Court and Parties
Court of Appeal for Ontario Date: 2022-09-22 Docket: C69578
Feldman, Roberts and Favreau JJ.A.
Between: Bennett Law Chambers Professional Corporation Applicant/ Respondent by cross-application (Respondent on Appeal)
And: Camcentre Holdings Inc. Respondent/ Applicant by cross-application (Appellant on Appeal)
Counsel: Symon Zucker and Nancy J. Tourgis, for the appellant Brian M. Jenkins, for the respondent
Heard: March 16, 2022
On appeal from the judgment of Justice Michael G. Emery of the Superior Court of Justice, dated May 10, 2021.
Feldman J.A.:
[1] The issue in this case is whether a Notice of Termination of a commercial lease was effective to terminate the lease. The application judge found that it was not. For the reasons that follow, I would dismiss the appeal.
Facts
[2] The respondent tenant entered into the lease for Suite 201 at 151 City Centre Drive with the owner, Desjardins Financial Security Life Insurance Company on February 1, 2011 for a five-year term. In August 2015 they entered into an amending agreement that extended the lease for a further seven years, expiring on January 31, 2023. The lease was subsequently assigned by Desjardins to the appellant landlord, Camcentre Holdings Inc. (“Camcentre”) when it purchased the building.
[3] Camcentre’s intention in purchasing the building was to tear it down and develop the property as a condominium complex. After Camcentre received authorization from Tarion Warranty Corporation (“Tarion”) on or about March 29, 2019 to begin marketing residential condominium units, it set up a sales office at 151 City Centre Drive and sold approximately 943 residential units, with advance sales totalling more than $557 million.
[4] The physical redevelopment was scheduled to commence in April 2020. Before demolition could occur, asbestos removal was required. That process was to commence at the beginning of May 2020 and take two months to complete. No permit was required to remove asbestos. However, all tenants had to have vacated the building before the asbestos abatement process could begin. By October 2019 there were 20 tenants remaining in the building. They were all given 6 months’ notice to vacate.
[5] The tenant’s lease contained article 15.05 which provides:
15.05 TERMINATION ON DEMOLITION If at any time the Landlord shall have decided to substantially redevelop or reconstruct the Project to the extent that vacant possession of the Leased Premises is necessary or expedient or to demolish the building of which the Leased Premises form a part, the Landlord may terminate this Lease by giving six months notice in writing to the Tenant. Such termination shall not be effective unless at the end of the notice period the Landlord shall have obtained all requisite permits and authorizations for the commencement of such redevelopment, reconstruction or demolition.
[6] The landlord delivered the following written notice to the tenant on October 31, 2019 (“Notice of Termination”):
Please be advised that, pursuant to Section 15.05 of the Lease, the Landlord has decided to demolish the building of which the Leased Premises forms a part and is hereby exercising its right to terminate the Lease as set out herein.
The Landlord does hereby provide six (6) months written notice of the termination of the Lease and the Tenant is required to deliver vacant possession of the Leased Premises by April 30, 2020.
[7] Because of the state of emergency announced by the Ontario government on March 15, 2020, by March 30, 2020, the tenant was no longer operating the law office at the leased premises and instead it was being operated remotely. On April 14, the state of emergency was extended to May 12, 2020. On or around April 24, 2020, the tenant made inquiries at the City of Mississauga and learned that the landlord had not obtained any permits to demolish or to substantially renovate the building.
[8] On April 27, 2020, the tenant requested that the landlord work with it to “arrange a mutually agreeable date in the very near future…to relocate its offices.” When the landlord advised that it could not delay the redevelopment by a month, the tenant took the position that the notice was not valid because the landlord had not obtained a demolition permit, and it refused to deliver vacant possession of the leased premises.
[9] The landlord proceeded to exclude all tenants from the building on May 1, 2020 in order to carry out the asbestos abatement. While no permit was required to conduct asbestos abatement, York Demolition Corp. had received all authorizations necessary to commence the abatement removals. The landlord ensured that all offices were vacated including the tenant’s Suite 201, and removed all files and personal property from the unit and moved them to storage.
