Court File and Parties

COURT FILE NO.: CV-16-556099 DATE: 20190819 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Harvey Kalles Realty Inc. Plaintiff – and – BSaR (Eglinton) LP Defendant

COUNSEL: Ian Cantor, for the Plaintiff Jeffery Larry and Emily Home, for the Defendant

HEARD: April 8-12, 2019

M.A. SANDERSON J.

REASONS FOR JUDGMENT

Introduction

[1] This is an action for payment of a leasing commission ("the commission") on a commercial lease in respect of property at 925-935 Eglinton Avenue West in Toronto ("925").

[2] The Plaintiff, a real estate brokerage and assignee of Commission payable under an October 7, 2012 Commission Agreement ("the Commission Agreement” or “the Agreement") between Alert Real Estate Limited ("Alert") and BSaR (Eglinton) ("BSaR"), sues the Defendant, BSaR, the owner of 925, for breach of contract/failure to pay commission of $217,592 + HST = $245,878.96 plus interest thereon.

[3] If commission is held to be payable, the parties have agreed that the principal amount owing is $245,878.96. There is a dispute about the quantum of interest payable on that amount.

[4] The Supreme Court of Canada in Creston Moly v Sattva Capital Corporation 2014 SCC 53 / Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 (“Sattva”) has provided guidance on the approach this Court should follow in interpreting contracts such as the Agreement here.

[5] The Supreme Court of Canada has held that interpretation of contracts involves deciding questions of mixed fact and law.

[6] The task for this Court, in interpreting Exhibit 2, the Commission Agreement, and its overriding concern must be to determine what the parties using the words against the relevant background would reasonably have been understood to mean. This Court must determine the objective intent of parties to the Agreement, (Alert and BSaR) and the scope of their understanding at the time they entered into the Agreement.

[7] The Supreme Court of Canada has noted that the interpretation of contracts has evolved towards a practical common sense approach not dominated by technical rules of construction. To determine the intent of the parties and the scope of their understanding, a decision maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words do not have an immutable or absolute meaning. Since contracts are not made in a vacuum, a Court should know the commercial purpose of the contract, and this in turn, presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

[8] The meaning of the words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement. The meaning which a document would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.

[9] In contractual interpretation the goal of the exercise is to ascertain the objective intent of the parties - a fact specific goal - through the application of the legal principles of interpretation.

[10] While the surrounding circumstances will be considered they must not be allowed to overwhelm the words of the agreement. The goal of examining such evidence is to deepen a decision maker's understanding of the mutual and objective intentions of the parties as expressed in the words of the contract.

[11] The court should look at objective evidence of the background facts at the time of the execution of the contact, that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting.

[12] The parol evidence rule precludes, among other things, evidence of the subjective intentions of the parties.

[13] With this direction in mind, this Court will set out the background facts/the factual matrix of the Commission Agreement.

[14] For the Commission to be payable there are two requirements set out in the Agreement:

(1) an Offer to Lease…must be entered into between BSaR and Loblaw or any associated affiliated related company or individual…(the Tenant) within 24 months from the date of the Commission Agreement i.e. on or before October 7, 2014; and (2) the Tenant has signed a Lease with all conditions met or waived.

[15] The parties agree that the first requirement was met when BSaR and Loblaw Properties Limited signed Exhibit 7, the Offer to Lease dated July 10, 2013 ("the Offer to Lease").

[16] The parties disagree about whether the second requirement was ever met.

[17] Several interpretation issues require resolution:

(1) Was the Offer to Lease Exhibit 7, ever terminated? (2) If the Offer to Lease was never terminated was requirement 2, signing of a Lease with all conditions met or waived, fulfilled when Shoppers Realty Inc. (“Shoppers”) and BSaR signed a Lease dated March 4, 2016 (the “Shoppers Lease”) and Loblaw and BSaR signed a mutual release on March 26, 2016? (3) Even if the signing of the Shoppers Lease would otherwise have met requirement 2, is BSaR nevertheless entitled to refuse to pay Commission to the Plaintiff on the basis that Shoppers Drug Mart, the named tenant under the March 4, 2016 Lease, does not qualify as a Tenant under the Commission Agreement because it was not a Loblaw entity as defined in the Commission Agreement at the time it was executed? Viewed objectively, would the parties using the words against the relevant background understand that only entities related to Loblaw at the time the Commission Agreement was entered into fall within the Definition of "Tenant" or would they understand any entities that would become affiliated with Loblaw within 24 months of the date of the Commission Agreement would be included? (4) If Commission is payable how should interest be calculated?

The Factual Matrix

[18] Most of the facts are uncontested.

[19] In 2012, BSaR was planning to construct 925, a 9-story mixed use building including an 8-story residential condominium above grade, parking below grade, and approximately 10,000 square feet of retail space on the ground floor "the commercial space".

[20] In April of 2012, Mr Tarek Sobhi ("Sobhi") a principal of BSaR, reached out to an acquaintance, a Mr Jordan Robins, seeking a recommendation for a commercial rental agent to assist in the leasing of the commercial space. Mr Robins provided the name of Mr Shane Spring ("Spring") of Alert.

[21] Sobhi was looking for a quality tenant with a good covenant.

[22] On August 28, 2012, Spring contacted Sobhi saying he was working with a "national tenant" with a "strong covenant".

[23] Sobhi then provided Exhibit 9, an overview of BSaR's proposed project to Spring.

[24] In September of 2012, Spring, Sobhi, and Sobhi's partner Hershberg met at the 925 model suite/condominium sales office to discuss leasing of the commercial space.

[25] For costs and administrative reasons, Sobhi did not want to split up the ground floor space but preferred to rent the entire commercial space to one tenant.

[26] Although Spring wanted an exclusive listing from BSaR, Sobhi refused to retain Spring/Alert as BSaR's exclusive leasing agent of the commercial space.

[27] Spring intended to identify and propose Loblaw as a potential lessee of the commercial space, but he was not prepared to do so unless and until BSaR had entered into a contract protecting Alert's commission.

[28] On September 12, 2012, the parties signed Exhibit 1, a "fee agreement" providing a 24-hour window within which Spring could present the name of the potential tenant.

[29] On September 13, 2012, Spring divulged to BSaR that the proposed national tenant with the quality covenant was Loblaw "and that he had presented the property for consideration for one of Loblaw banners."

[30] On September 20, 2012, by Exhibit 12, Spring wrote to Sobhi saying he had met at 925 with Loblaw Vice President Real Estate, Mr. Mark Van Doodewaard ("Van Doodewaard") who had posed questions on a number of matters including construction start date, rent details, tenant inducements, etc. Spring relayed those questions to Sobhi and suggested that if BSaR could rent the commercial space to Loblaw, it would be "securing a 15-year deal with options with a tenant with an extremely attractive covenant and use. One Tenant over multiple is obviously a much better situation…"

[31] On September 27, 2012 Spring sent an email confirming that Van Doodewaard would be prepared to meet with Sobhi on October 9, 2012.

[32] On October 3, Spring sent an email, Exhibit 14, copied to Sobhi mentioning that Van Doodewaard wanted to meet with BSaR and Spring on October 9, 2012, to deal with the questions posed in Exhibit 12.

[33] On October 7, 2012, BSaR entered into the Commission Agreement with Alert Real Estate Limited ("the Agreement"), Exhibit 2, in relation to the commercial space.

[34] Spring had prepared a typewritten draft. When Spring and Sobhi met, they made some handwritten additions to the typewritten words, primarily at Sobhi's request. For instance, the parties added the following handwritten words: “It is acknowledged by both parties that the Agent is the exclusive agent in this contemplated transaction and Commission Agreement.” Sobhi acknowledged that at the time the Commission Agreement was entered into, the parties understood that no other agent represented or would represent Loblaw with respect to the leasing of the commercial space.

[35] Sobhi said that at that point, he was prepared to sign the Commission Agreement in the form he did, because Spring had achieved something of value for BSaR - Spring had introduced Loblaw to BSaR and the property.

[36] Paragraph 1 of the Commission Agreement, Exhibit 2, provided as follows:

“As Landlord, I agree that in the event a Letter Agreement, Offer to Lease, Lease Agreement or any other similarly binding agreement (hereinafter known as the "Agreement") is entered into between the Landlord and Loblaw Companies Limited or any associated, related company or individual, nominees or any principals, partnerships, joint ventures, corporations, affiliates or associates for whom it is a nominee or to whom it is directly or indirectly related (hereinafter known as the Tenant) for occupancy of the Property within twenty four (24) months (Landlord's initials required) from mutual acceptance of this Commission Agreement, the Landlord agrees to pay the Agent a commission fee equal to…”

[37] Paragraph 2 provided:

Regardless of the form of Agreement entered into between the Landlord and the Tenant, the Commission shall be deemed to be earned and payable upon the earlier of the Tenant signing a Lease Agreement, with all conditions waived, the date the Tenant takes occupancy of all or part of the property, or the commencement of the payment of rent, or the commencement of the term as provided for in the Agreement, whichever occurs first.

[38] BSaR insisted on the "all conditions waived" term.

