J.S.M. Corporation (Ontario) Ltd. v. The Brick Furniture Warehouse Ltd., 2008 ONCA 183

CITATION: J.S.M. Corporation (Ontario) Ltd. v. The Brick Furniture Warehouse Ltd., 2008 ONCA 183

DATE: 20080314

DOCKET: C45137

COURT OF APPEAL FOR ONTARIO

DOHERTY, ARMSTRONG and LANG JJ.A.

BETWEEN:

J.S.M. CORPORATION (ONTARIO) LTD.

Plaintiff (Respondent)

and

THE BRICK FURNITURE WAREHOUSE LTD., THE BRICK FURNITURE WAREHOUSE (WINDSOR) LTD., THE BRICK WAREHOUSE CORPORATION LANDEX INVESTMENT LTD., THE BRICK WAREHOUSE LP, WAYNE TISCHER, PAUL RICHARDS and WILLIAM COMRIE

Defendants (Appellants)

H. James Marin for the appellants

Christopher D. Bredt and Aaron A. Blumenfeld for the respondent

Heard: September 17, 2007

On appeal from the judgment of Justice Cumming of the Superior Court of Justice, dated March 2, 2006, with reasons reported at (2006), 2006 6198 (ON SC), 16 B.L.R. (4th) 227.

DOHERTY J.A.:

I

OVERVIEW

[1] The respondent (plaintiff), J.S.M. Corporation (Ontario) Ltd. (“J.S.M.”), owned a large commercial property in Windsor, Ontario known as Gateway Plaza. In August 1986, it agreed to lease 29,000 square feet of the Gateway Plaza to the Brick Furniture Warehouse Ltd. (“Brick Ltd.”). The lease was for a ten-year term with two five-year renewals available at the option of Brick Ltd.

[2] Brick Ltd. was one of a number of corporate entities that together made up the Brick enterprise. That enterprise operated a number of very successful retail stores across Canada. The stores sold home furnishings and electronic products. The corporate entities that made up the Brick enterprise were controlled by the same group of persons headed by Mr. William Comrie, the principal owner and driving force behind the Brick enterprise. The companies did not operate at arms length from each other.

[3] In January 1996, the Brick enterprise (operating through a corporate entity known as Brick Corp. #3) exercised the first of the two five-year options available under the lease. After the option was exercised, the lease was in effect until September 2001.

[4] In February 2000, the Brick enterprise notified J.S.M. that it would cease to operate its store at the Gateway Plaza. The Brick enterprise planned to open a new larger store in another location in Windsor. The Brick store in the Gateway Plaza closed at the end of March 2000, some eighteen months before the expiry of the lease. The lease required that the tenant operate a store throughout the term of the lease.

[5] J.S.M. commenced an action against Brick Ltd. and Brick Warehouse (Windsor) Ltd. (“Brick Windsor”), the latter having taken an assignment of the tenant’s interest in the lease. Both companies had direct obligations to J.S.M. under the lease and a related assignment. Their liability to J.S.M. was not challenged. The trial judge found those companies liable for the unpaid rent under the lease and the assignment agreement (para. 52). This finding was, however, of no real value to J.S.M. because neither company had ever had any assets other than the lease.

[6] J.S.M. also claimed against Brick Warehouse Corporation (Brick Corp.), which had taken an assignment of a sublease to the premises.[^1] Brick Corp. did have substantial assets. Brick Corp. took the position that it had no obligation to J.S.M. From the corporate perspective, this litigation was all about Brick Corp.’s liability for the rent owing to J.S.M. under the lease.

[7] J.S.M. also sued Mr. Comrie and other directors and officers of the Brick enterprise personally. Those claims were dismissed at trial and a cross-appeal from that dismissal was abandoned prior to oral argument. I need say no more about those claims.

[8] At trial, J.S.M. claimed that Brick Corp. was liable:

• For breach of a contract entered into with J.S.M. in June 1987;
• Under the oppression remedy provision remedies of the Alberta Business Corporations Act, R.S.A. 2000, c. B-9 and the Canada Business Corporations Act, R.S.C. 1985, c. C-44; and
• In tort for inducing a breach of the lease and for intentional interference with J.S.M.’s economic relations.

