Parkland Corporation v. Caledon Fuels Inc, 2024 ONSC 2361

COURT FILE NO.: CV-24-00713752-0000 DATE: 20240422

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Parkland Corporation Applicant – and – Caledon Fuels Inc. Respondent

Counsel: Brendan Jones, Amelia Phillips Robbins, and Steven Kelly for the Applicant W.E. Weston Powell and Siddharth S. Joshi for the Respondent

HEARD: April 10, 2024

Papageorgiou J.

Overview

[1] Parkland Corporation (“Parkland”) is a supplier and marketer of fuel and petroleum products. It purchased this business from another company in or around 2017.

[2] Parkland’s business model is structured so that Parkland enters into agreements whereby it becomes the exclusive supplier of its petroleum products to dealer gas stations. This involves leasing the premises owned by dealers, followed by a subsequent sublease of these premises back to the dealer. This type of arrangement allows Parkland to build long-term supply arrangements, so it will have various remedies related to the land where fuel is sold if there is ever a breach in the lease.

[3] This model also involves entering into consignment arrangements whereby Parkland continues to own the fuel used at the stations, but the fuel is sold by dealers pursuant to terms dictated by Parkland.

[4] Caledon Fuels Inc. (“Caledon”) owns 16544 Hurontario Street and operates a gas station at that location (the “Premises”). Caledon purchased the Premises, and the existing Ultramar Gas Station and convenience store thereon, in 2018. Caledon’s predecessor had entered into leasing arrangements with Parkland’s predecessor, and Caledon entered into an assignment agreement when it purchased the Premises in 2018.

[5] The lease term ended on July 31, 2023.

[6] Parkland renewed the lease and sublease pursuant to renewal provisions.

[7] Nevertheless, in or around January 2024, Caledon advised Parkland that it intended to enter into arrangements with another supplier. Parkland brought an urgent motion for an injunction.

[8] Subsequently, Caledon advised Parkland that it wished to have the entire matter decided on the merits by way of application. The parties appeared before Chalmers J., and he converted the hearing from an interlocutory injunction motion to the hearing of this application on its merits.

[9] Before me, the parties advised that this change was for efficiency and to minimize costs.

[10] Parkland seeks a declaration that the lease and sublease are in full force and effect and a permanent injunction restraining Caledon from breaching negative covenants.

[11] There is no cross-application from Caledon.

Decision

[12] For the reasons that follow, I am making the declaration and ordering the permanent injunction sought by Parkland.

Issues

[13] In arriving at my decision, I have considered the following issues:

• Issue 1: Did Parkland validly exercise its option to renew the lease and sublease?
• Issue 2: Did Parkland and Caledon enter into an enforceable oral agreement that varied the Renewal Option in the Lease and Sublease?
• Issue 3: Should the affidavits of Pritesh Patel, sworn March 25, 2024, and Prathamesh Patel, sworn March 26, 2024, be admitted after cross examination?
• Issue 4: Did Parkland breach a duty of good faith contractual performance?
• Issue 5: Should injunctive relief be granted?

Analysis

[14] Before addressing the issues, I will say a few things about this matter being brought by way of application.

[15] Rule 14.05 of the Rules of Civil Procedure provides that a proceeding may be brought by application where the determination of rights depends upon the interpretation of a contract, or in respect of any matter where it is unlikely that there will be any material facts in dispute.

[16] The parties here have expressly agreed that this matter should be determined on its merits by way of application and have taken the position that an application was proportionate and appropriate. Given the issues before me, I agree. No one took the position that any disputed facts meant that I should direct this matter to trial. To the contrary, the parties want me to decide this application on the basis of the materials before me, for efficiency and to minimize their costs.

[17] This matter is primarily resolvable in Parkland’s favour based upon well-established legal principles and contractual interpretation.

[18] With respect to the facts, to the extent that there are any in dispute or credibility issues, these issues are also resolvable by the affidavit evidence and the cross examinations on those affidavits in Parkland’s favour.

[19] As set out in 2516216 Ontario Ltd. o/a NUMBRS v. AbleDocs Inc, 2023 ONSC 4713, at paras. 14-17, an order converting an application to an action is typically only made when there are complex and disputed questions of fact or credibility which require oral evidence. This is like the standard applied on a motion for summary judgment. The court also noted that, as with a summary judgment motion, a court may proceed on the basis that the parties have put their best foot forward.

[20] Caledon made specific reference to and relied upon Dubblestyne et al v. Town of Oakville, 2021 ONSC 2678, at para. 8, where the court agreed that enhanced fact-finding powers in r. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 19, are applicable to applications. Its position was that I should exercise such powers with respect to this matter.

[21] This approach to hearing and determining applications is consistent with the Supreme Court’s direction in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, that fairness and justice do not require “painstaking” procedure and viva voce evidence in all cases, even those where there is some conflict in the evidence: at para. 28. The paramount consideration is whether the process employed can achieve a fair and just outcome.