[10] Although the tenant suggested that it would bring an injunction proceeding to prevent the termination of the lease, it did not bring that proceeding. Instead, the tenant brought an application for a declaration that the lease had not been terminated by the Notice of Termination because the landlord had not obtained a demolition permit.
[11] The landlord brought a cross-application, which it pursued in the alternative, that the lease was terminated by the tenant’s breaches of lease before April 30, 2020 by transferring the lease without consent to a corporation and breaching use restrictions by allowing other lawyers and paralegals to use the leased premises as subtenants. In furtherance of the cross-application, the landlord sent out notices of default giving the tenant a time limit to rectify the breaches, with the following covering letter:
As a result of the position you have taken with our application, we are delivering two notices of default. These notices of default are without prejudice to our position that the lease has been terminated as a result of the Notice of Termination dated October 31, 2019.
[12] The tenant did not pay any rent for May 2020, or provide evidence that it took steps to rectify the alleged breaches.
Findings by the application judge on the application and cross-application
[13] The application judge commenced his analysis by referring to the legal principles from two authorities, Goodyear Canada Inc. v. Burnhamthorpe Square Inc. (1992), 41 O.R. (3d) 321, 166 D.L.R. (4th) 625 (C.A.), and Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. He noted that in Goodyear, the Court of Appeal held that courts should take a flexible approach to notices to terminate a commercial tenancy if there is doubt regarding the termination date. In Sattva, the Supreme Court of Canada set out principles for interpretation of commercial agreements. The application judge referred to three: (1) taking a practical non-technical approach to determining the intentions of the parties; (2) reading the contract as a whole consistent with the circumstances of the parties when it was formed; and (3) employing contextual factors that make up the factual matrix including the purpose of the agreement and the relationship between the parties: Sattva, at paras. 46-47.
[14] The purpose of the demolition clause, s. 15.05 of the lease, was to give the landlord the ability to terminate the lease where it decides to substantially renovate or redevelop the property and vacant possession or demolition is needed. He noted that the requirement for permits was to ensure that the landlord’s contractual right would not be misused.
[15] In this case there was no dispute that the decision to demolish was genuine, that demolition was imminent, and that vacant possession of the whole building was required. The issue for the application judge was “whether the asbestos abatement, which did not require a permit or authorization, was the commencement of the demolition process.”
[16] The landlord representative’s understanding was that the landlord could not obtain a demolition permit until the asbestos abatement was complete. In cross-examination, the landlord’s representative stated that a conditional demolition permit under the Building Code Act, 1992, S.O. 1992, c. 23 “may be able to be issued” before asbestos abatement is completed. He also agreed that the landlord was not precluded from applying for a demolition permit at the beginning of the project but stated that it would not be practical to do that.
[17] The application judge considered s. 8(2) of the Building Code Act which provides that the chief building official in a municipality shall issue a demolition permit unless the demolition would contravene the Act, the building code or “any other applicable law”. Section 6(1) of O. Reg. 278/05 under the Ontario Health and Safety Act, R.S.O. 1990, c. O.1 (“OHSA”) provides:
The demolition of all or part of machinery, equipment, a building, aircraft, locomotive, railway car, vehicle or ship shall be carried out or continued only when any asbestos-containing material that may be disturbed during the work has been removed to the extent practicable.
[18] In determining whether contravention of s. 6 of the OHSA regulation amounts to contravention of “any applicable law” within the meaning of s. 8(2) of the Building Code Act, the application judge referred to the Superior Court decision in Crober v. Corporation of the Municipality of South Dundas, 2016 ONSC 148. In that case, the issue was whether a building permit that had been issued should be rescinded on three bases. One was that the project, once built, would contravene s. 14(1) of the Environmental Protection Act, R.S.O. 1990, c. E.19 (“EPA”) by emitting noise and contaminants: Crober, at para. 104. The court referred to s. 1.4.1.3(1) of O. Reg. 332/12 of the Building Code Act, which provides that: “[f]or the purposes of clause 8(2)(a) of the Act, applicable law means,” (emphasis in original) followed by a list of provisions that does not include s. 14(1) of the EPA: Crober, at paras. 107-109. The court in Crober concluded, therefore, that contravention of that section was not applicable to the issuance of a building permit: at paras. 110-111.