[9] The trial judge found that there was a contractual relationship among J.S.M., Brick Windsor and Brick Corp., but that the terms of the contract did not give J.S.M. any right to recover the unpaid rent from Brick Corp. He dismissed the contract claim.

[10] The trial judge gave J.S.M. “complainant” status under the oppression remedy provisions. He went on to hold that the corporate affairs of Brick Windsor and Brick Corp. had been carried out in a manner that was oppressive to the interests of J.S.M. The trial judge further concluded that the appropriate remedy for the oppressive conduct was an order requiring Brick Corp. to pay damages to J.S.M. equal to the rent owing under the unexpired portion of the lease (April 1, 2000-September 2001).

[11] Having found Brick Corp. liable under the oppression remedy provisions, the trial judge did not address Brick Corp.’s potential liability in tort.

[12] J.S.M. had also sought leave under s. 240(1) of the Alberta Business Corporations Act to commence a derivative action on behalf of Brick Windsor against Brick Corp. The trial judge granted leave. The derivative action is, however, of no consequence unless J.S.M. cannot recover directly against Brick Corp.

[13] On appeal, the appellants submit that J.S.M. could not as a matter of law qualify as a complainant for the purposes of the oppression remedy. The appellants further argue that even if J.S.M. could so qualify, the trial judge erred in granting J.S.M. that status in the circumstances of this case. The appellants argue that the lease and subsequent agreements between J.S.M. and the Brick enterprise are the result of arms length negotiations between two sophisticated commercial parties. The appellants contend that J.S.M.’s only reasonable expectation could be that its rights and remedies were those that arose from the agreements. On the appellants’ interpretation of those agreements, J.S.M. had agreed to look to Brick Ltd. and Brick Windsor should there be any breach of the lease or the sublease. The appellants contend that the fact that neither entity had any assets, particularly given J.S.M.’s failure to conduct any due diligence inquiries before entering into the agreements, cannot alter the substance of the agreements or give J.S.M. a reasonable expectation to look to a non-party to the agreement for recovery of any unpaid rent.

[14] The appellants argue that in granting an oppression remedy, the trial judge effectively rewrote the contracts describing the relationship between J.S.M. and the various corporate entities within the Brick enterprise. The appellants contend that in so doing, the trial judge gave J.S.M. access to Brick Corp.’s wallet. The appellants submit that J.S.M. had not bargained for that access and in all likelihood could not have obtained that access through arms length bargaining with the Brick enterprise.

[15] Counsel for the respondent contends that the trial judge properly invoked the oppression remedy to grant relief against Brick Corp. in the form of damages equal to the unpaid rent under the lease. In the alternative, counsel submits that J.S.M. was entitled to recover the unpaid rent under the contract to which it and Brick Corp. were both parties. Finally, and in the further alternative, counsel submits that J.S.M. was entitled to recover against Brick Corp. in tort either on the basis that it induced Brick Windsor to breach the lease agreement with J.S.M., or on the basis that it wrongfully interfered with J.S.M.’s economic relations with Brick Windsor.

[16] I would dismiss the appeal. I think that J.S.M. was entitled to recover the unpaid rent under the agreement it had with Brick Corp. While it is unnecessary to decide J.S.M.’s entitlement to recover under the oppression remedy provisions, I will address that issue at the end of these reasons. I will not consider the tort claims.

II

THE RELEVANT TRANSACTIONS

(i) The Head Lease

[17] J.S.M. entered into the lease with Brick Ltd. in August 1986. Under the terms of the lease, Brick Ltd. agreed to operate a retail sales business on the leased premises and further agreed that it would not vacate the premises during the term of the lease. The lease had a ten-year term with two five-year renewal options available to the tenant. The lease did not contain any early termination provisions.

[18] In light of the subsequent transactions, para. 7.03.2 of the lease, which addresses assignments and sub-leases, is important. It reads in part:

The Tenant will not, and will not permit, a sub-tenant to assign this Lease in whole or in part, or sublet all or part of the Leased Premises, and will not permit the occupation or use of all or part thereof by others without the prior written consent of the Landlord in each case, which consent will not be unreasonably withheld … The consent by the Landlord to an assignment or subletting will not constitute a waiver of its consent to a subsequent assignment or subletting. This prohibition against assignment or subletting includes a prohibition against an assignment or subletting by operation of law. If this Lease is assigned, or if all or part of the Leased Premises is sublet or occupied by anybody other than the Tenant, in any case without the consent of the landlord when required, the Landlord may collect the rent from the assignee, sub-tenant or occupant and apply the net amount collected to the Rent herein reserved. Despite an assignment, the Tenant will remain fully liable under this Lease. The [T]enant may sublet the premises to its parent, subsidiary or affiliated company with notice but without consent … [Emphasis added.]

