Case: Lafarge Canada Inc v Bilozir, 2018 ABCA 416 (CanLII)
Keywords: Contract; Sand & Gravel; Option; Good Faith; Bhasin v Hrynew, 2014 SCC 71 (CanLII)
Lafarge Canada Inc. (“Lafarge”)lends Mr. William Bilozir some money. In exchange, Mr. Bilozar grants Lafargean option to extract sand and gravel from a parcel of land. The option to extract is contingent upon certain events occurring (and they do occur).
Lafarge first attempts to send notice of its intention to exercise the option, pursuant to clause 6.3 of the contract, by facsimile. Mr. Bilozir advises his machine is not working. Since the address for service in the contract is not Mr. Bilozir’s actual residence, but a post office box, hand delivery is impossible at that address.
Eventually, Lafarge attempts hand delivery of its notice to Mr. Bilozir by sending representatives to his house. Mr. Bilozir refuses to answer. He admits, however, that he knew Lafarge was at the door and that a representative indicated he was putting a letter in the door.
The question before the Courts is whether this delivery was effective. The Chambers Judge determines that it is:
Bilozir knew it was Lafarge at the door. Bilozir knew it was Lafarge at the door with a letter for him. Bilozir believed he had nothing more to do with Lafarge and, I infer, he was not interested in any new dealings with Lafarge. He was wrong in his view that Lafarge had no further rights under their agreement. Those rights had not expired. His misunderstanding of the effect of the contract does not lessen his continued obligations under the contract which remained in force; they did not lessen his continued obligations under the contract or the general organizing principle that he perform those obligations in good faith. (Reproduced at para. 4).
The Court of Appeal concurs with this reasoning; finds Lafarge’s hand delivery is effective service within the terms of the agreement.
The Court of Appeal answered a basic, fundamental, and very interesting question with respect to the law of contract: can a party who is being served a notice to exercise an option actively obstruct service of that notice? In other words, can you simply refuse to answer the door? Many a law student has asked themselves this question in Civil Procedure (or has been too shy to ask it aloud). Thanks to Slatter J.A.of the Alberta Court of Appeal, there is now a definitive answer in this case: “No”.
In order to determine whether service of the notice was effective in this case, the Court of Appeal set out the language of the contract between the parties as follows:
6.3 Any notices to be given by any party to the other shall be in writing and shall be sufficiently given and shall be deemed to be received by the addressee if delivered by hand or prepaid courier, or if mailed then by registered mail, postage prepaid, or forwarded by facsimile transmission to the parties’ respective addresses, as follows:
or to such other address as either party may hereafter notify the other in writing in the manner aforesaid. If any question arises as to whether any notice was sufficiently communicated by one party to the other, a notice shall be deemed to have been effectively communicated on the day delivered or sent by facsimile transmission (with confirmation of successful transmission) or on the fifth day following the date of mailing, as the case may be. If normal mail service is interrupted by strike, slow down, force majeure or other cause after the notice has been sent, the notice, if mailed, will not be deemed to be received until actually received. If normal mail service is impaired at the time of sending a notice, then delivery or facsimile transmission of the notice only shall be effective. (See para. 2).
Lafarge relied upon the provision which indicated it could “hand deliver” its notice. For the Court of Appeal, pursuant to Bhasin v Hrynew, 2014 SCC 71 (CanLII), “A contracting party can act in its own best interests, but it must not seek to undermine the legitimate interests of the other party in bad faith…By refusing to answer the door and take the letter, the appellant was wilfully blind to the respondent’s legitimate efforts to exercise the option.” (See para. 5).
Counsel for the Appellant: Charles Osuji (Osuji & Smith Lawyers, Calgary)
Counsel for the Respondent: Katharine Zhang (Walsh LLP, Calgary)