Court File and Parties
COURT FILE NOs.: CV-20-00650694-0000, CV-21-00668447-0000 DATE: 20230221 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
RT Twenty-Sixth Pension Properties Limited and The RW Commercial Properties Corporation Plaintiffs – and – Precise Parklink Inc. and GOPARK Management (Ontario) Inc. Defendants
Counsel: Elie Farkas and Nancy Roberts, for the Plaintiffs Mark Anthony Veneziano, Aoife Quinn, and Drew Black, for the Defendants
HEARD: January 31, 2023
Dineen J.
[1] This case concerns a contract for the operation of a parking garage at 277 Wellington Street West, a downtown Toronto office tower. The building was owned by the Plaintiff RT Twenty-Sixth Pension Properties Limited (“RT”) until September 2020 when it was sold to the plaintiff RW Commercial Properties Corporation (“RW”). The contract in issue concerned the operation of the garage from May 1, 2016 to April 30, 2021. The defendant GOPARK Management Ontario (“Gopark”) operated the garage until January, 2019, when it assigned its obligations to the defendant Precise Parklink Inc. (“Precise”).
[2] One term of the contract required the defendants to pay a fixed monthly fee to the plaintiffs. With the onset of the COVID-19 pandemic in March, 2020, this fee began to substantially exceed the revenue that Precise earned from the garage. Precise stopped paying the fee in April and later made partial payments for some months. In this action, the plaintiffs claim the unpaid fees from April 2020 to the expiry of the contract.
[3] The defendants resist the claim on several bases. With respect to RT for the period from April to August, 2020, Precise argues that it negotiated a binding agreement with an agent for RT that forgave portions of the fixed monthly fee and that this agreement should preclude RT from suing for the outstanding amounts. As against both RT and RW, the defendants rely on a force majeure clause in the contract and argue that the contract was frustrated in view of the pandemic and government actions in response.
[4] The plaintiffs move for summary judgment. The primary position of the defendants is that this case is unsuitable for summary judgment, but in the alternative they submit that the case can be decided by way of summary judgment in their favour.
Factual background
The relevant terms of the agreement
[5] 277 Wellington is an office building with many tenants, the largest of whom was Chartered Professional Accountants Canada. Its underground parking garage rented space to both tenants of the building and others who bought monthly parking passes, and also to occasional users. Nearby amenities including the Metropolitan Toronto Convention Centre and sports arenas helped to drive traffic to the garage.
[6] The agreement between RT and Gopark is dated June 16, 2016. It provides that Gopark would operate the garage. The payment provision of the agreement is term 4.1, which provides that Gopark pay:
a fixed guaranteed fee in the amount of (i) $419,000.00 per annum payable in equal consecutive monthly instalments of $34,916.67 each in advance on the first day of each calendar month;
[7] The term further provides for a variable fee of 75% of the annual gross revenue that exceeded $600,000. The monthly fixed fee was to be made by automatic monthly debit.
[8] Section 16.2 provides that any modification to the agreement must be executed in writing and signed:
No change or modification of this Agreement shall be valid unless it is executed in writing and signed by both parties hereto. Any amendment to any Schedule to this Agreement may be made by substituting for such Schedule a new Schedule dated and signed by both parties hereto and such amended Schedule shall be effective as of the date stated therein.
[9] The agreement also contains a non-waiver clause at 16.7:
The failure of either party at any time to require performance by the other party of any provisions hereof shall not in any way affect the full right to require such performance at any time thereafter; nor shall a waiver by either party of any breach of the provisions hereof be taken as or held to be a waiver of any succeeding breach or such provision or as a waiver of the provision itself.
[10] Section 16.13 is the force majeure clause, which reads:
Subject to Section 6.7, neither party shall be in violation of this Agreement for its bona fide failure to perform any of its obligations by reason of strikes, boycotts, labour disputes, embargoes, shortages of materials, acts of God, acts of the public enemy, acts of public authority, weather conditions, riots, rebellion, accidents, sabotage, terrorism acts or any other circumstances (other than financial inability to perform) for which it is not responsible and which are not within its control and the performance of the affected obligation shall be excused for the period of the delay.
Gopark assigns its obligations to Precise
[11] Precise took over the operation of the parking garage by way of an assignment agreement dated January 24, 2019. In accordance with section 16.2 of the original agreement, this assignment was executed in writing and signed by representatives of all parties. The assignment provided that it did not release Gopark from its obligations under the original agreement.