[19] Applying the same reasoning, the application judge found that because s. 6 of the OHSA regulation is not one of the listed applicable laws in s. 1.4.1.3(1) of O. Reg. 332/12, therefore non-compliance with that regulation does not prevent the issuance of a demolition permit. He also added that “[a]t the very least, it was open to Camcentre to obtain a conditional permit prior to April 30, 2020”.
[20] The application judge also rejected the landlord’s argument that asbestos abatement constituted “the commencement of the demolition process” within the meaning of s. 15.05 of the lease. Specifically, he found: “I do not accept that the asbestos abatement was a precursor to demolition work to justify Camcentre’s decision not to obtain a demolition permit by the date given to terminate the lease.”
[21] In interpreting s. 15.05 of the lease, the application judge found that by applying a common-sense, practical approach as required by Sattva, the correct conclusion was that having chosen to name “demolition” in the Notice of Termination as the reason for requiring vacant possession, the landlord was required to obtain a demolition permit in order to comply with the notice. He added that to hold otherwise would constitute a rewriting of the contract.
[22] As a result, the application judge concluded that the Notice of Termination was not effective and the lease therefore continued as valid and subsisting after April 30, 2020.
[23] He then turned to the landlord’s cross-application and found that the landlord’s subsequent notices of termination also did not have the effect of terminating the lease, but that finding was without prejudice to the landlord’s right to sue for breach of the lease and for an accounting. As part of the analysis, he addressed the issue whether by serving the subsequent notices, the landlord had thereby waived its Notice of Termination under the demolition clause.
[24] On that issue, the application judge found that although the subsequent notices were delivered by the landlord under a cover letter that explained that they were being delivered without prejudice to its position that the lease had been terminated by the Notice of Termination under the demolition clause, nevertheless they were intended to operate with prejudice, and therefore had the effect of recognizing that the lease remained in effect after April 30, 2020 and constituted a waiver of the Notice of Termination under the demolition clause.
Issues on the Appeal
[25] The landlord appeals only the finding by the application judge that the Notice of Termination under s. 15.05 of the lease was not effective to terminate the lease on April 30, 2020. There is no appeal of the dismissal of the landlord’s cross-application. However, the tenant relies on the application judge’s finding on the cross-application that by serving the subsequent notices of termination for breach of the lease, the landlord waived reliance on the Notice of Termination and confirmed the lease.
[26] There are therefore two potential issues on the appeal: (1) did the application judge err in fact or in law by finding that the Notice of Termination did not comply with s. 15.05 of the lease and was therefore ineffective to terminate the lease as of April 30, 2020; and (2) if the Notice of Termination was valid, did the landlord waive reliance on the notice by serving two subsequent notices of breach of the lease?
Analysis
(1) Did the application judge err in fact or in law by finding that the Notice of Termination did not comply with s. 15.05 of the lease and was therefore ineffective to terminate the lease as of April 30, 2020?
[27] The task in this case was to examine s. 15.05 of the lease together with the Notice of Termination that was given pursuant to that section in order to determine (a) whether the notice complied with the lease provision, and (b) whether the landlord complied with the notice by obtaining the requisite permits in accordance with the lease provision.
[28] The application judge correctly referred to Goodyear, the governing case on the proper approach to interpreting and enforcing a notice to vacate a commercial lease, and to Sattva, the governing case on the proper approach to the interpretation of commercial contracts.
[29] In Goodyear, the commencement date of the lease was unclear, and therefore the date of termination was also unclear. The application judge determined the commencement date, then found that because the notice period chosen did not end on the anniversary of the commencement of the lease, it was non-compliant with the requirement to give 6 months’ notice of termination: Goodyear, at para. 86.
[30] On appeal, the Court of Appeal for Ontario articulated a new and different approach to the interpretation and application of notices to vacate commercial tenancies, mandating a flexible test rather than a technical one, “preferring… fairness over technicality”: Goodyear, at paras. 88-89. The court quoted from the House of Lords decision in Mannai Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd., [1997] 2 W.L.R. 945, [1997] A.C. 749 (H.L.), at p. 962:
[T]he inquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases.