[39] Sobhi and Spring gave differing evidence on their subjective intentions as to whether Commission would be payable if the entity that eventually signed the Lease was not a Loblaw affiliate at the time of the execution of the Commission Agreement but became a Loblaw affiliate within the 24 months following the execution of the Commission Agreement.

[40] Spring said he understood that Alert would receive a Commission provided an Offer to Lease was entered into with an entity under the Loblaw umbrella within 24 months of the date of the Agreement and culminated in a finalized Lease.

[41] Sobhi said he understood that for a Commission to be payable, the tenant named on the Lease had to be a Loblaw entity at the time the Commission Agreement was entered into.

[42] The tenant ultimately named on the Lease with BSaR was Shoppers Realty Inc. (“Shoppers Drug Mart”). Shoppers Drug Mart became a Loblaw affiliate within 24 months of the execution of the Commission Agreement. At the time the Commission Agreement was entered into, neither Spring nor Sobhi knew or contemplated that Loblaw would acquire Shoppers Drug Mart.

[43] At the time of entering into the Commission Agreement Sobhi said he was aware that Loblaw was a multibillion dollar enterprise that operated under many different banners. He thought it operated grocery stores.

[44] He acknowledged in cross examination that he was aware, for example, of the Loblaw Joe Fresh clothing banner, but he said he thought that Loblaw only sold Joe Fresh clothing in Loblaw grocery stores.

[45] At the time the Agreement was entered into Sobhi, who has an MBA and certification as a financial planner, was aware that Loblaw could acquire or create businesses in the future.

[46] BSaR had created BSaR (Eglinton) LP to develop 925.

[47] Sobhi said he was unable to identify/name all entities that were affiliated associated or related to Loblaw on the date of the Commission Agreement. He made no effort to do so before he signed the Commission Agreement on behalf of BSaR.

October 7, 2012 - July 10, 2013

[48] Sobhi gave evidence that after the Commission Agreement was signed, he met directly with Loblaw for the first time on October 9, 2012 (two days after the Commission Agreement was signed).

[49] Exhibit 15 sets out a discussion on October 9, 2012 at the first meeting attended by Sobhi with Loblaw. When asked by the Landlord what the concept would be, Van Doodewaard shared that the proposed store would be a cross between the Bloor Market in the Manulife Centre [Toronto] and the Queen and Portland store. The meeting ended with Van Doodewaard requesting a proposal from BSaR outlining terms, including net rent; additional rent; area; term; possession date; fixturing period; commencement date; tenant inducements; build outs; parking arrangements etc.

[50] Further negotiations between Loblaw and BSaR ensued after October 9, with Spring occasionally acting as a go between.

Offer to Lease Dated July 10, 2013

[51] On July 10, 2013 BSaR and Loblaw Properties Limited executed Exhibit 7, an Offer to Lease.

[52] The Offer to Lease provided, inter alia, that Loblaw Properties Limited would lease 9575 square feet on the ground floor of 925 for an initial term of 15 years, would pay net rent of $45 per square foot during the first 5 years, then $47.50 per square foot for the next 5 years and then, $50 per square foot for the next 5 years. There were three 5-year options to extend.

[53] Paragraph 13 of the Offer to Lease set out allowed use and restrictions. The Tenant agreed to initially open for one day as a Loblaw, using one of its non-discount non-low-price conventional banners. From and after the commencement date …the Tenant shall be permitted to use the Leased Premises for the business of the operation of a food supermarket or, subject to the next paragraph such other non-hazardous retail use. Without limiting the generality of the foregoing, BSaR acknowledged that Loblaw Properties Limited had the right to operate a pharmacy selling prescription drugs within the leased premises. Subsequent to opening for business as a fully fixtured … food supermarket, Loblaw agreed if Loblaw intended to change the primary use of the leased premises from that of a food supermarket…it would need BSaR's written consent, … "not to be unreasonably withheld or unduly delayed …".

[54] Paragraph 16 provided that the Lease to be executed by the parties would be the Tenant's Standard Form of Lease. The parties were to use reasonable commercial efforts to finalize and execute the Lease within 60 days after waiver of the conditions in sections 22(a) and 23(a).

[55] Sobhi gave evidence that at the time the Offer to Lease was negotiated, Loblaw insisted on the economic feasibility provision in s 24. Despite Van Doodewaard's assurances that he was committed to that food store at that location, Sobhi said he had worried that Loblaw might be able to refuse to waive the economic feasibility requirement contained in paragraph 24(c) of the Offer to Lease and that it would give Loblaw an out.

[56] The Offer to Lease, Exhibit 7, Schedule A contains a sketch of the Leased premises, an outline of the leased area, but no detailed layout.

Loblaw's Acquisition of Shopper's Drug Mart

[57] Arie Bitton, Senior Director of Real Estate at Shoppers (“Bitton”), gave evidence that the Loblaw acquisition of Shoppers Drug Mart was announced on July 2 or 3, 2013 and closed in March of 2014, within 24 months of the execution of the Commission Agreement, October 7, 2012.

July 10, 2013 - February 2015

2013

[58] BSaR tendered the project to the sub trades in 2013.

[59] Counsel for the Plaintiff called Mr Shaun Rapoz (“Rapoz”) to give evidence. Rapoz said that after the Offer to Lease was finalized, Van Doodewaard, his superior, asked him to become involved to negotiate a final lease for an anticipated Loblaw City Market.

[60] All of 2013 passed during which neither party relied on any automatic termination resulting from failure of either Loblaw or BSaR to comply with or waive conditions in the Offer to Lease.

2014

[61] Construction of 925 started in early 2014. There were many delays.

[62] Discussions between Loblaw (Rapoz) and BSaR about the specifics of the Lease [on the assumption that there would be a City Market in the space] continued throughout 2014.

[63] All of 2014 passed during which neither party relied on any automatic termination provision in the Offer to Lease because of any failure by either party to comply with or waive conditions in the Offer to Lease.

[64] By the end of 2014 the 925 site had been excavated and shored.

[65] By early 2015, BSaR was setting up to pour the floors. Sobhi said he was anxious to receive Loblaw's final specifications, in part so BSaR could pour the floor in the commercial space to accommodate Loblaw' requirements.

[66] Rapoz gave evidence that in early 2015, Loblaw's employees had been having internal discussions about the performance of the Loblaw City Market that had opened for business at King and Shaw in December of 2014. Loblaw had started to have doubts about whether a City Market would work in the 925 commercial space. They concluded that a City Market at 925, with less traffic etc. than at King and Shaw would be a “tough go”.

[67] At the same time, Rapoz gave evidence to the effect that Loblaw had concerns that it might have a legal issue getting out of the Offer to Lease. At that point Loblaw started exploring other options for 925.

[68] By then, Loblaw's acquisition of Shoppers Drug Mart had been completed.

[69] Rapoz said that Loblaw thought if Shoppers were willing to lease the space “it would clear the matter”.

[70] Rapoz said he had several discussions with Sobhi, in which Rapoz told Sobhi that Loblaw was looking at alternatives for this location and saying Loblaw was trying to be sure it kept Sobhi whole in business terms. One such discussion was on February 18, 2015 on the day before Loblaw sent Exhibit 49 to Sobhi.

[71] On February 19, 2015, Loblaw sent Exhibit 49, a letter written by Jennifer Asnani (“Asnani”), Legal Counsel Loblaw Properties Limited to BSaR including the following:

“we have concerns with the economic due diligence investigations we have been conducting for this transaction. In addition, despite several extensions and despite all of our mutual efforts, we have not settled several of the other conditions (including reciprocal agreement Landlord and Tenant's work, schedule for Landlord and Tenant's work and entering into the Lease). We have not yet determined whether to waive our conditions and would like time to consider it. …In the circumstances as the conditions set out in 22(b) 23(b) and 24 have not been fulfilled or waived, the Offer to Lease is automatically terminated and is no longer of any force or effect. … Notwithstanding the foregoing we propose that the Offer to Lease be revived to include the following terms: We both agree to an extension of the conditions in s 22(b) and 23(b) and 24 from February 19, 2015 to March 15, 2015; (2) the right of either party to a 15-day unilateral extension in s. 24 is hereby deleted. (3) All other terms and conditions of the Offer remain in full force and effect except to the extent already waived and time to remain of the essence.”

Loblaw asked BSaR to execute an attached acknowledgement and return it by mail on February 20 or Loblaw would proceed on the basis that the offer was terminated.

[72] On February 20, 2015 Sobhi wrote Exhibit 46 to Asnani at Loblaw:

“We are in receipt of your letter of February 19, 2015. Contrary to the positions set out in your letter, we do not accept that the Offer to Lease has been validly terminated or expired, and it is our view that all of the conditions have been satisfied or waived by course of conduct and that the Offer to Lease is therefore binding upon the parties. We believe that the actions of both the Landlord and Tenant to date have affirmed the continuing validity of the Offer to Lease. In the spirit of cooperation, we suggest that neither party take any further positions with respect to the Offer to Lease until after March 15, 2015.”