[22] I add that in my view, there is nothing magical about viva voce evidence and demeanor evidence that makes it a better way of assessing credibility than doing so by subjecting a witness’ story “to an examination of its consistency with the probabilities that surround the currently existing conditions,” particularly when there is a robust documentary record that sets out what the parties did and said at the relevant time: Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.), at p. 357. See also: R. v. Kiss, 2018 ONCA 184, at para. 30.

[23] There are sometimes cultural differences that may impact the way a witness testifies and is perceived, and this problem generally does not exist in a paper record. While it is sometimes necessary to call viva voce evidence, because of the nature of the case, or the absence of contemporaneous documents, this is not always the case. Business disputes, where there are a raft of documents and written communications, are sometimes particularly suited to being resolved on a paper record. Suitability in each case will depend upon nature of the issue and record.

[24] I am satisfied that the record before me has permitted me to find facts, make any necessary credibility findings, and make necessary inferences to decide this matter; in all the circumstances, proceeding by way of application is a proportionate and fair process and is appropriate.

Issue 1: Did Parkland validly exercise its option to renew the Lease and Sublease?

Background

[25] There is no dispute that the initial lease was comprised of: i) a lease dated June 17, 2015, as extended by an amending agreement between Parkland’s predecessor and Caledon’s predecessor; and ii) an assignment and assumption of leases dated June 28, 2017, which Parkland entered into after it purchased the business from its predecessor—collectively, “the Lease.”

[26] There is no dispute that the sublease is composed of: i) a sublease dated June 17, 2015, between Parkland’s predecessor and Caledon’s predecessor, as amended by an amendment agreement; and ii) an assumption agreement—collectively, “the Sublease.”

[27] There is no dispute that Caledon entered into an agreement of purchase and sale to purchase the Premises from the previous owner 2440925 Ontario Inc. (“244”) on August 15, 2018 (the “244 Purchase Agreement). This agreement was conditional on 244 obtaining an assignment from Parkland and closed on December 20, 2018.

[28] There is no dispute that Parkland consented to 244 assigning its interests in the Lease and Sublease to Caledon on December 13, 2018 (the “Assignment Agreement”).

[29] There is no dispute that Parkland does not sell fuel to Caledon, but rather, sells it at the Ultramar gas station on the Premises by way of a consignment agreement with Caledon (the “Consignment Agreement”)

Terms Relevant To the Issues Before Me

Sale of other Gasoline

[30] Pursuant to ss. 15 and 18.2 of the Lease, Caledon covenanted not to allow the sale of non-Parkland gasoline and diesel at the Premises without prior written permission from Parkland.

Signage

[31] Pursuant to ss. 11 and 12 of the Lease and ss. 13 and 14 of the Sublease, Caledon covenanted not to allow signs or advertising material for petroleum products other than those supplied or authorized by Parkland at the Premises. Pursuant to s. 19.5 of the Lease, Caledon covenanted not to make any alterations to Parkland’s equipment (including signage) without Parkland’s consent.

Right to Renew and Rights of First Refusal

[32] As noted, the Lease and Sublease terminated on July 31, 2023.

[33] The Lease and Sublease gave Parkland the option to renew the Lease and Sublease for an additional five (5) year term from August 1st, 2023 to July 31st, 2028 (the “Renewal Option”).

[34] Specifically, s. 2.2 of the Lease provides as follows:

2.2 Notwithstanding the right of first refusal provided for in section 14 hereof, the Lessee [Parkland] may, at its discretion, renew the present lease for an additional period of five (5) years, at the same terms and conditions in force upon the expiry of the initial term. The financial conditions, including the rental payable, may, however, be renegotiated by the parties, acting in good faith. To exercise its option to renew, the Lessee shall provide the Lessor with a written notice to that effect at least ninety (90) days prior to the expiration of the initial term hereof. In the event that the parties decide to negotiate new financial conditions but are unable to agree within sixty (60) days following the exercise of the option to renew by the Lessee, rental payable shall be renewed for the term of the renewal. [Emphasis added]

[35] It is undisputed that there is a similar provision in the Sublease.

Parkland exercises its option to renew.

[36] On April 11th, 2023, Parkland gave notice in writing to Caledon that it was exercising its renewal option to extend the term of the Lease and Sublease by five (5) years (the “Renewal Option”), on the same terms and conditions.

[37] The only condition for Parkland to exercise the renewal option in s. 2.2 is the requirement to provide 90 days’ notice. Caledon does not dispute that Parkland provided sufficient notice.

[38] Adherence to this time limit is sufficient for the valid exercise of the renewal option: S.A.M.S. Service Centre v. Yami Yummy, 2023 ONSC 2115, 48 R.P.R. (6th) 38, at paras. 16-18.

[39] Thus, the Renewal Option was validly exercised, subject to Caledon’s argument that there was an oral agreement that varied the Renewal Option and/or that Parkland breached a duty of good faith performance.

Issue 2: Did Parkland and Caledon enter into an enforceable oral agreement that varied the Renewal Option in the Lease and Sublease?

