ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-09-375280
DATE: 20131106
BETWEEN:
TAI ZHAO C.O.B. AS ORIENTAL FALLS SPA
Plaintiff
– and –
N. TURK INVESTMENTS LIMITED
Defendant
William Murray, for the Plaintiff
Stephen M. Turk, for the Defendant
HEARD: October 7, 8, 9, 10, 11, 16, 17 and 18, 2013
LEDERMAN J.
NATURE OF ACTION
[1] The Plaintiff claims that an agreement to lease entered into between the parties was terminated and he seeks the return of his deposit of $52,828.13 and ancillary damages.
[2] The Defendant alleges that it was the Plaintiff who failed to honour his obligations under the agreement to lease and that the Defendant has suffered consequential losses of $810,000 as a result.
THE AGREEMENT TO LEASE
[3] On June 7, 2008, T.Y. Libra International Corp., as tenant, entered into an Agreement to Lease (the “Agreement to Lease”) with the Defendant, Norman Turk Investments Limited (“NTIL”), as landlord, for premises located at 1199 Kennedy Road, Toronto (the “Premises”).
[4] The Agreement to Lease was initially executed by Weiping Chen (the Plaintiff’s wife) on behalf of T.Y. Libra International Corp. on June 6, 2008 and forwarded to NTIL’s real estate agent, Mr. Steven Taylor (“Taylor”). The Agreement to Lease was then amended and, executed on June 7, 2013, by Norman Turk on behalf of the landlord, and additionally by Tai Zhao (also known as Frank Zhao) on behalf of the Tenant, after Norman Turk and his real estate agent, Taylor, had met with Frank Zhao (“Zhao”), Weiping Chan, and the real estate agent for T.Y. Libra International Corp., Helen Zhang (“Zhang”), at the Premises. Zhao’s ability to speak English is limited and Zhang also served as translator for him.
[5] The Premises consisted of approximately 17,500 square feet of space.
[6] The term of the Agreement to Lease was 5 years, with an option to renew for 5 years.
[7] The use of the Premises stated in the Agreement to Lease was “Spa/Fitness Centre”.
[8] In Schedule A to the Agreement to Lease, NTIL warranted that the usage of the Premises for a Spa/Fitness Centre, shall be in compliance with the zoning by-law of the City of Toronto and that the Premises complies with all the relevant government authorities including Fire & Hydro Departments.
[9] A condition in Schedule A to the Agreement to Lease made the offer conditional upon the tenant being able to acquire a Spa/Fitness Centre license and Building Renovation Permit within four (4) months after acceptance of the offer, failing which the Agreement to Lease would be null and void.
[10] A deposit of $52,828.13 was provided to NTIL’s real estate agent, Taylor. That deposit remains with Taylor.
[11] On or about the 25th of July, 2008 the Agreement to Lease was amended in writing wherein the corporation, T.Y. Libra International Corp. was deleted as the tenant, and the business trade name of Oriental Falls Spa was inserted as the tenant in its place.
ATTEMPTS TO OBTAIN THE NECESSARY BUSINESS LICENSE
[12] On June 11, 2008, Norman Turk, on behalf of the landlord, submitted a “Permitted Use Request” form to the Toronto Building Department, which listed the use for the Premises as “Recreational Use/fitness dancing/spa/massage including Nail and Hair Salon and alcohol use.” The purpose of the form was to identify whether the proposed use of the Premises is a permitted use under the zoning designation for that property.
[13] In response, by letter dated June 24, 2008 to NTIL, the Zoning Examiner stated:
“. . . based solely on the information provided, the proposed Fitness Centre, an Educational and Training Facility and Personal Service shop which includes a Nail and Hair Salon only would be a permitted use under municipality of Scarborough Zoning Code”.
[14] On June 30, 2008, Zhao submitted a Permitted Use Request form to the Toronto Building Department, which listed a company name of T.Y. Libra International Oriental Falls Spa, and which listed the use for the Premises as “Spa, Massage, Holistic Centre.”
[15] On or about July 9, 2008, Zhao submitted a “Preliminary Review Request for a Business License” to the Toronto Building Department, listing the business name of Oriental Falls Spa and the proposed use of the Premises as “Holistic Centre”.
