Pioneer Petroleums Limited Partnership v. 2049904 Ontario Inc.

2009 ONCA 122

DATE: 20090210

DOCKET: C48893

COURT OF APPEAL FOR ONTARIO

Laskin, Feldman and Cronk JJ.A.

BETWEEN

Pioneer Petroleums Limited Partnership and Pioneer Petroleums Management Inc.

Applicants/Respondents

and

2049904 Ontario Inc.

Respondent/Appellant

Patrick Di Monte, for the appellant

Michael J. Valente, for the respondents

Heard: February 4, 2009

On appeal from the Order of Justice Kim Carpenter-Gunn of the Superior Court of Justice dated May 6, 2008.

ENDORSEMENT

[1] This is an appeal from the Order of Carpenter-Gunn J. of the Superior Court of Justice dated May 6, 2008, granting the respondent tenants specific performance of an option to purchase contained in a commercial lease between the respondents and the predecessor company to the appellant landlord.

[2] The landlord attacks the application judge’s decision on three main grounds. It contends that: (i) the equitable remedy of specific performance should not have been granted since damages, which the landlord says it is now prepared to pay to the tenants, are a sufficient remedy in all the circumstances; (ii) the option to purchase granted under the lease operates as a clog on the landlord’s equity of redemption in the leased premises and is, therefore, unenforceable; (iii) the language of the option provision in the lease – paragraph 43 – is ambiguous and unclear. In particular, the landlord maintains that it is uncertain what amounts, if any, are to be deducted from the purchase price established by paragraph 43 – the “fixed price of $600,000” – on closing.

[3] We would not give effect to these arguments, for several reasons.

[4] First, on this record specific performance was the appropriate remedy. The leased premises are situate in Gananoque, Ontario. They are strategically located within the centre of that town. The tenants have invested about $1 million in improvements to the premises, plus approximately $350,000 (on the landlord’s account) to address various environmental issues associated with the property. Given the location of the leased premises and the tenants’ considerable investment in them, the landlord concedes that the premises are unique to the tenants. In these circumstances, the application judge did not err by concluding that specific performance was the appropriate remedy in this case.

[5] Second, this is not a mortgage case. Contrary to its explicit obligations under the lease, the landlord failed to enter into a mortgage with the tenants to secure the repayment of funds expended by the tenants on the landlord’s behalf to remove two buried storage tanks and related equipment from the leased premises. Nor was any other mortgage entered into by the landlord with the tenants. The mortgages on the leased premises were originally held by unrelated third party mortgagees. These mortgages were eventually acquired, not by the tenants, but by a company associated with the tenants. As between the landlord and the tenants, therefore, no issue of interference with the landlord’s equity of redemption in the property arises.

[6] The landlord’s position on this issue is misconceived for an additional reason. Options to purchase are often contained in negotiated commercial leases. Indeed they are commonplace. There is no impediment to their inclusion in such leases, at the election of the contracting parties, or to the exercise of them in accordance with the terms negotiated by the parties – as occurred here.

[7] Finally, paragraph 43 of the lease – the option to purchase provision – is not ambiguous. Viewed in the context of the lease as a whole including, especially, para-graphs 12 and 13 of the lease, we agree with the application judge that the meaning of paragraph 43 is straightforward.

[8] Accordingly, the appeal is dismissed. The respondents are entitled to their costs of the appeal, fixed – as agreed by counsel – in the amount of $7,500, inclusive of disbursements and G.S.T.

“John Laskin J.A.”

“K. Feldman J.A.”

“E.A. Cronk J.A.”