COURT OF APPEAL FOR ONTARIO
LABROSSE, DOHERTY and LASKIN JJ.A.
B E T W E E N :
THE ATTORNEY GENERAL OF CANADA
Plaintiff/Appellant
Liz Tinker, for the Appellant(s)
- and -
FREDERICK CHOMCY AND NORA CHOMCY
Defendants/Respondent(s)
David S. Strashin, for the Respondents(s)
Heard: January 17, 2002
AND BETWEEN :
FREDERICK CHOMCY
Plaintiff by Counterclaim
-and-
THE ATTORNEY GENERAL OF CANADA
Defendant by Counterclaim
On appeal from the judgment of Justice John C. Wilkins dated July 6, 2001.
LABROSSE J.A.
1The Attorney General of Canada representing the interests of Her Majesty the Queen in Right of Canada (the “landlord”) appeals the dismissal by Wilkins J. of his action brought against the respondents Chomcy (the “tenants”) for arrears of rent.
2On March 17, 1993, the landlord entered into a residential lease with the tenants with respect to a property consisting of some 20 acres of land in the Town of Pickering. The lease was to run from May 1, 1993 to April 30, 1994 at a rent of $1,100.00 per month. The lease has been subject to several renewals; however, by April 1, 1998, the tenants had become monthly tenants.
3The property contained a ranch style residence in which the tenants lived, a bank barn, and an old frame house. There is conflicting evidence on the condition of the bank barn and old frame house at the time the lease was entered into. However, in 1997-98, the landlord or his agents conducted a study on the property that described the barn and the old house as “abandoned/collapsing” and indicated that they “may pose a safety concern”. The landlord had the barn and old house demolished in early September 1998.
4The tenants stopped paying rent in October 1998. Subsequently, the parties entered into an interim rental agreement whereby the tenants agreed to pay some rent on a without prejudice basis. They paid $6,000 and then discontinued the payments. In the fall of 1999, the landlord brought an application before the Ontario Rental Housing Tribunal (the “Tribunal”) for termination of the tenancy and arrears of rent. At the time of the hearing, the arrears exceeded the jurisdiction of the Tribunal. The landlord requested an adjournment of the hearing in order to pursue the claim for arrears in the Superior Court. The hearing was adjourned pending disposition of the claim for arrears in the present action. The issue of the termination of the tenancy is to be dealt with when the hearing resumes before the Tribunal.
THE LEASE
5The relevant clauses of the lease are as follows:
AND WHEREAS the Tenant has inspected the premises and acknowledges them to be at present in good state of repair and fit for habitation;
WITNESSETH that [the Landlord leases to the Tenant the described land] being hereinafter referred to as the premises… and including ranch style residence, bank barn, and old frame house…;
The Tenant covenants to keep the premises in ordinary state of cleanliness…;
The Tenant covenants to leave the premises in good repair, reasonable wear and tear and damage by fire, lighting [sic] and tempest only excepted;
…the Tenant will use and occupy the said premises as: - a private dwelling only;
The Tenant covenants that he shall…keep the said premises in clean and wholesome condition, and shall immediately before the termination of the term hereby granted, wash the floor, windows and woodwork of the said premises…;
The Landlord covenants with the Tenant for quiet enjoyment; and that She will maintain the dwelling in substantial repair and fit for habitation;
In the event of destruction or partial destruction of the said premises, rent shall cease until the premises are rebuilt. Such rebuilding shall be in the Landlord’s sole discretion. If the landlord decides not to rebuild She may declare the term hereby granted to be forthwith terminated, and in such event rent shall be payable up to the time of such destruction or partial destruction;
The Landlord shall have the privilege at all reasonable times during the term hereby granted or any extension thereof, by Her agents, servants, contractors and workmen with requisite vehicles and equipment, to enter on the “lands” for the purpose of making surveys, soil test [sic], laying roads, erecting structures and removing “obstructions”, upon 10 days notice to the Tenant; the parties covenant that such entry for a limited purpose or purposes shall not terminate the lease, nor result in the abatement of rent; provided that if such entry becomes permanent and results in the reduction of the area of the leased premises, an appropriate adjustment of rental [sic] shall be negotiated by the Parties;
The Tenant covenants that, upon the Tenant abandoning or vacating the premises…the Tenant shall…repair all and every damage and injury occasioned to the lands and premises of the Landlord by reason of removal [of chattels, effects, etc.] or otherwise caused during the term of the tenancy. … The Tenant further agrees to indemnify the Landlord for all expenses incurred by Her, in effecting such removal, and in returning the premises to an ordinary state of cleanliness and good repair.