[73] Rapoz gave evidence that Sobhi agreed to put things on hold only because Rapoz had already broadcast the option of having Shoppers “come into Loblaw's shoes”.

[74] On March 11, 2015 Asnani wrote Exhibit 51 to BSaR, including the following:

“Further to our exchange of letters dated February 19 and 20, we do not agree with the characterization of Loblaw actions in respect of the Offer to Lease as set out in your letter. However, we will not set out our position further at this point as we believe it is in the parties' mutual interests to engage in discussions to resolve matters.”

[75] On March 12, 2015 BSaR wrote Exhibit 47, a without prejudice letter to Asnani at Loblaw:

“…We continue to maintain our position expressed in our most recent exchange of letters…regarding the status of the Offer…We understand the Tenant is having discussions relating to a possible assignment of its lease obligation that would be acceptable to the landlord pursuant to the terms of the Offer and allowable according to subsequently negotiated lease terms…We look forward to hearing from you and are hopeful that we will be able to reach a mutually acceptable position insofar as our recent divergence of understanding is concerned.”

[76] Bitton gave evidence that in early 2015, his former boss came to him after a meeting at Loblaw and advised him that an issue had arisen at Loblaw in respect of 925. Rapoz gave him a copy of the Offer to Lease (Exhibit 7) between Loblaw and BSaR. He was instructed to determine if “leaving the (Offer to Lease) terms identical", a Shoppers Drug Mart would work in that location. Bitton said he did some calculations and determined that a lease on the same terms as Exhibit 7 could work for Shoppers Drug Mart at that location.

[77] By then, Bitton said, Loblaw had consolidated decision making on Loblaw and Shoppers leases in one Loblaw Real Estate Committee consisting of Loblaw President, Mr Weston, Loblaw CFO Mr De Frayne, Loblaw CAO Ms. Davis, and Shoppers Divisional President Mr Mose.

[78] On April 9, 2015, Loblaw wrote Exhibit 50, a letter to BSaR:

“…We wish to advise you that Shoppers Realty has received preliminary senior management approval to lease the premises on the same financial terms and using the same lease form as LPL has negotiated to date, subject to changes to reflect SDM’s use and business practices…We propose that…2 There will be no agreement or modification to the rights of the Landlord or LPL set out in the Offer unless in writing and signed by both parties.”

[79] At the end of April of 2015, the Loblaw Real Estate Committee had given final approval to the Shoppers Lease at 925 on financial terms identical to those in the Offer to Lease, Exhibit 7.

[80] After final approval was given, Bitton said he worked directly with Sobhi to finalize the Lease. He said although Shoppers typically enters into Offers to Lease before finalizing Leases (on Shoppers forms) in this instance, there was no Shoppers Offer to Lease. They immediately set to work to finalize a Lease on a Loblaw (not a Shoppers) Standard Lease form.

March 4, 2016 - Lease Between Shoppers Drug Mart and BSaR

[81] Exhibit 42, a Lease between Loblaw affiliate/related party Shoppers Realty Inc. and BSaR was signed on March 4, 2016 that included the same financial provisions as contained in Exhibit 7, the earlier Loblaw Offer to Lease.

[82] Bitton said his instructions when finalizing the terms of Exhibit 42, the March 4, 2016 Shoppers Lease were, for instance, to keep the Work and Construction Schedule, Schedule C to Exhibit 42, as identical as possible to the Work and Construction Schedule that was earlier being negotiated by Loblaw and BSaR in fulfillment of Exhibit 7, the Loblaw Offer to Lease.

[83] Exhibit 42, the Shoppers Lease contains the following in s. 5.1:

“…the initial use shall be for the primary purpose of operating a variety/drug store and pharmaceutical dispensary but such initial use shall also include the following specifically enumerated rights… (b) the right to sell food and food products, including the right to sell dairy products frozen foods and prepackaged baked goods … It is hereby acknowledged that in lieu of the Shopper's Use, the Tenant shall be permitted to use the Demised Premises for a “Loblaw” or other comparable or conventional non discount/non-low-price conventional food supermarket such as, by way of example only , a Loblaw , Fortinos, or a new non-discount/non-low-price conventional supermarket , such as by way of example only, “Bloor Street Market” or “ City Market ” including drug store or pharmacy banking services and automated banking machines and such other lawful retail uses as are ancillary from time to time in food supermarket use by the Tenant…” (emphasis added)

[84] Bitton said in effect that Loblaw wanted to keep open the possibility of using 925 as it had intended at the time Exhibit 7 the Loblaw Offer to Lease had been signed. He said if the relocation of Shoppers from Bathurst and Glencairn “did not resonate with customers we'd be able to operate as a Loblaw, including an urban grocery store such as a City Market.”

[85] Bitton in his evidence in chief said that he looked at a Shoppers Lease as a continuance of the Loblaw deal. He said in cross examination that he was not making a legal determination.

[86] Exhibit 43, a Full and Final Release between BSaR and Loblaw Properties Limited "LPL” dated March 21, 2016 included the following recitals:

A. Whereas BSaR and LPL entered into an Offer to Lease dated July10 2013 …; B. Timing for the satisfaction of the conditions precedent in the Offer were extended from time to time; C. LPL takes the position it terminated the Offer pursuant to one or more conditions precedent and BSaR takes the position the conditions were waived by the conduct of LPL; D. Shoppers Realty and or its affiliates and or its permitted transferees pursuant to the Shoppers Lease…has entered into a binding conditional Lease with BSaR for the premises on substantially the same terms as the Offer; and E. The Shoppers Lease is conditional on this Release being fully executed by both BSaR and LPL…

[87] In the Release, LPL released BSaR from any and all claims save and except for those Claims that arise from a breach or alleged breach of the Shoppers Lease by BSaR. BSaR released LPL from any and all claims except those claims that arise from a breach or alleged breach of the Shoppers Lease by Shoppers…At paragraph 3 of the Release, BSaR confirmed that save and except for claims that arise from a breach or alleged breach of the Shoppers Lease by Shoppers it will not institute any claims and shall, inter alia, indemnify and save harmless LPL against any and all claims and related claims for real estate or other fees payable with respect to the Offer to Lease.

[88] When he heard that a Lease had been finalized, on March 16, 2016, in Exhibit 44, Spring wrote Sobhi seeking payment of commission due under the Commission Agreement.

[89] Counsel for Alert/Spring submitted that his introduction of BSaR to Loblaw created great value for BSaR.

[90] Sobhi said the value of the commercial component of 925 was a function among other things of the income it generated and the strength of the covenant behind the Lease. On October 1, 2018 BSaR sold the retail component of 925 for $11.8 million (Exhibit 60).

FINDINGS OF FACT

[91] Although Sobhi gave evidence that at the time the Agreement was entered into he contemplated the use of the commercial space at 925 to be a Loblaw City Market I reject that evidence. I find that the City Market concept was first mentioned to BSaR after the Agreement had already been executed. [See notes of October 9 meeting]

[92] BSaR and LPL/Loblaw signed the Offer to Lease on July 10, 2103, within 24 months of the execution of the Commission Agreement.

[93] I accept that by the time Exhibit 7, the Loblaw Offer to Lease was signed, Loblaw intended to operate a City Market at 925.

[94] As Exhibit 7 does not specify that particular use as the only allowed use although a City Market was a permitted use.

[95] I find that Loblaw did not question the economic feasibility of the City Market concept at 925 or conclude that a City Market would have a "tough go" there until after it had observed the performance of the King and Shaw City Market that had opened at the end of 2014.

[96] I accept the evidence of Rapoz to the effect that by the time it started to question the economic feasibility of a City Market at 925, Loblaw was concerned that too much time had elapsed and that it would not be able to legally terminate the Offer to Lease.

[97] I find that Loblaw decided that to avoid or minimize its legal exposure under the Offer to Lease, it would "keep BSaR whole" in connection with its obligations under the Offer to Lease dated July 10, 2013.

[98] I find, based on the evidence of Rapoz that Loblaw did not seek an outside legal opinion on whether it could terminate the Offer to Lease.

[99] I accept Rapoz' evidence that even before February 19, 2015, Loblaw had instructed Rapoz to advise Sobhi/BSaR that it intended "to keep BSaR whole", i.e. it was prepared to honour the financial terms of the Offer to Lease.

[100] I find by the time Sobhi wrote Exhibit 46 dated February 20, 2015, [the letter on which BSaR relies in submitting that Loblaw terminated Exhibit 7] Rapoz had already advised Sobhi that Loblaw was prepared to keep BSaR whole.

[101] Since Loblaw had acquired Shoppers, I find that in an attempt to minimize or eliminate Loblaw Properties Limited exposure under the Offer to Lease, Loblaw lined up its affiliate Shoppers to step into its shoes and to assume its obligations thereunder. In April 2015, a Loblaw Real Estate Committee first conditionally then finally approved a Shoppers Lease at 925 containing financial terms identical to those contained in Exhibit 7.

[102] I find that Loblaw understood from BSaR that if Shoppers were substituted for Loblaw/i.e. Shoppers took over the lease obligations created in the Offer to Lease and BSaR was kept whole, there would be no "push back" from BSaR.