[16] On July 9, 2008, Zhao submitted a Business License Application to the City of Toronto, which stated that the application was for:
“New, HOLISTIC CENTRE
H.C. - OWNER ALLOWED TO PROVIDE SERVICES”
[17] In furtherance of the application, Zhao submitted various documentation to the City of Toronto, including a business plan and copies of Holistic Practitioner Licenses for Zhao and Weiping Chen. The business plan refers to a Spa and massage, but does not refer to a Fitness Centre or Holistic Centre.
[18] By letter dated July 10, 2008 to T.Y. Libra International Oriental Falls Spa C/O Tai Zhao, the Zoning Examiner stated:
“This will acknowledge receipt of your letter dated June 30, 2008 and based solely upon the information provided, the proposed Holistic Centre including Massage Area would not be a permitted use under the former municipality of Scarborough Zoning Code.”
[19] On July 14, 2008, Norman Turk, on behalf of NTIL, signed a standard form (which was to be submitted to the Municipal Licensing and Standards Department of the City of Toronto) entitled “Acknowledgment of the Use of the Property as a Holistic Centre” acknowledging that NTIL is the owner of the property located at 1199 Kennedy Road and that Oriental Falls Spa (Tai Zhao) will occupy the location as a Licensed Holistic Centre.
[20] By Examiner's Notice dated July 24, 2008, addressed to Zhao and copied to the Municipal License and Standards Business License Issuing Office, the Zoning Examiner advised Zhao that examination of his request for a Licensing Project Review revealed that certain requirements of the City's Zoning By-law had not been satisfied. The Notice states “your property is zoned ME-Mixed Employment Zone where the proposed Holistic Centre including the Massage Areas is not a permitted use”.
[21] By letter dated August 14, 2008, To Tai Zhao, O/A Oriental Falls Spa, regarding the Holistic Centre Application, the Supervisor, Licensing Services for the City of Toronto, advised:
“Your application for the above-noted license has been reviewed. Our investigation discloses your proposed use of the premises relative to your application has not been approved by the Building Division... We are unable to issue you a license until you complete the following requirement:
“Contact Building Division -Scarborough District 416-396-7526to obtain further clarification on the rejected use of the premises and to attempt to resolve the zoning issue” (emphasis in original).
[22] By this time, it was clear to the parties that Zhao could not obtain the appropriate business license as the present zoning did not permit massage services.
[23] On September 8, 2008, Zhao signed a Mutual Release with regard to the Agreement to Lease, dated June 7, 2008. It stated that the transaction was terminated and directed the deposit holder to return the deposit. Zhang sent the Mutual Release to Taylor and requested that the landlord and broker of record sign it. It was never signed, nor responded to.
ATTEMPTS TO OBTAIN THE REQUIRED ZONING
[24] On or about September 18, 2008, NTIL engaged W. E. Oughtred & Associates Inc. to bring an application to the Committee of Adjustments for a minor variance to zoning.
[25] By letter dated October 7, 2008 Zhang wrote to Taylor:
“My client, Frank Zhao, didn't get Holistic License Approval on August 14, 2008 because of zoning. After that we tried to contact with the Scarborough Zoning Department, still cannot get satisfied results. So my client signed the Mutual Release on September 8, 2008”.
“Mr. Norman Turk said he will try his best to negotiate with the Scarborough Zoning Department, we appreciate what he does. But if the Landlord cannot get zoning approval on or before November 16, 2008, please signed the Mutual Release as soon as possible”.
[26] By email dated October 9, 2008 from William Oughtred (“Oughtred”) to Ihor Wons (“Wons”), an assistant to City Councillor Michael Thompson, Oughtred confirmed a telephone conversation that took place with Wons on October 6, 2008, stating:
“I understand from Mr. Turk that the Clinic/Spa is intending to offer Traditional Chinese Medicine, Registered Massage Therapy, Reflexology, Therapeutic Touch, as well as full spa treatments such as facial and skin treatment, waxing sauna and full body care”.