[19] Pursuant to this term, Brick Ltd. could not assign the lease without the written consent of J.S.M. Also, Brick Ltd. could not permit a sub-tenant to assign the lease without the written consent of J.S.M. The same prohibition applied with respect to subletting the leased premises except that Brick Ltd. could sublet to another Brick company without J.S.M.’s consent provided J.S.M. was notified. Finally, under this term, Brick Ltd. could not allow the leased premises to be occupied or used by anyone else without the written consent of J.S.M.

[20] Brick Ltd. had no assets other than the lease. Mr. Comrie testified that when the Brick enterprise was renting property for a retail store, it would use a shell corporation to act as the tenant. If the store’s business flourished, the Brick enterprise and the landlord would both profit. If the store failed, the Brick enterprise and the landlord would both suffer – the Brick enterprise because its business failed, and the landlord because it had no effective recourse against the shell corporation for non-payment of rent. The trial judge observed that this approach “makes good business sense and is consistent with freedom of contract in commercial relationships” (at para. 61).

[21] J.S.M. took no steps to inquire into Brick Ltd.’s financial means or its ability to meet its obligations under the lease. J.S.M. did not request the covenant of any individual or corporate entity other than Brick Ltd. on the lease. Under the terms of the lease, J.S.M. could reasonably expect to look only to Brick Ltd. for recovery should the terms of the lease be breached.

[22] The Brick store opened in the Gateway Plaza in November 1986. By all accounts, it operated successfully for the next thirteen years.

(ii) The First Assignment and Agreement to the Assignment

[23] In early January 1987, the Ontario solicitors for the Brick enterprise were instructed to prepare an assignment and a sublease. By assignment effective April 1, 1987, Brick Ltd. assigned its interest as a tenant in the head lease to Brick Windsor. As required under the head lease, Brick Ltd. notified J.S.M. of this assignment and obtained its written consent to the assignment.

[24] Under the terms of the agreement made among Brick Ltd., Brick Windsor and J.S.M., Brick Windsor, the assignee of the lease, agreed directly with J.S.M. to perform all of the tenant’s obligations under the lease. Brick Windsor had no assets when it entered into this agreement. J.S.M. did not make any inquiries as to Brick Windsor’s assets or its financial viability. In the same agreement, Brick Ltd., the original tenant and now the assignor of the lease, agreed to remain bound under the terms of the lease to J.S.M. Pursuant to this agreement, J.S.M. could reasonably expect that in the event of a breach of its lease, it could look to Brick Ltd. and/or Brick Windsor for recovery.

(iii) The Sub-Lease

[25] Effective the same day, April 1, 1987, Brick Windsor, who had assumed the tenant’s role under its assignment, sublet the leased premises to yet another Brick company, the Brick Warehouse Ltd. (“Brick Warehouse”). Under the terms of the sublease, Brick Windsor agreed to sublease the premises “for the term of the lease including renewal periods”. Brick Warehouse, as sub-tenant, undertook to pay to Brick Windsor all amounts and charges payable under the head lease. Brick Warehouse also agreed to abide by all of the sub-landlord’s covenants, obligations and agreements under the head lease. No term in the sublease provided for early termination of the sublease. Like the head lease, the sublease was for ten years with two five year renewal options exercisable at the sub-tenant’s option.

[26] J.S.M. was not a party to the sublease. As required under the head lease, however, J.S.M. was notified of the sublease. Its consent was not required because Brick Warehouse and Brick Windsor were affiliated companies. Like the head lease, the sublease provided to J.S.M. did not contain any early termination provisions and required the sub-tenant to operate a retail sales business on the rented premises for the duration of the lease. Additionally, the sublease provided for payment of the same rent as the head lease. Finally, in its notification letter, the Brick enterprise did not indicate that the terms of the lease differed from those of the head lease in any material respect.

