BARRIE COURT FILE NO.: CV-13-0694

DATE: 20131230

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

BURKLEY J. GIROUX and KATHLEEN V. GIROUX

Applicants

– and –

I.O.O.F. SENIOR CITIZEN HOMES INC. aka I.O.O.F. SENIOR CITIZEN HOMES INC.

Respondent

J. David Harris-Lowe, for the Applicants

Scott Fairley, for the Respondent

HEARD: December 17, 2013

DiTOMASO J.

THE APPLICATION

[1] The Applicants Burkley J. Giroux and Kathleen V. Giroux (“Giroux”) reside at 90 Dean Avenue, Barrie, Ontario in a building owned and operated by the Respondent I.O.O.F. Senior Homes Inc. aka I.O.O.F. Senior Citizen Homes Inc. (“IOOF”). IOOF changed the provisions of a Life Lease Occupancy Agreement with Mr. and Mrs. Giroux by removing a no pets provision contained in the Agreement. This provision required the third floor of 90 Dean Avenue, Barrie to be “pet free”. Mr. and Mrs. Giroux seek a declaration that the removal of the “pet free” designation is of no force and effect. In the alternative, they seek an order compelling IOOF to maintain the provision that the third floor of 90 Dean Avenue remain pet free, including the provision that residents wishing to house pets, such as cats or dogs, be restricted from the third floor.

[2] This Application relates to the interpretation of a Life Lease Occupancy Agreement between Mr. and Mrs. Giroux and IOOF and the decision by IOOF to change the Rules and Regulations of that Agreement by removing a no pets provision requiring the third floor of 90 Dean Avenue, Barrie, to be pet free.

OVERVIEW

[3] Mr. and Mrs. Giroux are senior citizens who live in a unit on the third floor at 90 Dean Avenue.

[4] Mrs. Giroux has a severe allergy to pets, particularly cats and dogs. Her allergy had a significant impact on Mr. and Mrs. Giroux’s lifestyle. They allege it had a direct impact on their choice of residence when they sold their home.

[5] IOOF is a charitable corporation incorporated pursuant to the laws of Ontario. IOOF has as its mandate the provision of programs and services to care for the disadvantaged, seniors and orphans, with a long history of doing so for over 100 years. IOOF is the owner and operator of seniors homes and facilities including those designated as Life Lease and located at 90 Dean Avenue and 94 Dean Avenue, Barrie, Ontario. The development located at these locations include two five storey buildings comprising of 161 suites with occupancy of over 200 residents. These buildings include units that are occupied by the owners as well as common areas that are available for all residents, similar to a condominium complex. IOOF co-ordinated and oversaw the development and construction of these buildings and is responsible for the ongoing management and operation of the Life Lease Complex.

[6] The Complex located on Dean Avenue is known as The Terraces at Heritage Square (“The Terraces”) and is occupied by residents on the basis of Life Lease Occupancy Agreements. Life Lease occupancy allows residents to purchase the right to occupy a unit at The Terraces and to use the common facilities, without purchasing title to a unit as would be the case in a condominium, but with more security of tenure than is the case in a rental facility.

[7] The parties agree that there is no specific legislative regime that applies to Life Lease Occupancy residences that would be similar to the Condominium Act or Residential Tenancies Act. The Life Lease Occupancy Agreements set out the terms and conditions under which residents are able to occupy their respective units and use the common facilities.

[8] The Board of Directors of the IOOF is comprised of 13 volunteer board members from various areas throughout Ontario, and is responsible for the governance of IOOF with respect to The Terraces as well as other facilities operated by IOOF. The Board of Directors and Management tend to operate The Terraces with guidance from the provisions of the Condominium Act and Residential Tenancies Act. However, while those Acts do not apply to The Terraces, the Board of Directors and Management take into consideration the principles stated in those Acts for reference on issues that pertain to The Terraces.