[103] I find Loblaw ensured that the financial terms of the Shoppers lease would be identical to the terms set out in the Offer to Lease. While there would be a change of use from a grocery store to a pharmacy, Loblaw knew that that was acceptable to BSaR. At the same time, BSaR/Loblaw /Shoppers agreed to a preservation of Loblaw’s future right to the use mentioned in the Offer to Lease including the precise use contemplated at the time the Offer to Lease was signed, a City Market at 925.

[104] I find for the Shoppers Lease, Loblaw instructed Shoppers to use (not a Shoppers Standard Lease Form) but a Loblaw Standard lease form.

[105] I find on Loblaw instructions, Shoppers also used a Loblaw Work and Construction Schedule form for Schedule C of Exhibit 42, the Shoppers Lease. I have accepted Bitton's evidence that Loblaw instructed Shoppers to make the content of Schedule C to Exhibit 42 as similar as possible to the Work and Construction Schedule that Loblaw had been negotiating for attachment to the draft Lease that had been being negotiated pursuant to Exhibit 7, the Loblaw Offer to Lease.

[106] As it had indicated it was prepared to do in Exhibit 47, I find BSaR would have consented to an assignment of Exhibit 7 to Shoppers and would have been prepared to enter into a finalized Lease with Shoppers on the same terms.

[107] However, had Loblaw and BSaR simply agreed to an assignment of Exhibit 7 by Loblaw to its affiliate Shoppers, and had the lease between Shoppers and BSaR been finalized pursuant to the terms in Exhibit 7, the lessee would have been required to open as a fully fixtured Loblaw store for one day.

[108] I find that instead of assigning Exhibit 7, Loblaw decided, with BSaR’s agreement, to finalize and substitute a Lease between BSaR and its affiliate Shoppers on identical financial terms.

[109] The only substantive difference between a finalized Lease under Exhibit 7 and Exhibit 42, the Lease Loblaw and BSaR agreed to substitute in its place [the Lease between Shoppers and BSaR dated March 4 2016], was the substitution of a pharmacy use for a grocery store use but with the express preservation of the Lessee’s right to a future grocery store use including a City Market in the commercial space at 925.

[110] I accept the evidence of both Rapoz of Loblaw and Bitton of Shoppers that the typical cost of a pharmacy use to a landlord is less than the usual cost of a grocery store use. Under Exhibit 42, of the Shoppers Lease, the provisions relating, for instance, to BSaR’s obligations with respect to providing tenant inducements to Shoppers were identical to the tenant inducements provisions in Exhibit 7 in the Loblaw Properties Limited Offer to Lease. I find that in the ordinary course, given the identical terms in Exhibit 7 and Exhibit 42, the substitution of a pharmacy use for a grocery store use would have resulted in a net benefit or windfall to BSaR.

[111] I do not accept Sobhi's evidence to the effect that the change from a grocery store use to a pharmacy use resulted in significantly increased costs to BSaR to the effect that Exhibit 42 did not “keep BSaR whole” because Exhibit 42 was substantially more costly to BSaR than a lease finalized under Exhibit 7 would have been. I have considered and rejected his evidence that one of the reasons for significant extra costs related to the pharmacy use was that BSaR’s costs related to Shoppers’ HVAC requirements were higher than the HVAC costs that had been contemplated for the grocery store use. In rejecting Sobhi’s evidence on that point, I have had regard, among other things, to the evidence mentioned earlier that Loblaw instructed Shoppers’ that in drafting Schedule C, the Shoppers Work and Construction Schedule to be attached to Exhibit 42 they must use a Loblaw form and must follow the Loblaw Work and Construction Schedule that had been negotiated under Exhibit 7 as closely as possible. I have noted that on Schedule C to Exhibit 42 is written “insert s. 6(a) of Loblaws Schedule C”. From that insertion I have concluded that the HVAC costs under the contemplated Loblaw Lease being negotiated pursuant to Exhibit 7 for a grocery use and the HVAC costs for a pharmacy use under Exhibit 42, the Shoppers Lease as finalized, should have been identical.

[112] I find that Loblaw kept its promise to keep BSaR whole in substituting its affiliate Shoppers as lessee on Exhibit 42.

[113] In addition to his evidence on extra HVAC costs, Sobhi's evidence on BSaR’s extra costs as a result of amounts related to the change from grocery to pharmacy use, was in my view, vague, unsatisfactory and unconvincing.

[114] While he mentioned extra costs for change orders and while he provided some invoices in an obvious attempt to corroborate his oral evidence on such extra costs, some of those invoices did not specifically mention extra costs attributable to a change of use from grocery to pharmacy in the commercial component of 925 and together did not support his claim of extra costs in the magnitude of the extra costs he was claiming that BSaR had incurred as a result of the change in use.

Analysis – Interpretation Issues to be Resolved

(1) Was the Offer to Lease, Exhibit 7 ever terminated? Did Loblaw terminate the Offer to Lease dated July 10, 2013 in February or March 2015 or did the Offer to Lease continue in force?

[115] Counsel for the Defendant submitted that Loblaw validly terminated the Offer to Lease dated July 10, 2013 in February 2015 and BSaR entered into new negotiations with Shoppers, “a new counterparty”, about the terms of a new lease.

[116] Under paragraph 16 of Exhibit 7 of the Offer to Lease Loblaw and BSaR agreed to use reasonable commercial efforts to finalize and execute the Lease within 60 days of fulfilment or waiver of ss. 22(a) and 23(a). (emphasis added).

[117] Between July 10, 2013, the date of the Offer to Lease and early 2015, I have found that Loblaw’s conduct was consistent with its intention to finalize a Lease with BSaR. Had that happened, (unless BSaR were successful on its argument on issue 3) commission under the Commission Agreement would clearly have been payable by BSaR to Alert.

[118] I have accepted the evidence of Rapoz, a Senior Director of Real Estate for Loblaw that during that time frame, he pursued a finalized Lease on Loblaw’s behalf, proceeding full steam ahead.

[119] I have found Loblaw did not question the economic feasibility of a City Market at 925 until 2015.

[120] While Loblaw might have preferred to make "a clean break" with BSaR, I have noted that Loblaw’s conduct both before and after February 2015 was consistent with an understanding that it had not terminated the Offer to Lease.

[121] I have accepted Rapoz's evidence that even before the February 19, 2015 letter was sent, on Loblaw instructions, Rapoz had already reached out to BSaR and notified Sobhi that it intended "to keep BSaR whole", i.e. it intended to honour the financial terms of the Offer to Lease.

[122] I have accepted Rapoz's evidence that Loblaw never went down the path of obtaining an outside legal opinion on whether it could terminate Exhibit 7. Instead, it first sought to get BSaR to agree to an assignment of Exhibit 7 to Shoppers, a Loblaw affiliate, on the same financial terms as in Exhibit 7, then later to get BSaR to agree to a substitute lease on substantially the same terms. [Identical financial terms and an agreed change of use with a right to revert to the original use contemplated.]

[123] I have already set out the correspondence between BSaR and Loblaw in early 2015 including Loblaw’s February 19, 2015 letter that counsel for BSaR submitted in argument here terminated the Offer to Lease.

[124] I have found that Loblaw did not question the economic feasibility of a City Market at 925 until 2015.

[125] While in February 2015, Loblaw was certainly threatening, maybe, to terminate the Offer to Lease at that time, in my view, the wording of the Loblaw letter to BSaR dated February 19, 2015 was equivocal.

[126] Loblaw acknowledged in Exhibit 51, a letter dated March 11, 2015 that the Offer to Lease was still in force as of March 11, 2015. Asnani wrote:

“All of our communications through to April 10, 2015 with respect to the Offer to Lease will be on a without prejudice basis; (2) There will be no agreement or modification to the Offer to Lease unless in writing and signed by the parties.” [emphasis added]

Sobhi agreed in cross examination that as at March 11,2015, in Exhibit 51, Loblaw would not have still been referring to the Offer to Lease in the manner that it did had it been taking the position at that time that it had already terminated the Offer to Lease.

[127] Again, in Exhibit 50 on April 9, 2015 Loblaw referred to the Offer to Lease, Exhibit 7, in a manner indicating it recognized it was still in force. “There will be no agreement or modification to the rights of the Landlord or LPL set out in the Offer unless in writing and signed by both parties”. [Emphasis added]

[128] Counsel for BSaR pointed to nothing after April 9, 2015 that could have had the effect of terminating the Offer to Lease.

[129] In my view, the conduct of Loblaw before and after February/March/April 2015 was consistent with Loblaw’s understanding that BSaR was prepared to take steps to force Loblaw to perform its continuing obligations under Exhibit 7, the Offer to Lease, that BSaR would not have agreed and did not agree to a termination of the Offer to Lease or to a release of Loblaw from its obligations thereunder. Until it changed its stance the week before this trial started, BSaR asserted and continued to assert that the Offer to Lease was binding on Loblaw, as all its conditions had been satisfied or waived. Loblaw did not effectively terminate Exhibit 7 in its February letter to BSaR. It acknowledged as much in its March 11 and April 9 letters.