Caledon gives notice of its intention to sell other automotive fuel and remove signage.

[40] After the Renewal Notice, Parkland continued to supply automotive fuel to be sold at the Premises.

[41] On January 25, 2024, Caledon advised that it was installing a new point of sale system and made arrangements with an independent supplier for the supply of motor fuel.

[42] But for the alleged oral agreement described below and/or any impact it might have on Parkland’s good faith performance obligations, it is uncontested that Caledon’s actions would have breached the terms of the Lease and the Sublease, in particular ss. 11 to 15 and 19.5.

The Alleged Oral Agreement

[43] Masud Raja is the Business Development Officer for Caledon.

[44] In an affidavit dated March 7, 2024, Mr. Raja claims that during the first week of December 2018, before he signed the Assignment Agreement, he met with Parkland employees, Mike Merkley and/or Ed Whitehouse. At that time, he expressed concerns about the Lease and Sublease, particularly that Caledon would sustain losses instead of profits under the current terms. He stated that Caledon proposed revising the terms from a consignment arrangement to a buy/sell arrangement. Parkland refused to make changes at that time, but he says it assured Caledon that:

(a) If Parkland desired to renew the Lease after July 2023, they would offer new terms on a buy/sell basis to Caledon.

(b) If Caledon received a better offer on a buy/sell basis from a competing supplier, Parkland would match the offer or provide a better offer, and that if Parkland were not willing to match the offer, Caledon could accept the competing supplier’s offer (the “Alleged Oral Agreement”).

[45] Mr. Raja says that Caledon asked for this agreement to be put in writing to avoid interpretation issues, but Parkland refused. Instead, to assure Caledon of their commitment to the terms of the Alleged Oral Agreement, Parkland representatives informed Caledon that they had buy/sell arrangements with other dealers in Ontario. They purportedly provided copies of lease agreements and communications with one other dealer (the “Toronto Dealer”) that showed this.

[46] Mr. Raja says that the Alleged Oral Agreement was of such critical importance that Caledon would not have purchased the Premises and business without it.

[47] Mr. Merkley and Mr. Whitehouse say they do not recall any such meeting.

[48] There is an obvious conflict in the evidence, and I will address this in Parkland’s favour. But first, I will outline the legal reasons why the Alleged Oral Agreement is unenforceable in any event.

No consideration

[49] It is important to understand that the effect of the Alleged Oral Agreement was to surrender Parkland’s renewal rights, which permitted Parkland to renew on the same terms if the parties negotiated and could not agree to new terms. In that regard, Caledon’s lawyer argued that “the sense of the Alleged Oral Agreement was that the parties would mandatorily negotiate new terms and if they did not agree, the Lease and Sublease were determined at the end of July 31, 2023.”

[50] Mr. Raja’s description of the Alleged Oral Agreement contains no reference to any consideration flowing to Parkland. The Lease and Sublease, which contained the Renewal Option, were already registered on title, ran with the land, and Parkland already had a tenant that was bound by them, the previous owner 244.

[51] The only thing that Parkland did was consent to the assignment at 244’s request as part of its good faith performance of its agreement to not unreasonably withhold such consent.

[52] Indeed, the Assignment Agreement, signed by Caledon, 244 and Parkland, only notes consideration flowing between Caledon and 244.

[53] Thus, the Alleged Oral Agreement fails for want of consideration.

Parol Evidence Rule

[54] As well, because the Alleged Oral Agreement purports to change and/or is inconsistent with Parkland’s contractual renewal rights, it also violates the parol evidence rule, whose purpose is twofold: i) to achieve finality and certainty in contractual obligations; and ii) to hamper a party’s ability to use fabricated evidence to attack a contract: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 59; M. Bravar Custom Builders v. Long Island Homes Inc., 2015 ONSC 6627, at para. 26, citing Canadian Imperial Bank of Commerce v. Mitchell, 2010 ONSC 2227, at para. 19.

[55] Caledon is seeking to admit evidence that would change the parties’ obligations expressed in the Lease and Sublease, and then to enforce it as a contract. This is the quintessential problem that the parol evidence rule is designed to guard against. In effect, Caledon seeks to introduce impermissible evidence as to the parties’ subjective intentions by way of parol evidence to change a written agreement which is not permitted: Sattva, at para. 59.

[56] I reject Caledon’s argument that these alleged communications fall within an exception to the parol evidence rule that permits the admission of evidence of misrepresentations that induced the making of a contract.

[57] Caledon relies upon the case Beer v. Townsgate (1997), 36 O.R. (3d) 136 (C.A.). In that case, unsophisticated purchasers of homes relied upon pre-contractual representations of facts that their purchases were “risk-free” and a “guaranteed investment”. This was found to be untrue.

