DATE: 20040202

DOCKET: C40534

COURT OF APPEAL FOR ONTARIO

RE: HOOPP REALTY INC. (Applicant/Respondent) –and– SERVI‑LOGISTIX INC. and KATOEN NATIE CANADA COMPANY, also known as COMPAGNIE KATOEN NATIE CANADA (Respondents/Appellants)

BEFORE: LABROSSE, MOLDAVER and GILLESE JJ.A.

COUNSEL: James A. Hodgson and Samuel M. Robinson for the appellants

Douglas Christie for the respondent

HEARD: January 23, 2004

On appeal from the order of Justice Nancy M. Mossip of the Superior Court of Justice dated July 11, 2003.

E N D O R S E M E N T

[1] This is an appeal from the judgment of Mossip J., dated July 11, 2003, dealing with the interpretation of certain provisions in a commercial lease made between the respondent (the "landlord") and the appellants (the "tenant") of certain lands and premises.

[2] A purchaser agreed to purchase all of the tenant's shares. It is conceded that, under the terms of the lease, such a transaction amounts to a change in control of the tenant that constitutes a "transfer" requiring the landlord's consent.

[3] Prior to the closing of the transaction that effected the change of control of the tenant, the landlord's solicitors purported to consent to the transaction, while reserving all of the landlord's rights under the lease.

[4] The transaction was closed.

[5] The tenant took the position that it never agreed to a conditional consent and that, pursuant to the lease provisions, once the transfer was effected the landlord's only option was to terminate the lease. It argued that clause 11.03(b) made the landlord's consent conditional upon the tenant and the transferee executing an agreement with the landlord.

[6] The landlord took the position that, upon the change of control of the tenant, clause 11.03(b) of the lease entitled it to an amended lease with certain specified terms that included an increase in the minimum rent payable under the lease in accordance with the formula therein provided and an update of the terms of the lease to conform with the landlord's current form of lease.

[7] The applications judge held that the change in control of the tenant triggered the provisions in clause 11 of the lease and that the tenant was contractually and legally obliged to sign a new lease incorporating the terms contained in clause 11.03, including an increase in rental payments. The landlord was also entitled to recover the legal fees incurred in dealing with this matter.

[8] In our view, clause 11 of the lease was intended to deal with, among other things, a change of corporate control of the tenant. To accede to the interpretation advanced by the tenant would render much of clause 11.03(b) ineffective. Moreover, such an interpretation would be inconsistent with the true intent of the parties at the time of entry into the contract, which was to specify the effect of such a transfer.

[9] We agree with the interpretation of the provisions given by the applications judge and would dismiss the appeal with costs fixed at $11,368.55.

Signed: "J.-M. Labrosse J.A."

"M.J. Moldaver J.A."

"E.E. Gillese J.A."