[130] Since I have held that BSaR never effectively terminated the Offer to Lease, Exhibit 7, it does not matter legally whether or not Loblaw could have terminated it legally had it unequivocally purported to do so in February-March of 2015.

[131] In case a higher Court should disagree with my conclusion that Loblaw did not effectively terminate Exhibit 7 and that Exhibit 7 therefore remained in force until Exhibit 44 was signed, I shall set out here the pertinent facts, correspondence and sections of Exhibit 7 that I would have considered relevant in deciding whether it would have been legally open to Loblaw to terminate Exhibit 7 had it given unequivocal notice of termination at that time.

[132] Had it been necessary to do so, I would have rejected Sobhi's evidence that in February 2015 he believed Loblaw was entitled to terminate the Offer to Lease.

[133] In reaching this conclusion I would have considered that BSaR obtained legal advice in early 2015 before writing Exhibit 46, and that from February 20, 2015 until the week before the trial in 2019, BSaR never wavered from its position that the Offer to Lease dated July 10, 2013 was binding on Loblaw. BSaR maintained that position on March 26, 2016 in the recitals to the Release, even after the Shoppers Lease had already been executed. I would have, among other things, had regard to Sobhi's answers at questions 138 and 139 of his Examination for Discovery held on May 18, 2017.

Question: And you expressed the view that all of the conditions had been satisfied or waived by a course of conduct and that the Offer to Lease was therefore binding on the parties. That's what you said in the letter correct? Answer: Correct. Question 139: And that was your genuine view at the time, correct? A: Correct.

[134] I would have found that because Sobhi genuinely understood in February/March/April 2015 that Loblaw was not legally entitled to terminate Exhibit 7, the Offer to Lease, BSaR was ONLY prepared to release LPL from its obligations thereunder Exhibit 7 if Loblaw assigned Exhibit 7 to another Loblaw affiliate and the Lease were finalized on the same financial terms, or if Loblaw substituted another Loblaw affiliate in Loblaw Properties' place, and if, on the substitution, the terms of the finalized lease were in essence identical to the financial terms and conditions contained in the Exhibit 7,the Offer to Lease dated July 10, 2013.

[135] Loblaw's insistence on BSaR's release of Loblaw obligations to BSaR under the Offer to Lease was consistent with Loblaw’s understanding of BSaR’s legal position and with Loblaw’s concerns about whether it would have been legally entitled to terminate the Offer to Lease.

[136] Had it been necessary to decide whether Loblaw could have legally terminated Exhibit 7 had it given BSaR an equivocal notice to terminate on February 19, I would have considered the following provisions in Exhibit 7, the Loblaw Offer to Lease:

Section 16

Section 16 obligated Loblaw and BSaR to use reasonable commercial efforts to finalize and execute the Lease within 60 days after waiver of the conditions in ss. 22(a) and 23(a).

Section 22 Landlord's Conditions:

22(a) provided that the Offer to Lease was conditional upon the Landlord obtaining approval of the terms of this Offer to Lease from the Toronto Parking Authority no later than 30 days following the execution of this Offer to Lease. 22(b) provided that this Offer … is further conditional for… 60 days following satisfaction or waiver of …22(a) on the Landlord approving Tenant's plans and specifications for the leased premises. 22(c) …is further conditional for… 90 days following final acceptance of this Offer to Lease on the Landlord obtaining building permits… or other approvals…Provided the Landlord was actively pursuing, the Landlord shall have right to extend the Approvals condition for an additional 90 days on written notice to the Tenant These conditions were for the sole benefit of the BSaR and may be waived by the Landlord…

[137] It is not clear from the evidence exactly when the conditions under ss. 22(a) and 23(a) were fulfilled but it appears that they were.

[138] BSaR called no specific evidence that an extension had been given with respect to fulfilment or waivers of the condition under paragraph 22(a).

[139] I note that in Exhibit 49 counsel for Loblaw did not contend that s. 22(a) had not been fulfilled or waived. 30 days from July 10, 2013 would have been August 11, 2013. She did contend that s. 22(b) had not been fulfilled or waived. I note that s. 22(b) of the Offer to Lease upon which Loblaw purported to rely was conditional for a period of 60 days following satisfaction or waiver of s. 22(a) [or likely 60 days from August 11, 2013].

[140] Therefore, it is apparent that it was too late for Loblaw to cite 22(b) as unfulfilled or unwaived.

[141] In any event BSaR wanted a finalized Lease with Loblaw throughout and could have waived the 22(b) condition and it is clear in 2015 BSaR was not relying on any unfulfilled or unwaived conditions in s22.

Section 23 - Tenant's Conditions:

“23(a) provided that the Offer to lease was conditional for…30 days following final acceptance of Offer to Lease upon (i)Tenant obtaining approval from Board of Management and Tenant to enter into this Offer to Lease (ii) the Tenant approving the draft operating costs budget to be provided by the Landlord to the Tenant within 5 business days following final acceptance of this Offer…; 23(b) was conditional for a further period of 60 days following satisfaction or waiver of Tenant Conditions in s. 23(a) of Tenant having received and approved Condominium Declaration, Easement and Operating Agreement and/or Shared Services Facilities Agreement.

[142] Again, in its February 19, 2015 letter Loblaw did not cite non-fulfillment of s. 23(a)(i) or (ii). BSaR did not call any evidence that approval of the Board of Management to entering into the Offer to Lease had not been obtained by Tenant within 30 days or that there had been no approval of draft operating costs within 5 days of the final acceptance of the Offer to Lease.

[143] Again, since 23(b) allowed only 60 days from satisfaction of 23(a), a condition that had apparently been met, and since BSaR called no evidence on an extension given by BSaR of tenant condition 23(b), if I had been required to decide the issue I would have concluded that under Exhibit 7, the time for relying on unfulfilled or unwaived conditions under 23(b) had passed.

Section 24-Landlord and Tenant Conditions:

“This Offer to Lease is further conditional for a period of 60 days following satisfaction or waiver of conditions in ss. 22(a) or 23(a) on the following:

(a) Landlord and Tenant agreeing upon: (i) the scope of the Landlord and Tenant's Work…; (ii) a construction schedule…; (b) Landlord and Tenant entering into the Lease; and (c) the Tenant satisfying itself with its due diligence investigations including, but not limited to, confirming the availability required municipal, zoning and site plan approvals and building permits and satisfying itself as to traffic, noise, environmental geotechnical and economic feasibility of the store …

If the Landlord and Tenant are not able to satisfy the above mutual conditions within 60 days following satisfaction or waiver of conditions in 22(a) and 23(a) then this offer shall automatically terminate and be of no further force and effect except that either party shall have the right to extend the date for satisfaction of these conditions for one additional period of 15 days from the expiry of the said sixty day period upon prior written notice to each other. Each of the Landlord and Tenant agree to diligently work towards satisfying the above mutual conditions and in doing so will act reasonably and in good faith.”(emphasis added)

[144] The conditions in s. 24 again were made conditional for a period of 60 days following satisfaction or waiver of conditions in sections 22(a) and 23(a). Had it been necessary to do so, I would have concluded that if the Offer to Lease had been subject to termination automatically for non-satisfaction of any of the mutual conditions in s 24 of Exhibit 7, that would have happened many months before January 2015. I would have held that by continuing to negotiate with BSaR as long as it did into 2015, Loblaw, by its conduct, had long before waived any entitlement to terminate Exhibit 7 for breach of the economic feasibility condition in s. 24 of the Offer to Lease.

[145] In addition, apart from the timing considerations, had it been necessary to consider whether Loblaw could have terminated Exhibit 7 based on the economic feasibility provision in s. 24 of Exhibit 7, I would have also considered that s. 13 of the Offer to Lease allowed a Loblaw or one of its higher end non-discount/non-low-price conventional banners and did not limit allowable uses only to a City Market. The only evidence on economic unfeasibility before this Court was that Loblaw had concerns about the economic unfeasibility of a City Market use at 925. Counsel for BSaR called no evidence to prove that Loblaw considered whether all uses allowable under paragraph 13 of the Offer to Lease would have been economically unfeasible at 925, i.e. whether every other use allowable besides a City Market would also be economically unfeasible.

Summary of Answer to Question One

[146] In short, I have held Loblaw never took sufficient steps to terminate the Offer to Lease. Had it been necessary to determine whether Loblaw was entitled to terminate Exhibit 7 of the Offer to Lease had Loblaw unequivocally purported to do so on February 19, 2015 in Exhibit 49, I would have concluded it could not have validly done so. The Offer to Lease was never terminated.

(2) Was requirement 2 of the Commission Agreement, the signing of a Lease with all conditions waived met? Does the Lease between Shoppers and BSaR dated March 4, 2016 suffice to meet requirement 2? Was the Shoppers Lease a new and different Lease entered into after the Loblaw Offer to Lease had been terminated or was it in substance a fulfillment of Loblaw obligations to sign a Lease pursuant to the Loblaw Offer to Lease dated July 10, 2013?