(iv) The Second Assignment

[27] By agreement dated June 1, 1987, Brick Warehouse, the sub-tenant, agreed to assign its interest in the sublease to Brick Corp.[^2] The assignment, after referring to the various transactions outlined above, provided that the Brick Corp., as assignee, would:

[F]rom time to time during all the residue of the term granted by the Sublease, and every renewal thereof, pay the rent and perform the Lessee’s covenants, conditions, obligations and agreements therein respectively reserved and contained.

[28] When the sublease was assigned to Brick Corp., it did not contain any early termination provisions. The terms of the sublease as assigned to Brick Corp. were for all relevant purposes identical to the terms of the head lease.

[29] Counsel for the Brick enterprise provided J.S.M. with a copy of the assignment of the lease from Brick Warehouse to Brick Corp. and requested J.S.M.’s consent to the assignment. Counsel advised that the assignment and transfer of the business conducted on the leased premises to Brick Corp. were part of a “going public” strategy by the Brick enterprise. There was no suggestion that the assignment or the sublease in any way affected J.S.M.’s rights under the head lease.

(v) The Consent and Acknowledgement

[30] J.S.M. provided its consent to the assignment in a document executed as of June 1, 1987. The terms of the document, entitled “Consent and Acknowledgement” provide the basis for J.S.M.’s claim against Brick Corp. in contract and are central to my resolution of the appeal.

[31] J.S.M., Brick Windsor and Brick Corp. were signators to the “Consent and Acknowledgement”. It was drafted by the Brick enterprise lawyers. The agreement begins with a series of recitals describing the various transactions starting with the head lease and flowing through to the assignment of the sublease to Brick Corp. The document then refers to “the mutual covenants herein contained” and sets out a series of seven paragraphs.

[32] In the first paragraph, J.S.M. and Brick Windsor consent to the assignment of the sublease to Brick Corp. That consent is qualified as being, “…subject to the payments of rent reserved by and the performance and observance of the covenants, conditions and agreements in the Sublease”.

[33] As will be outlined below, Brick Corp., as the assignee of the tenant’s position under the sublease, undertook to perform all obligations arising under the sublease. These obligations included the obligation to pay rent throughout the term of the lease and to operate the retail store on the leased premises throughout the term of the lease.

[34] In para. 2, Brick Windsor, as the assignor and sub-landlord, covenants and warrants to Brick Corp. that the sublease is in good standing.

[35] In para. 3, J.S.M. and Brick Windsor acknowledge and consent to the sale of the business operated on the leased premises by Brick Warehouse to Brick Corp. J.S.M. and Brick Windsor further acknowledge that the sale does not breach any provision of the lease or the sublease.

[36] In para. 4, Brick Windsor covenants to advise Brick Warehouse of any breach or default by Brick Corp. of the sublease.

[37] In para. 5, Brick Corp. “covenants and agrees” with Brick Windsor that Brick Corp. will:

[O]bserve, comply with and perform all terms, conditions and covenants in the Sublease and will pay all sums of any kind whatsoever and perform all obligations of any kind whatsoever as and when the same are due to be paid or performed by the tenant pursuant to the terms of the Sublease during all of the residue of the term of the said Sublease and any renewal thereof, and without limiting the generality of the foregoing, to use the premises for the purposes as set out in the said Sublease.

[38] In other words, in para. 5, Brick Corp. agreed to abide by all terms in the sublease, including those relating to the term of the lease and the payment of rent. Since the sublease did not contain any early termination provision, Brick Corp. was committing itself to comply with the lease for the full ten-year term and for any extension it agreed to at the end of the ten years.

[39] In para. 6 of the “Consent and Acknowledgement”, J.S.M., Brick Windsor and Brick Corp. agreed that the “Consent and Acknowledgement” was given without prejudice to J.S.M. and Brick Windsor’s rights under the lease or sublease and could not be taken as authorizing any further assignments.

(vi) The New Sublease

[40] In the fall of 1987, internal correspondence within the Brick enterprise indicated that the sublease entered into between Brick Windsor and Brick Warehouse and now assigned to Brick Corp. should have contained an early termination clause. A new sublease agreement was drawn in March 1988 bearing the date April 1, 1987. The preamble of the new sublease indicated that certain terms had been omitted by inadvertence from the sublease as initially drawn. Para. 10 of the new sublease provided that the sub-tenant (and now Brick Corp. as the assignee of the sub-tenant) had the sole right, on ninety days notice to the sub-landlord (Brick Windsor), to terminate the remaining term of the sublease. If the sublease was terminated pursuant to this term, Brick Corp. could vacate the premise without further obligation to Brick Windsor under the sublease.

