Kensington Park Capital Ltd. (“Kensington”), the tenant, filed a caveat claiming a right of first refusal (“ROFR”) under its lease after Franjon Excavating & Trucking Ltd. (the “Landlord”) accepted a third-party offer without notifying Kensington.

Under the lease, the Landlord was required to give Kensington the first opportunity to purchase if the property was offered for sale. While the property was initially listed at $1.7M and later reduced to $1.499M, the Landlord accepted a $1.4M third-party offer shortly after Kensington had bid $1.2M, without providing Kensington the chance to match. The Applications Judge discharged the caveat, concluding that the Landlord had complied with the ROFR. Kensington appealed, arguing that the Landlord breached both the ROFR and its duty of good faith.

Hollins J. clarified that, under Rule 6.14(3), this was an Appeal on the record rather than a true de novo hearing. A de novo hearing, Hollins J. noted, would involve no deference to the prior decision and would not require a transcript. By contrast, Hollins J. stated that an Appeal on the record requires the Court to determine whether the prior decision was correct. As such, Justice Hollins emphasized that the Applications Judge’s ruling is therefore presumed correct but remains subject to review for error.

In the result, the Court found that the Applications Judge erred in finding that the ROFR clause did not entitle Kensington to be notified of third-party offers and the opportunity to match them. Accordingly, the caveat would remain on title, subject to the parties’ agreement or further order of the Court.