[147] Counsel for the defendant BSaR submitted that no Lease was ever finalized between Loblaw and BSaR. Loblaw did not assign Exhibit 1, the Loblaw Offer to Lease to Shoppers. Since the Loblaw Offer to Lease was not assigned to Shoppers, the requirements in the Agreement were not met. The substitute Lease between Shoppers Drug Mart and BSaR, Exhibit 42, did not qualify to trigger a Commission payment under paragraph 2 of the Commission Agreement. There was no single continuous lease transaction that satisfied the terms of the Commission Agreement. The Lease with Shoppers Exhibit 42 was “a fresh start with a fresh counterparty”.

[148] Counsel for the Plaintiff submitted that Exhibit 7, the legally binding Offer to Lease between Loblaw and BSaR dated July 10, 2013, ultimately "morphed into" Exhibit 42, the Lease between Shoppers and BSaR dated March 4, 2016. Despite the lack of a formal assignment of Exhibit 7, the Offer to Lease, or a finalized Lease between Loblaw and BSaR, the signing of Exhibit 42 the Shoppers Lease was sufficiently tied to the unterminated Exhibit 7/Offer to Lease, that it can be fairly characterized as its finalization, or, phrased differently, as fulfillment of Loblaw's obligations under Exhibit 7, the signing of a Lease with all conditions waived. When that Lease was executed with all conditions waived, the second prerequisite under the Commission Agreement was met, and the Commission under the Commission payment became due and payable. A formal assignment of Exhibit 7 was not necessary to trigger entitlement to Commission under Exhibit 2 of the Commission Agreement because in substance, the Shoppers deal was the Loblaw deal. BSaR received the same benefit from Exhibit 42, the Shoppers Lease and therefore the Commission Agreement, as it would have received from a Loblaw Lease finalized pursuant to Exhibit 7, the Offer to Lease. Exhibit 7/the Offer to Lease culminated in Exhibit 42/the Shoppers Lease. There would have been no Exhibit 7/Offer to Lease or ensuing Exhibit 42/Shoppers Lease if Alert had not introduced Loblaw to BSaR in 2012.

[149] In considering this aspect of the dispute, this Court considered the words of Exhibit 2, the circumstances at the time of Exhibit 2 as outlined elsewhere in these Reasons and compared the terms of the Exhibit 7/Offer to Lease to the terms of Exhibit 42, the Shoppers Lease, as well as the circumstances that led to the substitution of one for the other.

[150] I have already held that Exhibit 7, the Offer to Lease between Loblaw Properties Limited and BSaR, was never terminated. Loblaw and BSaR had an obligation under paragraph 16 of the Offer to Lease to use reasonable commercial efforts to finalize and execute a Lease within 60 days after waiver of the conditions in ss. 22(a) and 23(a).

[151] There was no evidence that Loblaw and BSaR could not have finalized a Lease pursuant to Exhibit 7 as they were required to do. BSaR was not prepared to let Loblaw out of its obligations under Exhibit 7.

[152] There was only evidence that in early 2015 Loblaw had a change of heart and Loblaw’s actions thereafter resulted in the substitution of Exhibit 42 for a Lease that had been being finalized pursuant to Exhibit 7.

[153] Loblaw fingerprints are all over Exhibit 42. I find that Loblaw brought Exhibit 42 about. Loblaw approached Shoppers about putting a Shoppers pharmacy into the commercial space at 925 instead of a Loblaw food store on financial terms identical to those in Exhibit 7. In April 2015, a Loblaw Real Estate Committee approved of a Shoppers Lease there on identical financial terms to those set out in Exhibit 7. Loblaw convinced BSaR to agree to an assignment of Exhibit 7 to Shoppers by promising that a Shoppers Lease would “keep BSaR whole”. Later, Loblaw convinced BSaR not to insist on an assignment of Exhibit 7, but to agree to a substitute Lease with Loblaw’s affiliate Shoppers, again on identical financial terms to those contained in Exhibit 7. To ensure that BSaR would agree to a Shoppers Lease and to release Loblaw from its obligation to open a food store under Exhibit 7, Loblaw directed Shoppers to make the Shoppers Lease, including Schedule C thereto, conform to the greatest extent possible with Exhibit 7.

[154] I have found that Loblaw directed Shoppers not to negotiate an Offer to Lease with BSaR. I have accepted Bitton's evidence that no separate Shoppers’ Offer to Lease was pursued because BSaR and Loblaw had already entered into Exhibit 7, the Loblaw Offer to Lease, and because Lease terms had already been largely negotiated by Loblaw and BSaR pursuant to Exhibit 7. I have accepted Bitton’s evidence that on Loblaw’s instruction, Shoppers did not use its own form of Lease (that Shoppers would usually use) and that the Shoppers Lease was prepared using the Loblaw Standard Form of Lease. Attached to Exhibit 42 the Shoppers’ Lease as Schedule C was the Loblaw form of Construction and Work Schedule. Again, on the instruction of Loblaw, Schedule C was made to conform to the greatest extent possible with the previously negotiated Loblaw Construction and Work Schedule. For example, 6a from that schedule was inserted as part of Schedule C to Exhibit 42.

[155] Bitton, in his evidence in chief, said that he looked at a Shoppers Lease as a continuance of the Loblaw deal. I have accepted that evidence and consider it significant because Bitton was an employee of Shoppers, yet in negotiating and finalizing the Shoppers Lease was following Loblaw’s direction to keep BSaR whole.

[156] Loblaw had assured BSaR it would keep it whole and the Shoppers Lease implemented the Loblaw promise by the inclusion of financial terms identical to those in the Offer to Lease. BSaR received the same financial benefits from the one as it would have received from the other. Like the Offer to Lease, the Shoppers Lease provided that the leased premises would consist of 9575 square feet on the ground floor of 925, for an initial term of 15 years, with net rent to be paid of $45 per square foot during the first 5 years, then $47.50 per square foot for the next 5 years and then, $50 per square foot for the next 5 years. There were three 5-year options to extend. The tenant inducements were the same. The Loblaw covenant would apply equally to Loblaw affiliate Shoppers as to Loblaw Properties Ltd., the entity that signed Exhibit 7.

[157] The terms concerning use did change from a primary grocery store use to a primary pharmacy use but Loblaw ensured that the Shoppers Lease would also include a specific proviso allowing a grocery store use at 925. The use provisions in the Shoppers Lease reflected Loblaw’s continuing interest in the 925 site for a grocery store, including a City Market there. I have found that the change in use from a grocery store to a Shoppers Drug Mart was revenue positive or neutral for BSaR.

[158] I have not accepted the submission of Counsel for BSaR to the effect that Shoppers was acting autonomously in doing its own due diligence etc., as if this were a completely new deal. While I accept that Shoppers did some of its own due diligence etc., I have concluded, based on the evidence of Rapoz and Bitton as a whole, that once Shoppers indicated a lease on identical terms would work, it was clearly taking and following instructions from Loblaws to finalize a lease that would keep BSaR whole.

[159] On the question of whether the lack of a formal assignment is fatal to the Plaintiff’s claim, I have found that BSaR would clearly have agreed to an assignment of Exhibit 7. In Exhibit 47 on March 12, 2015, BSaR wrote:

“We understand that the Tenant is having discussions relating to a possible assignment of its lease obligation to a transferee that would be acceptable to the Landlord pursuant to the terms of the Offer and allowable according to the subsequently negotiated lease terms”.

BSaR consented to a pharmacy use.

[160] Exhibit 7, the Offer to Lease could have been assigned. Had that happened, once a Lease thereunder had been finalized, as I have found would have happened, Commission would have been clearly payable by BSaR to the Plaintiff under the Commission Agreement [unless BSaR’s submission 3 as set out below is accepted by this Court].

[161] I have found that BSaR was prepared to accept the substitution of Shoppers for Loblaw Properties Limited/LPL rather than a simple assignment, so long as, but only so long as the financial terms of the Lease with Shoppers would be the same as had been agreed in Exhibit 7, the Offer to Lease.

Summary of Answer to Question 2

[162] In substance I have found that at Loblaw’s request, a Loblaw affiliate, Shoppers, stepped into Loblaw’s shoes and assumed what would otherwise have been LPL's obligations under Exhibit 7, the Offer to Lease.

[163] Loblaw both orchestrated and approved the substitution.

[164] I have found that it was because the Plaintiff introduced BSaR to Loblaw that Exhibit 7, the Offer to Lease was signed. It was because Loblaw had signed the Offer to Lease that Loblaw arranged a substitute Lease, Exhibit 42, the Shoppers Lease and orchestrated what was in essence the finalization of what Loblaw would have finalized with BSaR under Exhibit 7. In that way, the plaintiff’s introduction of BSaR to Loblaw resulted in the Offer to Lease with Loblaw within 24 months of the execution of the Commission Agreement and culminated in Exhibit 42, the Lease with Shoppers, a Loblaw affiliate.

[165] On all of the evidence and in all the circumstances here, I do not accept the submission of Counsel for the Defendant that the Shoppers Lease with BSaR was "a fresh start with a fresh counterparty".