[41] The trial judge found that the purported amendment to the sublease represented a fundamental change to the terms of the sublease and constituted a new sublease (para. 37). He further held that J.S.M. had no knowledge of this new sublease until after this litigation commenced. Both findings are fully justified on the trial record and I would not disturb either of them.

[42] It follows from the trial judge’s findings that the sublease referred to in the “Consent and Acknowledgement” executed in June 1987 is the sublease as it existed in June 1987 and not the new sublease created in March 1988. I agree with the trial judge’s conclusion that J.S.M.’s contractual rights under the “Consent and Acknowledgement” could not be affected by a new sublease entered into several months later without notice to J.S.M. The terms of the new sublease, in particular the early termination provision, are irrelevant to J.S.M.’s contractual rights under the “Consent and Acknowledgement” executed in June 1987

(vii) The Renewal of the Head Lease and Sublease

[43] In January 1996, the assignee of the sub-tenant, now Brick Corp. #3, a successor of Brick Corp., exercised the first of the two five-year renewal options available under the sublease. Brick Windsor, the sub-landlord, notified J.S.M. that the option had been exercised. Under the renewal, the sublease and the head lease remained in force until 2001. J.S.M. was not informed by the Brick enterprise that a new sublease containing an early termination date had been entered into some eight years earlier by Brick Windsor. J.S.M. understood that the renewal was on the same terms as the initial sublease.

(viii) The Early Termination

[44] In November 1999, Brick Corp. #3, exercising its rights under the early termination provision in the new sublease, advised the sub-landlord, Brick Windsor, that it would terminate the lease as of February 2000. In early February, Brick Windsor notified J.S.M. that its sub-tenant, Brick Corp. #3, would be vacating the premise at the end of February. Brick Windsor also advised J.S.M. that it would be unable to pay the rent beyond that date. In late February, it was agreed that the sub-tenant would remain in place until the end of March 2000. The Brick store was closed by the end of March 2000. In June 2000, J.S.M. terminated its lease with Brick Windsor for non-payment of rent and because, contrary to the terms of the lease, the premises had been vacated by the Brick.

III

THE CONTRACT CLAIM

[45] The trial judge carefully analyzed the contract claim of J.S.M. (paras. 45-65). I agree with and accept much of that analysis. In my view, however, the “Consent and Acknowledgement” does give rise to a contractual claim by J.S.M. against Brick Corp. for the unpaid rent.

[46] The trial judge found that:

• The “Consent and Acknowledgement” constituted a three-way agreement between J.S.M., Brick Windsor and Brick Corp. There was privity of contract among all three parties to the agreement (paras. 45, 56);
• The “Consent and Acknowledgement” reflected a bargain struck among the three signators to that agreement. Pursuant to the bargain, J.S.M. gave certain consents to corporate entities within the Brick enterprise, including Brick Corp., and those entities, in exchange for those consents, promised to assume certain obligations under the sublease. The obligations were those found in the original sublease. Those obligations continued in effect throughout the initial ten-year term of the sublease and for the five-year renewal period after the renewal option was exercised in 1996 (para. 63);
• The consideration that flowed from J.S.M. to Brick Corp. consisted of the consents given by J.S.M. to the assignment of the sublease and Brick Corp.’s purchase of the business being operated on the leased premises (para. 50);
• In exchange for the consents, Brick Corp. promised to assume all obligations under the sublease (paras. 56-58); and
• J.S.M. relied on Brick Corp.’s promise to assume all obligations under the sublease in giving its consents to the assignment and to the sale of the business (para. 58).

[47] The findings summarized above establish all of the essential elements of a contractual relationship between J.S.M. and Brick Corp. The trial judge concluded, however, that Brick Corp.’s promise to abide by the terms of the sublease, found in para. 5 of the “Consent and Acknowledgement”, was made exclusively to Brick Windsor and could not be enforced by J.S.M. The trial judge made this finding despite his further finding that J.S.M. relied on Brick Corp.’s promise to abide by the terms of the sublease in advancing consideration to the Brick Corp. in the form of the two consents given by J.S.M.

