DATE: 20030624

DOCKET: C39295

COURT OF APPEAL FOR ONTARIO

RE:

BANTREE HOLDINGS INC. (Applicant (Respondent in Appeal)) – and - 1286289 ONTARIO LTD. (Respondent (Appellant in Appeal))

BEFORE:

WEILER, LASKIN AND GOUDGE JJ.A.

COUNSEL:

William G.D. McCarthy

for the appellant 1286289 Ontario Ltd.

Katherine A. Cotton

for the respondent Bantree Holdings Inc.

HEARD:

June 12, 2003

On appeal from the order of Justice B. J. Manton of the Superior Court of Justice dated November 22, 2002.

E N D O R S E M E N T

LASKIN AND GOUDGE JJ.A.:

[1] The first issue in this appeal is the interpretation of s. 1.6(c) of the lease. Manton J. held that this provision entitled the tenant to a reduction in the basic rent from January 1, 2000 forward to its expiry, by 50% of the increase of real estate taxes over $54,622.85.

[2] We do not agree.

[3] As the tenant acknowledged in the affidavit of Mr. Armstrong, s. 1.6(c) was designed to cushion the tenant not against all increases in real estate taxes over $54,622.85, but only against those that are a result of the 1998 real estate assessment appeal. Increases that result from that appeal are to be shared equally between the landlord and the tenant.

[4] The language used by the parties makes this clear. The protection for the tenant is triggered only if, as a result of the 1998 assessment appeal, the real estate taxes increased to more than $54,622.85. The relevant language of s. 1.6(c) is as follows:

Notwithstanding Subsubsections 1.6(a) and (b), if the result of the Assessment Appeal is that the Tax, with respect to the Premises, is greater than $54,622.85, from and after January 1 of the year following the determination of the Assessment Appeal, the Basic Rent payable for each year of the Term, following the determination of the Assessment Appeal, shall be reduced by one-half of the increase of the real estate tax over $54,622.85.

[5] The 1998 Assessment Appeal process yielded a tax assessment that remained at $52,858.78. There is nothing to suggest that this assessment appeal produced any increase in real estate taxes. Ms. Cotton was candid to acknowledge as much in argument. The subsequent increases in real estate taxes that did occur were due to higher rates being applied to this assessment. The tenant did not bargain for protection from such increases. Section 1.6(c) does not protect the tenant against them.

[6] This ground of appeal must therefore succeed and the tenant’s application is in this respect dismissed.

[7] This disposition is based on the interpretation of s. 1.6(c). It does not deal with the question raised in the affidavit material (but not dealt with below) of bad faith or misrepresentation in the negotiations leading to the lease. It will be up to the respondent to determine whether to pursue this issue.

[8] The second issue in the appeal is whether s. 7.4(d) of the lease precluded Manton J. from ordering a reference to determine the percentage of snow removal operating costs and taxes for which the tenant is not responsible to pay.

[9] In our view he did not err. The audit clause is specific. It provides that a disagreement as to the accuracy of the operating costs or taxes is to be referred to an auditor for final disposition. Here the dispute is not about the accuracy of the figures but about the apportionment of costs for the nonexclusive use of the parking lot. In these circumstances, there is no bar to the reference made to the master. We would dismiss this ground of appeal.

[10] Since success is divided, there shall be no costs of this appeal. Costs below remain to be fixed by Manton J. after the reference is completed keeping in mind the alteration we have made to his order.

_ “John Laskin J.A.”

_ “S.T. Goudge J.A.”

WEILER J. A. (Dissenting):

[11] This appeal involves the interpretation of certain provisions of a commercial lease between the parties relating to the apportionment of real property taxes and the scope of an audit clause as it relates to the determination of liability for payment of taxes, operating costs and common expenses.

[12] The Respondent tenant was wholly successful on its original application for an interpretation of the lease. The apportionment of taxes, operating costs and common expenses was referred to a Master to be determined on a reference, the liability for payment by the parties having been determined by the court. The Appellant landlord appeals the Order of Justice B. J. Manton of the Superior Court of Justice dated November 22, 2002.

[13] The clause in issue reads:

The parties acknowledge that the 1998 real estate tax assessment, with respect to the Premises, is under appeal (“Assessment Appeal”). Notwithstanding Subsections 1.6(a) and (b), if the result of the Assessment Appeal is that the Tax, with respect to the Premises, is greater than $54,622.85, from and after January 1 of the year following the determination of the Assessment Appeal, the Basic Rent payable for each year of the Term, following the determination of the Assessment Appeal, shall be reduced by one-half of the increase of the real estate tax over $54,622.85.

[14] The clause in issue is somewhat ambiguous. In my opinion it was open to Manton J. to interpret the clause as he did, namely, that the tenant was bargaining for protection not just against the result of the assessment appeal but for limited exposure to an increase in taxes. Following the settlement of the 1998 assessment appeal, the tax with respect to the premises was greater than $54,622.85 or approximately $60,000. On the interpretation of Manton J., from January 1, 1999 , the year following the settlement of the Assessment Appeal, the tenant would be entitled to a reduction of one-half of the difference between $54,622.85 and the taxes of $60,000, or about a $3000 reduction in rent. For each year of the term thereafter the Basic Rent payable would be reduced by one-half of the amount the real estate taxes were increased over $54,622.85. I would dismiss the first ground of appeal. I agree with the majority that the second ground of appeal should be dismissed.

[15] I would therefore dismiss the appeal with costs fixed in the amount of $12,000 payable by the appellant.

“K.M. Weiler J.A.”