C.A. No. 02893
NOVA SCOTIA COURT OF APPEAL
Giles v. Halifax County (Municipality), 1994 NSCA 18
Jones, Matthews and Chipman, JJ.A.
BETWEEN:
ALFRED JOHN GILES, JR. ) David W. Richey
) for the Appellant
Appellant )
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- and - )
) Peter Gurnham
) for the Respondent
MUNICIPALITY OF THE COUNTY )
OF HALIFAX, a body corporate )
)
Respondent ) Appeal Heard:
) January 14, 1994
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) Judgment Delivered:
) February 1, 1994
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THE COURT: Appeal allowed, the judgment and order of the trial judge set aside per reasons for judgment of Jones, J.A.; Matthews and Chipman, JJ.A. concurring.
JONES, J.A.:
This is an appeal from a decision in the Supreme Court interpreting a deed.
In 1963 John Giles and his wife Hazel conveyed a lot "B: on the Cole Harbour Road to the Municipality of the County of Halifax for the construction of a firehall to service the Cole Harbour area. The warranty deed contained the following covenant:
"The Grantee, for itself, its successors and assigns, covenants with the Grantors, their heirs, executors, administrators and assigns that if, at any time within fifty years from the date of this Deed, the land hereby conveyed shall for any reason become vacant or unoccupied by the Grantee, its successors or assigns, and is no longer required by the said Grantee, its successors or assigns, as a site for a firehall, the Grantors, their heirs, executors, administrators and assigns shall have the first right or option to purchase the same from the Grantee, its successors or assigns."
A firehall was constructed on the site and was operational until December 1987. The fire station was expanded onto an adjoining lot and that parcel has been consolidated with lot B. A portion of Lot B was conveyed for highway purposes. On January 27, 1988 Hazel Giles wrote to the County stating that she wished to exercise her rights as reserved in the deed. The appellant is the sole heir of John and Hazel Giles. Negotiations were conducted between the parties but no agreement was reached. The County offered to sell the consolidated lot to the claimants at fair market value which was based on an appraisal. There was a dispute between the parties as to the meaning of the clause in the deed.
The municipality applied for a declaration that it had complied with the terms of the covenant and that the appellant had no interest in the property. The defence alleged the property was conveyed to the County as a gift and that it was to be reconveyed to the grantors without charge when the land was no longer required for a fire station. The defence pleaded non est factum. The defence also alleged that the County could no longer convey the property and counterclaimed for damages. On the trial of the action before Mr. Justice Gruchy, the defence called four witnesses who testified as to statements allegedly made by the late John Giles concerning the conveyance of the property as a gift and the intention of the parties that the property be reconveyed when it was no longer required. The evidence was objected to on the grounds that it was hearsay and violated the parol evidence rules. In his decision the trial judge found that the evidence "falls far short of explaining or clarifying or clearing up any ambiguities, whether latent or patent in the covenant". The trial judge found that the covenant conferred a right of first refusal which was open to the appellant to accept subject to certain terms and conditions which he imposed.
The appellant has raised the following issues in his factum:
"1. Did the learned trial judge err in not finding that the statement attributed to the late John Giles by witnesses Leonard W. Biggs, James Hugh Reid, Ken Robb and Alfred John Giles, Jr., as to the intent of the covenant in the deed, were hearsay statements and, therefore inadmissible?
2. Did the learned trial judge err by defeating the intention of the donors of Lot "B" by approving use of the land by the Respondent since December 1987 for purposes not intended by the donors, whereby the Respondent has been unjustly enriched?
3. Did the learned trial judge err by writing a contract for the parties to the 1963 deed of Lot "B" from Giles to the Municipality, and by implying terms in the deed which were never intended by the parties?
4. Did the learned trial judge err by imposing contractual terms which have the effect of depriving the Appellant of land without compensation?
5. Did the learned trial judge err by concluding that the evidence which he admitted at trial was insufficient to support a plea of non est factum in respect of the 1963 deed?
