Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20210927 DOCKET: C68786

Strathy C.J.O., Pepall and Pardu JJ.A.

BETWEEN

Narwhal International Limited Applicant (Appellant)

and

Teda International Realty Inc. Respondent (Respondent)

Counsel: Gennady Tcherny, President of Narwal International Limited, acting as agent for the appellant, with leave of the Court Stephanie Tassopoulos, for the respondent

Heard: September 17, 2021 by video conference

On appeal from the order of Justice Breese Davies of the Superior Court of Justice, dated January 7, 2021.

Reasons for Decision

[1] This appeal concerns a dispute about the renewal term in a commercial lease.

[2] In March 2019, the appellant tenant notified the respondent landlord of its intention to renew the lease for a five-year period. Protracted negotiations between the parties did not result in agreement on the rent to be paid during the renewal period. The appellant commenced an application for a declaration that it was entitled to renew the lease and for an order setting the rent for the renewal period.

[3] There were two principal issues before the application judge. The first concerned which of two documents was actually the agreement to lease executed by the parties. This was significant because the renewal provisions in the two documents were different.

[4] After reviewing the conflicting evidence tendered by the parties, the application judge found that the document tendered by the respondent was the agreement made between the parties. She gave cogent reasons for her conclusion.

[5] Unlike the document proffered by the appellant, which provided that the rent on renewal would be determined by reference to prevailing market rates for similar space, the document produced by the respondent, and accepted by the application judge, simply stated that the net rental rate for the five-year renewal period was to be “discussed between landlord and tenant”.

[6] The application judge noted that a right to renew a lease on the same terms except for the rental rate does not create an enforceable legal obligation, other than an obligation on the landlord to negotiate in good faith: referring inter alia to Godson v. P. Burns & Co. (1919), 46 D.L.R. 97 (S.C.C.); Molson Canada 2005 v. Miller Brewing Company, 2013 ONSC 2758, 116 O.R. (3d) 108, at paras. 95-108.

[7] The second issue was whether the landlord had negotiated in good faith with respect to the rental rate for the renewal term.

[8] After setting out the chronology of the renewal discussions in considerable detail, the application judge found that “[the respondent] acted in good faith during its negotiations with [the appellant] and ultimately made a reasonable offer to [the appellant] for the renewal.” The appellant rejected that offer, although it subsequently attempted to accept the offer after it received notice of termination of the lease. Again, the application judge gave detailed and thoughtful reasons for her finding of good faith.

[9] The application judge therefore dismissed the appellant’s application.

[10] In this appeal, the appellant challenges the application judge’s findings on both central issues: the determination of which of the two documents constituted the agreement to lease and whether the respondent had engaged in good faith negotiations to renew the lease.

[11] The appellant also seeks to introduce fresh evidence on the appeal. In essence, that evidence challenges: (a) the respondent’s evidence on the application concerning the appropriate market rent for the premises; (b) the respondent’s conduct after the hearing of the application; and (c) the conduct of the respondent and its counsel in related proceedings.

[12] We decline to admit the fresh evidence. While some of it relates to events that occurred after the application had been heard and was not available at the hearing, we are not satisfied that any of the evidence is relevant to the issues to be determined on this appeal. In any event, we are satisfied that even if the evidence were to be admitted, it would not have affected the outcome as it does not call into question the application judge’s findings of fact on the central issues: see R. v. Palmer, [1980] 1 S.C.R. 759.

[13] Turning to the appeal itself, the appellant invites us to revisit the findings of fact made by the application judge. In effect, it argues that the application judge erred in finding that the agreement to lease was the document tendered by the respondent and in finding that the respondent had negotiated in good faith.

[14] Unfortunately, the appellant misunderstands the function of an appellate court. It is not this Court’s responsibility to conduct a second trial. In the absence of a palpable and overriding error in the application judge’s assessment of the evidence, an appellate court must accept the judge’s findings of fact. A palpable and overriding error is an “obvious error that is sufficiently significant to vitiate the challenged finding of fact”: Longo v. MacLaren Art Centre, 2014 ONCA 526, [2014] O.J. No. 3242, at para. 39. It has also been said that:

A palpable error is one which is clear to the mind or plain to see, so obvious that it could be easily seen or known or readily or plainly seen. An overriding error is one which had a sufficiently decisive effect, such that it would justify intervention and review on appeal: 1632093 Ontario Inc. (Turn-Key Projects) v. York Condominium Corporation No. 74, 2020 ONCA 843, 328 A.C.W.S. (3d) 66, at para. 1.

[15] The application judge made no such error. She gave thorough and cogent reasons for her findings of fact, some of which were based on her assessment of the credibility of the respondent’s witness. Her findings of fact are entitled to deference and are dispositive of this appeal.

[16] The appeal is dismissed. We did not receive submissions on costs. If costs are sought, they may be addressed by written submissions. The respondent shall serve and file its submissions within 10 days of the issuance of the reasons. The appellant shall have 10 days from receipt of the respondent’s submissions to serve and file its submissions. The submissions shall not exceed three (3) double-spaced pages, excluding cost outlines. They shall be filed with the Registrar of this Court, and copied to the opposing party, either by email or by ordinary mail.

“G.R. Strathy C.J.O.” “S.E. Pepall J.A.” “G. Pardu J.A.”