The Tenant acknowledges that he has inspected the premises, and that, as of the date first above-mentioned, the premises are in a state of substantial repair and fit for habitation.
[Emphasis added.]
THE TRIAL DECISION
6The action proceeded as a summary trial on the basis of a written record without cross-examination. In his reasons for judgment, the trial judge emphasized the fact that the lease had been entirely prepared by the landlord. He also gave considerable weight to the definition of “premises” in the preamble of the lease, which includes the ranch style residence, the bank barn, and the old frame house. He found that by September 1998, the bank barn and the old frame house were in a state of disrepair. He also found that the destruction of the bank barn and the old frame house were not the removal of an “obstruction” and did not fall within clause 17 of the lease. Instead, the trial judge relied on clause 15. He concluded that because the landlord had destroyed part of the premises, had failed to rebuild the bank barn and the old frame house, and had failed to declare the tenancy terminated, rent had ceased to be payable.
7Accordingly, there were no arrears of rent to the date of the trial, namely, July 6, 2001. The trial judge dismissed the landlord’s action with costs and ordered the landlord to repay to the tenants the interim rent of $6,000.
8The trial judge was clearly not impressed with the conduct of the landlord. He was of the view that the lease had been poorly drafted, that the landlord had not acted reasonably in this dispute, and that the landlord had been the author of its own misfortune.
THE POSITION OF THE PARTIES
9The landlord claims to be in a Catch-22 situation as a result of the trial judge’s decision. The trial judge held that the tenants owe no rent to the landlord and are, in effect, entitled to live on the property rent-free. The landlord argues that, under the Tenant Protection Act, 1997, S.O. 1997, c. 24, ss. 39(1), 41, and 60(1), failure to pay rent is the sole basis on which the landlord can terminate this lease. Consequently, the landlord claims that the only ground on which the tenancy could be terminated before the Tribunal has been removed.
10The tenants rely on the fact that the lease was drafted by the landlord without any input from the tenants. They endorse the trial judge’s decision that there is no rent owing on the basis of clause 15. When pressed during the hearing of the appeal, counsel reluctantly conceded that the tenants will take the position before the Tribunal that, in light of the trial decision, the Tribunal has no jurisdiction to terminate the tenancy.
11Under either scenario, the result is a commercial absurdity. As a result of the destruction of an old barn and frame house, which were in a state of disrepair, the tenants can remain on the property rent-free forever.
ANALYSIS
12The trial judge never considered the contract as a whole. Rather, the trial judge centered his decision on the definition of “premises” in the preamble that, as noted above, is said to include the ranch style house, bank barn, and old frame house. That definition does not accord with the use of the word “premises” in another part of the preamble (i.e. "fit for habitation") and in clauses 2,5,8,10,19 and 21, where the word cannot possibly be taken to be referring to all the buildings on the property. In fact, the definition used by the trial judge is not consistent with the use of that word in a majority of the clauses in the lease. For example, one would not interpret the provisions of the lease requiring tenants to “keep the premises in ordinary state of cleanliness” and to “leave the premises in good repair” as applying to the bank barn and frame house. Nor would they have believed that they would have to indemnify the Crown for the repair of any damage to those buildings, as provided in clause 19. Clearly, there was ambiguity in the lease with respect to the word "premises".