[58] Beer involved the issue of concurrent liability in tort and contract, and there was a specific claim of negligent misrepresentation. The court held that the parol evidence rule could not foreclose a claim for misrepresentation in tort based upon the purchase agreement, which provided that there were no representations or conditions other than those expressed in the agreement. The court interpreted the provision and concluded that it did not preclude a claim in tort and that, in any event, the entire agreement clause was buried in the agreement, and they did not have an opportunity to read or negotiate the provision. Thus, they could not be taken to have assented to it.

[59] There are a number of problems with Caledon’s argument that this exception applies here.

[60] First, Caledon has not advanced a claim for negligent misrepresentation or any remedy for same. The remedy in Beer was recission of the purchaser’s agreement to purchase the home. It is not clear how such remedy would apply in this case. Caledon says it was induced to purchase the Premises by these alleged misrepresentations; however, the purchase agreement was not entered into with Parkland but with 244. Even if the Assignment Agreement were rescinded the Lease and Sublease are still registered on title and run with the land.

[61] Second, Caledon would not be able to satisfy the elements of negligent misrepresentation because: i) the alleged representation was not of fact, but of future intention; ii) it would have been unreasonable for Caledon to rely upon it because Mr. Raja is an experienced real estate agent and had the Lease and Sublease in hand that contained the Renewal Option. The Renewal Option was clear and unequivocal.

[62] Therefore, the Alleged Oral Agreement is inadmissible pursuant to the parol evidence rule.

Statute of Frauds

[63] The Alleged Oral Agreement would also be inadmissible pursuant to the Statute of Frauds, R.S.O. 1990, c. S.19, but for the doctrine of part performance.

[64] Section 1.1 of the Statute of Frauds provides as follows:

1 (1) Every estate or interest of freehold and every uncertain interest of, in, to or out of any messuages, lands, tenements or hereditaments shall be made or created by a writing signed by the parties making or creating the same, or their agents thereunto lawfully authorized in writing, and, if not so made or created, has the force and effect of an estate at will only, and shall not be deemed or taken to have any other or greater force or effect.

[65] Pursuant to s. 4 of the Statute of Frauds, no action may be brought upon any contract in respect of any interest in land unless the agreement upon which the action is brought, or some memorandum or note thereof, is signed by the party alleged to have made the agreement: Abdollahpour v. Banifatemi, 2015 ONCA 834, 344 O.A.C. 14, at para. 30.

[66] Courts have held that the Statute of Frauds applies to amendments or variations of agreements governed by it including the amendments of leases: C.I.D. v. Garnier Holdings, 2021 ONSC 196, at para. 52; M. Bravar Custom Builders, at para. 25, citing Shook v. Munro, [1948] S.C.R. 539; Graham v. Her Majesty the Queen, 2015 ONSC 41, 50 R.P.R. (5th) 128, at paras. 50-55.

[67] In this case the Alleged Oral Agreement purports to amend the Renewal Option in the Lease and Sublease and is therefore governed by the Statute of Frauds.

[68] Nevertheless, I agree that the doctrine of part performance would take the Alleged Oral Agreement outside the Statute of Frauds if it were proven.

[69] As noted by Centa J. in 2730453 Ont. Inc. v. 2380673 Ont. Inc., 2022 ONSC 6660, 51 R.P.R. (6th) 259, at para. 116, equity created a doctrine of part performance so that the Statute of Frauds could not be used to perpetrate a fraud. Where one party to a contract that would be unenforceable under the Statute of Frauds sits back while the other party acts to his detriment in performing the contract, the first party will not be allowed to rely on the Statute of Frauds.

[70] Even though Caledon does not say that it performed the actual Alleged Oral Agreement in reliance on anything Parkland did or said, it does say that it would not have purchased the Premises but for the Alleged Oral Agreement. As noted, the 244 Purchase Agreement was entered into on August 13, 2018, but it did not close until December 20, 2018. There was an amendment to the 244 Purchase Agreement on December 13, 2018, whereby Caledon and 244 agreed that the 244 Purchase Agreement was conditional on Caledon being satisfied with the terms and conditions in the Lease and Sublease. In my view, this would be sufficient part performance to take the Alleged Oral Agreement outside the Statute of Frauds, if it were proven as a matter of fact.

Conclusion re Legal Issues

[71] The Alleged Oral Agreement would fail for want of consideration and is inadmissible pursuant to the parol evidence rule, even if it were proven as a matter of fact.

Believability of the Alleged Oral Agreement

[72] Caledon did not argue promissory estoppel. Even if it had, at the time of the Alleged Oral Agreement, the parties were not yet in a legal relationship so that argument would fail on that basis.

[73] Further and in any event, I also find on a balance of probabilities that the Alleged Oral Agreement is not believable. In doing so, I have proceeded to weigh the evidence before me, make inferences and credibility assessments on the basis that the parties have put their best foot forward in accordance with Caledon’s submissions.

