COURT OF APPEAL FOR ONTARIO

CITATION: Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc. (Mr. Sub), 2016 ONCA 93

DATE: 20160202

DOCKET: C60604

Blair, Hourigan and Brown JJ.A.

BETWEEN

Mapleview-Veterans Drive Investments Inc.

Applicant

(Appellant)

and

Papa Kerollus VI Inc. c.o.b Mr. Sub

c.o.b Mr. Submarine-Mapleview and

Mr. Submarine Limited

Respondents

(Respondents in Appeal)

Milton A. Davis and Ian P. Katchin, for the appellant

Sharon M. Addison for the respondent

Heard: October 26, 2015

On appeal from the order of Justice Gregory M. Mulligan of the Superior Court of Justice, dated June 12, 2015, with reasons reported at 2015 ONSC 3833, 59 R.P.R. (5th) 134.

R.A. Blair J.A.:

Overview

[1] The issue on this appeal is whether the respondent, Papa Kerollus VI Inc., is entitled to exercise a right of renewal contained in a commercial lease of premises located in Barrie, Ontario, where it carries on a Mr. Submarine franchise business. Mapleview-Veterans Drive Investments Inc., the appellant, is the owner of the premises and the successor landlord under the Lease.

[2] The Lease was effective as of June 1, 2000 for a 15-year term expiring on May 31, 2015. It gave Papa Kerollus an option to renew for one further period of five years on the same terms and conditions “save as to the rental rate which shall be the then current rate.”

[3] Papa Kerollus purported to exercise the renewal option in November 2014 – within the time required – but Mapleview disputed its right to do so on the following bases:

(a) the renewal option was void for uncertainty because, with no guidelines for the calculation of the renewal term rent and no arbitration provision to settle it if agreement was not reached, the renewal rent could not be ascertained; and in any event,

(b) the renewal option could not be exercised for two reasons:

(i) Papa Kerollus was in default of a precondition to the exercise of the option because it had not “paid the rent and all other sums payable under [the] Lease when due” at the time it purported to exercise the renewal option (the “rent-related covenant”); and,

(ii) it was also in default of a precondition to the exercise of the option because it had not “performed all other covenants under the Lease” at the relevant time (the “non- rent covenants”).

[4] Mapleview applied to the court for a declaration that the renewal option was void for uncertainty or, in the alternative, for an order and declaration that Papa Kerollus was in breach of the terms of the Lease and that the purported exercise of the renewal option was invalid and unenforceable, as well as for other related relief.

[5] After a hearing, the application judge made the following orders and/or declarations that are the subject of the appeal:

(a) the renewal option was not void for uncertainty because the term “current rate” was capable of judicial determination provided the parties called expert evidence on the point;

(b) there was, however, a live issue as to the proper calculation of what the tenant owed for additional amounts of arrears and a trial was required to make a determination of what was owing by the tenant to the landlord;

(c) once there had been a judicial determination of the arrears, if any, by trial, the tenant was to have a sixty-day period to pay the properly calculated arrears, if any, by way of a lump sum payment, at which time the renewal notice would be deemed to have been validly constituted, as of June 1, 2015; and

(d) once the tenant had paid the arrears, if any, “the current rate” for the renewal period was to be determined judicially on the basis of expert evidence presented by the parties.

[6] With respect to Mapleview’s contention that the renewal option could not be exercised because Papa Kerollus was in default of various non-rent covenants under the Lease, relating to such things as the failure to maintain the premises and the improper subleasing of space to others for advertising, the application judge found that these defaults had been “substantially cured” by the time of the application. In oral argument before this Court, counsel for Mapleview withdrew any reliance on the non-rent covenant defaults in support of its argument that the renewal option could not be exercised. It is therefore unnecessary to deal with this issue.

[7] While I agree with the application judge that the renewal option is not void for uncertainty, I would allow the appeal and set aside the remainder of his order, for the reasons that follow.

