Court of Appeal for Ontario

CITATION: Beswick Properties Yonge Street Inc. v. Royal Bank of Canada, 2013 ONCA 612

DATE: 20131010

DOCKET: C56291

Goudge, Cronk and Gillese JJ.A.

BETWEEN

Beswick Properties Yonge Street Inc.

Applicant (Appellant)

and

Royal Bank of Canada

Respondent (Respondent)

Paul J. Pape and Andrea M. Boliero, for the appellant

Sharon Wong, for the respondent

Heard: October 2, 2013

On appeal from the judgment of Justice Michael K. McKelvey of the Superior Court of Justice, dated October 15, 2012.

ENDORSEMENT

[1] The appellant/landlord appeals from the decision below that the respondent/tenant is not liable to it for the excess hard costs it incurred in constructing the building at 14785 Yonge Street in Aurora.

[2] The appellant’s argument in this court is that the application judge erred in reading the binding Offer to Lease between the parties to require the respondent’s approval of the excess hard costs in order for the respondent to be liable for those costs.

[3] It is acknowledged that no such approval was obtained by the appellant and no construction contracts have ever been submitted for approval to the respondent.

[4] Central to the appeal is one paragraph in Article 7 of the Offer to Lease:

Upon substantial completion of the Landlord’s Work, the Landlord shall provide the Tenant with copies of all construction invoices to evidence the total hard costs for constructing the Premises. In the event that the Landlord’s actual hard costs for constructing the Premises are more than $130.00 per square foot of Rentable Area of the Building, exclusive of Value Added Tax, the Tenant shall, provided such excess costs are in accordance with the contract or contracts approved by the Tenant or have otherwise been approved in advance by the Tenant, pay the difference to the Landlord within thirty (30) days after substantial completion of the Landlord’s Work. [Emphasis added.]

[5] The appellant’s argument turns on the meaning, if any, to be given to the phrase in this paragraph: “provided such excess costs are in accordance with the contract or contracts approved by the Tenant or have otherwise been approved in advance by the Tenant.”

[6] The appellant says that this phrase is a vestige of the original draft of the Offer to Lease, which required the appellant to put the construction contract out for bids, thereby giving commercial sense to the disputed phrase. When the Offer to Lease was finalized and became binding, the bid provision was removed, since the appellant was to do the construction in-house. The disputed phrase however remained. The appellant argues that the phrase is meaningless absent the bid provision. It says commercial reality requires that conclusion, since the business essence of the contract always was that the respondent would be responsible for excess hard costs, provided they were reasonable.

[7] We do not agree. The disputed phrase remains a term of the contract. Its plain meaning requires respondent approval of the excess hard costs through approval of the construction contracts or otherwise in advance. In our view, commercial reality does not require these words to be given no meaning as the appellant contends. It would have been quite possible for the appellant to have obtained approval for the excess hard costs through approval of the construction contracts or advance approval otherwise. This gives some control over excess hard costs to the respondent, rather than leaving that entirely to the appellant.

[8] Moreover, to give this phrase no meaning is to effectively conclude that it was included in the Offer to Lease by mutual mistake. However, there is simply no evidence to support this theory. It is simply not open to us to read this phrase out of the Offer to Lease.

[9] Nor do we view the disputed phrase to be ambiguous. Indeed the appellant does not advance a meaning other than the plain meaning. It simply says the phrase is meaningless, an argument we have dealt with.

[10] The appellant does not advance the remaining arguments in its factum and we need not deal with them.

[11] In the final analysis, while it may be that the result seems to be a hard commercial reality, we are compelled to it by the wording of the contract.

[12] The appeal must be dismissed.

[13] In light of the result of the appeal, the respondent withdrew its substantive cross-appeal.

[14] The respondent, however, pursued its cross-appeal as to costs. We see no error in principle in the disposition of costs by the application judge. Nor is his award plainly wrong. It was quite open, and indeed we think correct, to treat the appellant, who was the applicant, as the effective plaintiff for the purposes of Rule 49. Moreover we agree with the application judge that the divided success on the applications deserved some consideration in the award of costs below. In our view, there is no basis for this court to interfere with his discretion in that award. We would therefore dismiss the cross-appeal as to costs.

[15] In the result, success in this court has been mixed. While the respondent was in the main successful, it was unsuccessful in its costs cross-appeal. Taking that into account, and determining what is fair and reasonable in the circumstances, we would award the respondent $25,000 in total as the costs order resulting from the appeal and cross-appeal.

“S.T. Goudge J.A.”

“E.A. Cronk J.A.”

“E.E. Gillese J.A.”