COURT OF APPEAL FOR ONTARIO

DATE: 20061103

DOCKET: C45211

RE:

1174615 ONTARIO INC. (Applicant (Respondent in Appeal)) – and – 2040711 ONTARIO INC. (Respondent (Appellant in Appeal))

BEFORE:

BORINS, FELDMAN and MacFARLAND JJ.A.

COUNSEL:

Avrum D. Slodovnick

for the appellant

Michael R. Kestenberg

for the respondent

HEARD:

October 24, 2006

On appeal from the judgment of Justice R. T. P. Gravely of the Superior Court of Justice dated March 9, 2006.

E N D O R S E M E N T

[1] The appellant is the landlord of a small commercial plaza and the respondent, which is one of its tenants, operates a gas bar in the plaza. By way of notice of application, the tenant sought an interpretation of the lease with respect to two issues. The only issue that is under appeal is whether the provisions of the lease require the tenant to share in the landlord’s costs for maintenance of the common facilities.

[2] The application judge found that the tenant was not required to share these costs. On his interpretation of the lease, he found that the tenant was required to pay its propor-tionate share of the landlord’s costs for maintenance of the common facilities. However, he went on to find that the lease had been amended by the parties’ subsequent course of conduct with the result that the tenant was not required to share in the landlord’s costs for maintenance of the common facilities.

[3] The landlord contests part of the application judge’s judgment. It submits that the trial judge correctly interpreted the lease, but appeals on the ground that he erred in finding that the lease was amended by the subsequent course of conduct of the parties, with the result that the tenant would be required to share in the landlord’s costs for maintenance of the common facilities. The tenant cross-appeals from the application judge’s interpretation of the lease. It contends that the lease, properly interpreted, does not require that it share in the landlord’s maintenance costs.

[4] Although we agree with the result of the application, we do not agree with the application judge’s interpretation of the lease or with his conclusion that the lease was amended by the subsequent conduct of the parties. In our view, the interpretation of the lease advanced by the tenant is correct.

[5] By way of background, the application judge made the following findings of fact that are relevant to the interpretation of the lease:

• because the tenant’s gas bar is separate and apart from the plaza’s main building, its arrangements with the landlord were different from those of the other tenants;

• the tenant has always paid separate metered utilities, its own insurance premiums and its own heating and ventilation costs;

• the two prior landlords did not request payment of the tenant’s share for maintenance costs of the common facilities from the tenant, nor did the tenant pay such costs;

• the tenant paid its proportionate share of municipal taxes;

• the tenant’s acknowledgement of lease provided to the landlord on its purchase of the plaza confirmed that the tenant was not required to pay its share for main-tenance costs of the common facilities.

In our view, these facts support, and are consistent with, the proper interpretation of the lease.

[6] We agree with the tenant that the lease is unambiguous. In reading Articles 4.2(c) and 6.1(a) of the lease, together with Schedule “C” and the definition of “premises” in Article 1.1, it is clear that the tenant’s obligation with respect to maintenance costs applies only to its gas bar, which is separate and apart from the main building and the common facilities. Consequently, the tenant is not required to share in the landlord’s costs for maintenance of the common facilities.

[7] Moreover, the true intent of the tenant and the original landlord when they entered into the lease is evident by the parties’ conduct in the subsequent five years before the landlord acquired the plaza, during which the tenant did not contribute to the landlord’s costs of maintaining the common facilities. As well, the interpretation of the lease urged by the landlord does not make commercial sense. It would require the tenant to contribute a proportionate share of the landlord’s maintenance costs of the common facilities, while at the same time paying all maintenance costs related to its premises without contribution from the other tenants of the plaza.

[8] Because we agree that the lease, properly interpreted, does not require the tenant to share in the landlord’s costs for maintenance of the common facilities, it is unnecessary to consider whether the lease was amended by the subsequent conduct of the parties to achieve the same result.

[9] In the result, we would dismiss the landlord’s appeal and allow the tenant’s cross-appeal. Accordingly, we would set aside the order of the application judge and grant an order in accordance with these reasons.

[10] Counsel have agreed on costs in the amount of $8,000 payable to the respondent, inclusive of costs and GST.

“S. Borins J.A.”

“K. Feldman J.A.”

“J. MacFarland J.A.”