Background

The Lease

[8] Clause 2 of the Lease provides for the option to renew:

Provided that the Tenant has paid the rent and all other sums payable under this Lease when due and, provided the Tenant has performed all other covenants under the Lease as and when the same are required to be performed, the tenant shall have the option to renew for one further term of Five (5) years each provided that written notice is given to the Landlord at least six (6) months prior to the expiry of the term or any previous renewal thereof, on the same terms and conditions as herein contained, save as to the rental rate which shall be the then current rate. [Emphasis added.]

[9] As noted above, Mapleview abandoned in oral argument its ground of appeal based upon the alleged default of Papa Kerollus under the non-rent covenants of the Lease. It submits, however, that Papa Kerollus was – and remains – in default of its obligation “[to pay] the rent and all other sums payable under [the] Lease when due”. A number of provisions in the Lease bear upon this submission.

[10] As tenant, Papa Kerollus was obliged to pay both a base rent (as stipulated in clause 3.A) and additional rent consisting of (a) goods and services taxes (clause 3.B) and (b) the Tenant’s Percentage of taxes, utilities, insurance, common area maintenance and repairs, other operating costs and administrative fees (clause 3.C). Clause 21 makes it clear that it was intended to be “a carefree net Lease for the Landlord”.

[11] There is no dispute that Papa Kerollus has paid its base rent throughout the term of the Lease, as required. Amounts owing as additional rent pursuant to the Tenant’s Percentage clause became an issue, however.

[12] Clause 3.C outlines this obligation:

The Tenant’s Percentage hereinafter referred to, is calculated by dividing the total square footage of the Demised Premises as referred to in clause 1 by the total rentable square footage of the project.

As a method of payment of the Tenant’s percentage of taxes, utilities, insurance, common area maintenance and repairs, other operating costs and administrative fees, the Landlord may estimate the total cost of these charges on an annual basis and request the Tenant to pay monthly to the Landlord, one-twelfth of the Tenant’s proportionate cost for those charges.

The Landlord will provide the Tenant with a statement of actual expenses on an annual basis. An adjustment of over/under payment will be made at that time. [Emphasis added.]

[13] Clauses 10 through 13 contain the tenant’s specific covenants to pay its share of taxes, utilities, insurance costs, and common area maintenance and repairs. Each stipulates that the tenant’s obligation is to pay “upon demand”. Clause 20 provides for the payment of interest “on all rent or additional rent in arrears at the rate of 18% per annum”.

The Disputes and Purported Exercise of the Option to Renew

[14] Beginning in 2013, as the application judge noted at para. 9, the relationship between Mapleview and Papa Kerollus “turned sour”. Papa Kerollus says this was because Mapleview was upset with it for not accepting a suggestion that it relocate to other nearby premises in spring 2013, something that would have freed up the leased premises to be used for other purposes by Mapleview. Papa Kerollus contends that it was only after this refusal that Mapleview began to make complaints about defaults under the Lease. Mapleview calls this allegation “a complete fabrication”, and denies that the manner in which it dealt with Papa Kerollus changed as a result of the tenant’s disinterest in relocating. It says that it was not attempting to move Papa Kerollus out, but was only responding to complaints by Papa Kerollus’s principal, Mary Athanasios, about the rent, and was trying to suggest another nearby available location where it could continue to carry on its business while paying less rent.

[15] In any event, Mapleview delivered a notice of default in June 2013. For the most part, the alleged defaults involved non-rent covenant defaults – failures to comply with the terms of the Lease concerning garbage bins, third party signs, parking lot lights and other maintenance failures. The only rent-related complaint was that the rental payments were habitually late.

[16] There followed an exchange of correspondence between the parties and their solicitors regarding the merits of these complaints and what had been done, or what was to be done, to deal with them.

[17] Matters escalated in 2014. On May 12, Mapleview delivered invoices reconciling its cost recovery claims for 2012 ($2,275.67) and 2013 ($11,040.30). At the same time, it delivered a revised monthly summary statement for 2014 calling for a monthly payment for base rent plus operating expenses, property taxes, and HST in the amount of $7,250.84 commencing June 1, 2014. This represented an increase of $1,017.00 over the $6,233.84 that Papa Kerollus had been paying for some time.

