2013 ONSC 4953
COURT FILE NO.: 59/12
DATE: 2013/07/31
ONTARIO
SUPERIOR COURT OF JUSTICE
APPLICATION UNDER Rule 14.05(3)(d)(g) and (h) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended, and under Section 20(1) of the Commercial Tenancies Act, R.S.O. 1990, c.L.7, as amended
B E T W E E N:
1328773 ONTARIO INC. o/a Angling Outfitters
A.L.J. Kowalsky, for the Applicant
Applicant
- and -
2047152 ONTARIO LIMITED
D. L. Bowyer, for the Respondent
Respondent
ONTARIO
SUPERIOR COURT OF JUSTICE
APPLICATION UNDER Rule 14.05(3)(d), (g) and (h) of the Rules of Civil Procedure, R.R.S. 1990, Reg. 104, as amended and under Section 74 of the Commercial Tenancies Act, R.S.O. 1990, C.L.7, as amended
COURT FILE NO.: 77/12
B E T W E E N:
2047152 Ontario Limited
D. L. Bowyer, for the Applicant
Applicant
- and -
1328773 Ontario Inc., o/a Angling Outfitters
A.L.J. Kowalsky, for the Respondent
Respondent
HEARD: September 14 and October 4, 2012
LEACH J.
[1] The focus of this litigation is a commercial property known by its municipal address as 684460, Road 68, Zorra Township, Ontario, (“the Road 68 property”), which is owned by 204715 Ontario Limited (“the Landlord”).
[2] A portion of a building on the Road 68 property was leased to a commercial tenant, 1328773 Ontario Inc., (“Angling Outfitters”), and the central question before me for determination is whether that lease agreement remains in effect, despite its purported termination by the Landlord. In particular:
a) By way of application, Angling Outfitters seeks a declaration that the lease agreement (including provisions giving Angling Outfitters a right of first refusal on any sale of the property and an option to lease the premises for a further term) remains in full force and effect or, in the alternative, relief from forfeiture so as to reinstate the lease. Ancillary relief requested includes orders for possession and enjoining the Landlord from interfering with use and occupation of the leased premises, as well as an order for a further trial to determine the damages or compensation to which the Applicant may be entitled in the circumstances.
b) By way of a counter-application, the Landlord seeks a declaration that the lease agreement was terminated and/or forfeited as of April 12, 2012. Ancillary relief requested by the landlord includes orders compelling Angling Outfitters to remove its chattels from the Road 68 property, provide vacant possession of the premises to the Landlord, and refrain from damaging the property in any way.
[3] The application and counter-application came before me for simultaneous trial, pursuant to an earlier Rule 38.10(1)(b) direction made by Justice Henderson. No further directions were given in relation to the resulting trial.
Evidence and facts
[4] As both parties had made considerable effort to put evidence before the court by way of affidavits, in the original application proceedings, I granted leave pursuant to Rule 53.02, permitting the affiants, (called as witnesses at trial), to confirm, adopt and repeat that evidence by way of reference, before supplementing it as desired by way of oral testimony at trial.
[5] In the result, the evidence I received at trial included the following:
a) affidavit evidence and oral testimony of Mr Joslyn (“Josh”) Jun-Bong Leung, a director, officer and general manager of Angling Outfitters;
b) affidavit evidence and oral testimony of Bruce Bowyer, a director and president of the Landlord; and
c) oral testimony of Brian Bowyer, who is both a son of Bruce Bowyer, and the principal of another commercial tenant at the Road 68 property, (i.e., 2029405 Ontario Limited, carrying on business as “Bowyer Marine and Leisure”).
[6] As discussed in more detail below, Brian Bowyer also resides at the Road 68 property, and has acted from time to time as the Landlord’s representative.
[7] Although certain facts and events were a matter of dispute and controversy, (as identified and discussed in greater detail below), I note at the outset that there actually was little disagreement about many of the developments leading to the present litigation. Disagreement stems from the parties’ widely divergent views on the significance and legal propriety of certain events, and the consequences that should follow.
[8] In my view, the relevant facts and evidence are as follows:
• For approximately 11 years, Angling Outfitters has carried on business as a retail fishing and tackle accessory store; e.g., selling more traditional equipment such as rods, reels and lures, as well as more modern electronics such as GPS and “fish finder” units. Although operated through a corporation, its principals include Kenneth Leung (father) and Josh Leung (son). The latter serves as general manager and officer of the business, and largely looks after its daily operations. Although demand for the products sold by Angling Outfitters increases during the spring and summer months, it carries on business throughout the year, (e.g., selling ice huts and augurs for fishing during the winter months).