6. Did the learned trial judge err by failing to find that the former fire station property was and is held by the Respondent subject to a constructive trust in favour of the Appellant, and that the Respondent has been unjustly enriched?"
With reference to the first issue the respondent has filed a notice of contention that the evidence is hearsay and therefore inadmissible. I agree with the respondent's contention that the evidence was hearsay and therefore inadmissible. Under the expanded rules for the admissibility of hearsay evidence the tests are necessity and reliability. See R. v. Smith (1993), 15 C.R. (4th) 133. The evidence falls short of establishing that it is reliable. To the extent that it contradicts the written document it violates the parol evidence rule. In any event the trial judge found it of no assistance in interpreting the clause and I agree with his conclusions in that regard. It follows that there is no evidence to support the arguments set out in issues two, five and six and they are dismissed. I agree with the respondent that the evidence did not establish a resulting or constructive trust.
Grounds three and four relate to the interpretation of the covenant in the deed. The trial judge as I have noted, found that the clause conferred a right of first refusal. He stated that the terms of the right of first refusal are as follows:
"(a) The County has granted to the Giles the right of first refusal irrevocable for the period of fifty years from the date of the deed - May 6, 1963. The lands over which such right of first refusal are now applicable are those described by the parties as Lot BC; that is, the original lot conveyed, less land conveyed to the Department of Highways and easements,plus additional land to accommodate the expanded building.
(b) If at any time during the period of the right of first refusal the County shall receive a bona fide offer from a third person for the purchase of the property which the County desires to accept, the County shall promptly deliver to Alfred John Giles, Jr., a copy of such offer and he may within thirty days thereafter elect to purchase the property on the same terms and conditions as those set forth in such offer.
(c) If the County shall receive an offer for the purchase of the property which is not consummated by delivering a deed to such offer or, the right of Alfred John Giles, Jr., of first refusal shall remain applicable to all subsequent offers.
(d) If Alfred John Giles,Jr. does not exercise his right of first refusal within the time limit, the County shall have the right to sell to the third party at the price and on the terms set forth in the offer received.
(e) The parties shall agree on the addresses to which notice may be forwarded and a method by which the parties will be kept informed by the current address of one another."
It is necessary to consider the meaning of the clause. In Smith v. Morgan, [1971] 1 W.L.R. 803 Brightman J. had to consider a clause in a conveyance that provided:
"...should the vendor wish to sell the same the first option of purchasing the said land edged and hatched blue as aforesaid shall be given to the purchaser at a figure to be agreed upon. Provided that any such offer for sale shall only remain open for a period of three months from the date on which the said offer for sale is made by the vendor".
The plaintiff contended that the clause was not binding as there was no agreement as to price. Brightman J. stated at p. 806:
"The plaintiff's counsel has relied heavily on a principle of law which is conveniently summarised in the judgment of Maugham L.J. in Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1, 13:
'An agreement to agree in the future is not a contract; nor is there a contract if a material term is neither settled nor implied by law and the document contains no machinery for ascertaining it. Neither of these propositions was in question either in May v. Butcher Ltd. v. The King (Note) [1934] 2 K.B. 17 or in Hillas & Co. Ltd. v. Arcos (1932) 147 L.T. 503, and it happens that in the first case the decision was one way and in the second case the other way on the construction of the relevant documents, but in neither was any new principle of construction laid down.'
The May & Butcher case [1934] 2 K.B. 17, is reported as a footnote to Foley v. Classique Coaches Ltd. [1934] 2 K.B. 1. It was a petition of right which ultimately was decided by the House of Lords. So far as the facts are concerned it is sufficient to refer to two paragraphs of a letter which I take from the report, at p. 17:
'(1) The commission agrees to sell and [May & Butcher Ltd.] agree to purchase the total stock of old tentage...(3) The price or prices to be paid, and the date or dates on which payment is to be made by the purchasers to the commission for such old tentage shall be agreed upon from time to time between the commission and the purchasers as the quantities of the said old tentage become available for disposal, and are offered to the purchasers by the commission.'