[31] While this case dealt with flexibility on the date for termination of the lease, the principle articulated by the court is one of general application, as demonstrated by the quoted paragraph from the House of Lords decision. The issue is whether the recipient of the notice would have understood what was intended by the notice.
[32] In Sattva, the Supreme Court of Canada articulated a similar approach to the interpretation of contracts, referring to a practical, “common-sense approach not dominated by technical rules of construction” where the “overriding concern is to determine ‘the intent of the parties and the scope of their understanding’”: at para. 47, citing Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27.
[33] Section 15.05 of the lease is reproduced here again for ease of reference:
15.05 TERMINATION ON DEMOLITION If at any time the Landlord shall have decided to substantially redevelop or reconstruct the Project to the extent that vacant possession of the Leased Premises is necessary or expedient or to demolish the building of which the Leased Premises form a part, the Landlord may terminate this Lease by giving six months notice in writing to the Tenant. Such termination shall not be effective unless at the end of the notice period the Landlord shall have obtained all requisite permits and authorizations for the commencement of such redevelopment, reconstruction or demolition.
[34] The term “project” is defined in the lease as the building known as 151 City Centre Drive. There is no issue in this case that the landlord had decided to substantially redevelop or reconstruct the project and that it required vacant possession of the entire building, including the leased premises of the tenant, in order to demolish the building. The landlord had received Tarion approval to begin to sell units in the redeveloped project and had sold approximately 943 units by October 2019, when it was ready to demolish.
[35] In order to obtain vacant possession from the final 20 tenants, including the respondent, the landlord gave 6 months’ notice, citing s. 15.05 of the lease and stating that it required the premises for demolition.
[36] It is also undisputed that before it could commence demolition, the landlord was required to conduct asbestos abatement from the entire building, and that no permits were required to do so. The asbestos abatement would take about two months to complete. It is also undisputed that the landlord would require a demolition permit to commence demolition and that it had not applied for or obtained a demolition permit by April 30, 2020.
[37] The sole issue therefore was whether the landlord had complied with the second sentence of s. 15.05 i.e., had the landlord obtained “all requisite permits and authorizations for the commencement of such redevelopment, reconstruction or demolition”?
[38] To answer that question the application judge took three approaches. First, he determined that compliance with the asbestos abatement requirement of s. 6 of the OHSA regulation was not required before a demolition permit could be obtained, or at least a conditional demolition permit. Second, he found that asbestos abatement was not “the commencement” of the demolition process within the meaning of s. 15.05. And third, he found that because the landlord had relied on demolition as opposed to redevelopment as the reason for requiring vacant possession in the Notice of Termination, it therefore had to have a demolition permit in order to comply.
[39] I will examine each of these findings in turn. The first finding is that the landlord was not prevented from obtaining a demolition permit before it began or completed the asbestos abatement. This finding by the application judge was not challenged on the appeal. While the landlord’s original evidence and understanding was that it first had to do the asbestos abatement before it could obtain a demolition permit, the application judge concluded that in law that was not the case. Therefore, on the record before the court, the landlord was not prevented from obtaining the demolition permit by April 30, 2020, had it sought to do so.
[40] The second finding is the application judge’s interpretation of the word “commencement” in the context of the second sentence of s. 15.05 of the lease.
[41] This raises the preliminary issue of the standard of review. Interestingly, it is clear from the Manitoba Court of Appeal’s decision in Arnold v. 2261324 Manitoba Ltd. (1994), 97 Man. R. (2d) 216, that the clause in question is a standard form clause in commercial leases used across Canada. Therefore, the decision in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23 would suggest that the standard of review for the interpretation of the clause is correctness: at para. 4. However, there is always a factual matrix when any lease is negotiated, which would attract a more deferential standard of review in accordance with Sattva.
[42] In this case, the negotiation of the lease terms is not in issue. The issue is the application of the words used to the factual circumstances that arose when the notice was given and when it was intended to take effect. The landlord submits that asbestos abatement is the commencement of the demolition process within the meaning of the clause.