[74] The Alleged Oral Agreement is not believable for the following reasons:

• Parkland’s practice is for all its agreements, including leases and subleases with dealers, to be in writing. Mr. Merkley and Mr. Whitehouse both testified that they would not, and did not, make the Alleged Oral Agreement.
• The Alleged Oral Agreement was purportedly entered into in 2018 prior to the Assignment Agreement. If so, it is odd that the Alleged Oral Agreement is not referenced in the Assignment Agreement. Even if Parkland would not agree to put these terms into a formal agreement, it is odd that there was no follow up by Caledon documenting these alleged assurances, which it says were of critical importance, even if only by email.
• Mr. Raja is a real-estate agent by profession. He testified that he had been involved in 11 gas stations before the Premises. He knew that leases and subleases are in writing; amendments to leases and subleases are in writing; and fuel supply agreements, and any amendments to those agreements, are in writing.
• Caledon purchased the Premises for over $7,000,000. It is odd that Caledon would pay this amount of money for a business which Mr. Raja said was sure to lose money pursuant to the current contractual arrangements. It is not believable, given Mr. Raja’s sophistication and experience that he would agree to purchase an unprofitable business on the basis of an Alleged Oral Agreement that could make the business profitable five years later, without documenting the Alleged Oral Agreement in some way at the time. This was quite a risk for such an experienced person to take and makes little commercial sense.
• Caledon did not mention this Alleged Oral Agreement in writing until Mr. Raja swore his March 7, 2024, affidavit even though the parties have had multiple written interactions between the date of the Alleged Oral Agreement and March 7, 2024. These include:
  • On October 20, 2020, Caledon and Parkland entered into a fuel consignment agreement for a term of one year, which automatically renewed year to year (the “Consignment Agreement”). Under the Consignment Agreement, Caledon receives a commission on each litre of motor fuel sold at the Premises. There was no mention of the Alleged Oral Agreement at that time.
  • In 2022 and 2023, in the interest of maintaining positive dealer relations, Parkland offered several accretive proposals to Caledon by way of Letters of Intent (“LOI”). These proposals included increasing commission payable, as well as increasing motor fuel volumes delivered to Caledon. Caledon did not accept any of the LOIs. There is no evidence that Caledon referenced the Alleged Oral Agreement in communications related to the LOIs. One would have expected it to do so, since the Alleged Oral Agreement would have given Caledon leverage in any negotiations.
  • When Parkland gave notice in writing on April 23, 2023, that it was exercising its Renewal Option, Caledon did not respond by reminding Parkland of the Alleged Oral Agreement, which effectively changed the terms of the Renewal Option.
  • In May 2023, Parkland sought to renegotiate the terms of the renewal in accordance with s. 2.2, which provided that the parties “may” do so. Again, there is no evidence of any communications during such negotiations referencing the Alleged Oral Agreement.
  • In early May 2023, Caledon informed Parkland that it received an offer from one of Parkland’s competitors, Global Fuels Inc. to replace Parkland as the fuel supplier at the Premises, on a buy/sell basis. Caledon sent a copy of the Global offer (the “Global LOI”) to Parkland on May 29th, 2023, via email. The written communications in respect of the Global LOI do not reference the Alleged Oral Agreement which is odd since the Alleged Oral Agreement provided that if Parkland did not match any such offer, Caledon could accept it and terminate the Lease and Sublease.
  • On June 23rd, 2023, Parkland informed Caledon that the initial term of the Lease and Sublease had not expired and the Global LOI was premature since the Renewal Period had not begun. Caledon responded that it had no intention to renew with Parkland and would be ending the relationship, despite the renewal being Parkland’s option. Again, the written communications do not reference the Alleged Oral Agreement.
  • Then, from October to December 2023, the parties had further communications regarding the renewal. Parkland maintained that it had unfettered renewal rights, and Mr. Raja made no reference to the Alleged Oral Agreement. In fact, in his email of November 11, 2023, Mr. Raja referenced s. 2.2 of the Lease without saying that it had been altered by any Alleged Oral Agreement. His emails show that he was misinterpreting s. 2.2 to require agreement on new terms as a condition of renewal.
  • Not even the communication made by Caledon on January 25, 2024, indicating that it had arranged to sell other fuel, set out the Alleged Oral Agreement. Caledon continued operations as usual under the Lease and Sublease after the Renewal Notice without ever referencing the Alleged Oral Agreement.
• There are also credibility issues with Mr. Raja’s assertion that Mr. Merkley and Mr. Whitehouse provided him with a copy of agreements between Parkland and another Toronto Dealer as reassurance:
  • In his March 7, 2024, affidavit, Mr. Raja said that the Toronto Dealer lease agreement, as well as an email dated August 17, 2017, between Parkland and the Toronto dealer, were given to him in 2018 during the meeting where the Alleged Oral Agreement occurred. When cross examined, Mr. Raja was adamant that the August 17, 2017, email was handed to him at this December 2018 meeting instead of being forwarded to him as an email. He said he did not know who provided it.
  • After this evidence, Parkland filed an affidavit showing that the GMAIL logo on the August 17, 2017 email only came into existence in October 2020; as such, this email could not have been printed out and handed to him at this alleged meeting in 2018. Mr. Raja then filed a supplementary affidavit that said that the email may have been printed out and given to him at a subsequent meeting with Parkland representatives, sometime after the GMAIL logo was changed in 2020. [1] However, even this changed evidence does not improve the believability of this assertion.
  • GMAIL inboxes have categories that show the number of emails in various inboxes and folders on the left-hand side. When GMAIL emails are printed out, these inboxes appear on the left-hand side of the email. When one compares the August 17, 2017, email between Parkland and the Toronto Dealer, that Mr. Raja says was handed to him, with a printout of another email dated July 1, 2023, sent from Mr. Raja’s own email account, it is clear that the two emails show almost the identical numbers of messages in various email inboxes and folders, as follows:

	August 17, 2017 email between Toronto Dealer and Parkland allegedly handed to Mr. Raja by Parkland	Mr. Rajas’s July 1, 2023, email
Inbox	11,143	11,323
Starred	0	0
Snoozed	0	0
Important	0	0
Sent	None shown	None shown
Drafts	907	909
Social	20,317	20,359
Updates	6,876	6,968
Forums	2,851	2,853
Promotions	64,810	65,488

*   It is an improbable coincidence that two different people would have almost identical numbers of messages in their various inboxes and folders. I conclude on a balance of probabilities that the email could not have been handed to Mr. Raja as he says but was forwarded to him by someone and then printed from his own email inbox. This is why the information on the left-hand side of the two emails are almost identical. The fact that he has misstated how he received this email also leads me to conclude that it must have been emailed recently. I conclude that he said it was handed to him in December 2018 (revised to sometime after 2020) because it does not help his narrative if this email was sent to him recently. All this casts doubt on his evidence as a whole.

• Even though Parkland did agree to a buy/sell arrangement with the Toronto Dealer after the lease and sublease terminated, the original lease and sublease between Parkland and the Toronto Dealer were different than the ones to which Caledon is bound. The renewal option in Parkland’s initial lease and sublease with the Toronto Dealer is set out in s. 2.02 of the lease between them and provided that Parkland could renew “at conditions acceptable and that the parties undertake to negotiate in good faith.” The Renewal Option in the Caledon Lease and Sublease in s. 2.2 directs that the parties “may” negotiate new terms, but if they cannot agree, then previous terms apply. Thus, Parkland agreed to the buy/sell arrangement proposed by the Toronto Dealer at the time of renewal because it had to, or the leases would not renew. This is not the case here.
• Given Parkland’s business model, it is implausible that it would agree to gratuitously surrender its renewal rights.

Issue 3: Should the affidavits of Pritesh Patel, sworn March 25, 2024, and Prathamesh Patel, sworn March 26, 2024, be admitted?

[75] Following cross examination, Caledon obtained affidavits from Pritesh Patel and Prathamesh Patel, the principals of 244, (the “Patels”), who said they were present at the meeting when the Alleged Oral Agreement took place. Caledon brought a motion to admit this evidence. Parkland opposed the motion because it was brought after cross examination.

[76] In their affidavits which are virtually identical, the Patels say that they attended a meeting and that Parkland representatives “stated they would not make any changes for the remaining term of the lease, but they would change it to a [buy/sell] agreement after the expiration of the Lease and Sublease in July 2023 and that to support their commitment they handed over to Caledon representatives documents related to another Parkland dealer.”

[77] I agree that the contents of the Patel affidavits do not arise out of any evidence from the cross examination of Parkland’s affidavits. The very issue of what was allegedly discussed at the alleged meeting was in issue from the outset.

[78] Caledon provided no explanation as to why this evidence was not included at the outset. There was a very tight timetable for this motion, and Caledon should have provided these affidavits earlier, when the parties had agreed to conduct cross examination.

[79] Further, this evidence does not actually assist Caledon. The Patels do not say most of what Mr. Raja says in his affidavit. They do not corroborate the main part of Mr. Raja’s evidence, which was that Parkland agreed if “Caledon received a better offer on a [buy/sell] basis from a competing supplier, Parkland would match the offer or provide a better offer, and that if Parkland were not willing to match the offer, Caledon could accept the competing supplier’s offer.” Neither Mr. Raja nor the Patels set out any proposed terms of any such buy/sell arrangement which would still have to be negotiated even if what they are saying is true.

[80] Thus, at most, even if what the Patels say is true, they corroborate nothing more than an agreement to agree, which is not enforceable: Fice v. Ontario (Department of Public Works) (1921), 64 D.L.R. 535 (Ont. C.A.), at p. 539; Brown’s Cleaners & Tailors Ltd. V. OMERS Realty Corp., 2010 ONCA 599, at paras. 1, 4; Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc., 2016 ONCA 93, 393 D.L.R. (4th) 690, at para. 27.

[81] Thus, in all the circumstances, it is not in the interests of justice for the Patels’ affidavits to be admitted, and I do not admit them. Even if I did, it would not change the outcome of this proceeding.