The events and negotiations that followed the pandemic
[12] The operation agreement was in force with no apparent difficulties until the end of the fourth year of its five-year term. In March 2020, traffic into downtown Toronto abruptly collapsed as the COVID-19 pandemic took hold. Through the remainder of the term of the agreement, the garage would continue to operate but would never again generate enough revenue to come close to covering the monthly fee. Events near the building were cancelled or restricted, and many of the office’s tenants were frequently subject to stay-at-home recommendations or orders. At the outset of the pandemic, the building’s management asked Precise to allow CPA Canada tenants with monthly passes to cancel those without abiding by the normal 30-day cancellation period, and Precise complied.
[13] In April, Precise did not make its normal monthly fee payment on the date it was owed and requested temporary relief given the impact of the pandemic on revenues. Negotiations between Precise and Julian Aziz of Triovest Realty Advisors on behalf of RT ensued. Precise proposed that for April through June, 2020 it remit an amount equal to all revenue up to the amount of the fixed fee for each month less $2,500. By May, RT was in discussions to sell the building and was interested in negotiating a commitment for Precise to pay a specified amount during a future period. Negotiations continued over e-mail and during phone calls.
[14] These negotiations culminated in a July 7 email from Mr. Aziz to Precise’s representative Mr. Tse that grounds some of the defendants’ arguments, as will be discussed further below. He wrote:
In advance of tomorrow’s call I wanted to tell you that, until I get instructions from the property owners, I can’t commit to any alternate ongoing rental stream at this time, other than in your original proposal from April to August 2020 .
For that period you offered to pay Triovest 100% of the parking revenue less $2,500 per month as the Precise fee. Can you make payment for April, May and June.
Also for the period Sept 2021 to April 2022, can you commit to paying the contract amount per month? (Emphasis added)
[15] After follow-up phone calls, the details of which are disputed, Precise sent a draft of a proposed written amendment to the contract for the signatures of the parties. This amendment was never signed. Precise’s representative Mr. Tse says that he did not follow up seeking a signed copy because he understood the agreement to be concluded and effectively in place. Mr. Aziz says by contrast that no final agreement had been reached, and RT points to an email Mr. Aziz sent on July 14 seeming to continue negotiations about a proposed rate from September 2021 to April 2022, to which Precise did not respond.
[16] Precise made payments under the terms of its proposed amendment to the contract. On September 10, a representative of Triovest emailed Mr. Tse saying:
Thank you for the partial payments of rent for the months of April, May, June, and July, and August soon.
For the record, Triovest’s acceptance of partial payments does not bind nor does it set any precedence with respect to the contract. Precise has not received an abatement from the landlord and are still required to pay the balance of the contract of until such time as another arrangement has been agreed to in writing.
[17] The position of the defendants is that this was the first indication from a representative of RT that the reduced rate had not been agreed.
[18] In September, 2021, RW took over the property from RT. Precise continued to make partial payments for the remaining months of the original agreement and this litigation followed.
The legal issues
The general principles applicable to motions for summary judgment
[19] The applicable test on a motion for summary judgment is well-known. The moving party must demonstrate that there is no genuine issue that would require a trial. As Karakatsanis J. stated in Hryniak v. Mauldin, 2014 SCC 7 at paragraph 49:
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
Was the agreement between RT and the defendants validly amended?
[20] The defendants submit that they negotiated a valid and enforceable agreement with RT, which is reflected in the email of July 7 in which Mr. Aziz expresses agreement with the defendant’s proposal for the period from April to August.
[21] They submit that, at the very least, this alleged agreement raises a genuine issue for trial in view of the conflicting evidence from witnesses about the phone calls between the parties and their intentions at this time.
[22] For two reasons, I disagree.
[23] First, the position of the defendants cannot be reconciled with section 16.2 of the original agreement, which provides that no amendment is effective unless executed in writing and signed. The defendants here prepared a written amendment for signature but the plaintiffs did not sign and return it.
[24] The defendants note that terms equivalent to 16.2 are not always enforceable and that the focus should remain on the intention of the parties. They rely on the Court of Appeal’s decision in Shelanu Inc. v. Print Three Franchising Corp., in which Weiler J.A. held for the Court at paragraphs 53-54:
In view of my conclusion above, it is not strictly necessary for me to address the enforceability of the exclusion clauses. However, given the trial judge's conclusion and the extent of argument on the question of whether he erred in refusing to give effect to the clauses, I will consider this issue.
At the trial, the existence of the oral agreement and thus the intention of the parties was in issue. The trial judge relied on the parties' subsequent course of conduct to infer that they did not intend to continue to be bound by the exclusion clauses in the agreement. The trial judge found that Print Three had orally agreed to the surrender of a franchise by Shelanu on a previous occasion, and had allowed Shelanu to change locations and to lease space directly without anything being in writing. Where the parties have, by their subsequent course of conduct, amended the written agreement so that it no longer represents the intention of the parties, the court will refuse to enforce the written agreement. This is so even in the face of a clause requiring changes to the agreement to be in writing.