[18] There followed another lengthy exchange of correspondence between the parties’ solicitors. Papa Kerollus demanded backup particulars of the statements provided in May and also for all years dating back to 2009. It did admit, however, that it was in arrears in the amount of $251.92 (the “admitted arrears”), comprising a debt of $303.46 for 2013, less a credit it had been granted for $51.54 for 2012.

[19] Although Mapleview took the position that its only obligation was to provide a statement of actual expenses, it ultimately yielded and provided detailed backup information for all of these years by letter dated September 19, 2014. This only led to further demands and disputes. As it turned out, one of the side effects of this exercise was that – after Mapleview had completed this more thorough review of the cost reconciliations – its claim for backward-looking adjustments only increased. In addition to the raised monthly payments of $7,250.84 going forward, the effect of the reconciliations reflected in the 2009-2013 annual statements was to increase Mapleview’s demand for payment for shortfalls said to be due to it under the Lease to $33,328.99 (an amount that, with interest, had increased to a little over $56,000 by the time of the hearing of the application).

[20] Papa Kerollus did not pay any of these amounts, including the admitted arrears. Instead, it continued to pay only the $6,233.84 per month that it had been paying for the previous several years, and the running dispute continued.

[21] Papa Kerollus objected both to the increased monthly amount and to the lump sum demanded. It questioned some of the mathematics. It contested the percentage allocation of taxes and operating expenses as between it and the adjacent tenant, RBC, based on the proportionate square footage of the two premises, something that would affect the 15% management fee Mapleview was charging as well.[^1] Papa Kerollus also contended that Mapleview had changed the method of billing subcontractors without advising it and that insurance costs were improperly attributed to it instead of being apportioned between it and RBC.

[22] During these exchanges, each party took care to preserve its position on the issue of renewal. Mapleview insisted that the renewal option could not be exercised because it was void for uncertainty and because Papa Kerollus continued to be in default in respect of both the rent-related covenant and the non-rent covenants. Papa Kerollus continued to deny any default that would preclude it from exercising the renewal option, and advised that it intended to do so.

[23] By letter dated November 6, 2014, but not delivered until November 27, Papa Kerollus purported to exercise the option to renew. These proceedings followed.

The Issues

[24] There are two issues to be determined on the appeal:

(1) Did the application judge err in holding that the renewal option clause was not void for uncertainty?

(2) Did the application judge err in holding that Papa Kerollus was entitled to exercise the renewal option once the amount of rental arrears owing by it had been determined by way of a trial of that issue?

(1) The Renewal Option is Not Void for Uncertainty

[25] We did not call upon counsel for Papa Kerollus to respond to the argument that the renewal option is void for uncertainty. I agree with the application judge that it is not.

[26] The renewal option provides that the “rental rate” for the renewal period is to be the “then current rate.” This is a rate that can be readily ascertained through resort to expert evidence as to the rental rates for comparable spaces as at the renewal date. If the parties are unable to agree, the rate can be determined, as the application judge concluded, through judicial or other binding means.

[27] It is trite law that the courts will not enforce “an agreement to agree” and that there must be reasonable certainty as to the length of the term of a lease or of a renewal option, as well as to the amount of rent to be paid. See e.g. Re Fice and Department of Public Works of Ontario (1922), 1921 CanLII 529 (ON CA), 64 D.L.R. 535 (Ont. S.C. (A.D.)), at p. 539; Gourlay v. Canadian Department Stores Ltd., 1933 CanLII 9 (SCC), [1933] S.C.R. 329, at p.331; and Re Calford Properties Ltd. and Kelly’s Billiards Ltd. (1973), 1973 CanLII 215 (AB SCTD), 37 D.L.R. (3d) 300 (Alta. S.C. (T.D.)), at pp. 303-5.

[28] However, contrary to Mapleview’s submission, this case does not involve “an agreement to agree” on the renewal rate. In the cases relied upon by Mapleview, there was neither a formula or other objective standard for establishing the rate, nor any mechanism for its determination in the event of a failure to agree: see Sheppard v. Czechoslovak (Toronto) Credit Union Ltd. (1989), 1 R.P.R. (2d) 290 (Ont. D.C.), at p. 293; Young v. Van Beneen, 1953 CanLII 275 (BC CA), [1953] 3 D.L.R. 702 (B.C.C.A.), at pp. 704-5; Great Atlantic & Pacific Co. of Canada v. Topostar (Aurora) Inc., 2006 CanLII 7279 (Ont. S.C.), at paras. 51-52; and Delphi Management Corp. v. Dawson Properties, 2014 ONSC 354, at paras. 10-11.

