In the case of Fernbrook Homes (Bass Lake) Limited v. Cameron Stephens Mortgage Capital Ltd., 2026 ONCA 603, the Court of Appeal held that changes to how contractual services will be delivered without consulting the counterparty or amending the contract, does not create payment obligations under agreements to which the purchaser was not a party.
Eagles Rest Estates Inc. (the “Vendor”) entered into an agreement of purchase and sale (the “2021 APS”) with the homebuilders, Fernbrook Homes (Bass Lake) Limited and Crystal Homes’ (Eagles’ Rest) Corporation (the “Purchasers”). The parties entered into a subsequent agreement of purchase and sale in 2023 (the “2023 APS”) that replaced the 2021 APS. The 2023 APS contemplated that the Vendor would build infrastructure to connect the lots to the Township’s drinking and wastewater systems. However, the Vendor decided, without consulting the Purchasers or amending the agreement with the Purchasers, to build a private system for both water services and consequently entered into two municipal responsibility agreements with the Township, to which the Purchasers were not a party. The Purchasers refused to pay the Vendor’s costs arising from the private construction and the Vendor brought an application. The application judge determined that the Purchasers had no obligation to pay for the costs incurred for the private water series.
Amongst other things, the application judge found that the Vendor neither consulted the Purchasers nor sought payment from them when deciding to construct a private water system and that the Purchasers were not a party to the municipal responsibility agreements negotiated by the Vendor with the Township.
The Court of Appel found that the application judge did not err in his analysis, having based his objective analysis on the ordinary and grammatical meaning of the words, in the context of the agreements as a whole, in a manner consistent with the surrounding circumstances known by the parties at the time, and by considering their reasonable expectations.
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