[9] A factor taken into consideration by Mr. and Mrs. Giroux in selecting their current unit was the pet free status on the third floor of both buildings. They paid the sum of $273,525 for the right to occupy their unit on the third floor of 90 Dean Avenue. Schedule C of the Life Lease Occupancy Agreement between Mr. and Mrs. Giroux and IOOF had provided that the third floor of 90 Dean Avenue was designated as pet free and that residents wishing to house pets such as cats and dogs were restricted from that floor.

[10] On or about July or August of 2011, IOOF amended Schedule C of the Life Lease Occupancy Agreement by removing the provision that made the third floor of 90 Dean Avenue pet free.

[11] In response to a complaint regarding a visiting pet, IOOF communicated to Mr. and Mrs. Giroux that the Life Lease Occupancy Agreement had been amended to remove the pet exclusion. IOOF received a follow-up letter from Mr. and Mrs. Giroux enclosing a petition signed by certain residents of the third floor of 90 Dean Avenue. In response to this communication, IOOF convened a meeting of the Residents Liaison Committee on August 29, 2011. At the meeting, certain residents raised their concerns with respect to permitting pets on the third floor of The Terraces. The Residents Liaison Committee then communicated by letter dated September 9, 2011 to Mary MacDougall, Director of Housing Accommodations for IOOF.

[12] The Board of IOOF considered the issue further at its Board meeting on September 22, 2011. There is dispute as to whether or not Mr. and Mrs. Giroux were prohibited from attending this meeting. Nevertheless, at the Board meeting, the letter from the Residents Liaison Committee and the petition were reviewed with the Board and outlined an overview of the issue. The Board considered the fact that there was a pet dog that visited the third floor and that there was no rule denying visiting pets. The Board also discussed whether a rule precluding pets was enforceable or desirable and the Board agreed to proceed with the change to the Rules and Regulations to eliminate the prohibition on pets. At the meeting there was a motion to support the CEO and Management in whatever decision was made to allow or not to allow pets on the third floor of The Terraces which motion was carried. The Board considered the input of the Residents Liaison Committee and determined that it would support Management with respect to the repealed rule prohibiting pets.

[13] By letter dated November 18, 2011, the Board communicated to all of the residents of The Terraces to advise of the changes with respect to the pet free provision. This letter outlined the reasons for which the Board made this decision, including statutory provisions relating to residential tenancies that cause similar such provisions to be unenforceable. Following the communication of this decision, certain residents of the third floor continued to object the elimination of the pet free floors. An incident arose in respect of the existence of a visiting dog on the third floor of 90 Dean Avenue. This caused conflict between the residents. Such conflict was another reason for the amendment to rules regarding the existence and interpretation of the dog prohibition. The issue had caused tension among the residents and had evolved into a safety and security issue. The amendment to the pet prohibition was considered again by the Board of Directors at a meeting on December 8, 2011. At that meeting, the Board again determined that the pet free decision would remain unchanged.

[14] By letter dated May 23, 2012, IOOF was contacted by counsel for Mr. and Mrs. Giroux requesting a reconsideration of the pet prohibition. IOOF responded by letter dated June 8, 2012 with the result that the Board considered and reconsidered the issue without changing its ultimate decision to remove the pet free designation for the third floor of 90 Dean Avenue.

ISSUES

[15] When interpreting the Life Lease Occupancy Agreement (the “Agreement”), there are the following issues to be determined:

(1) whether the Agreement authorizes IOOF to change the pet free provision; and

(2) whether IOOF breached the Agreement by not acting in good faith when changing the pet free provision.

POSITION OF THE PARTIES

Position of Mr. and Mrs. Giroux

[16] Mr. and Mrs. Giroux submit that IOOF breached its duty to consult in good faith and did not act reasonably. It failed to have regard to how the interests of Mr. and Mrs. Giroux would be affected because:

(a) it removed the pet free clause in July 2011 before any attempt at consultation occurred;

(b) Ms. Saunders provided the Board with incorrect information and did not give the Applicants or other residents an adequate opportunity to correct this information;

(c) it did not give the Applicants or members of the Residents Liaison Committee a meaningful opportunity to attend at the Board meetings where the pet free issue was being discussed;

(d) it did not take the Applicants’ particular needs, being that Kay Giroux has a serious allergy to cats and dogs, into account. In fact, the IOOF has consistently minimized or ignored those needs; and

(e) the IOOF’s concern was, improperly, about not deferring to the Residents. It was improper because they were concerned that the Residents would think they could force the IOOF’s hand on other items instead of whether the no pet provision should be maintained.

