COURT OF APPEAL FOR ONTARIO

CITATION: 2249740 Ontario Inc. v. Morguard Elgin Ltd., 2016 ONCA 100

DATE: 20160203

DOCKET: C59998

Feldman, Simmons and Miller JJ.A.

BETWEEN

2249740 Ontario Inc.

Plaintiff (Respondent)

and

Morguard Elgin Ltd. and Morguard Corporation

Defendants (Appellants)

J. Scott Maidment and Stephen Brown-Okruhlik, for the appellants

Ronald F. Caza and Anne M. Tardif, for the respondent

Heard: August 24, 2015

On appeal from the order of Justice Marc R. Labrosse of the Superior Court of Justice, dated January 14, 2015, with reasons reported at 2015 ONSC 299.

ENDORSEMENT

[1] This endorsement is to be read in conjunction with the endorsement on this appeal dated September 10, 2015, in which the motion judge’s order for summary judgment was set aside: see 2249740 Ontario Inc. v. Morguard Elgin Ltd., 2015 ONCA 605, [2015] O.J. No 4668.

[2] At that time the court requested written submissions from the parties on the effect of the oral agreement of February 2011 to extend the Commencement Date of the lease for “at least one year” and, depending on the effect, whether Morguard was entitled to terminate the lease in December 2011 under Article 3.03. The article provides, in part:

[I]f the Landlord is of the opinion that it will be unable to deliver possession of all of the Leased Premises before the expiration of 6 months after the Commencement Date (in the condition required hereby), the Landlord shall have the right to terminate this Lease upon written notice to the Tenant, whereupon neither party shall have any liability to the other.

[3] It is common ground in the parties’ written submissions that: the lease was not repudiated by the oral agreement to extend; it remained in effect; and the Commencement Date remained April 1, 2011 (in accordance with para. 8 of the Term Sheet that formed part of the lease). We accept those submissions.

[4] The remaining question is whether Morguard was entitled to terminate the lease under Article 3.03 in December 2011. In its written submissions, Morguard invited the Court to read Article 3.03 as providing it with “a right to terminate if Morguard determines that it will not be able to deliver possession within 6 months after the Commencement Date.” On Morguard’s reading, once Morguard came to the opinion that it could not deliver possession within 6 months of April 1, 2011, and informed the tenant of this, there was no “express time limit on the exercise of the termination right”. It further submits that Article 3.03 should be interpreted as providing that “a crystallized right to terminate the lease does not expire until the actual delivery of possession [of the premises] to the Tenant” (emphasis in original).

[5] On this reading, Morguard’s right to terminate “crystallized” when it formed the opinion that it would not be able to provide possession of the premises prior to the expiration of six months after the Commencement Date, i.e. in February 2011 when it made the oral extension agreement. Further, Morguard could then choose to exercise its right to terminate – or not – at any time prior to the tenant actually coming into possession of the premises.

[6] We cannot accept this reading of Article 3.03. Article 3.03 contains only one communication obligation for the landlord, which is to terminate the lease by written notice. It is clear from the text of Article 3.03 that the same temporal restriction on forming the opinion that the landlord cannot deliver possession of the premises also applies to the delivery of the written notice of termination.

[7] In this case, there was in fact communication with the tenant in February 2011 that Morguard would not be able to deliver possession within six months of the Commencement Date. But since Morguard did not terminate at that time, it did not make use of Article 3.03 in accordance with the terms of that provision.

[8] Accordingly, the written notice of termination that Morguard provided in December 2011 was beyond six months after April 1, 2011. It was therefore out of time, and in breach of the lease.

[9] Having previously set aside the decision of the motion judge, judgment shall go in favour of the respondent for breach of contract by the appellants. The matter is remitted back to the motion judge for quantification of damages, if any.

“K. Feldman J.A.”

“J. Simmons J.A.”

“B.W. Miller J.A.”