“The typical body care will include massage therapy, hydro therapy, Sea Salt scrub Thermal Mud Hydro Treatments, Skin Lifting Treatment, Anti-Acne Treatment, Vitamin Whitening Treatment, Eye Contour Treatment, and a host of other traditional Chinese Treatments. They are proposing to provide Anti Cellulite Treatments and Skin Firming Treatments . . . Mr. Turk advised me that he is sure the operation is a legitimate Holistic Spa/Clinic. He would not have leased to the tenant if he felt otherwise.”
[27] By Notice of Public Hearing, dated October 10, 2008, from the Committee of Adjustment, Scarborough Civic Centre, notice was given of a hearing date on October 22, 2008 with regard to an application seeking relief from the provisions of the Zoning By-law to permit the use of proposed Holistic Centre including Massage Areas.
[28] By letter dated October 14, 2008, Oughtred provided Wons of the office of Councillor Michael Thompson with copies of the Holistic Practitioner's Licenses of Zhao and Weiping Chen, Price Lists for Holistic Treatments, Holistic Centre Operating Information and a copy of the Master Business License of Oriental Falls Spa.
[29] On October 22, 2008, at the request of Oughtred, the application before the Committee of Adjustment was adjourned to November 12, 2008 and this is confirmed by letter dated October 29, 2008 from the Committee of Adjustment to Oughtred.
[30] On the morning of November 6, 2008, Oughtred and Wons had a telephone conversation. By email dated November 6, 2008 Oughtred proposed to Wons certain conditions for the grant of relief from the zoning by-law from the Committee of Adjustment.
[31] By letter dated November 10, 2008, to the Scarborough Panel of the Committee of Adjustment, Councillor Michael Thompson proposed similar conditions for consideration by the Committee of Adjustment. Mr. Thompson stated that the terms had been agreed to by Norman Turk and Zhao.
[32] By Notice of Decision dated November 12, 20008, the Committee of Adjustment approved a minor variance of the Zoning By-law to permit the use of a proposed holistic centre including massage, subject to the following conditions:
(1) This approval is limited to a five (5) year term, to expire on or before November 30, 2013.
(2) The decision is personal to “Oriental Falls Spa” owned and operated by “Frank Zhao”, and shall be in effect so long as the subject premises are leased and/or occupied by the same and operated as a Holistic Centre and Spa.
(3) The approval is limited to the 2nd floor of the building, of approximately 1,646, square metres (17,721 square feet) being utilized as the Holistic Centre and Spa.
(4) The permitted uses of Holistic Centre and Spa are restricted to Aromatherapy, Chinese Traditional Medicine, Registered Massage Therapy, Shiatsu, Polarity Therapy, Reflexology, and spa treatments.
(5) The Holistic Centre and Spa hours of operations are restricted to 9 a.m. to 9 p.m., seven days a week.
[33] On November 14, 2008, the decision of the Committee of Adjustment was provided to Zhang and Zhao via facsimile.
[34] By fax dated November 14, 2008, Zhang sent a new offer to lease the Premises to Taylor. The new offer describes the use for the Premises as “Spa/Fitness/Holistic Centre” and asks that NTIL warrant that the use of the Premises as a “Spa/Fitness/Holistic Centre” be in compliance with the zoning by-law of the City of Toronto. The new offer included terms more favourable to Zhao than the original Agreement to Lease, such as 4 months free rent, and no security deposit.
[35] In the same fax from Zhang to Taylor, Zhang provided a Mutual Release dated November 14, 2008 and signed by Zhao with respect to the Agreement to Lease dated June 7, 2008.
[36] By fax dated November 17, 2008 from Zhang to Taylor, Zhang provided another copy of the New Mutual Release, also executed by the manager of her real estate company, as Cooperating Broker.
[37] By letter dated November 18, 2008 to Zhang and Zhao, Norman Turk considered the lease dated June 7, 2008 to be firm and binding and requested that the keys to the Premises be picked up. He further stated that if Zhao failed to pick up the keys by 12:00 p.m. on November 19, 2008, he would be in breach of contract and his deposit would be forfeited.