• The Landlord is a holding company, controlled by members of the Bowyer family. At all material times, it has owned the Road 68 property, which is located to the west of Woodstock. On the property is a large “main” building, which effectively is segregated into three areas described informally as the front, middle and rear, (based on their relative proximity to the adjacent highway), although all three areas use and rely upon washrooms located in the front portion of the building. Initially, the front and middle areas of the main building were occupied by Bowyer Marine and Leisure, which until 2007 carried on business as a Yamaha dealership, (e.g., selling snowmobiles and ATVs), in addition to providing boat services and repairs. At all material times, the rear area of the main building has been occupied by another commercial tenant, carrying on business as “Burrill Auction Services”.
• For the first six years of its existence, Angling Outfitters operated from a location in downtown Woodstock, in a building owned by Kenneth Leung. However, in or about November of 2007, it was persuaded to relocate its business to the front area of the main building on the Road 68 property, (which had become vacant owing to Bowyer Marine and Leisure discontinuing its Yamaha dealership activities, and thereafter restricting its business to boat services and repairs using the middle area of the main building). In that regard:
o The initial approach to Angling Outfitters was made repeatedly by Bruce Bowyer who, as a customer, patronized Angling Outfitters. He saw that Angling Outfitters was extremely busy, but in his opinion its business suffered from lack of space and parking at its downtown Woodstock location. He also thought the business of Angling Outfitters and Bowyer Marine and Leisure would complement each other, by facilitating mutual referral of customers.
o The Leungs were reluctant to relocate, as their business was thriving in downtown Woodstock, (where they owned the building and accordingly had little overhead), and the Road 68 property seemed remote. Over time, however, they were persuaded by the favorable terms eventually offered by the Landlord, whose representation, in terms of lease negotiation, (when initial preliminary discussion of a possible purchase of the Road 68 property by the Leungs proved abortive), had been entrusted by the Landlord (and by Bruce Bowyer in particular) to Brian Bowyer.
o A formal lease agreement was executed by the parties, (with Josh Leung signing for Angling Outfitters and Brian Bowyer signing for the Landlord), on November 17, 2007. At trial, there were disputes and uncertainties as to how the wording of that documented lease agreement was finalized. In particular, in support of suggested contra proferentum arguments, witnesses for the Landlord suggested that the Leungs refused to sign an initial version of the lease prepared by the Landlord, (e.g., including provisions that would have required Angling Outfitters to formally assume responsibility for payment of utilities), and that the Leungs may have been responsible for typing the draft version of the lease eventually signed by the parties, (although Brian Bowyer was uncertain as to whether that was the case). In my view, however, it effectively was common ground that the final lease agreement signed by the parties was the result of extended negotiation between the parties, neither of which was in a position to dictate terms. In the circumstances, application of the contra proferentum doctrine to a contract resulting from such mutual input and revisions, between parties of relatively equal bargaining power, would be inappropriate.
• The formal lease agreement is approximately two pages long. I have regard to the document in its entirety, but for present purposes, its more salient provisions include the following:
o The “Location” of the leased premises was identified by the Road 68 property’s municipal address, and by a reference to the “Front Portion of the main building with an area of approximately 4,000 square feet”, as shown in an attached handwritten diagram. However, other provisions of the lease, under the headings “Maintenance and Repairs”, “Parking” and “Signs”, indicate that the agreement was intended to confer rights and impose obligations extending beyond the building itself. For example, the Landlord undertook various obligations in relation to the parking lot, snow removal, and “outside maintenance and gardening of the lands forming part of the Premises”. (I note that the Landlord’s obligations also expressly included, “without limitation, maintenance and repairs to all heating, electrical and air-conditioning equipment”.) Angling Outfitters and its customers were given “the right to park on the uncovered areas in the front of the building”. (I note that the lease contains no restriction on overnight parking.) Angling Outfitters also was given the right to “erect signs on the Premises, including free-standing signs”, (i.e., signs not attached to the building), “relating to its business”, providing the Landlord approved them.
