COURT OF APPEAL FOR ONTARIO

CITATION: Canadian Language Leadership Centre - CLLC Inc. v. 20 Eglinton Commercial Centre Inc., 2018 ONCA 604

DATE: 20180629

DOCKET: C64013

Pepall, van Rensburg and Paciocco JJ.A.

BETWEEN

Canadian Language Leadership Centre – CLLC Inc.

Plaintiff (Appellant)

and

20 Eglinton Commercial Centre Inc.

Defendant (Respondent)

Jerome R. Morse and David M. Trafford, for the appellant

Alanna P. Brogan, for the respondent

Heard: May 24, 2018

On appeal from the judgment of Justice Edward M. Morgan of the Superior Court of Justice, dated June 7, 2017, with reasons for judgment reported at 2017 ONSC 3542.

REASONS FOR DECISION

[1] The appellant, Canadian Language Leadership Centre – CLLC Inc. (“CLLC”), sued its commercial landlord, the respondent, 20 Eglinton Commercial Centre Inc. (“20 Eglinton”), for damages arising from water leaks that originated in the building’s roof, and from a non-functioning gas line. There were two agreements between the parties that are material to CLLC’s lawsuit: (i) an Agreement to Lease that was effective between the parties on August 22, 2012; and (ii) a 5 year Office Lease executed on October 16, 2012, for a term commencing September 1, 2012 (“Lease”).

[2] 20 Eglinton sought and obtained summary judgment dismissing CLLC’s action on the basis that it disclosed no genuine issue requiring a trial.

[3] CLLC seeks, on appeal, to have this summary judgment set aside.

[4] We are of the view that this appeal must be allowed and the summary judgment set aside. CLLC’s claim for damages arising from the leaking roof required the motion judge to determine whether CLLC assumed the risk of damage, if sustained. Clause 9.02 of the lease provided:

9.02 Tenant’s Insurance

(a) The Tenant shall, throughout the period that the Tenant is given possession of the Premises and during the entire Term, at its sole cost and expense, take out and keep in full force and effect and in the names of the Tenant, the Landlord, and the Landlord’s mortgagee (if required), as their respective interests may appear, the following insurance…

[5] The reasons disclose no real examination by the motion judge of the commencement of CLLC’s obligation to insure.

[6] There were material factual contests between the parties that presented genuine issues requiring a trial that were not resolved by the motion judge. The disputed factual issues relevant to the application of clause 9.02 included when CLLC took possession of the premises, and when water leaks caused damage to CLLC. The parties disagreed about whether the premises were insurable in light of the water leaks. This is an important fact given 20 Eglinton’s concession that if the premises were not insurable when CLLC’s obligation to insure arose, then CLLC could not be bound by clause 9.02.

[7] The motion judge did not address these crucial factual issues. He opened his reasons, at para. 4, by noting that this is not a case where “intensely fact-specific matters are in issue”. Rather, he said it was “a quintessentially document-based case”, suggesting that he saw no need to resolve the factual disputes identified above.

[8] Only two passages in the motion judge’s reasons could reflect relevant factual findings.

[9] The first, at para. 13 of the reasons, is ambiguous:

Counsel for the Defendant responds that the entirety of efforts apparently made by the Plaintiff is one casual phone call, not followed up by anything in writing or an inquiry to any other company. Furthermore, to state the obvious, had the Plaintiff obtained insurance at the outset of its tenancy as it was supposed to do, this problem would not have arisen. The Plaintiff signed a covenant to insure; no one who really intends to purchase insurance coverage waits until the damage already occurs. It was the Plaintiff’s obligation to obtain insurance when it was available, and not to roll the dice with a wait-and-see position in respect of the need for coverage.

[10] It is not clear whether, in para. 13, the motion judge was summarizing arguments made by 20 Eglinton or making his own determinations. Given the organization of his reasons, it would appear that these were the submissions advanced by 20 Eglinton rather than the motion judge’s factual findings.

[11] The second, at para. 16 of the reasons, is also unclear:

In any event, counsel for the Defendant points out that the Plaintiff’s business had indeed already commenced at the time of the roof leaks. It had an administration in place, it had hired personnel who had started working, it had students registered for its language school, etc. The language classes themselves had not yet started, but the Plaintiff’s business itself was up and running.

[12] This paragraph, made in the context of considering CLLC’s argument that what occurred was “business delay” and not “business interruption”, is ambiguous. Does it contain a finding of fact, or a summary of arguments made? If it is a finding of fact, it fails to address when the roof leaks started, and whether CLLC’s business was up and running in the leased premises at the time the roof leaks commenced.

[13] In our view, the motion judge erred by failing to consider and resolve these factual disputes in finding that there was no genuine issue requiring a trial. Indeed, the motion judge never invoked his fact-finding powers under rr. 20.04(2.1) or (2.2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to make findings of fact or to resolve factual disputes on summary judgment.

[14] The motion judge committed a further extricable legal error in finding that the damage claims linked to the defective gas line were clearly without merit because of the “as is” provisions of the Lease.

[15] In arriving at that conclusion, the motion judge appears not to have considered other language in the Lease that confines the “as is” clause to the “Premises”. “Premises” is defined in the Lease in clause 1.01(o), in contrast to “Building”, which is defined in clause 1.01(d). The motion judge merged these distinct terms in his reasons, commenting at para. 20: “The entire point of this kind of clause is that the landlord is not detailing for the tenant each and every defect or non-working system in the premises or the building.” This is a material error in determining the scope of the application of the “as is” provisions of the Lease.

[16] Moreover, the “as is” clauses are found in both Schedules “D” and “E” to the Lease. Schedule “D” merely declares acknowledgment by CLLC that “the 5th Floor premises is being transferred on an ‘as is’ basis”. Schedule “E” describes items that are included in the “as is status”, including, but not limited to, “the status of its HVAC, duct work, makeup air, plumbing and electrical systems, incomplete washrooms, any equipment, facilities, and leasehold improvements.” CLLC argues that the omission of “gas line” in this list of inclusions is significant, while 20 Eglinton argues that the gas line, which was important for the HVAC system, was contemplated in Schedule E as part of the HVAC, duct work and makeup air systems.

[17] Yet the motion judge referred only to Schedule “D” in his decision. He appears not to have considered the impact of Schedule “E”, if any, on 20 Eglinton’s responsibility.

[18] In both of these respects – the failure to note the difference between the “Premises” and “Building” as defined in the contract, and the disregard of Schedule “E” when applying the “as is” clause – the motion judge committed extricable errors of law in interpreting the contract.

[19] Finally, there was evidence that the gas line was not connected. Whether the connection problem was at the fifth floor, and therefore within the premises, or elsewhere in the building, and therefore arguably outside of the premises, was a genuine issue that ought to have been considered. This factor ought to have been considered by the motion judge.

[20] We therefore allow the appeal and set aside the motion judge’s summary judgment, including the costs order made below.

[21] We grant costs of this appeal to the appellant on a partial indemnity basis in the amount of $20,000, inclusive of disbursements and applicable taxes.

“S.E. Pepall J.A.”

“K. van Rensburg J.A.”

“David M. Paciocco J.A.”