In his speech Lord Buckmater said, at p. 20:
'In my opinion there never was a concluded contract between the parties. It has long been a well-recognised principle of contract law that an agreement between two parties to enter into an agreement in which some critical part of the contract matter is left undetermined is no contract at all. It is of course perfectly possible for two people to contract that they will sign a document which contains all the relevant terms, but it is not open to them to agree that they will in the future agree upon a matter which is vital to the arrangement between them and has not yet been determined.'
I now turn to the speech of Viscount Dunedin, at p. 21:
'This case arises upon a question of sale, but in my view the principles which we are applying are not confined to sale, but are the general principles of the law of contract. To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties. In the system of law in which I was brought up, that was expressed by one of those brocards of which perhaps we have been too fond, but which often express very neatly what is wanted: 'Certum est quod certum reddi potest'. Therefore, you may very well agree that a certain part of the contract of sale, such as price, may be settled by someone else. As a matter of the general law of contract all the essentials have to be settled. What are the essentials may vary according to the particular contract under consideration. We are here dealing with sale, and undoubtedly price is one of the essentials of sale, and if it is left still to be agreed between the parties, then there is no contract.'
I turn to paragraph 1 of the second schedule. The five year period has expired and I ignore that part of paragraph 1. It is important to observe that paragraph 1 of the schedule is not an agreement to agree. It does not purport to impose a future contract on the parties. For that reason I take the view that the May & Butcher case [1934] 2 K.B. 17 is not decisive of the case before me. The claim in May & Butcher failed because the document demanded consensus which is a contradiction in terms. That is not this case. What the conveyance purports to impose is an obligation on the vendor alone, that is to say, an obligation to make to the purchaser an offer for sale should the vendor wish to sell, such offer for sale to remain open for three months."
He held that the clause implied a price which was acceptable to both parties.
In Brown v. Gould [1972] 1 ch. 53 a lease of business premises contained an option to renew the lease, providing for "such new lease to be for a further term of 21 years at a rent to be fixed having regard to the market value of the premises at the time of exercising this option taking into account to the advantage of the tenant any increased value of such premises attributable to structural improvements made by the tenant...". The landlord contended that the option to renew was void for uncertainty.
Megarry J. referred to the principle that courts are loath to hold a condition bad for uncertainty and that a reasonable interpretation will be given to it whenever possible. In referring to Smith v. Morgan he stated at p. 58:
"Second, it illustrates one of the differences between an option and a right of pre-emption. Under an option, only one step is normally needed to constitute a contract, namely, the exercise of the option. Under a right of pre-emption, two steps will usually be necessary, the making of the offer in accordance with the right of pre-emption, and the acceptance of that offer. The failure to provide either a price or a formula for ascertaining the price is accordingly far more serious in the case of an option than under a pre-emption: he who exercises such an option may well be virtually signing a blank cheque, whereas he who is entitled to a right of pre-emption can at least refrain from accepting the grantor's offer if the price be too high."
And at p. 61:
"Furthermore, it does not seem to me that Mr. Scamell has been able to demonstrate that this is a case of uncertainty in either of the two main ways in which that can be done. A provision may be void for uncertainty because it is devoid of any meaning. As some critics of certain modern writings might testify, there may be an unintelligible collocation of ordinary English words, or there may be mere gibberish, such as the phrase 'Fustum funnidos tantaraboo' cited in Fawcett Properties Ltd. v. Buckingham County Council [1961] A.C. 636, 647. The present case manifestly does not fall under this head. The other main head is where there is a variety of meanings which can fairly be put on the provision, and it is impossible to say which of them was intended. Mere ambiguities may sometimes be resolved by the application of legal presumptions, and so on: but where the language used is equally consistent with a wide range of different meanings, it may be impossible to discern the concept which the provision was intended to enshrine. If a case is to be brought under this head, the attack will usually start with the demonstration of a diversity of meanings which are consistent with the language used; and if this is not done, the attack will usually fail. In the present case, there has been no demonstration of this kind which has brought me anywhere near to the point of saying that the clause is void for uncertainty."