[17] Further, they submit that IOOF was improperly focused upon the pet provisions contained in Residential Tenancy and Condominium legislation. Therefore, Mr. and Mrs. Giroux seek an Order restoring the provisions of the Agreement that require the third floor of 90 Dean Avenue to be pet free.

Position of IOOF

[18] IOOF submits that the Agreement in this case is clear and enforceable. The intention between the parties is plainly expressed in the language of the Agreement and the Court should not stray beyond the four corners of the Agreement. It is submitted that this Application relates to the interpretation of the Agreement which provides that Rules and Regulations contained at Schedule C may be changed by the Board of IOOF. It also provides that IOOF retains the final decision-making authority with respect to management.

[19] It is submitted IOOF determined that it was appropriate for various reasons to amend the Rules and Regulations as to a prohibition of pets on the third floor. Further, IOOF submits that it was entitled to make this decision in accordance with the terms of the Agreement. IOOF submits that there are justifiable reasons for the deletion of the pet prohibition and submits that this is not a case of bad faith or arbitrary conduct.

[20] Therefore, IOOF seeks an Order dismissing this Application.

ANALYSIS

Issue No. 1 – Whether the Agreement authorizes IOOF to change the pet free provision in the Agreement?

[21] The answer to this question is yes.

[22] A copy of the Agreement can be found in the Application Record at Tab 2B. The Agreement is identified as Exhibit B to the Affidavit of Kathleen Giroux sworn May 30, 2013. The Agreement is not subject to any legislative regime. The parties agree that neither the Residential Tenancies Act nor the Condominium Act applies to Life Lease Occupancy Agreements.

[23] I find that the Agreement governs the rights and obligations as between the parties. As such, I find that the Court should give effect to the intention of the parties as expressed in their written Agreement. Further, where an intention is plainly expressed in the language of the Agreement, the Court should not stray beyond the four corners of the Agreement.[^1]

[24] The Agreement between the parties was signed on January 6, 2005.

[25] Article 16 of the Agreement provides:

Common areas and Facilities: The Lease also includes the non-exclusive right to use in common with all other Residents of The Terraces at Heritage Square – Phase II, and for the purposes for which they are intended by us, the areas described in Schedule B (the “Common Areas and Facilities”). The use of the Common Areas and Facilities is subject to the Lease and to rules and regulations made by us (the “Rules and Regulations”). A copy of the Rules and Regulations currently in force are attached as Schedule C. We reserve the right to amend the Rules and Regulations or create any new rules or regulations in the future, with input from the Residents’ Advisory Association as defined under paragraph 29.4.

[26] Article 16 makes reference to a copy of the Rules and Regulations attached as Schedule C. The Agreement provides that IOOF reserves the right to amend the Rules and Regulations or to create any new Rules and Regulations in the future, with input from the Residents’ Advisory Association as defined under para. 29.4.

[27] Paragraph 28.2 provides that Mr. and Mrs. Giroux agree to comply with their obligations under the lease and the Rules and Regulations.

[28] Paragraph 29 addresses the covenants of the Corporation and at para. 29.4 makes reference to the Residents’ Advisory Association.

[29] Paragraph 38 sets out the Schedules that are part of the Agreement and specifically identifies Schedule C, Rules and Regulations.

[30] Paragraph 41 stipulates that the Lease is the entire Agreement dealing with the matters contained in it and supersedes any prior Agreements. Paragraph 41 also provides:

No modification of this Lease is binding unless it is written and signed by all of us. No warranties, declarations or undertakings will be given or required on the Completion Date, except as stated in his lease.