[43] In my view, the applicable standard of review is the deferential standard applying to questions of mixed fact and law. In any event, I agree with the application judge’s conclusion. While asbestos abatement is a precondition to beginning demolition, it is not the commencement of demolition. The word commencement must be read in the context of the sentence, which is the obtaining of permits to allow demolition to commence. In that context, commencement is the first step in the demolition process that is permitted to occur because the requisite permit has been obtained.
[44] The interpretation suggested by the landlord could have the effect of undermining the effectiveness of the clause in the lease. The purpose of the caveat contained in s. 15.05 is to prevent a landlord from terminating a lease on the basis that it requires vacant possession for redevelopment or demolition, when the landlord is not in fact proceeding because it does not have the requisite permits. There may be many preconditions to demolition or functions such as cleaning out the space which do not require a permit. If such functions were treated as the commencement of demolition before the permit is obtained, it could neutralize the protective effect of the clause.
[45] The application judge’s third basis for his conclusion that the landlord had not complied with s. 15.05 of the lease was the landlord’s reliance on demolition in the Notice of Termination rather than redevelopment, one of the other bases on which s. 15.05 allows the landlord to terminate the lease. The landlord’s position is that the reason it required vacant possession by the beginning of May 2020, was to conduct asbestos abatement preliminary to demolition, which itself was preliminary to reconstructing the project and part of the redevelopment process. Therefore, whether it used the word redevelopment, reconstruction or demolition in the notice, it did not require any permits to commence with the first step which was asbestos abatement.
[46] In my view, the application judge made no error in giving effect to the words used in the Notice of Termination including the word demolition. While the tenant was well aware that the project was being redeveloped before the end of its lease term, the tenant was entitled to rely on the words of the notice in conjunction with the protection contained in s. 15.05 of the lease that a permit was required to be in place before the notice could be effective.
[47] Had the Notice of Termination relied on redevelopment rather than demolition, arguably the result would have been the same on this record, because the next step was demolition for which a permit was required. However, if it had been the case that the permit could not have been obtained before the asbestos abatement was done, then had the landlord used the word redevelopment in the notice, its position that the next step was asbestos abatement that required no permit for the notice to be effective, could have been a tenable one.
[48] To summarize, the correct approach to interpreting a notice to vacate a commercial lease is fairness rather than technicality. That approach requires the court to consider and assess what the tenant would have understood about the intent and effect of the Notice of Termination in conjunction with s. 15.05 of the lease. In this case, while the tenant knew that redevelopment including demolition of the building was imminent, it also knew that no demolition permit had yet been obtained. It was not unfair to require the landlord to comply with its obligations under the demolition clause of the lease so that the tenant would know that vacant possession was actually required by the date in the notice.
(2) If the Notice of Termination was valid, did the landlord waive reliance on the Notice of Termination by serving two subsequent notices of breach of the lease?
[49] This issue arose in the landlord’s cross-application. The landlord served two notices of breach of the lease and termination based on those breaches. The notices were served without prejudice to the landlord’s position that the lease had been terminated by the Notice of Termination dated October 31, 2019.
[50] In the context of the landlord’s cross-application, the application judge made a finding that by serving subsequent notices of breach of the lease, the landlord had waived its reliance on the October 31, 2019 Notice of Termination.
[51] That finding by the application judge was not appealed by the landlord, presumably because it did not appeal the dismissal of the cross-application.
[52] Because I would dismiss the appeal of the application judge’s decision on the application, that the Notice of Termination was not effective to terminate the lease, there is no need to address the finding of the application judge on the cross-application which was not appealed.
Result
[53] I would dismiss the appeal with costs to the respondent tenant fixed in the amount of $15,000 inclusive of disbursements and HST.
“K. Feldman J.A.”
“I agree. L. Favreau J.A.”
L.B. Roberts J.A. (Dissenting):
[54] I have had the benefit of reading my colleague’s well written reasons. Respectfully, I do not agree that the landlord’s Notice of Termination under s. 15.05 of the lease was ineffective. In my view, the application judge erred in his interpretation of the lease as applied to the factual circumstances of this case by holding that demolition of the building, including the premises leased by the tenant (“the building”), did not commence with the asbestos abatement and by failing to determine when demolition did commence. I would therefore allow the appeal.
[55] It is not necessary for me to repeat the summary of the relevant facts ably set out by my colleague, on which I rely.