Issue 4: Did Parkland breach a duty of good faith contractual performance?

[82] As set out in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, the reasonable expectations of commercial parties are the underlying thread of good faith: at para. 41.

[83] Caledon argues that because Parkland made assurances, it had a reasonable expectation that Parkland was obliged to agree to a buy/sell arrangement as part of these negotiations. If Parkland did not agree, then the Lease and Sublease would be determined as of July 31, 2023.

[84] Caledon argues that similar communications were part of the surrounding circumstances or factual matrix.

[85] I reject this argument for a number of reasons.

[86] First, I do not accept, as a matter of evidence, that these communications took place for the reasons set out above.

[87] Second, the Lease and Sublease, which contained the Renewal Option, were entered into in 2015. Events which took place in 2018 cannot be the factual matrix for these agreements.

[88] Third, even if Caledon is correct that these communications are part of the factual matrix for the Assignment Agreement, which then formed part of the Lease and Sublease, these alleged communications are not surrounding circumstances. Rather, they are evidence of the parties’ subjective intentions, which are not permissible as part of the factual matrix. [2]

[89] Furthermore, and in any event, admission of these communications to interpret the good faith obligations under Renewal Option would be contrary to the court’s directions in Sattva, at para. 57, that surrounding circumstances cannot be used “to deviate from the text such that the court creates a new agreement”. That is what would happen here if these alleged communications were admitted to inform the good faith obligation. They would completely change the Renewal Option.

[90] I add that the good faith obligation does not mean that parties must agree to change negotiated contractual provisions because they end up being disadvantageous to the other party. This is not what Bhasin stands for.

[91] The fact that Caledon has produced financial statements that show it has been losing money does not mean that Parkland agreed to negotiate a buy/sell arrangement. I note here that these financial statements are unaudited, and they were largely during a period when many businesses were having financial difficulties because of COVID.

[92] I also reject the argument that it was a surrounding circumstance at the time of the Assignment Agreement that the arrangement was unprofitable. There is no admission from Parkland that it was aware of this and no reason why it would have been.

[93] The evidence before me shows that in accordance with s. 2.2, Parkland sought to renegotiate terms and made a number of offers, but the parties could not come to an agreement. I find no breach of the duty of good faith in the circumstances.

Issue 5: Should injunctive relief be granted?

[94] I grant a permanent injunction enjoining Caledon from using, storing, selling, or advertising motor fuels other than those supplied by Parkland at the Premises during the term of the Lease and Sublease, for the reasons that follow.

[95] As noted above, on January 25, 2024, Caledon advised Parkland it was installing a new point of sale system over the weekend and had arranged for an independent supplier to supply motor fuel at the Premises. This was an anticipatory breach.

[96] After Parkland wrote to Caledon advising that the proposed unilateral termination of the Lease and Sublease was unlawful and that it would be moving for an interlocutory injunction, Caledon advised that it would make no changes “for now.”

[97] Had Caledon proceeded with its intended action, this would have constituted a breach of a variety of the provisions and negative covenants in the Lease and Sublease, including ss. 10-15, and 19.5.

[98] As of the hearing of this application, Caledon has taken no other steps. However, Caledon has not committed to not pursuing this kind of action in the future during the renewal term.

[99] In addition, on September 26, 2023, Caledon deleted Parkland’s registration on title without Parkland’s notice or consent. It also removed the Lease from title to the Leased Premises. Caledon’s title application in support of the deletion included a statement that the Lease had been “determined” and that there was no occupation under the Lease. These acts constitute repudiation of the Lease and Sublease.

[100] In Parkland Corporation v. SRAA Inc., 2021 ONSC 2874, 35 R.P.R. (6th) 138, Myers J. granted an interlocutory injunction in similar circumstances to prevent the dealer from terminating the lease and re-leasing it, pending a determination on the merits.

[101] Parkland also relies upon caselaw that holds that where a tenant alleges a wrongful interference with its property interest, an injunction to restrain the wrong is the usual remedy. In 1465152 Ontario Limited v. Amexon Development Inc, 2015 ONCA 86, 381 D.L.R. (4th) 66, at para. 23, the Court of Appeal affirmed a permanent injunction restraining a landlord from terminating a lease.

[102] Although irreparable harm and balance of convenience are not relevant to granting a final injunction, similar evidence might be relevant in considering whether the court should grant permanent injunctive relief. As such, I am taking these into account: 1711811 Ontario Ltd (Adline) v. Buckley Insurance Brokers Ltd. 2014 ONCA 125, 371 D.L.R. (4th) 643, at paras. 79-80.

[103] In my view, Caledon’s actions demonstrate an intention to act unilaterally to breach the Lease and Sublease and include conduct that did breach the contract: e.g., the deletion of Parkland’s registration on title.

[104] Parkland’s business model depends upon the enforceability of its long-term supply agreements with members of its dealer network.