[29] Here, however, there is a formula or other objective standard for establishing the rate – namely, what is the “then current rate” at the time of renewal. Courts should not strive to set aside a commercial bargain that was intended to have legal effect where a clause in an agreement – even if not precisely expressed – has an ascertainable meaning: Hillas & Co. Ltd. v. Arcos Ltd. (1932), 147 L.T. 503 (Eng. H.L.), at p. 514; and Griffin v. Martens (1988), 1988 CanLII 2852 (BC CA), 27 B.C.L.R. (2d) 152 (C.A.), at p. 153. Adopting this approach in Empress Towers Ltd. v. Bank of Nova Scotia (1991), 1990 CanLII 2207 (BC CA), 73 D.L.R. (4th) 400, at p. 403, leave to appeal refused, [1990] S.C.C.A. No. 472, the British Columbia Court of Appeal concluded that “the courts will try, wherever possible, to give the proper legal effect to any clause that the parties understood and intended was to have legal effect.” I agree.

[30] Here, I am satisfied that the parties intended to make a binding agreement as to the renewal rate; they simply declined to specify that rate in a dollar amount because neither wished to assume the risk of error (too high or too low, depending on their interest) 15 years later. This makes commercial sense. Expressing the renewal rate as the “then current rate” is the functional equivalent of saying the “then market value” or the “then prevailing market rate” – expressions that have been found to be sufficient to overcome a void-for-uncertainty argument. See e.g. Mustard Seed (Calgary) Street Ministry Society v. Century Services Inc., 2009 ABQB 171, 79 R.P.R. (4th) 252, at paras. 31-39, 46 (the “then prevailing market rate”); Brown v. Gould, [1972] 1 Ch. 53, at pp. 60-62 (the “market value of the premises at the time”); Great Atlantic & Pacific Co., at para. 51 (an “objective standard such as ‘market’ rent”); and Empress Towers, at p. 404 (the expression “market rent prevailing at the commencement of [the] renewal term” would itself have sufficed, but the addition of the words “as mutually agreed between the Landlord and the Tenant” rendered the clause void for uncertainty in the circumstances).

[31] I agree with the application judge’s conclusion, at para. 22 of his reasons:

[T]he use of the words “current rates” in the lease is a clear intention that the parties anticipated a renewal, and that the renewal rate would have legal effect. Although there was no provision for arbitration, there was nothing preventing the parties from making proposal[s] and counter-proposals…. If the issue was not resolved, the parties could have resorted to a decision by arbitration or the courts as to the current rate to be applied to the subject premises.

[32] I would not give effect to this ground of appeal.

(2) Rent-Related Default

[33] Respectfully, however, the application judge erred in concluding that Papa Kerollus:

(a) was not in rent-related default at the time of its purported exercise of the option to renew; and,

(b) was entitled to a judicial determination of what amounts were owing under the Lease and, following that, to a further 60 days during which to pay the properly calculated arrears, if any, at which time the renewal notice would be deemed to have been validly constituted (except for the renewal term, which was ordered to mature on May 31, 2020, in any event).

[34] The appeal must be allowed on this basis.

Default

[35] In my view, Papa Kerollus has not satisfied its onus to show that it complied with its obligation to “[have] paid the rent and all other sums payable under [the] Lease when due” as a precondition for the exercise of the renewal option (emphasis added). The application judge erred in law in overlooking the onus Papa Kerollus was required to meet, and made palpable and overriding errors of mixed fact and law in failing to hold, on this record, that Papa Kerollus had not complied with its obligation to pay all additional rent when due and that it therefore was not in a position to exercise the right to renewal of the Lease.