[38] By letter dated November 21, 2008 from Jason Huang, the solicitor for Zhao, to NTIL, Mr. Huang identified himself as the solicitor for the tenant, T.Y. Libra International Corp. and requested the return of the deposit, stating that the lease was conditional upon the tenant being able to acquire a Spa/Fitness Centre License from the Government Authority within 4 months after acceptance of the offer and that the tenant was unable to do so, despite having diligently applied for the license. And as such, pursuant to the condition to the agreement, this agreement was thereby null and void.
[39] By letter dated November 26, 2008 from Jason Huang to NTIL, Mr. Huang stated “My client’s position remains that the conditions set out under the agreement to lease, the condition with respect to obtaining licensing has not been met . . . As such, and as a result of failure of condition, the agreement is hereby terminated.”
POSITION OF THE PARTIES
[40] The Plaintiff alleges that the Defendant breached its warranty in the Agreement to Lease as the proposed use of the premises did not comply with the applicable zoning by-law of the City of Toronto. As a result, he was unable to obtain the necessary business license within the four (4) months required by the Agreement to Lease and accordingly, the Agreement to Lease is null and void.
[41] The Defendant alleges that the Plaintiff mislead it concerning the nature of the proposed use of the Premises, and the Defendant’s warranty as to zoning was based on the Plaintiff’s mis-description in the Agreement to Lease of the proposed use of the Premises. Further, the Defendant submits that the parties agreed to an extension of the conditional period for the Plaintiff to obtain his license, or alternatively, the Plaintiff waived the four (4) month condition period and is estopped from relying on the condition. The Defendant submits that, within the time extension, it obtained a variance to zoning to permit the use sought by the Plaintiff; however, the Plaintiff deliberately refused to obtain the required license and instead attempted to renegotiate new Lease terms seeking a better deal. The Defendant argues that, in so doing, the Plaintiff breached the Agreement to Lease thereby forfeiting the deposit and the Defendant is entitled to damages.
ANALYSIS
1) USE OF THE PREMISES
[42] The Agreement to Lease provided that the Premises shall be used for a Spa/Fitness Centre.” That was the basis of the warranty given by the Defendant Landlord and the Agreement was conditional upon the Tenant being able to acquire “a Spa/Fitness Centre license” within four (4) months after the agreement was entered into. It was learned early on that there did not exist a license specifically named a “Spa/Fitness Centre” license. Rather, the appropriate license to be obtained was a “Holistic Centre license.” The Defendant contends that is a use different than a “Spa/Fitness Centre” as stated in the Agreement to Lease. That became evident when Norman Turk saw the original layout drawings of the Premises presented by the Plaintiff as part of the documentation for the license application process. It indicated that the Premises were to be made up mainly of massage rooms rather than a mixed use facility which included a fitness centre as originally represented to the Defendant. The original concept of a Spa/Fitness Centre induced it to enter into the Lease Agreement in the first place, and which was the basis for NTIL providing its warranty with respect to zoning in the Agreement to Lease.
[43] The Defendant points out that the floor plans in fact showed no fitness centre. It submits that the problem in obtaining licensing originated with the Plaintiff’s own description of use. It submits that the result was that the Plaintiff never applied for a “Spa/Fitness Centre License” but rather a “Holistic Centre License” which is very different in nature. The Defendant submits that the Plaintiff should not be able to take advantage of his own mischaracterization of the use in order to escape his obligations under the Agreement because he was unable to obtain a license for a use different than that set out in the Agreement.
[44] Although the Plaintiff described the use of the premises generally as “Spa/Fitness Centre”, he always had in mind and told Norman Turk that the services to be provided would include such things as spa, massage, acupuncture, reflexology, jacuzzi, shiatsu, waxing, etc. Zhao and Zhang inserted the general phase “Spa/Fitness Centre” in the Agreement to Lease as a short form to comprise all of these services. Zhang testified that it was not practical to itemize 20 or 30 specific services or treatments in the Agreement. Massage was to be a core activity essential to the services to be provided and Zhao and Zhang reiterated this prior to and at the time the Agreement was entered into. Even though the clause in the Agreement to Lease made no mention of the word “massage”, both Norman Turk and Taylor acknowledged in their testimony that it is quite common for spas to include such services. In fact, Norman Turk testified about his long time experience with his own fitness club at which he as a member, partook of such massage services.