13An apparent ambiguity in a word in a contract does not require immediate resort to the contra proferentem rule. As Estey J. explained in Consolidated-Bathurst v. Mutual Boiler, 1979 SCC 10, [1980] 1 S.C.R. 888 at 901:
Even apart from the doctrine of contra proferentem as it may be applied in the construction of contracts, the normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere [in which the contract was made].
14The trial judge never examined the entirety of the contract with a view to determining whether his interpretation was commercially sensible.
15It could not have been the intention of the parties that the “destruction” of any part of the 20 acres would allow the tenant to live in the residence (the ranch style house) rent-free, no more than it would allow the landlord to destroy a fence in disrepair and terminate the tenancy. On the contrary, the intention of clause 15 was to provide relief to tenants who can no longer occupy a residence because it has been partially or fully destroyed.
16The record supports this interpretation. Even assuming that the barn and frame house were in a good state of repair in 1993 (and the record does not support that assumption) there can be no doubt that they were in a state of disrepair in 1998. The tenants never complained about the condition of these buildings or requested the landlord to repair them, as they may have been entitled to do under s. 24(1) of the Tenant Protection Act, 1997, if not under the lease. Moreover, the landlord maintains that the tenants did not object to the demolition of the barn and old house. On the contrary, when the tenants did complain by way of a letter dated November 11, 1998, they complained only about the waste materials on the property resulting from the demolition. Their letter, in its entirety, reads:
As per our conversation October 30th, 1998, I have been holding back the rent on […] North Road, Claremont, Ontario, due to breach of Landlord and Tenant Act. I have requested as compensation all rent monies since August 1998 be returned until the dump and sort site is cleaned up. [Emphasis added.]
17The tenants did not complain that there should have been no demolition, nor did they make any claim for losing part of the enjoyment of the premises. The sole basis for the complaint is the use of the property as a "dump and sort site".
18In my view, “destruction or partial destruction” of the premises in clause 15 must be interpreted in relation to the purpose of the lease. The predominant purpose of the lease was to provide living accommodation in the “ranch style” residence located on the property. Clause 8 specifies that the premises are to be used as “a private dwelling only”. The only reasonable interpretation of clause 15, in order to give the lease a sensible commercial result, is that “destruction” applied only to the residence. In the circumstances, clause 15 had no application and there was no basis to suspend or stop the monthly rent payable.
THE TENANTS
19There is an issue as to who the tenants of the property were at the time of trial.
20The lease was signed by both Frederick Earl Chomcy and Nora Chomcy. The action was commenced against both defendants and the Amended Statement of Defence is filed on behalf of both. It is pleaded that Mrs. Chomcy vacated the premises on or about the 30th day of December 1996. The counterclaim is brought only by Mr. Chomcy. In the Reply and Defence to Counterclaim, the landlord denies being advised of this allegation until October 1999 and claims recovery of the rent arrears against both tenants. These respective positions are essentially repeated in the affidavits of the landlord’s representative and Mr. Chomcy.
21This issue was not dealt with by the trial judge. The issue is only mentioned in the factum of the landlord. It was not argued on appeal.
22There is no record that the landlord was advised that Mrs. Chomcy had vacated the property or had made a request to have the lease amended to remove her name. More importantly, Mrs. Chomcy never filed any evidence to support that allegation. This is an issue between the tenants. The landlord is entitled to recover against both tenants.
DISPOSITION
23In the result, the appeal is allowed and the judgment dated July 6, 2001 is set aside. The landlord will have judgment for the total rent owing since October 1998. If the parties cannot agree to the amount owing, I direct a reference be held before a registrar pursuant to Rule 54.03 of the Rules of Civil Procedure.
24With respect to costs, the trial judge was justified in being displeased with the conduct of the landlord in this dispute. The poorly drafted lease was the major cause of the dispute. In addition, the landlord failed to act in a commercially responsible manner in dealing with the tenants and was solely responsible for the inexcusable delay in resolving the dispute. In these circumstances, I would make no order as to costs in this court or in the court below.
Released: February 5, 2002
Labrosse J.A.
I agree Doherty J.A.
I agree Laskin J.A.