The clauses in those two cases are different from the clause in this case but the decisions do set out the principles applicable with respect to the interpretation of such clauses.
The County relies on the decision in Manchester Ship Canal Company v. Manchester Racecourse Company, [1901] 2 ch. 37. The agreement in that case was scheduled to an Act of Parliament and was thereby "confirmed and declared to be valid and binding upon the parties thereto", The following clause was contained in the agreement:
"(3.) If and whenever the lands and hereditaments belonging to the racecourse company, and now used as a racecourse, shall cease to be used as a racecourse, or should the aforesaid lands and hereditaments be at any time proposed to be used for dock purposes, then and in either of such cases the racecourse company shall give to the canal company the first refusal of the aforesaid lands and hereditaments en bloc..."
Vaughan Williams L.J. in delivering the judgment of the Court of Appeal stated at p. 46:
"There appear to be two possible meanings of the words 'first refusal': one is that they mean the opportunity of refusing a 'fair and reasonable offer' by the racecourse company to sell the lands en bloc to the canal company; the other is that they mean the opportunity of refusing the land at a price acceptable to the racecourse company offered by some person other than the canal company, which is what we understand by the term 'right of pre-emption'.
He stated at p. 47:
"...The agreement does not provide that the first refusal shall be given at any particular price or on any particular terms; nor that the price and other terms shall be ascertained by arbitration, or in any other way. Looking at these circumstances, we think there is at least fair ground for the contention that the clause only imports that the racecourse company shall, in either of the prescribed events, make a fair and reasonable offer to sell the lands to the canal company; and we wish to consider the case from this point of view, which is the view most favourable to the defendants."
With reference to the argument that the clause was void for uncertainty he stated:
"We think, for the reasons given by Farwell J. that every clause of the agreement has statutory validity, and that no objection can be taken on that score."
Counsel for the appellant contended on the argument that it was impossible to determine the meaning of the clause and that the trial judge erred in writing a contract for the parties. While it does not advance the appellant's cause I agree with that submission. It is up to the parties to make their own agreement. If they fail to reach a consensus on the essential terms the provision is void for uncertainty. It should be noted that the deed was not signed by the County. The clause refers to the land "hereby conveyed". That refers to the land described in the deed. The clause states that the grantors "shall have the first right or option to purchase the same from the grantors". By using the words "first right or option" to purchase the parties intended that the right was in the nature of an option and had priority over any other party provided the conditions in the clause were met, that is the property was no longer required for the maintenance of a firehall. There is nothing in the clause which depends on offers by third parties. There is no price or method for determining the price in the agreement. There is no mechanism for carrying out the sale. That is obvious from the terms and conditions imposed by the trial judge. The order provided for the right of first refusal irrevocable for a period of fifty years with respect to lot BC. That is not the land described in the deed. The obligation purports to give the right of first refusal whenever the lands cease to be occupied and are no longer required as a site for a firehall. See Manchester Ship Canal Co., supra. The condition was fulfilled at least in part before the expiration of fifty years. The order is dependent on the offer of a third party. That is not in accord with the clause. Nor is the right an ongoing one until an acceptable offer is received from a third party. It is clear that the clause is not a valid option. It does not follow that it constitutes a right of pre-emption if the right cannot be exercised in accordance with the terms of the agreement.
I would therefore allow the appeal, set aside the judgment and order of the trial judge and order that the clause in the deed is null and void for uncertainty and does not constitute an encumbrance upon the title of the property as conveyed to the County.
The County is entitled to the costs on the appeal which I would fix at $2500.00.
J.A.
Concurred in:
Matthews, J.A.
Chipman, J.A.