[45] There is no question that the business license that the parties understood Zhao would be seeking during the conditional period would be one which would allow for massage services. When Zhao made the appropriate application at the City offices, he discovered that because he would be offering massage services, the license that was needed was known as a Holistic Centre license and that to obtain such a license, certain requirements had to be met. He was already a professional holistic practitioner and had a qualifying license for that activity. In order to complete the application process, he had to include a number of documented items, one of which was an Acknowledgement by the property owner as to the use of the Premises as a Holistic Centre. Norman Turk on behalf of NTIL did sign an acknowledgement that the premises were to be occupied as a “Licensed Holistic Centre”.
[46] The ordinary meaning of the word “spa” includes massage. The Canadian Oxford Dictionary, Second Edition, Oxford University Press, 2004 defines spa as “a commercial establishment or resort offering health and beauty treatment through steam baths, exercise equipment, massage, etc.” (emphasis added).
[47] The fact of the matter is that Norman Turk was advised from the outset that massage was an important component of the services to be provided; he understood from his own experience that massage was to be an included service, even though it may not have been to the extent that he had experienced in his own fitness club; the plain and ordinary meaning of “spa” includes massage; he used that word himself in the Permitted Use Request when he was lending assistance to the Plaintiff to obtain the appropriate Holistic Centre License.
[48] When he signed the Agreement to Lease, Norman Turk was confident that the zoning was in place for such activities since he had earlier leased the first floor of the property for a bar and nightclub activities, an adult use, such that he thought the existing zoning was sufficient to also cover the spa/fitness activities to take place on the second floor.
[49] Norman Turk owned about 20-30 commercial and industrial buildings all over the Greater Toronto Area, mostly in Scarborough and Mississauga, with a total of about 1,000 – 1,500 tenants. He had more than 30 years experience as a landlord leasing commercial premises. He was somewhat of a regular fixture at City zoning offices and he has been to the Committee of Adjustments on numerous occasions to seek variances, if necessary. There was, therefore, a basis for his confidence that there would be zoning for the stated use.
[50] The Agreement to Lease was conditional upon the Plaintiff obtaining the special license required to run a Spa/Fitness Centre. By reason of the fact that a spa, to everyone’s knowledge, included massage services, it turned out that a special license called a Holistic Centre License was required. The phrase “Spa/Fitness Centre” was not used as a term of art in the Agreement to Lease with respect to the necessary license to be obtained. Whatever license that was required to run a spa which included massage, was within the understanding of the parties and that was the license the Plaintiff would seek to acquire.
[51] The reality is that the condition in the Agreement to Lease required the Plaintiff to obtain the necessary license for a Spa/Fitness Centre and that encompassed a Holistic Centre License, the only license that would permit massage services.
[52] Norman Turk himself, in the end, was not concerned about the extent of the massage services to be provided since his consultant, William Oughtred, in an email to I. Wons on October 9, 2008 stated “Mr. Turk advised me that he is sure that the operation is a legitimate Holistic Spa/Clinic. He would not have leased to the tenant if he felt otherwise.”
[53] I conclude that the Defendant was not mislead by the phrase “Spa/Fitness Centre”. There is no ambiguity in the phrase. The plain and ordinary meaning of the word “spa” includes massage services. Even if there was ambiguity, both parties from their statements and conduct, were aware at that time that it was intended to include massage. Norman Turk’s own written description in the Permitted Use Request includes massage. Accordingly, the intention of the parties was that the Plaintiff was to acquire within the four (4) month time period, the business license necessary for it to offer spa services which included massage, and that turned out to be a Holistic Centre License.
[54] The present zoning as of June 7, 2008, did not permit this use. Accordingly, the Defendant was in breach of its warranty at that time.