[25] I accept the submission of the plaintiffs that Shelanu is distinguishable on this point. The agreement in issue in that case was a franchise contract, and not one independently negotiated between two sophisticated commercial parties as in this case. The franchisor had, as Weiler J.A. noted, set an established practice of permitting oral variations to the agreement, and in that case the existence of the oral agreement in question was admitted at trial.
[26] I do not agree with the defendants that the evidence in this case can support a finding that the “subsequent course of conduct” of the parties shows an intention to no longer be bound by section 16.2 of the agreement. The parties had previously abided by the section when amending the agreement to assign Gopark’s obligations to Precise, and the very act of preparing a written amendment for signature in my view compellingly demonstrates that the defendants appreciated that this was necessary to formalize any variation.
[27] The dispute between the parties about what, if anything, was agreed during the negotiations in July of 2020 illustrates exactly why the parties included section 16.2 in the contract in the first place: to provide certainty about what was agreed and avoid litigation based on misunderstandings or differing memories of oral negotiations: see Etedali et al. v. Disi-Peri Mgt. Inc., 2022 ONSC 2184. To accept the position of the defendants that expressing what might be provisional partial agreement indicates an intention to no longer be bound by an exclusion clause would be to render such clauses completely ineffective.
[28] I also accept the position of the plaintiffs that the alleged agreement on fees from April through August 2020 is unenforceable for want of consideration. While the parties were clearly attempting to negotiate an agreement that would also have value for the plaintiffs by having Precise commit to future payments, the actual agreement the defendants allege is entirely one-sided and involves only a reduction in what the defendants had contracted to pay.
[29] The defendants argue that there was consideration present. Specifically, RT received a measure of certainty in its business relationship with Precise and received partial payments that had previously been withheld. The difficulty with this position is that RT was already contractually entitled to certainty for the term of the agreement and to the money it received.
[30] The defendants point to Select Restaurant Plaza Corp. v. Pavilion Royale Inc. as an example of a case where the receipt of partial payment and the certainty of a long-term relationship was held to constitute sufficient consideration for an agreement to reduce rent payments under a commercial lease. I accept the position of the plaintiffs that in that case, actual consideration was present because a percentage rent was added that created the potential for rents that exceeded the original agreement: see paragraph 83.
[31] The defendants also urge that recent out-of-province jurisprudence (Rosas v. Toca, 2018 BCCA 191; Greater Fredericton Airport Authority Inc. v. NAV Canada, 2008 NBCA 28) and academic commentary show a move away from requiring consideration for variations to contracts negotiated by parties with equal bargaining power. Until the issue is revisited by our Court of Appeal, however, I am bound by Gilbert Steel Ltd. v. University Construction Ltd. (1976), 12 O.R. (2d) 19 (C.A.) and must proceed on the basis that consideration is necessary.
[32] The plaintiffs also argue that Mr. Aziz lacked authority to negotiate a binding agreement and that no actual meeting of the minds occurred. Given my other findings it is not necessary for me to decide whether these issues could be resolved by way of summary judgment.
Should RT be estopped from enforcing the original agreement?
[33] The defendants further submit that, even if the amendment is not enforceable, RT should be estopped from enforcing the original agreement as a result of Mr. Aziz’s indication that a reduction in payments was agreed.
[34] Sopinka J. described the necessary components of a claim of promissory estoppel as follows in Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50:
The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position.
[35] Moldaver and Brown JJ. in Trial Lawyers Association of British Columbia v. Royal & Sun Alliance Insurance Company of Canada, 2021 SCC 47 at para 51 affirmed that any form of estoppel claim requires not just reliance but detrimental reliance. It requires that the legal position of the party making the claim has altered: Ryan v. Moore, 2005 SCC 38 at para. 69.
[36] The defendants assert that Precise relied on the purported agreement to its detriment by making the partial payments required under the amended agreement and by not following up and continuing negotiations because of a belief that they had a deal. They cite Dimensa Corp. v. TX / Communications Canada Inc., [1998] O.J. No. 1170 in support of their position.
[37] I see no basis in the record for a finding of detrimental reliance. Precise was already required under the contract to make the payments it did. Its legal position accordingly did not change. In my view, partial performance of existing contractual obligations cannot properly constitute detrimental reliance. It is understandable that Precise may have believed they had an agreement to reduce payments and may feel aggrieved that the plaintiffs have instead sought to enforce their full contractual entitlement, but this is not in my opinion the type of “evidence of prejudice, inequity, unfairness or injustice” required to sustain an estoppel claim (Trial Lawyers, supra at para 51).