[105] The Lease and Sublease are integral to the maintenance of Parkland’s network of gas stations, through which Parkland seeks to create and expand market share. Such goals are dependent on parties honoring long-term contractual relationships, such as the Lease and Sublease. Without gas stations under long-term contracts and the right to long-term control of the supply of motor fuels to its gas station network, Parkland would be operating under an entirely different business model.

[106] If the permanent injunction does not issue, Parkland’s reputation and ability to enforce similar agreements and renewal options will be impacted. Dealers operating in Ontario are in touch with each other and are monitoring Caledon’s strategy in this case.

[107] As noted by Myers J. in SRAA Inc., at para. 92, the potential loss of control of the site brings a specie of loss that is not readily susceptible to quantification in damages. It involves assessing the harm to Parkland of the loss of its renewal rights designed to bring it control over the Premises for years to come.

[108] Subsection 18.4 of the Sublease specifically acknowledges that Parkland would suffer irreparable harm if Caledon breached subsection 18.2 of the Sublease, and that Parkland would be entitled to an injunction restraining such breach.

[109] The only harm to Caledon is that it will have to comply with agreements to which it is already bound.

[110] Thus, the irreparable harm considerations and balance of convenience strongly favour Parkland.

[111] I am granting the permanent injunction, but with a carveout that the injunction shall not prevent Caledon from exercising its rights pursuant to the Lease and Sublease in the event that Parkland breaches any of the provisions therein in the future. In that regard, as in 1465152, at para. 28, the permanent injunction shall not protect Parkland from the consequences of future breaches of the Lease or Sublease. I note in this regard that s. 3 of the Lease gives Caledon the right to terminate upon default.

[112] The parties shall provide me with a draft Order that complies with the above.

Costs

[113] Pursuant to s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, costs are in the discretion of the court. Rule 57 sets out the factors which courts should have regard to when awarding costs. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Zesta Engineering Ltd. v. Cloutier (2002), 21 C.C.E.L. (3d) 161 (Ont. C.A.), at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para. 26; Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 52; and G.C. v. Ontario (Attorney General), 2014 ONSC 1191, at para. 5.

[114] Parkland requests substantial indemnity costs in the amount of $64,580, or partial indemnity costs in the amount of $44,233.

[115] Caledon’s costs on a partial indemnity basis are $19,281, or $28,921 on a substantial indemnity basis.

[116] There is no basis for an award of substantial indemnity costs, which are “rare and exceptional” and only warranted where there has been reprehensible, scandalous, or outrageous conduct on the part of a party: see DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5; Foulis v. Robinson (1978), 21 O.R. (2d) 769 (C.A.); and most recently Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239, 140 O.R. (3d) 81, at para. 43.

[117] With respect to the factors in r. 57, the matter was important to Parkland. Parkland had to move quickly, which increased costs, and the matter was reasonably complex, both factually and legally. As well, even though Parkland’s costs are almost double Caledon’s, it was the moving party, and its materials were more fulsome as a result. Parkland had to address inaccuracies in Mr. Raja’s affidavit.

[118] Nevertheless, given Caledon’s own costs, in my view it was not within its reasonable expectations that the costs would be more than double its own.

[119] In the exercise of my discretion, taking into account all considerations, I award Parkland $30,000 on a partial indemnity basis payable within 30 days.

Papageorgiou J.

Released: April 23, 2024

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Parkland Corporation Applicant – and – Caledon Fuels Inc. Respondent

REASONS FOR JUDGMENT

Papageorgiou J.

Released: April 22, 2024

[1] There was no objection before me to either of these affidavits on the basis of r. 39.02.

[2] Courts in some cases have admitted some limited evidence of negotiations where the evidence set out objective facts of which the parties were aware, or where the evidence demonstrated the objective purpose of the agreement: see Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, [2021] 1 S.C.R. 32; Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, [2019] 4 S.C.R. 394; Corner Brook (City) v. Bailey, 2021 SCC 29, [2021] 2 S.C.R. 540, at para. 56; and Canada (Attorney General) v. Fontaine, 2017 SCC 47, [2017] 2 S.C.R. 205. Recently, in Goodlife Fitness Centres Inc. v. Rock Developments Inc., 2019 ONCA 58, at para. 15, the Court of Appeal observed that it has “repeatedly cautioned against looking to negotiations to interpret a contract.” Quoting its decision in Primo Poloniato Grandchildren's Trust (Trustee of) v. Browne, 2012 ONCA 862, 115 O.R. (3d) 287, it affirmed that “[w]hile the scope of the factual matrix is broad, it excludes evidence of negotiations, except perhaps in the most general terms”: at para. 16. In that case, the court determined that the application judge’s reference to email exchanges during negotiations to make findings of fact about the meaning of a commercial contract was an error. This is the most direct and applicable authority to the issues before me. Finally, introduction of the kind of pre-contractual negotiations that Caledon seeks to admit would be inconsistent with the Supreme Court’s express direction in Sattva, at para. 55, that the goal of contractual interpretation is “to ascertain the objective intentions of the parties”.