2) EFFECT OF THE MUTUAL RELEASE DATED SEPTEMBER 8, 2008
[55] Without the proper zoning, it became clear to Zhao and Zhang that they would not be able to obtain the appropriate business license. I accept Zhang’s testimony that she was in communication with Taylor about the problems pertaining to zoning and that she told him on a number of occasions that the Landlord was in breach of his warranty and that the deposit should be returned.
[56] On September 8, 2008, Zhao signed a Mutual Release witnessed by Zhang in which it is clearly stated that the transaction is terminated and that the broker, Taylor Real Estate Services Inc. should disburse the deposit of $52,828.13 “to the Buyer (sic).” Zhang faxed this Mutual Release to Taylor on September 10, 2008, along with a copy of a letter from the City of Toronto indicating the problem with zoning and she stated in the cover sheet “Pls have the Landlord and your broker of record’s signature”. This was a formal statement by the Plaintiff that the transaction was terminated and was seeking the return of the deposit.
[57] The Mutual Release was never signed by the Defendant. Nor were the deposit monies returned. The document was simply ignored.
[58] Taylor agreed in his testimony that it is possible that Zhang had told him that the deal was dead and that Zhao wanted the deposit back.
[59] Presumably, both Norman Turk and Taylor ignored the Mutual Release because they were confident that Norman Turk would resolve the matter with the City, although Taylor had little knowledge of what Norman Turk was doing in that regard.
[60] Norman Turk testified that he never saw the Mutual Release although he conceded that he may have talked to Taylor about it and perhaps Taylor told him that the Plaintiff wanted his money back.
[61] When the Mutual Release was not returned, Zhang kept calling Taylor insisting upon the return of the deposit. However, Taylor merely repeated that Norman Turk was influential with the City, and he was taking steps to resolve the problem.
[62] Zhang testified that she did not encourage Zhao to retain a lawyer to take legal action at this point in time because of the expense involved, and in the belief that, with urging on her part, the deposit funds would be returned shortly.
3) ANY AGREEMENT TO EXTEND THE TIME FOR OBTAINING A LICENSE
[63] Although not pleaded in the Statement of Defence and Counterclaim, Defendant’s counsel argued that Zhang’s letter of October 7, 2008, constituted an agreement whereby the Plaintiff was giving the Defendant until November 16, 2008 to honour its warranty that there was zoning and for the Plaintiff to obtain his license. He argued that Zhang either had actual or ostensible authority from the Plaintiff and was acting within the ordinary course of business in extending the time to satisfy the condition to November 16, 2008, particularly since clause 10 of the Agreement to Lease allowed for the agents to give and receive notices in writing pursuant to the Agreement.
[64] The four (4) month period for obtaining the appropriate license expired on October 6, 2008. Between the time that Zhang sent the Mutual Release to Taylor and October 6, she testified that she was always calling Taylor and asking for the deposit back so much so that Taylor appeared to be exasperated by the number of calls that she was making.
[65] She testified that when October 6 came and went, she called Taylor and re-iterated that the agreement was null and void and requested that the deposit be returned. Taylor told her that she could write an amendment to extend the time. She testified that that was not her client’s desire and that in any event it is impossible to amend the Agreement. The Plaintiff and Zhang’s intention was always to get the deposit money back and she testified that the October 7 letter was just a statement of that intention.
[66] Zhang testified that the purpose of the October 7th letter was merely to record what she had been told by Taylor, that is, that Norman Turk would get the appropriate zoning by November 16. She stated she just wrote down what Taylor told her. She did not consult with Zhao or get his approval to send this letter. Zhao did not see the letter at the time. Taylor testified that it was possible that he advised her that Norman Turk was negotiating with Scarborough and that a deadline was set for November 16 and, at that time, he would get Norman Turk to sign the Mutual Release.
[67] The October 7th letter seemed to be of no significance to Taylor. Taylor testified that he doesn’t even recall speaking to Zhang before October 7th to negotiate an extension, nor does he have any recollection of what he did with the letter.
[68] Norman Turk testified that he did not see this letter until after the lawsuit had been brought, but he did say he had some direct discussions with Zhang and she indicated that they were prepared to wait and see if he was successful in getting Committee of Adjustment approval to a minor variance and if he failed to do so, the Plaintiff would get his money back.