[48] In finding that Brick Corp.’s promise to abide by the terms of the sublease was made only to its immediate landlord, Brick Windsor, the trial judge relied exclusively on the language of clause 5 of the “Consent and Acknowledgement”. He said at paras. 54 and 56:

Clause 5 in the Consent and Acknowledgement dated June 1, 1987, imposes an obligation upon Brick Corp. to Brick Windsor, and not directly to J.S.M., to meet the subtenant Brick Warehouse’s obligations to pay rent to Brick Windsor under the sublease. However, implicit in J.S.M. agreeing to the Consent and Acknowledgement, as would be known and understood by the Brick parties, is the promise that Brick Corp. will meet the rent obligations under the sublease.

There was no privity between J.S.M. and Brick Corp. in respect of the first five covenants. I agree there is no covenant from Brick Corp. to pay rent directly to J.S.M. However, there were representations and undertakings by Brick Corp. in Clause 5 of the Consent and Acknowledgement (that the rent under the sublease will be paid). These representations remain relevant to the issues at hand, notwithstanding that the contractual obligation in Clause 5 was simply from Brick Corp. to Brick Windsor. [Emphasis added.]

[49] I do not think that para. 5 of the agreement can be read in isolation. The full meaning and effect of para. 5 must be garnered from a consideration of the entire document and the context in which it was created.

[50] The “Consent and Acknowledgement” is an agreement among three parties, including Brick Corp. and J.S.M. Paragraph 5 is a part of that tripartite agreement and not a freestanding contract. The various promises exchanged in the “Consent and Acknowledgement” are specifically described in the opening language of that document as “mutual covenants”.

[51] As indicated above, I think consideration flowed from J.S.M. to Brick Corp. in the form of the two consents given by J.S.M. The appellants submitted that the consents could not constitute valid consideration because J.S.M.’s consent was not required under the terms of the head lease. My reading of para. 7.03.2 of the head lease (supra, para. 19), like that of the trial judge’s, is to the contrary. I think that provision does envision J.S.M.’s consent to the assignment of the sublease to Brick Corp. and to Brick Corp.’s operation of the business on the leased premises.

[52] In any event, even if the appellants’ interpretation is correct and the consents were not required under the terms of the head lease, the giving of those consents to Brick Corp. still constituted valuable consideration. At a minimum, J.S.M.’s consents brought certainty to what would otherwise have been Brick Corp.’s uncertain entitlement to the assignment and to occupation of the leased premises. The consents given by J.S.M. put those entitlements beyond any doubt. For that reason alone the consents had value to Brick Corp. and constituted consideration flowing from J.S.M. to Brick Corp. under the terms of the “Consent and Acknowledgement”.

[53] The consent to the assignment of the sublease referred to in para. 1 of the “Consent and Acknowledgement” is expressly made conditional upon ongoing compliance with the obligations under the sublease. Those obligations include payment of the rent and occupation of the premises throughout the term of the lease and the renewal of the lease. The obligation of continued compliance with the sublease described in para. 1 must be directed at Brick Corp., the assignee of the sub-tenant and the operator of the business on the leased premises. Paragraph 1 places an obligation on Brick Corp. to comply with the sublease in exchange for J.S.M.’s consent to the assignment of the sublease. Paragraph 5 of the “Consent and Acknowledgement”, which contains Brick Corp.’s express promise to Brick Windsor to comply with the obligations of the sublease, is a further indication that compliance with the sublease described in para. 1 refers to compliance by Brick Corp. In my view, para. 1 of the “Consent and Acknowledgement” connects the consideration advanced by J.S.M. to Brick Corp. (the consent) to Brick Corp.’s promise to comply with the sublease. This connection makes Brick Corp.’s promise to abide by the sublease enforceable by J.S.M.

[54] My reading of the language of the “Consent and Acknowledgement” is buttressed by the context in which the document was created. The various Brick corporate entities were all fingers of the same hand. Those in control of the Brick enterprise presented these corporate entities to J.S.M. as interchangeable parts for the purposes of the lease and related subleases and assignments. None of the corporate machinations engineered by the Brick enterprise were held out to J.S.M. as having any effect on J.S.M.’s rights under its lease. J.S.M. had every reason to regard its dealings with respect to the lease as being with the Brick enterprise as a whole and not with any discrete corporate entity that the Brick enterprise might choose to use for any given transaction. J.S.M. read the “Consent and Acknowledgement” prepared by the Brick enterprise lawyers in that light.