[166] The Shoppers Lease was in substance, the same Lease that would have been finalized under Exhibit 7, the Offer to Lease. All that had changed was a substitution of Shoppers, a Loblaw affiliate, for Loblaw Properties Ltd. and a change from an initial grocery to pharmacy use, with a future right to revert back to the initial grocery use that had been anticipated at the time Exhibit 7, the Offer to Lease was signed. All financial terms and the Loblaw covenant stayed the same.

[167] BSaR would receive the same benefits under either, including the same financial benefits and the same strong Loblaw covenant.

[168] I find the execution of the Shoppers Lease on March 4, 2016 together with the execution of Exhibit 43 the Release of Loblaw obligation under the Offer to Lease on March 21,2016 met the requirements in paragraph 2 of the Commission Agreement of an executed Lease with all conditions waived. When the Shoppers Lease was signed with all conditions waived on March 21, 2016, Commission became payable under the Commission Agreement [unless BSaR is successful on issue 3].

ISSUE 3

Even if the Shoppers Lease meets Requirement 2 of the Commission Agreement is BSaR entitled to refuse to pay Commission to the Plaintiff on the basis that Shoppers Drug Mart does not qualify as a Tenant under the Commission Agreement because Shoppers was not a Loblaw entity as defined in the Commission Agreement at the time the Commission Agreement was executed? Viewed objectively, would BSaR and Alert/the parties, using the words against the relevant background understand that only entities related to Loblaw at the time the Commission Agreement was entered into would fall within the Definition of "Tenant" in the Agreement or did they understand that any entities that would become affiliated with Loblaw within 24 months of the date of the execution of Commission Agreement would be included?

[169] What would the parties using the words they used, viewed against the relevant background have reasonably understood them to mean? What would their objective understanding have been with respect to whether Commission would be payable under the Commission Agreement if the Loblaw affiliate that ultimately signed the Lease was not a Loblaw affiliate when the Agreement was signed, but was a Loblaw affiliate within 24 months thereafter?

[170] In Sattva, supra, the Supreme Court of Canada has directed the lower courts in determining objective understanding to know the commercial purpose of the contract, including the genesis of the transaction, the background, the context, the market in which the parties were operating.

[171] The Court must give the words of the contract their ordinary meaning consistent with the surrounding circumstances known to the parties at the time of the formation of the contract.

[172] The words in the Agreement to be interpreted are as follows:

“in the event an Offer to Lease is entered into between the Landlord and Loblaw Companies Limited and any associated, related company…affiliates associates…for occupancy of the property within 24 months from mutual acceptance of this Commission Agreement, the Landlord agrees to pay the Agent a commission fee…The Commission shall be earned and payable upon the earlier of the Tenant signing a Lease Agreement with all conditions waived…or…whichever comes first.”

[173] Counsel for the Plaintiff submitted that in determining objective understanding of these words, this Court should consider that the wording of the Commission Agreement was prospective in nature as it specified a two-year window for the Defendant to enter into an Offer to Lease with a Loblaw related entity. There was nothing in the Commission Agreement expressly limiting the definition of Tenant to Loblaw entities as at October 7, 2012, the date the Commission Agreement was executed.

[174] Counsel for the Plaintiff submitted that Sobhi reviewed and negotiated the terms of the Commission Agreement with Spring. Sobhi required and obtained handwritten amendments to the Agreement. Sobhi's initials appear in various locations on the Agreement, including after the reference to the 24-month period. Had Sobhi/BSaR intended to limit the definition of Tenant to entities that fell within the definition of Tenant as of October 7, 2012 he/BSaR could and would have specified that intention in the Agreement.

[175] Counsel for the Defendant submitted that Spring, the drafter of the Agreement, did not include any reference to parties that might become affiliates within 24 months. Nothing in the wording of the Agreement as a whole indicated an intention to include future members of the class of affiliated or associated companies.

[176] In considering the meaning to be given to the words used, I have had regard to the surrounding circumstances at the time the Commission Agreement was entered into, including the genesis of the transaction, the context, and what the parties knew or objectively should have known. I have considered the discussions leading up to the execution of the Commission Agreement.

[177] Had I considered the evidence of Sobhi and Spring about their subjective intentions I would have rejected Sobhi's evidence (to the effect that at the time he signed the Commission Agreement he would not have intended Commission to be payable because he specifically intended that the definition of Tenant in the Agreement would only cover entities affiliated with or related to Loblaw as at the time the Agreement was entered into) and I would also have rejected Spring's evidence (to the effect that he specifically intended that all Loblaw related entities that would come under the Loblaw' umbrella within 24 months of the execution of the Commission Agreement would be included in the definition of Tenant, whether or not they had been Loblaw related entities at the time the Agreement was executed).

[178] I find that at the time the Agreement was executed, neither BSaR/Sobhi nor Alert/Spring had considered specifically whether an after acquired Loblaw entity/banner would qualify as a Tenant under the Agreement. (In any event, the Supreme Court of Canada in Sattva, supra, has directed that the parol evidence rule precludes evidence of subjective intention. Subjective intention does not govern the result. Objective intention does and must be determined by this Court).

[179] On the genesis and commercial purpose of the Commission Agreement/the transaction, BSaR was looking for assistance in leasing the commercial component of 925. At the time the Commission Agreement was entered into, BSaR was primarily concerned about the quality of any prospective commercial lessee, especially the strength of its covenant, and the revenue that would be generated by the commercial lease.

[180] At the time the Commission Agreement was entered into, I find that BSaR considered a Lease with Loblaw or a Loblaw affiliate to be especially attractive, because of the strength of the Loblaw covenant and Loblaw’s apparent interest in a Lease for the whole ground floor of 925 with multiple possible extensions.

[181] While Loblaw was not a party to the Commission Agreement between Alert and BSaR, for both BSaR/Sobhi and Alert/Spring, BSaR’s willingness to pay Alert a Commission if an Offer to Lease were finalized was because BSaR would derive a benefit from Alert’s introduction of BSaR to Loblaw in the event a Lease were finalized between BSaR and Loblaw or a Loblaw affiliate. Sobhi gave evidence that he was prepared to sign the Commission Agreement because of the value of Alert’s introduction of Loblaw to BSaR and the property.

[182] At the time the Commission Agreement was entered into, I find that BSaR considered a lease with Loblaw or a Loblaw affiliate to be especially attractive, because of the strength of the Loblaw covenant and Loblaw’s apparent interest in a lease for the whole ground floor of 925 over a long term with multiple possible extensions.

[183] Sobhi had an MBA and was a Certified Financial Planner. I find that at the time BSaR entered into the Commission Agreement he was well aware that business entities such as Loblaw often create or acquire other entities to develop/build/hold/operate business projects. Indeed, BSaR had created BSaR (Eglinton) specifically for the purpose of developing/building/holding/operating 925.

[184] I find that Sobhi understood or should have understood at the time the Commission Agreement was entered into that Loblaw could use one of its numerous banners /entities to operate a Loblaw affiliated/associated/related business entity at 925. He also understood that Loblaw could acquire/create an entity for that purpose after the Agreement was executed but before entering into an Offer to Lease with BSaR.

[185] Although he was aware that Loblaw was operating under many banners/entities before entering into the Commission Agreement, Sobhi took no steps to identify all of the banner/entities under which Loblaw was operating at the time. Sobhi was aware, and it was attractive to Sobhi/BSaR that Loblaw was a very large business. While he likely understood at the time the Commission Agreement was executed that Loblaw would likely open a grocery store at 925, nothing in the Commission Agreement so specified. Sobhi knew that Loblaw operated under many banners including non-food related banners such as its Joe Fresh clothing banner. Despite that knowledge he did not seek to know or have Loblaw identify precisely under which banner/entity Loblaw proposed to operate at 925. Objectively, from its actions, BSaR/Sobhi signified at the time of the execution of the Commission Agreement that it understood that Loblaw would want to choose the entity it would use and the precise use or mix of uses under which Loblaw would operate its store at 925.

[186] Objectively, at the time the Commission Agreement was entered into, BSaR understood that Loblaw might not yet have acquired or created the entity it could eventually choose to operate its business at 925.

[187] Objectively, which entity Loblaw would use to operate its business at 925 would not really matter to BSaR so long as the Loblaw covenant would apply to it when the Lease came into effect and over its term. Objectively BSaR understood that it was the affiliation with Loblaw and the Loblaw covenant that would matter, not the particular entity Loblaw might choose to use to operate its business at 925.

[188] Once an Offer to Lease with Loblaw was entered into within 24 months BSaR would reasonably have contemplated that Loblaw could use either an existing or a newly acquired or created entity to operate Loblaw business at 925.

[189] Objectively, BSaR and Alert would want Alert’s introduction of Loblaw to BSaR to be of optimal financial benefit to both of them. They would both want any Offer to Lease within 24 months to ultimately culminate in a finalized Lease between BSaR and Loblaw or a Loblaw affiliate. BSaR would want the substantial financial benefits of the Lease. Alert would want the financial benefit of the Commission to be earned as a result of the finalization of the Lease.