[69] What is clear from the evidence is that neither Norman Turk nor Taylor sent any confirming letter in response to the October 7th letter. In fact, they did not respond in any way. They did not seek an amendment to the Agreement to Lease, knowing that is what Zhao and Zhang did when there was a name change of the tenant. The parties placed no importance whatsoever on the October 7th letter and that letter cannot be said to constitute any form of agreement between the parties.
4) PROMISSORY ESTOPPEL OR WAIVER
[70] The Defendant has raised the defences of waiver acquiescence and estoppel.
[71] The Defendant submits that after learning of the rejection of the Plaintiff’s licensing application, it then engaged in a concerted effort to obtain a minor variance with respect to the zoning by-law to ensure that the Plaintiff’s operations could in fact take place on the Premises.
[72] To that end, Norman Turk retained the services of William Oughtred, a planning consultant, to seek his assistance with a Committee of Adjustment Minor Variance Application.
[73] The Defendant suggests that there is only one way to read Zhang’s October 7th letter – that the Plaintiff is giving NTIL until November 16th to honour its warranty and for the business license to be obtained. The Defendant submits that Zhang’s October 7th letter explicitly waived the Plaintiff’s rights under the Agreement to Lease and the Plaintiff is now estopped from asserting such rights. After October 7, the Defendant kept spending money on the application. Further, the Defendant points out that Zhao and Zhang were actively engaged in the application process. They provided supporting documentation such as Zhao’s holistic practitioner’s license and other documentation to assist Oughtred in obtaining the variance.
[74] The Defendant submits that it relied on Zhang’s October 7 letter to continue with the process. Further, Zhao and Zhang attended a meeting with City of Toronto Councillor, Michael Thompson, and others, and the Defendant submits that at the meeting, both the Plaintiff and the Defendant agreed to certain conditions to the proposed variance which in fact were later adopted by the Committee of Adjustment.
[75] The Defendant submits that as a result of its efforts, which efforts the Plaintiff was fully aware of and participated in, a minor variance with conditions was granted by the Committee of Adjustment which in turn allowed the Plaintiff to obtain a license to operate a holistic centre/spa for the leased premises.
[76] Michael Thompson’s letter to the Committee of Adjustments dated November 10, 2008 did specifically state that
“The vetted conditions have been agreed to by both the owner of the property and the owner of the proposed business” (underlining in the original).
However, Michael Thompson did not testify at the trial and this hearsay statement is not evidence that the Plaintiff in fact agreed to the conditions. Zhao and Zhang both testified that they did not in fact agree to any such conditions; nor were they even discussed at the meeting.
[77] The evidence indicates that the conditions originated after the conclusion of the meeting with Michael Thompson and after Zhao and Zhang had left. In response to concerns expressed by Councillor Michael Thompson to Norman Turk, Oughtred later submitted for Councillor Thompson’s review some conditions which would ensure that the use as a Holistic Centre would be well regulated. Those conditions were then incorporated into Councillor Thompson’s November 10th letter to the Committee of Adjustments.
[78] I find, on the evidence, that Zhao and Zhang never even heard of these conditions until after the release of the Committee of Adjustments decision dated November 12, 2008.
[79] Zhao and Zhang participated by providing requested documents and attending a meeting with Councillor Thomson, not because they were continuing with the Agreement to Lease, but did so as they hoped this would facilitate getting the deposit back without litigation and also perhaps of negotiating new lease terms if the variance was ultimately granted and their circumstances favoured it. They in fact made a new offer a day or two after the Committee of Adjustments released its decision that imposed conditions to the minor variance.
[80] The onus is upon the party alleging the waiver to establish that there was a clear and intentional waiver of the condition: Antifave v. Tisnic [1981] S. J. No. 1402 (Sask. C. A.).
[81] In Saskatchewan River Bungalows Ltd. v. Maritime Assurance Co. (1994) 1994 100 (SCC), 115 D.L.R. (4th) 478 (S.C.C.), Major J. stated at pp. 483 and 484 as follows:
Recent cases have indicated that waiver and promissory estoppel are closely related . . . The noted author Waddams suggests that the principle underlying both doctrines is that a party should not be allowed to go back on a choice when it would be unfair to the other party to do so.