[36] The application judge properly recognized that the option to renew was available only provided that the tenant had complied with its obligation to pay rent and all other sums payable when due. He also correctly observed that a tenant must take a covenant to renew as the tenant finds it and must comply with any conditions precedent that apply to its exercise: see Finch v. Underwood (1876), 2 Ch. 310 (Eng. C.A.), at p. 315; and Clark Auto Body Ltd. v. Integra Custom Collision Ltd., 2007 BCCA 24, 277 D.L.R. (4th) 201, at para. 30.

[37] However, the application judge became overly engrossed in the dispute about the proper amount of the arrears owing by Papa Kerollus to Mapleview, and focussed on how that issue could be resolved before the renewal option was to be exercised. Respectfully, that was not the issue he was required to determine.

[38] The issue for the application judge to have determined was whether Papa Kerollus “[had] paid the rent and all other sums payable under [the] Lease when due”, which was a precondition to its right to exercise the renewal option. On this question, the onus was on Papa Kerollus: 1383421 Ontario Inc. v. Ole Miss Place Inc. (2004), 2003 CanLII 57436 (ON CA), 67 O.R. (3d) 161 (C.A.), at paras. 53-55.

[39] Had the application judge turned his mind to the onus question, he would have realized that Papa Kerollus could not meet its onus on this record.

[40] Undeniably, there is a dispute as to the amount of additional rent Papa Kerollus is required to pay. It may be that “[a] trial is required to make a determination of what is owing by the tenant to the landlord”: para. 41. But there is no real dispute that it is required to pay something. Indeed, as noted, Papa Kerollus acknowledges the admitted arrears of $251.92.

[41] More significantly, perhaps, Papa Kerollus was in breach of its covenant to pay additional rent on a monthly basis in accordance with the terms of the Lease, at least as of June 1, 2014 and thereafter. Recall that clause 3.C of the Lease permits the landlord “as a method of payment … [to] estimate the total cost of [the Tenant’s Percentage] on an annual basis and request the Tenant to pay monthly” one-twelfth of that estimated amount. Under that same clause, the landlord is required to provide a statement of actual expenses annually, at which time “[a]n adjustment of over/under payment will be made”. In addition, clauses 10 through 13 provide that the various payments constituting the Tenant’s Percentage are to be payable “upon demand”.

[42] An obligation to pay upon demand signals that the payment is due once that demand is made. According to Black’s Law Dictionary, the term“payable on demand” means “[p]ayable when presented or upon request for payment; payable at once at any time”: Bryan A. Garner, ed., 10th ed. (St. Paul, Minn.: Thomson Reuters, 2014). Courts have held – albeit in the promissory note context – that “payable on demand” indicates that the debt is “payable at once” and “due as soon as it is delivered”: Edwards v. Walters, [1896] 2 Ch. 157 (Eng. C.A.), at p. 166; and Royal BK. v. Hogg, 1929 CanLII 417 (ON CA), [1930] 2 D.L.R. 488 (Ont. S.C. (A.D.)), at p. 489. See also Boulton v. Langmuir (1897), 24 O.A.R. 618 (C.A.), at p. 622. I see no reason for diverging from that approach here.

[43] Papa Kerollus was notified on May 12, 2014 that its revised monthly payment for rent, operating expenses, property taxes and HST would be increased to $7,250.84 from the previous $6,233.84, effective June 1, 2014, to account for increases in operations and property taxes. This was a reference to the Tenant’s Percentage under clause 3.C of the Lease. Papa Kerollus admits that it has not been paying this increased amount (a difference of $1,017.00 per month). Its explanation is that, in the view of Ms. Athanasios, “[Mapleview] asked me for too much increase for no reason”. Ms. Athanasios acknowledged on her cross-examination that at least starting as of August 1, 2014, “the rent that [Papa Kerollus] had to then pay was $7,250.84” (emphasis added).

[44] By its own admission, then, Papa Kerollus was not in compliance with the method for payment set out in clauses 3.C and 10 through 13, which required the Tenant’s Percentage payments to be made monthly and “upon demand” after receipt of the landlord’s estimate, and later re-adjusted after receipt of the annual statement of actual expenses.