[190] In all the circumstances that pertained at the time the Commission Agreement was executed, BSaR would perceive no benefit to BSaR in adversely limiting the chances of Lease finalization by limiting the pool of potential Loblaw affiliates that Loblaw might choose to operate its business at 925. BSaR would understand it was in BSaR’s interest to maximize, not to limit, the possibility of achieving the benefit of a finalized Lease with Loblaw resulting from Alert’s introduction of Loblaw to BSaR.

[191] BSaR would understand that there could be a downside to BSaR if the words used in the Commission Agreement limited the pool of Loblaw affiliates that Loblaw could choose to use to operate its business at 925, to affiliates in existence at the time of the execution of the Commission Agreement. If Loblaw wanted to create or acquire an entity that Loblaw wanted to operate the Loblaw business at 925 and BSaR refused to agree that that entity could operate the business at 925, Loblaw might refuse to sign the Offer to Lease and BSaR could lose the benefit of the Lease. Sobhi would understand, given the common business practice of creating or acquiring affiliates to operate businesses that if BSAR were to take that position, Loblaw would be foreseeably incredulous or annoyed or both, and that that could interfere with BSaR’s ability to get an Offer to Lease and ultimately a Lease finalized.

[192] The words used in the Commission Agreement do not expressly limit Loblaw affiliates to Loblaw affiliates at the time the Commission Agreement was executed. Objectively, in all the circumstances here, Sobhi would not want them or understand them to do so.

[193] Objectively, at the time the Commission Agreement was executed, Sobhi would understand that if, between the date the Commission Agreement was executed and the date any Offer to Lease was concluded within 24 months of the execution of the Commission Agreement, Loblaw decided to create or acquire an entity to use to operate its business at 925, that entity would fall within the definition of Tenant in the Commission Agreement.

[194] Objectively BSaR would understand in all the circumstances at the time the Commission Agreement was executed that there was no good reason to differentiate between Loblaw affiliates, solely on the basis that one had been and one had not been an affiliate of Loblaw at the time the Commission Agreement was entered into, given that the benefit from Alert’s introduction of BSaR to Loblaw from an Offer to Lease with a Loblaw affiliate made within 24 months of the execution of the Commission Agreement, and the benefit to BSaR under the resultant Lease would be the same, whether or not the affiliate Loblaw ultimately used to operate the Loblaw business at 925 had been an affiliate at the time of the execution of the Commission Agreement.

[195] Spring would have understood that BSaR was prepared to pay a commission to Alert because of the benefit Alert was bringing to BSaR in introducing BSaR to Loblaw. Knowing that BSaR was willing to pay a Commission if its introduction of BSaR to Loblaw culminated in an Offer to Lease within 24 months, then a finalized Lease, Alert/Spring objectively would have understood that a Commission would be payable if its introduction of BSaR to Loblaw culminated in a finalized Lease with Loblaw or a Loblaw affiliate.

[196] Given those circumstances neither Spring nor Sobhi would have objectively understood the word Tenant to have been limited to a Loblaw affiliate at the time of the execution of the Commission Agreement or to have a different meaning depending on whether the Loblaw affiliate had been a Loblaw affiliate at the time the Commission Agreement was signed. The benefit to BSaR from Alert’s introduction of Loblaw to BSaR would be the same under either scenario, so long as the entity /affiliate was a Loblaw affiliate within 24 months of the execution of the Commission Agreement and a Lease was finalized as a result of Alert’s introduction to Loblaw.

[197] Objectively, given the genesis of the Commission Agreement/the reason why Sobhi was prepared to pay a commission to Alert if a Lease were finalized, Alert’s introduction of BSaR to Loblaw, given the substantial benefit a finalized Lease between BSaR and Loblaw or a Loblaw affiliate would bring to BSaR, and given that the benefit to BSaR from a finalized Lease with Loblaw or a Loblaw affiliate would be the same whether or not the entity operating the business at 925 was an affiliate of Loblaw on the date of the execution of the Commission Agreement or had become an affiliate of Loblaw by the time an Offer to Lease was executed within 24 months thereafter, both Alert/Spring and Sobhi/BSaR would have reasonably understood from the wording of the Agreement that Alert would be entitled to Commission as a result of Alert’s introduction of Loblaw to BSaR so long as an Offer to Lease were entered into between BSaR and Loblaw, or a Loblaw affiliate [that had either been a Loblaw affiliate at the time of the execution of the Commission Agreement or had become a Loblaw affiliate by the time the Offer to Lease was executed] within 24 months of the execution of the Commission Agreement, and so long as a finalized Lease ultimately resulted from Springs’ introduction to Loblaw.

[198] Counsel for the Defendant submitted that this Court should follow the reasoning and approach to interpretation adopted by the New York Circuit Court of Appeals in Ellington v Emi Music Inc. (2014) 24 NY 3d 239.

[199] I do not accept that submission. This Court is required to follow the approach to contractual interpretation mandated by the Supreme Court of Canada in Sattva set out earlier, an approach that, in my view, is inconsistent with the approach to interpretation of commercial contracts followed by the Court of Appeals of New York in that case.

Summary of Answer to Question 3

[200] I have found that at the time the Commission Agreement was signed, objectively both Sobhi and Spring would have understood that the value Alert was bringing to BSaR and for which BSaR was prepared to pay a commission to Alert was in the introduction of Loblaw to BSaR, a huge business with a strong covenant.

[201] The rationale for payment of Commission, the benefit of the introduction, that BSaR would receive if an Offer to Lease with Loblaw or a Loblaw affiliate were signed within 24 months and a Lease were ultimately finalized, would apply equally whether the affiliate that Loblaw chose to operate at 925 was an affiliate at the time the commission Agreement was executed or became a Loblaw affiliate within 24 months, but before the execution of the Offer to Lease.

[202] In following the approach mandated in, Sattva supra, I have concluded that in October 2012 the objective understanding of both BSaR and Alert was that “Tenant” in the Commission Agreement would include any affiliate, associate, related party, etc. of Loblaw at the time of the Offer to Lease within 24 months of the execution of the Agreement, whether or not it had been an affiliate or related party at the time the Commission Agreement was executed.

[203] Since BSaR did not check or identify all Loblaw related companies or entities at the time of the execution of the Commission Agreement, I do not accept the submission of counsel for BSaR, that certainty was critical to BSaR and that to hold otherwise would be commercially unreasonable.

[204] In following the approach mandated in Sattva, supra, I have concluded that in October 2012 BSaR’s and Alert’s objective understanding of the words of the Commission Agreement and particularly the word ”Tenant” was that any affiliate associate, related party, etc. of Loblaw at the time of the Offer to Lease within 24 months of the execution of the Commission Agreement, would fall under the definition of Tenant in the Commission Agreement whether or not it had been an affiliate or related party of Loblaw at the time the Commission Agreement was executed.

Issue 3 - Does the Commission Agreement violate the provisions of the Interest Act

[205] The Plaintiff has claimed interest on the Commission owing at the rate of 2% per month based on the wording of Subsection 2 of the Commission Agreement that reads as follows:

“One hundred per cent of the Commission shall be deemed to be earned and payable upon the earlier of the Tenant signing a Lease Agreement with the conditions waived, the date the Tenant takes occupancy of all or part of the property, or commencement of payment of rent whichever occurs first. Any such commission payment may be deducted from the deposit which shall be held by the Agent in trust with the balance payable forthwith. Interest on overdue accounts will be charged an interest rate of 2% per month.”

[206] Section 4 of the Interest Act, R.S.C., 1985, c. I-15 provides as follows:

“Except as to mortgages on real property or hypothecs on immovables, whenever any interest is, by the terms of any written or printed contract, whether under seal or not, made payable at a rate or percentage per day, week, month, or at any rate or percentage for any period less than a year, no interest exceeding the rate or percentage of five per cent per annum shall be chargeable, payable or recoverable on any part of the principal money unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent.”

[207] Counsel for the Defendant BSaR submits that the Commission Agreement provides a monthly rate of calculating interest without providing an express Statement of the yearly rate or a formula to annualize the rate of interest and violating s. 4 of the Interest Act. The Plaintiff's claim for interest calculated by the Plaintiff at 26.82% per year must fail. If Commission is payable at all, interest on the principal amount must be calculated at 5% per year.

[208] I accept that submission. The wording of s. 4 of the Interest Act is clear and mandatory. Elcano Acceptance Ltd v Richmond, Richmond Stambler and Mills 1991 Carswell Ont 835 (Ont CA).

DISPOSITION

[209] For all the foregoing reasons Judgment will go in favour of the Plaintiff for $217,592 plus HST for a total of $245,878.96 plus interest thereon at 5% per annum from March 21, 2016.

[210] The parties may make written submissions on costs not to exceed 10 pages each within 10 days of the release of these Reasons.

M.A. Sanderson J.

Released: August 19, 2019

COURT FILE NO.: CV16-556099 DATE: 20190819 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Harvey Kalles Realty Inc. Plaintiff – and – BSaR (Eglinton) LP Defendant

REASONS FOR JUDGMENT M.A. Sanderson J. Released: August 19, 2019