DATE: 20050216
DOCKET: C42525
COURT OF APPEAL FOR ONTARIO
RE:
ENTICOR PROPERTIES INC. (Applicant/Respondent) – and – QUIK-RUN COURIER LTD. (Respondent/Appellant)
BEFORE:
FELDMAN, SIMMONS AND GILLESE JJ.A.
COUNSEL:
Robert D. Malen
for the appellant
Richard Campbell
for the respondent
HEARD:
February 4, 2005
On appeal from the judgment of Justice Francine Van Melle of the Superior Court of Justice dated May 4, 2004.
E N D O R S E M E N T
[1] The landlord moved under Rule 14 of the Rules of Civil Procedure for an order rectifying the terms of a commercial lease to include a clause contained in the offer to lease that imposed on the tenant the obligation to restore the leased premises to their original condition at the expiration of the term. In her reasons granting the application, the application judge referred to the criteria under both rules 14.05(3)(d) and 14.05(3)(h). In our view, because rule 14.05(3)(d) permits an application “where the relief claimed is … the determination of rights that depend on the interpretation of a contract”, it does not authorize a claim for rectification, which requires factual findings extending beyond simply interpreting a contract.
[2] In any event, whether this application was made under r. 14.05(3)(d) or 14.05(3)(h), the application judge erred by making findings based on disputed evidence and evidence that was capable of giving rise to competing inferences. In the face of such evidence concerning material issues, the application judge should either have dismissed the application or directed the trial of an issue: see r. 38.10.
[3] Further, it appears that the application judge did not make an explicit finding concerning one of the essential components of rectification as it applied to this case i.e. whether the tenant knew or ought to have known about the landlord’s error at the time the formal lease was prepared. In any event there was no evidence capable of supporting a finding on this issue by the application judge. While we note that the application judge found that the tenant’s failure to “acknowledge the rectification provision [was] an attempt by [the tenant] to take advantage of [the landlord’s] mistake”, this finding appears to relate to the date when the error was discovered.
[4] Most significantly, the application judge erred in finding that the offer to lease was a “prior contract,” another essential component of rectification. In Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 1991 2734 (ON CA), 79 D.L.R. (4th) 97 (C.A.) this court said:
However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is
dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the “contract to make a contract” is not a contract at all. The execution of the contemplated formal document is not intended only as a solemn record or memorial of an already complete and binding contract but is essential to the formation of the contract itself: … [emphasis added]
[5] Here, the offer to lease included a term providing that “this offer shall be void” if the parties were unable to agree on the formal lease within a specified time period. In the face of this provision, we conclude that the execution of the formal lease was more than a mere formality, and that the offer to lease constituted no more than an agreement to agree. In light of this conclusion, the respondent’s application for rectification of the formal lease based on the earlier written offer to lease was incapable of establishing that the offer was a prior contract. The landlord could not therefore establish all of the elements of rectification.
[6] The appeal is therefore allowed, the application judge’s order is set aside and the application is dismissed.
[7] The appellant is entitled to costs of the appeal and of the application below on a partial indemnity basis. After reviewing the appellant’s bills of costs we fix those costs at $7,500 inclusive of G.S.T. for the appeal and at $15,000 inclusive of G.S.T. for the application below.
“K. Feldman J.A.”
“Janet Simmons J.A.”
“E.E. Gillese J.A.”