o The lease expressly indicated that the leased premises could be used “for the purpose of any use permitted by the applicable by-laws, or as otherwise represented herein”. (I note that, although the agreement permitted its termination if, for any reason, Angling Outfitters could not use the property as a “tackle and fishing accessory shop”, there is nothing in the lease requiring Angling Outfitters to use the leased premises in that limited way. Subject to contravention of any applicable by-laws, any desired use of the leased premises is expressly permitted by the lease. Complaints expressed by Bruce Bowyer during his evidence, suggesting that Angling Outfitters improperly was engaging in the competitive provision of services similar to those previously provided by Bowyer Marine and Leisure, are in my opinion not well founded in law.)
o The lease expressly permitted Angling Outfitters to “make such renovations” as it deemed appropriate for its business, providing the Landlord approved them – and the Landlord in turn was not to withhold such approval unreasonably. However, Angling Outfitters also assumed responsibility for repairing, at its expense, any damage caused to the premises by its leasehold improvements or trade fixtures, or their removal, (which could be requested and required by the Landlord at the expiration of the lease).
o The agreement contemplated an initial five-year term, running from November 17, 2007, to November 16, 2012. However, it also expressly provided Angling Outfitters with an option to renew the lease for a further five-year term, (with the option to be exercised, if at all, between June 17, 2012, and July 17, 2012).
o Angling Outfitters also was given a “Right of First Refusal”, whereby it would be permitted, (during the term of the lease, “provided that the Lease is not in default or otherwise terminated”), to purchase the property on precisely the same terms and conditions of any agreement of purchase and sale otherwise entered into by the Landlord.
o The agreement contained detailed provisions specifying the rent payable, both during the initial term of the lease and during any further term brought about by exercise of the renewal option. These included provisions obliging Angling Outfitters to pay a “Gross rent of $1,500.00 per month for the first 5 years”, (although it was also given an initial “rent free” period of two months at the outset of the initial term), while the “Gross Rent for the renewal term of five years” was to be “$1,600.00 per month, plus an annual increase based on the Consumer Price Index (CPI) as quoted by Statistics Canada, for the previous year”. The term “Gross rent” was expressly defined as including “usage of parking facility, all utilities, property taxes, ground maintenance, property insurance, and all related GST charges.” [Emphasis added.]
... (continues verbatim)
Justice I.F. Leach
Released: July 31, 2013
2013 ONSC 4953
COURT FILE NO.: 59/12 & 77/12
Ontario
Superior court of justice
APPLICATION UNDER Rule 14.05(3)(d)(g) and (h) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended, and under Section 20(1) of the Commercial Tenancies Act, R.S.O. 1990, c.L.7, as amended
B E T W E E N:
1328773 Ontario Inc. o/a as Angling Outfitters
Applicant/Respondent in Counterclaim
– and –
2047152 Ontario Limited
Respondent/Applicant in Counterclaim
REASONS FOR JUDGMENT
LEACH J.
Released: July 31, 2013
[^1]: Prior to the meeting of February 28, 2012, Angling Outfitters and its customers had been permitted to engage in the various specified activities at the property for over four years without any prior complaint or objection by the Landlord. That forbearance continued notwithstanding the almost daily presence and observations of Brian Bowyer, (whom I find to have acted as the Landlord’s representative at all material times), and intermittent attendance and observations by the Landlord’s principal Bruce Bowyer. The ongoing nature of the relevant conduct of Angling Outfitters, the Landlord’s awareness of such conduct, and the absence of complaint or corrective action for more than four years all warrant a conclusion, which I make, that the Landlord effectively had authorized, waived or otherwise condoned, expressly or implicitly, the relevant activities prior to the meeting of February 28, 2012.
[^2]: I already have made reference to Bruce Bowyer’s statement to Mr Leung, immediately after the lock-out, that the problems suddenly being experienced by Angling Outfitters would all go away if it simply purchased the property, and to Mr Bowyer’s acknowledgment that the existing lease was a “pretty good deal” for Angling Outfitters and therefore correspondingly off-putting for other potential purchasers of the property. However, various other remarks at trial confirmed Mr Bowyer’s general and palpable frustration with the monetary aspects of the existing situation, and the Landlord’s inability to extract further payments from Angling Outfitters in relation to utilities, purchase of the property or otherwise. In one memorable example, he loudly emphasized Josh Leung’s insistence on paying only $175 for additional storage space, (rather than $200), as an indication of “the type of man we’re dealing with here”.