DATE: 20030422

DOCKET: C39122

COURT OF APPEAL FOR ONTARIO

MORDEN, LABROSSE AND GOUDGE JJ.A.

B E T W E E N:

FASHION MILL CANADA LTD.

Appellant

James E. Lewis, Q.C., for the appellant

• and -

WESTDALE CONSTRUCTION CO. LIMITED

Respondent

Paul H. Starkman, for the respondent

Heard: April 11, 2003

Released Orally: April 11, 2003

On appeal from the judgment of Justice Silia S. Seppi of the Superior Court of Justice dated October 18, 2001.

BY THE COURT:

[1] The issue in this appeal (as it was in the application below) is whether the letter agreement of February 18, 1999 can be said to remove the tenant’s renewal right in the original lease.

[2] In our view it does not do so. We disagree with the conclusion of the application judge and would allow the appeal.

[3] The letter agreement does not refer to the renewal clause let alone expressly set it aside. However, the respondent says that the sentence “the tenant in good faith has agreed to negotiate a five year net lease for the premises” in the letter agreement carries that necessary implication because it must mean a five year lease starting April 1, 2000, which is the very period that would be covered by a renewal.

[4] We do not agree.

[5] The appellant says this sentence refers to a lease to commence April 1, 2005. This makes commercial sense given that the good faith negotiating obligation would give the respondent leverage to negotiate favourable terms over an additional five years at a time when it was seeking to sell the property.

[6] This interpretation of the letter agreement leaves in place the renewal clause in the original lease. Indeed the evidence on the application shows that the tenant’s understanding was consistent with this interpretation as were his actions. The evidence that for some months after the purported renewal the landlord took no steps suggesting the contrary is equally consistent with this interpretation. Moreover, the respondent put no evidence before the application judge to support the alternative interpretation it now puts forward.

[7] At the very least the disputed sentence in the letter agreement is ambiguous. Having been drafted by the respondent the doctrine of contra proferentum can properly be applied.

[8] We would therefore allow the appeal, set aside the order below and grant the declaration sought.

[9] We cannot leave this matter without noting that the application judge gave absolutely no reasons for reaching her conclusion. This is less than the parties, the public, and this court are entitled to expect.

[10] Costs of the application to the appellant fixed in the amount of $5,500 plus G.S.T. Costs of the appeal to the appellant fixed in the amount of $5,000 plus G.S.T.

Released: April 22, 2003 “JWM”

“J.W. Morden J.A.”

“J. Labrosse J.A.”

“S.T. Goudge J.A.”