[45] Papa Kerollus has submitted that Mapleview was itself in default with respect to the exercise of the method of payment provided for in clause 3.C by improperly allocating expenses and by not delivering statements of actual expenses for certain of the years prior to 2014. However, even if this submission is correct, it is not an answer to the above. Mapleview could not have been in default of its obligation to provide a statement of actual expenses for the year 2014 at the time of the exercise of the option in November 2014. No such statement was called for at that time.

[46] On any view of the record, Papa Kerollus was therefore in default in the payment of additional rent under the Lease and could not satisfy its onus of establishing that it had complied with all the preconditions for its exercise of the renewal option.

[47] The application judge concluded that “[a] tenant is entitled to know with some degree of accuracy what arrears exist, so that it can put itself in a position where it is not in default when exercising its right to renewal”: para. 40. I do not accept this as a general proposition, at least in the absence of bad faith conduct, which was not established here. As I have noted, the question for these purposes is not what arrears exist, if any, but whether Papa Kerollus complied with the covenants under the Lease that were necessary preconditions for the exercise of the option.

[48] On the wording of this Lease at least, if the tenant cannot show that it “has paid the rent and all other sums payable under [the] Lease when due”, it is not entitled to exercise the renewal option. The Lease does not permit renewal where the tenant has paid “some or most of” the sums payable, or “almost but not all of” the sums payable, or merely the “undisputed” sums payable. The application judge’s interpretation would require the Lease to be read as amended in that fashion.

[49] I do not think that is a permissible interpretation.

[50] A tenant must comply with the terms of a renewal option as a condition of exercising that option. Gillese J.A. summarized the law with respect to this principle and the onus issue in Ole Miss Place Inc. Atpara. 54, she stated:

Where … performance of the lease covenants is a precondition to renewal, the onus rests on the tenant to show due performance. That is, the Tenant has the burden of proof to show that it was not in default. See Fingold v. Hunter, 1944 CanLII 337 (ON CA), [1944] 3 D.L.R. 43, [1944] O.W.N. 287 (Ont. C.A.), at p. 46 D.L.R., in which this court held that where “[d]ue performance of the lessee’s covenants is a condition precedent … The burden is upon the lessee in such a case to show that he had performed the terms upon which his right depends.”

[51] Here, in order to be entitled to exercise the renewal option, Papa Kerollus must show that it “has paid” the rent and all other sums payable (e.g., additional rent) “when due”. This means that the covenant must have been complied with before the option is exercised. Otherwise, the words “has paid” would have no meaning, nor would the words “when due”.

Equitable Considerations

[52] Nor does equity assist Papa Kerollus in these circumstances.

[53] There appear to be conflicting authorities on whether a court can grant equitable relief from the failure to comply with a covenant that is a condition precedent to the renewal of a lease. In Re Pacella and Giuliana (1977), 1977 CanLII 1413 (ON CA), 16 O.R. (2d) 6, at p. 8, this Court concluded that the court “has power to relieve against forfeiture, but no power to excuse performance of conditions precedent.” While Re Pacella was a mortgage renewal case, the Court adopted the following statement from Sparkhall v. Watson, 1953 CanLII 395 (ON SC), [1954] 2 D.L.R. 22 (Ont. H.C.), at pp. 25-26 – a lease renewal case – in support of its conclusion:

Counsel for the lessee also submitted that the order relieving against forfeiture wiped the slate clean and made it impossible to look at the prior default in the payment of rent in order to determine whether the right to renew was lost. The proposition is correct so far as the original term is concerned, but the order does not operate so as to excuse performance of conditions precedent to the right of renewal. The distinction is clearly made in Finch v. Underwood, 2 Ch. D. 310. The Court has power to relieve against forfeiture, but no power to excuse performance of conditions precedent. [Citation omitted.]