[55] In obtaining J.S.M.’s consent to the assignment of the sublease, as contained in the “Consent and Acknowledgement”, the Brick enterprise knew that J.S.M. was relying on the Brick enterprise’s representation that the obligations under the lease would be fulfilled. The Brick enterprise appreciated that J.S.M. was dealing with the Brick enterprise and not individual corporate entities. The Brick enterprise also knew that J.S.M. was the ultimate beneficiary of any of the rents paid under the sublease or any assignment of the sublease.

[56] The reasonable expectations of the parties can inform the meaning to be given to the words used by the parties in an agreement. The reasonable expectations of J.S.M. when the “Consent and Acknowledgement” was executed strongly support the contention that Brick Corp.’s obligation to abide by the sublease was owed to, and therefore enforceable by, J.S.M.

[57] I would hold that under the terms of the “Consent and Acknowledgement”, Brick Corp. promised J.S.M. that it would fulfill the obligations under the sublease. The sublease referred to in the “Consent and Acknowledgement” is the original sublease. It had no early termination provisions. Under the terms of that sublease, Brick Corp. was obligated to pay the rent throughout the full term of the sublease and the first renewal period. J.S.M. gave consideration for Brick Corp.’s promise and was entitled to take action against Brick Corp. under the agreement when Brick Corp. broke its promise to J.S.M., abandoned the leased premises, and stopped paying rent. Brick Corp.’s liability under the contract with J.S.M. is the amount of the unpaid rent.

IV

THE OPPRESSION REMEDY

[58] Having found that Brick Corp. is liable in contract, it is unnecessary for me to consider J.S.M.’s oppression claim or the tort claim. I will, however, address the appellants’ submission that relief under the oppression remedy is not appropriate in the circumstances of this case.

[59] It cannot be gainsaid that the oppression remedy gives the court a broad discretion. That discretion is directed both at those who can qualify as “complainants” for the purpose of bringing an oppression application and the nature of the remedy that can be granted if the requisite oppression is established. See James Farley, Roger J. Chouinard & Nicholas Daube, Expectations of Fairness: The State of Oppression Remedy in Canada Today (2007) 33 Advocates’ Q. 261.

[60] The oppression remedy is not, however, a means by which commercial agreements negotiated at arms length by sophisticated parties can be rewritten to accord with a court’s after-the-fact assessment of what is “just and equitable” in the circumstances. It is not the function of the court to rewrite contracts or to relieve a party to a contract of the consequences of an improvident agreement. See Jedfro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55, [2007] S.C.J. No. 55 at para. 34.

[61] J.S.M. and the Brick enterprise entered into a business arrangement in 1986 when they negotiated the head lease. There is no suggestion of any relationship between them other than commercial landlord and commercial tenant. Nor is it contended that there was any imbalance of power between the two such that it might be said that the terms of the lease were not the product of legitimate arms length negotiation. Subsequent agreements between J.S.M. and the various Brick companies were negotiated in the same way.

[62] The reasonable expectations of parties to commercial agreements negotiated at arms length must be those reasonable expectations that find expression in the agreements negotiated by the parties. For example, when J.S.M. initially negotiated the head lease, it did not negotiate any provision in that lease that would allow it to look to any party other than the tenant, Brick Ltd., for payment of the rent upon a breach of the lease. Having negotiated a detailed lease which did not bind any other entity, J.S.M. could not be heard to argue that it reasonably expected that some other corporate entity would be liable if Brick Ltd. breached the original lease. The fact that Brick Ltd. had no assets certainly suggests that J.S.M. may have acted improvidently in agreeing to look only to Brick Ltd. for recovery. A bad bargain cannot, however, alter J.S.M.’s reasonable expectations or render the breach of the lease oppressive conduct.

[63] Similarly, if, contrary to my holding on the contract claim, the “Consent and Acknowledgement” did not give J.S.M. recourse against Brick Corp. for unpaid rent, then J.S.M. could not argue that it reasonably expected to have rights it had not negotiated in its agreement.