(1) Commencement of demolition under s. 15.05 of the lease
[56] I start my analysis in agreement with my colleague that there is nothing unfair in requiring the landlord to comply with the provisions of s. 15.05 of the parties’ lease as invoked by the form of termination clause that the landlord chose to deliver to its tenants, including the respondent tenant. The landlord is a very sophisticated developer. It relied on demolition as the reason for termination, rather than on the terms “substantially redevelop or reconstruct”. As a result, it was required to have obtained by the end of the six-month notice period of termination “all requisite permits and authorizations for the commencement of such … demolition.”
[57] I also take no issue with the application judge’s finding that there was no impediment to the landlord obtaining a demolition permit prior to the asbestos abatement insofar as it arises out of the application judge’s assessment of the evidence on the record before him. Specifically, this finding is supported by the testimony of the landlord’s principal that it would have been possible but not practical to obtain a conditional demolition permit because the next stage of demolition could not commence until the asbestos abatement was completed.
[58] However, whether the landlord could have obtained a conditional demolition permit does not determine the validity of the landlord’s termination notice. This is because the application and this appeal turn on the issue of when demolition commenced for the purpose of determining the validity of the Notice of Termination given by the landlord under s. 15.05 of the parties’ lease.
[59] The application judge rejected the landlord’s position that demolition commenced with the start of the asbestos abatement process, as follows:
I do not agree with [the landlord’s] argument that the asbestos abatement was the commencement of the demolition process. I do not accept that the asbestos abatement was a precursor to demolition work to justify [the landlord’s] decision not to obtain a demolition permit by the date given to terminate the lease.
[60] As a result, the application judge found that the landlord’s Notice of Termination was not effective on April 30, 2020 because the landlord “did not have the required demolition permit by that date.”
[61] As my colleague rightly states, the issue is the application of the words used in s. 15.05 of the lease to the factual circumstances that arose when the Notice of Termination was given and when it was intended to take effect. The application judge therefore had to interpret the meaning of “demolition” and “commencement” of the demolition process under s. 15.05 of the lease in the light of the facts of this case. “Demolition” and “commencement” of the demolition process are not defined under the lease.
[62] As my colleague notes, the application judge set out a litany of unchallenged facts. Notably, there was no dispute that the landlord’s decision to demolish the building was genuine and that demolition was imminent. There was also no issue that asbestos abatement of the entire building was required prior to knocking the building down, vacant possession was required to carry out the abatement, and no permit was required for the abatement.
[63] The application judge did not turn to or rely on any statutory or common law definitions respecting the meaning of demolition or its commencement but appeared to accept the evidence given by the landlord’s principal about the demolition process followed by the landlord in this case. Specifically, the application judge appeared to accept the landlord’s uncontroverted evidence about the demolition process and stated the following:
[The landlord] planned the demolition of 151 City Centre Drive in stages. The first stage was the abatement of asbestos. According to [the landlord’s] plan, a demolition permit issued by the City of Mississauga was not necessary for this stage. [The landlord’s] contractor had all required documents and was in a legal position to commence the abatement stage on May 4, 2020. [Emphasis added.]
[64] This passage reflects the only evidence on the record about the demolition process that was provided by the landlord’s principal in his affidavit and on his cross-examination that the first step of the demolition process was to begin with asbestos abatement. The landlord was not challenged on this evidence by the tenant’s evidence or on cross-examination.
[65] In other words, the only evidence about the demolition process in this case is that it was planned in stages and that the first stage of the demolition process was the asbestos abatement for which no permit from the municipality was required. There was no evidence that any other permits were required at that stage or that “all requisite permits” for the commencement of the demolition had not been obtained by the end of the six-month termination notice period. That there might have been other permits required for other stages in the demolition process did not affect the effectiveness of the notice at the first stage, that is, the commencement of the process. This evidence was not rejected by the application judge. Indeed, there was no basis to do so. There was no evidence to the contrary.
