Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20210616 DOCKET: C67776

Rouleau, Hoy and van Rensburg JJ.A.

BETWEEN

Harvey Kalles Realty Inc. Plaintiff (Respondent)

and

BSAR (Eglinton) LP Defendant (Appellant)

Counsel: James M. Wortzman and Spencer Malthouse, for the appellant Ian Cantor, for the respondent

Heard: June 2, 2021 by video conference

On appeal from the judgment of Justice Mary Anne Sanderson of the Superior Court of Justice, dated November 8, 2019, with reasons reported at 2019 ONSC 4434.

Reasons for Decision

[1] The appellant appeals from the trial judge’s decision awarding the respondent real estate brokerage the sum of $245,878.96 together with interest and costs pursuant to its claim as assignee of the commission payable under an October 7, 2012 Commission Agreement. The appellant submits that no commission is owing because one of the two conditions set out in the Commission Agreement was not met.

[2] The parties generally agree on the two conditions contained in the Commission Agreement. The first condition required that an offer to lease be entered into between the appellant and a “Tenant”, defined as “Loblaw Companies Limited or any associated, affiliated, related company or individual, nominees or any principals, partnerships, joint ventures, corporations, affiliates or associates for whom it is a nominee or to whom it is directly or indirectly related” within 24 months of the Commission Agreement. The second condition required that the “Tenant” subsequently enter into a final form of lease with all conditions of the offer met or waived.

[3] The appellant concedes, as it did at trial, that the first condition was met when the appellant and Loblaw Properties Limited signed a formal offer to lease on July 10, 2013. However, the appellant argues that the trial judge erred in finding that the second condition was met. According to the appellant, the second condition in the Commission Agreement required that the appellant sign a lease with Loblaws Companies Limited or a company that was associated, affiliated or related to it as of the date of the Commission Agreement. The eventual tenant, Shoppers Drug Mart, only became a Loblaws entity after the offer to lease was signed.

[4] In the appellant’s submission, the trial judge made a series of palpable and overriding errors in reaching her decision. In addition, the appellant maintains that the trial judge also erred in law in at least two respects. First, she erred in failing to find that the offer to lease had been automatically terminated. Second, she erred in law when she found that Shoppers met the definition of “Tenant” in the offer to lease and in the Commission Agreement.

[5] There is no dispute as to the relevant principles. As explained in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, the primary goal of contractual interpretation is to give effect to the objective intention of the parties at the time of contract formation. Courts must determine the intent of the parties and the scope of their understanding by reading the contract “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.” The meaning of words is determined by contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement: Sattva, at paras. 47-48.

[6] It is also well settled that courts should avoid commercially absurd interpretations of contracts. Commercial reasonableness must be interpreted from the perspective of both contracting parties: Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, at para. 148.

[7] We see no error in the trial judge’s findings or conclusions. This was a straightforward case involving the interpretation of two agreements. The trial judge did not, as the appellant suggests, confuse the objective intent of the parties to the Commission Agreement with the objective intent of the parties to the offer to lease. In her reasons setting out how she made her findings and reached her decision, the trial judge carefully and correctly applied the approach for interpreting commercial contracts set out in the leading case of Sattva. She considered the genesis and factual matrix of the Commission Agreement and determined that it was clearly the objective intention of the parties that the leasing commission would be paid if the appellant concluded a lease for the commercial component of the subject property with any Loblaws entity.

[8] The trial judge rejected the appellant’s submission that a provision of the Commission Agreement limited its application to leases signed with Loblaws entities in existence at the time the Commission Agreement was signed. In our view she did not err in so concluding. We disagree with the appellant’s submission that, because the definition of “Tenant” in the Commission Agreement includes an entity to whom Loblaws “is” directly or indirectly related, the Commission Agreement contemplated only entities in existence at the time it was signed and that the trial judge’s conclusion to the contrary constitutes palpable and overriding error or a failure to give effect to the words of the agreement. The trial judge’s findings constitute, in our view, a commercially reasonable interpretation of that provision in the context of the entire agreement and the factual matrix and should be accorded due deference in this court. The appellant has not demonstrated any palpable or overriding errors in any of the trial judge’s findings.

[9] We also reject the submission that the trial judge erred in law in reaching her conclusion that the offer to lease had not been terminated and that Shoppers met the definition of “Tenant” in the relevant agreements. These conclusions flowed from the trial judge’s considered interpretation of the terms of the agreements and her findings of fact.

[10] The appellant submits that the trial judge failed to adequately deal with the submission that the offer to lease terminated automatically because certain conditions in the offer to lease were neither satisfied nor waived by Loblaws. That submission, however, was not the focus of the appellant’s argument at trial and the trial judge cannot be faulted for her failure to deal extensively with it in her reasons. The trial judge explained that the parties conducted themselves on the basis that the offer to lease had not been terminated and that a final form of lease would be signed. It was only in the alternative that she turned to the issue of whether the automatic termination provision may have been triggered. The trial judge explained that, had it been necessary, she would have found that by continuing to negotiate with the respondent, Loblaws, by its conduct, waived the need for compliance with these conditions. Significantly, at trial, the appellant produced no documents and led no evidence setting out, in any substantive way, the timing, terms and conditions under which the transaction continued after the point at which the appellant argues the offer to lease automatically terminated. There would therefore have been no reasonable basis for the trial judge to have found that, notwithstanding the lengthy passage of time, the numerous steps taken in furtherance of the transaction and the appellant's own firm assertions otherwise, the offer to lease had been automatically terminated.

[11] The trial judge’s finding that, in effect, the lease was simply a “finalization” or “fulfillment” of a single lease transaction contemplated in the offer to lease was fully supported by the evidence and her interpretation of the agreements. The findings of the trial judge in support of this conclusion include:

a. throughout the period from the offer to lease to the signing of the lease both Loblaws and the appellant dealt with each other as if they were continuing an existing transaction; b. Loblaws reassured the appellant that it intended to keep the appellant whole under their initial agreement; c. Loblaws brought Shoppers into the transaction with instructions that the lease with Shoppers must be on identical financial terms as the offer to lease; d. the lease did in fact have substantive and financial terms identical to the offer to lease; e. the appellant never re-listed the property for lease; f. there was no offer to lease with Shoppers and the parties proceeded with the Loblaws standard lease form; g. Shoppers regarded the lease as a continuation of the Loblaws deal; and h. while the lease changed the primary use of the space from grocery to pharmacy, it expressly permitted the space to be used as a grocery, provided it first opened for a single day as a pharmacy.

[12] We see no basis to interfere with the trial judge’s finding that the offer to lease had not been terminated and that Shoppers met the definition of “Tenant” in the Commission Agreement.

[13] Finally, in its factum, the appellant submits that the trial judge approached this case by first deciding what she considered to be the equitable result and then proceeding to find the facts that justified this conclusion. We reject this submission. The trial judge heard the evidence and made the factual findings that naturally flowed from the record before her. Nothing suggests that she somehow sought to tailor those findings to achieve a predetermined result.

[14] The appellant has not identified any error of law or error of fact, let alone a palpable and overriding error.

[15] The appeal is dismissed. Costs to the respondent fixed in the amount of $40,000 inclusive of disbursements and applicable taxes.

“Paul Rouleau J.A.”

“Alexandra Hoy J.A.”

“K. van Rensburg J.A.”