[64] If, again, contrary to my holding above, J.S.M. had negotiated to recover unpaid rent as against only Brick Windsor and Brick Ltd., the two shell companies, J.S.M.’s subsequent inability to make any real recovery when the lease was breached would have nothing to do with the Brick enterprise’s subsequent unilateral and devious rewriting of the sublease. If J.S.M. did not have a contractual claim against Brick Corp., it would not have been the terms of the new sublease that frustrated J.S.M.’s ability to make any real recovery. J.S.M.’s inability to reach a corporate entity with assets, had I come to a different conclusion on the contractual claim, would have been the product of J.S.M.’s own failure to adequately protect its position in its negotiations with the Brick enterprise, and not the product of any oppressive conduct on the part of any corporate entity within the Brick enterprise.

[65] I would adopt, as applicable to the facts of this case, the observations of Kevin P. McGuiness, The Law and Practice of Canadian Business Corporations (Toronto: Buttersworth, 1999) at para. 9.247:

In most cases it would seem reasonable to hold the creditors of the corporation are limited to the normal remedies for a breach of contract (including any available security or personal guarantee) should the corporation default in performance, for it cannot have been intended that the oppression remedy would be available where a creditor failed to protect himself or herself adequately against the inherent risks of doing business with a corporation. While acts of oppression may entail a breach of contract, or the commission of some tortious or similar wrong, against the complainant, it is doubtful that the oppression remedy was intended to be a substitute for an ordinary right of action in contract – or tort for that matter. Where the sole complaint is that of a breach of contract, then a contract action should be pursued. Insofar as the contract deals with a specific matter, it seems only natural to conclude that it sets out exhaustively the underlying intentions, understandings and expectations of the parties. While many – perhaps all – breaches of a contract can be characterized as oppressive to the injured party, and while many – perhaps all – forms of tortious injury may be said to be unfairly prejudicial, the legislature clearly cannot have intended for the oppression provisions to serve as a panacea for all manner of legal wrongs, or to make the remedies created under the statute for genuine cases of oppression or unfair prejudice a substitute for the normal legal and equitable remedies that are available to aggrieved parties. Where a simple breach of contract, or comparable legal wrong has occurred, it is not appropriate for the court to invoke the oppression provisions of the Act merely because the party in breach is a corporation. [Emphasis added.]

[66] I stress Mr. McGuiness’ observation that the oppression remedy is not intended to give a creditor after-the-fact protection against risks that the creditor assumed when he entered into an agreement with a corporation. The position of a creditor who can, but does not, protect itself against an eventuality from which he later seeks relief under the oppression remedy, is much different than the position of a creditor who finds his interest as a creditor compromised by unlawful and internal corporate manoeuvres against which the creditor cannot effectively protect itself. In the latter case, there is much more room for relief under the oppression provisions than in the former case. See S.C.I. Systems, Inc. v. Gornitzki Thompson & Little Co. Ltd. (1997), 1997 12436 (ON SC), 147 D.L.R. (4th) 300 (Gen. Div.) var’d on other grounds (1998), 1998 17741 (ON SCDC), 110 O.A.C. 160 (Div. Ct.); see also M. Koehnen, Oppression and Related Remedies (Toronto: Carswell, 2006) at pp. 88-93.

[67] In the factual circumstances of this case, J.S.M.’s claim against Brick Corp. could succeed only if properly founded in contract or tort. There was no basis for an assertion by J.S.M. that its reasonable expectations were other than those it negotiated in the various relevant agreements. If, contrary to my holding above, those agreements provided no remedy against Brick Corp., it was not for the court, through the invocation of the oppression remedy, to correct J.S.M.’s failure to bind Brick Corp. to the lease.

V

CONCLUSION

[68] I would dismiss the appeal with costs to the respondent in the amount of $20,000, inclusive of disbursements and GST.

RELEASED: “DD” MAR 14 2008”

“Doherty J.A.”

“I agree Robert P. Armstrong J.A.”

“I agree Susan Lang J.A.”

[^1]: Brick Corp. went through various name changes and amalgamations. These account for the other corporate names in the style of cause. If Brick Corp. is liable so are its corporate heirs.

[^2]: At the relevant time, Brick Warehouse owned all of the issued shares of Brick Corp. They later amalgamated.