[66] In my view, the application judge’s finding that the asbestos abatement was not the commencement of the demolition process was patently unreasonable. This finding had no evidentiary foundation and contradicted the unchallenged evidence that he did not reject but appears to have accepted that the asbestos abatement was the first stage of the demolition process. It is not disputed that no occupant could have been in the building when the asbestos abatement began for safety reasons. The asbestos abatement was therefore beyond doubt the start of demolition for which, purposively understood, vacant possession was critical. Viewed purposively, the finding that the landlord’s Notice of Termination was not effective because the landlord had not obtained all requisite permits in accordance with s. 15.05 of the lease is therefore, in my view, unreasonable. As such, the application judge’s conclusion that the Notice of Termination was not effective should be set aside.
[67] Even if it were open to the application judge to find that the asbestos abatement did not mark the commencement of the demolition process, the additional difficulty with his decision is that he never made any finding as to what constituted “demolition” and when it commenced for the purposes of s. 15.05 of the lease. He simply determined that demolition did not begin with the commencement of the asbestos abatement. That determination, however, did not end the analysis. Given the evidence before him, the application judge was required to go on and determine when and at what stage demolition began and whether, at that stage, any permits were required.
[68] The landlord’s principal explained that demolition must take place in stages and the stages have different approval and permit requirements. As he graphically put it, to obtain a permit for demolition, “[Y]ou don’t go to the City and say, ‘We want to blow up a building or demolish.’” Rather, as he explained, “You need to provide detailed drawings and adhere to conditions prior to starting the structural” and “[p]art of the critical path was beginning the demolition process by starting the abatement, and then doing the more structural aspect of the demolition.”
[69] If demolition did not start with the asbestos abatement, when and how did demolition commence? At what stage of the demolition process was a permit required? Was a permit required for the commencement of demolition by the end of the six-month notice period under the termination notice? The application judge did not determine these questions that were necessary for the resolution of the principal question before him: was the landlord’s Notice of Termination ineffective because all permits that were required for the commencement of demolition had not been obtained by the end of the notice period? As I earlier indicated, it is my opinion that on any reasonable view, given the lethality of asbestos exposure, the commencement of the demolition process could only have been when the asbestos abatement, which clearly required vacant possession, began.
[70] Based on the specific facts of this case, where there is no question that the landlord was genuinely invoking s. 15.05 to terminate the lease for demolition, I do not see any danger of misuse of the termination clause by the landlord here. This is not a case of a landlord acting in bad faith by pretending to demolish a building in order to rid itself of tenants. Indeed, the tenant admitted on cross-examination that it was aware of the landlord’s redevelopment plan, including that it intended to demolish the building.
[71] It was the tenant’s onus to prove that the notice was ineffective because, as it alleged, all requisite permits had not been obtained. It failed to put forward any evidence or refer to any statutory or regulatory authority that required the landlord to obtain permits to proceed with the first stage of the demolition of the premises by the end of the notice period. The only evidence before the application judge, which stood unchallenged, was that no permit was required for the asbestos abatement and that vacant possession was required for that abatement to start. There was no evidence that any other permits were required for the commencement of demolition by the end of the notice period under the termination notice. As a result, the application judge should have dismissed the tenant’s application.
(2) Waiver
[72] I agree that it is not necessary to determine whether the landlord waived the Notice of Termination by delivering the subsequent notices of termination on May 11, 2020. The application judge’s finding that the landlord had waived the Notice of Termination pertained to the landlord’s cross-application that was dismissed and from which no appeal was taken. It is therefore not a live issue before this panel.
[73] If I am wrong, I would find that the application judge erred in determining that the landlord waived the initial Notice of Termination by delivering the subsequent notices of termination based on the tenant’s alleged breaches of the lease. Waiver must be clear and unequivocal. Here, the tenant’s alleged breaches simply constituted an additional and different basis on which the landlord relied to terminate the lease, which was not inconsistent with the first Notice of Termination based on s. 15.05 of the lease.
Disposition
[74] Accordingly, I would allow the appeal, set aside the application judge’s decision, and dismiss the tenant’s application. I would grant the appellant the costs of the appeal in the amount of $15,000 and the costs on the application in the amount of $46,557, both amounts inclusive of disbursements and applicable taxes.
Released: September 22, 2022 “K. Feldman J.A.”
“I agree. L.B Roberts J.A.”
“I agree. L. Favreau J.A.”
