Case information

Contracts — Interpretation — Time is of the essence — Whether the Court of Appeal erred in law by interpreting a time is of the essence clause as an extricable question of law, in isolation from the agreement as a whole, without regard to the factual matrix, and without considering the objective intentions of the parties — Whether, under the modern approach to contractual interpretation, a time is of the essence clause can apply to a contextual temporal obligation where the parties so intend.

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Cold Ocean Salmon Inc. agreed to sell several trout farms to Nova Fish Farms Inc. under an agreement of purchase and sale. The trout farms were on property leased from the provincial government and were licensed and regulated by both federal and provincial governments. Therefore, sale of the farms was conditional on government approval. The agreement was signed in February 2020 and did not state a fixed or outside closing date. Instead, it provided that the closing would occur seven days following the completion of certain conditions precedent including receiving government approval. The agreement required each party to take the necessary steps to obtain government approval as promptly as practicable following signing and that the parties were to use commercially reasonable efforts to obtain approval before closing. The agreement included a clause that stated that time shall be of the essence of the agreement.

Neither party took any steps to effectuate the agreement until June 2021 when Nova Fish submitted transfer applications to the provincial government. The government approved the applications in October 2021. Nova Fish told Cold Ocean’s solicitor of the approval in December 2021 and that Nova Fish wanted to proceed to close the transaction. The parties had direct communications and communications through their lawyers on several occasions through the spring of 2022. In May 2022, Cold Ocean told Nova Fish that it did not intend to proceed with the transaction.

Nova Fish sued Cold Ocean seeking specific performance of the agreement. Cold Ocean pleaded in defence that Nova Fish was in breach of the agreement because of its delay in obtaining government approval and that Cold Ocean was entitled to terminate the agreement because of that breach. At a summary trial, it was determined that Nova Fish breached the agreement because it did not act as promptly as practicable, or use reasonable commercial efforts to obtain government approval. The time is of the essence clause applied to the terms of the agreement and entitled Cold Ocean to terminate the agreement. Cold Ocean was not required to prompt Nova Fish to comply with the agreement and it did not waive the breaches by Nova Fish and it was not obliged to allow Nova Fish to cure its breaches. Nova Fish’s action for specific performance was dismissed.

The Court of Appeal allowed Nova Fish’s appeal. The trial judge’s finding that Nova Fish breached the agreement was not disturbed, however, it was determined that the trial judge erred by finding that the time is of the essence clause applied to the obligations that Nova Fish breached and the trial judge erred in finding that Cold Ocean was entitled to terminate the agreement because of Nova Fish’s breach of those obligations. The Court of Appeal granted Nova Fish’s request for an order of specific performance.