meeting, Greg Maindonald, the Vice-President and General Manager of Evraz, returned to Chicago planning to take steps to prepare the cheque to acquire the lands. What transpired at that meeting —at which Jacob Lazareck participated fully—gave rise to Mr. Maindonald’s belief in that regard. The Partnership was in serious jeopardy of losing the ability to buy land in 2007 that was worth $14,619,690 for the 1997 price of $2,860,810—if notice was still required and if the Memorandum of Agreement did not constitute notice.

Depending on what one makes of the lack of a “time is of the essence clause” in the Lands Option Agreement, it may still have been possible to take steps to avoid the difficulties that followed, but Jacob Lazareck did not ask what would have been a highly pertinent question regarding the exercise of the option. [ 61 ] While the trial judge’s finding of no evidence as to what the Lazarecks knew may constitute error, nothing turns on it because the trial judge found that the Memorandum of Agreement did constitute notice.

Thus, Jamel and the Lazarecks could not have been found to have breached their fiduciary obligations by failing to advise the Partnership that notice was required—the Memorandum of Agreement was the notice. [ 62 ] When the Partnership narrowed its claim of a breach of fiduciary duty on the part of the Lazarecks to a failure to advise of their belief that notice was required and the trial judge found that the parties intended all along that the Memorandum of Agreement would be the required notice under the Lands Option Agreement, no basis existed for the trial judge to find a breach of fiduciary duty.

The Partnership’s and the Lazarecks’ belief coincided. Thus, the cross-appeal must be dismissed. [ 63 ] In dismissing the cross-appeal, I should note that Jamel and the Lazarecks resist the conclusion that they owed a fiduciary obligation on several grounds, including the fact that Jamel held an independent right to assert its own interests regarding the option to purchase. I question this submission, but given the conclusion in the preceding paragraph, I need not resolve this or the balance of the arguments raised on behalf of Jamel. [ 64 ] Some further points should be made.

As noted, the Partnership and Genlandco pursue this cross-appeal for the purpose of ensuring that they would be able to recover the costs of their expert’s report. I make no comment on whether the Court would be prepared to grant a declaration of a breach of fiduciary duty as part of the cross-appeal for that purpose—in the circumstances of this case. According to the record placed before the Court, the trial judge has not yet addressed the question of costs of the expert report. That issue has yet to be decided. VII. Conclusion

[ 65 ] The appeal proper is dismissed with costs. The cross-appeal must be dismissed with costs as well. DATED at the City of Regina, in the Province of Saskatchewan, this 5th day of December, A.D. 2012. __ “Jackson J.A.” ______________________ Jackson J.A. I concur __ “Vancise J.A.” _______________________ Vancise J.A. I concur __ “Herauf J.A.” _______________________ Herauf J.A.