Waiver will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them. The creation of such a stringent test is justified since no consideration moves from the party in whose favour a waiver operates. An overly broad interpretation of waiver would undermine the requirement of contractual consideration.
[82] In Maracle v. Travellers Indemnity Co. of Canada 1991 58 (SCC), [1991] 2 S.C.R. 50, Sopinka J. stated at para. 13:
The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position. In John Burrows Ltd. v. Subsurface Surveys Ltd., 1968 81 (SCC), [1968] S.C.R. 607, Ritchie J. stated, at p. 615:
It seems clear to me that this type of equitable defence cannot be invoked unless there is some evidence that one of the parties entered into a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not be enforced, and I think that this implies that there must be evidence from which it can be inferred that the first party intended that the legal relations created by the contract would be altered as a result of the negotiation. [emphasis added].
[83] The Defendant had commenced the Committee of Adjustment Application well before Zhang’s October 7th letter and after the Plaintiff had indicated in the September 8th Mutual Release that the Agreement was terminated. Norman Turk did not rely on or change his legal position in any way as a result of the October 7th letter which he either never saw or simply ignored.
[84] In these circumstances, the defences of promissory estoppel and/or waiver have not been established by the Defendant.
CONDITIONS TO COMMITTEE OF ADJUSTMENT’S DECISION
[85] I accept Zhao and Zhang’s evidence that two of the conditions, in particular, would not have been acceptable to them. Limiting the zoning for just a five year period with no renewal rights would put at risk the significant investment of capital improvements into the Premises. Further, the Committee of Adjustment decision was personal only to Zhao so long as the Premises were leased to him. It thereby restricted the Plaintiff’s ability to sell the business to a third party. Any prospective purchaser would not only have to obtain its own Holistic Centre license, but there would be the added hurdle of obtaining Committee of Adjustment approval as well.
[86] The five year term limitation imposed by the Committee of Adjustments was also at odds with the Option to Renew provision in the Agreement to Lease. In addition, to what is required in the clause to exercise the option, one would also have to obtain Committee of Adjustment approval for another five years. No amendment was made to the Agreement to Lease to provide for this.
SUMMARY
[87] In summary, I conclude that:
(a) The Plaintiff was unable to acquire the special license to operate the Premises as a “Spa/Fitness Centre” within the four (4) month conditional period and the Agreement to Lease became null and void.
(b) The Defendant breached its warranty that appropriate zoning was in place to permit the use specified in the Agreement to Lease.
(c) The Plaintiff did not agree to an extension of time or waive the condition which had been put into the Agreement to Lease for his benefit. Nor was there any promissory estoppel as a result of Zhang’s October 7th letter or the conduct of Zhao and Zhang.
(d) The conditions to the minor variance to zoning imposed by the Committee of Adjustments in its decision of November 12, 2008, would conflict with the Option to Renew provisions of the Agreement to Lease and no amendment was agreed to by the parties.
DISPOSITION
[88] The Plaintiff is entitled to the return of the deposit funds of $52,828.13 plus pre-judgment interest in accordance with the Courts of Justice Act.
[89] The Plaintiff also incurred some damages in obtaining engineering plans and other costs in seeking a business license. This issue was not addressed in oral argument. Given the relatively small amount involved, I believe the parties can resolve this issue between themselves. If not, they may make submissions in writing as to the Plaintiff’s entitlement to and amount of such damages.
[90] The counterclaim is dismissed.
[91] If the parties cannot otherwise agree as to costs, they may make written submissions; the Plaintiff within 30 days; the Defendant within 15 days thereafter; and Reply, if any, 5 days thereafter.
Lederman J.
Released: November 6, 2013
COURT FILE NO.: CV-09-375280
DATE: 20131106
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TAI ZHAO C.O.B. AS ORIENTAL FALLS SPA
Plaintiff
– and –
N. TURK INVESTMENTS LIMITED
Defendant
REASONS FOR JUDGMENT
Lederman J.
Released: November 6, 2013