[54] More recently, the British Columbia Court of Appeal adopted a similar view in Clark Auto Body. At para. 30, Kirkpatrick J.A. said:

In my opinion, it is essential to distinguish between the court’s equitable jurisdiction to grant relief from forfeiture for the non-observance of covenants in an existing lease and from the failure to comply with conditions precedent to the exercise of an option to renew a lease. In the former, equity recognizes that a tenant may be permitted to cure its default and be relieved from forfeiture to allow it to retain the balance of the term of the lease. In the latter, there is no compulsion on the tenant to exercise the renewal option, but if it does so, the tenant must comply with the conditions precedent. If the tenant fails to comply, it does not suffer a penalty or forfeiture of an existing tenancy. Equity will not intervene.

[55] On the other hand, this Court has also concluded that the court does have jurisdiction to grant equitable relief in circumstances where there has been a failure to comply with a precondition to the renewal of a lease. But the jurisdiction to do so is a “narrow” or a “limited one”: see Ross v. T. Eaton Co. (1993), 1992 CanLII 7470 (ON CA), 11 O.R. (3d) 115 (C.A.), at pp. 124-25; 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., [1993] O.J. No. 2801 (Ont. C.A.), at para. 9; and Ole Miss Place Inc., at para. 80.

[56] It is not necessary to resolve the differences between these two lines of authority here because, in the circumstances of this appeal, Papa Kerollus is not entitled to the benefit of equitable intervention on either approach, in my view. The T. Eaton Co., 120 Adelaide Leaseholds, and Ole Miss Place Inc. line of authorities makes clear that one of the prerequisites for the exercise of any such equitable jurisdiction is that “the tenant has made diligent efforts to comply with the terms of the lease which are unavailing through no default of his or her own”: T. Eaton Co., at p. 125, cited in Ole Miss Place Inc., at para 80.

[57] That cannot be said in favour of Papa Kerollus here, for the reasons outlined above. It acknowledges that it was in default in payment of the admitted arrears of $251.92. This is a small amount, and had Papa Kerollus wished to preserve its position with respect to the renewal option, it could easily have paid it. Similarly, it could have paid the additional $1,017.00 monthly amounts for the period June 1, 2014 onwards – as the payment method in clause 3.C of the Lease required – and then sought a re-adjustment after receipt of the statement of actual expenses for the year 2014. But it did neither. Instead, it held tenaciously to its stance that it would pay nothing further until the dispute over the total amount of arrears owing was resolved. In my view, it was not entitled to do so under the terms of the Lease if it wished to preserve its option to renew.

Disposition

[58] It may or may not be that Mapleview is entitled to all of the amounts that it claims are owing for rent and additional rent under the Lease. However, Papa Kerollus has not met its onus of establishing that it was not in default of its covenant “[to pay] the rent and all other sums payable…when due” as a precondition to its right to exercise the option to renew under clause 2 of the Lease.

[59] For all of the foregoing reasons, although I agree with the application judge that the renewal option was not void for uncertainty, I would allow the appeal, set aside the order below and in its place substitute an order:

(a) that Papa Kerollus VI Inc. was in breach of its obligation under the Lease to have paid the rent and all other sums payable under the Lease when due at the time it purported to exercise the renewal option under the Lease;

(b) that, accordingly, the purported exercise by Papa Kerollus VI Inc. of the renewal option under the Lease is invalid and unenforceable;

(c) that the time for exercising the renewal option under the Lease has expired and the term of the Lease ended on May 31, 2015;

(d) that Papa Kerollus VI Inc. shall have 30 days from the date of this order to vacate the premises, subject to the continued application of the terms of the Lease during that period, and thereafter shall have no right to hold, occupy, remain in possession or control the Demised Premises or in any way access the Demised Premises for any reason; and,

(e) that if the parties cannot come to an agreement, there shall be a trial on the issue of the amounts owing to Mapleview by Papa Kerollus VI Inc. under the Lease.

[60] Mapleview is entitled to its costs of the appeal, fixed in the amount of $20,000 inclusive of disbursements and all applicable taxes.

Released: February 2, 2016

“R.A. Blair J.A.”

“I agree C.W. Hourigan J.A.”

“I agree David Brown J.A.”

[^1]: Mapleview applied a 35%/65% ratio, whereas Papa Kerollus submits that its square footage represents only 24% of the subject property and that it should therefore only be responsible for 24% of the expenses. In this regard, Mapleview says that it was simply continuing the practice established by the original landlord.