[38] I also do not read Dimensa, supra, as supporting the defendants’ position. That case involved detrimental reliance that went beyond the performance of existing legal obligations: specifically, entering into new sales agreements in reliance on an understanding that commissions had been renegotiated: see para 16.
Should the defendants be relieved from payment as a result of the force majeure clause?
[39] The defendants argue that the COVID-19 pandemic is exactly the sort of situation contemplated by the agreement’s force majeure clause and that Precise’s non-payment is excusable under that clause.
[40] The clause itself is reproduced above at para. 10 of these reasons. The defendants submit that the clause is broad, and that its reference to a “bona fide failure to carry out any of its obligations” is unqualified and must accordingly include payment obligations. They further submit that an obvious underlying assumption of the entire agreement is that the monthly fee would be paid out of revenues received from operating the parking garage, which both parties would have believed would exceed the amount of the fixed fee for the duration of the contract. Accordingly, where an unexpected event within the meaning of the force majeure clause causes revenues to drop below the amount of the monthly fee, then the failure to pay the fee is a “bona fide” one caused by the unexpected event.
[41] While acknowledging the existence of authority suggesting that force majeure clauses do not apply to situations where contractual obligations become unprofitable to carry out rather than impossible, they emphasize that the authorities are clear that each force majeure clause must be interpreted based on its own specific language. They also rely on the Alberta Court of Appeal’s decision in Atcor Ltd. v. Continental Energy Marketing Ltd., 1996 ABCA 40, where the court interpreted a force majeure clause in a contract for the supply of natural gas as forgiving non-performance where “the event made performance commercially impracticable or unreasonable.”
[42] I do not accept these submissions. I accept that the pandemic and resulting government response is the type of event that might trigger the application of the clause. However, when s. 16.13 is read in the context of the entire agreement, it does not in my view serve to excuse non-payment of the fixed fee merely because of a drop in revenue at the parking garage occasioned by such an event.
[43] The parties no doubt anticipated that operating the garage would be profitable for the defendants. The very structure of the agreement in providing for a fixed monthly fee, however, clearly placed the risk of loss on the defendant should business at the facility drop precipitously. I see nothing in the language of s. 16.13 to suggest that it was intended to re-allocate that risk and assign this loss to the plaintiffs if it could be said to be caused by force majeure. In my view, the only sensible reading of the section is that the parties intended it to apply to situations where carrying out contractual obligations became genuine impossible, in line with the overwhelming weight of the pre-existing authority on similar clauses.
[44] In Porter Airlines Inc. v. Nieuport Aviation Infrastructure Partners GP, 2022 ONSC 5922, at paragraphs 424-462 Cavanagh J. gave comprehensive reasons for finding that a similarly worded force majeure clause did not relieve an airline from paying a monthly terminal fee even where its operations ceased during the pandemic. I rely on his summary of the authorities and reasoning, and in particular his reasons for declining to apply Aticor, supra, at paragraphs 442-448.
Was the contract frustrated?
[45] I do not accept the submission of the defendants that the contract was frustrated. Binnie J. defined frustration as follows in Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58:
Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract”: Peter Kiewit Sons’ Co. v. Eakins Construction Ltd., [1960] S.C.R. 361, per Judson J., at p. 368, quoting Davis Contractors Ltd. v. Fareham Urban District Council, [1956] A.C. 696 (H.L.).
[46] In my view, it cannot be said that performance of the contract became “radically different” following the pandemic within the meaning of the authorities. The parking garage continued to operate as it had before the pandemic. It simply became unprofitable. This Court has rejected similar arguments in the context of commercial leases even where businesses ceased to operate entirely for periods as a result of government restrictions during the pandemic: Braebury Development Corporation v. Gap (Canada) Inc., 2021 ONSC 6210; Niagara Falls Shopping Centre Inc v. LAF Canada Company and Fitness International, LLC, 2022 ONSC 2377. I was referred to no authority where a contract was found to be frustrated because of events that did no more than eliminate its profitability, and this would be in my view an unreasonably broad conception of the defence.
Conclusion
[47] I conclude that this case is suitable for summary judgment. All necessary facts are established on the existing record and the pleaded defences are not viable and do not raise genuine issues for trial.
[48] I award judgment to the plaintiff RT in the amount of $153,172.77 and RW in the amount of $239,205.12 in addition to prejudgment interest. If the parties cannot agree on prejudgment interest and costs, the plaintiffs may provide submissions within 30 days of the release of these reasons by emailing my judicial assistant, and the respondents will have 30 days to respond.
Dineen J. Released: February 21, 2023