[31] By paragraph 28.17, Mr. and Mrs. Giroux acknowledge that they received independent legal advice prior to executing the Agreement.

[32] Turning to Schedule C, the preamble to the Rules and Regulations provides:

The following rules and regulations shall be observed by you, and, in this Schedule, the term “Resident” shall include you and any other person(s) occupying the Unit. Once formed, the Residents’ Advisory Association will be consulted on any additions, deletions or amendments to the Rules and Regulations although final decision-making authority is retained by the Corporation.

[33] Paragraph 9 of Schedule C provides for the pet free policy on the third floor of The Terraces as follows:

You are permitted to have one small dog or one house cat neither to exceed a body weight of twenty (25) pounds and one caged bird. Any additional pets or other types of pets must be approved by the Corporation in writing prior to occupancy. No pet that is deemed by us in our absolute discretion to be a nuisance shall be kept by you in the Unit. The third (3rd) floor of The Terraces at Heritage Square – Phase II has been designed as “Pet-Free” and Residents wishing to house pets such as cats or dogs are restricted from that floor. All pet owners must comply with the Pet Policy adopted by the Corporation. You shall, within one week of receipt of written notice from us requesting the removal of any pet, permanently remove such pet from the Unit or be considered in default under the Lease. The breeding of any animals in The Terraces at Heritage Square is strictly prohibited. The Corporation’s Pet Policy for the Life Lease Development is appended hereto and provides more detail with respect to maintaining pets in the complex.

[34] It is submitted on behalf of Mr. and Mrs. Giroux that in the interpretation of the Agreement, the Court should ascertain and give effect to the intention of the parties. In doing so, the Court may defer to the doctrine of good faith to ensure that the parties do not act in such a way as to defeat the objectives of the Agreement.[^2]

[35] Further, it is submitted that the duty of IOOF to consult with the residents in good faith can be implied because it is necessary to give efficacy to the Agreement and it meets the officious bystander test set out in Civiclife, supra, at para. 46.

[36] It is argued that prior to closing, Mr. and Mrs. Giroux relied upon what they were told by a sales person for IOOF that the third floor of both buildings were pet free floors. As a result, Mr. and Mrs. Giroux selected their current unit because of this factor and entered into the Agreement with IOOF on January 6, 2005.

[37] I find any discussions or any representations or warranties made by anyone on behalf of IOOF have been superseded by the Agreement. The Life Lease Occupancy Agreement executed on January 6, 2005 between the parties forms the full Agreement regarding which Mr. and Mrs. Giroux had obtained independent legal advice before signing. I find that the intention of the parties can be found within the four corners of the Agreement.

[38] By analogy, on behalf of Mr. and Mrs. Giroux, it is argued that there is an imbalance of power between them and IOOF. This is analogous to a relationship between franchisees and franchisors in a commercial context. This is something that must be taken into account when considering the interpretation and enforcement of the contract. It is submitted that the same considerations apply to the Agreement.[^3]

[39] With respect, this is not a franchise case nor does a franchisee/franchisor relationship exist between the parties. I find that when considering the interpretation and enforcement of the Agreement, the terms of the Agreement define the rights and obligations as between the parties.

[40] I also find that at para. 16 of the Agreement, IOOF reserves the right to amend the Rules and Regulations or create any new Rules or Regulations in the future, with input from the Residents’ Advisory Association as defined under para. 29.4.

[41] Schedule C in the preamble also provides that the Residents’ Advisory Association will be consulted on any additions, deletions or amendments in the Rules and Regulations although final decision-making authority is retained by the Corporation. (emphasis added)

[42] The Agreement is clear and unambiguous that once formed, the Residents’ Advisory Association will be consulted on any additions, deletions or amendments to the Rules and Regulations. However, final decision-making authority is retained by the Corporation. (emphasis added). None of the provisions speak to what form the consultation with the Association will take. Rather, the form of consultation is left to the Association.

[43] In respect of the first issue, I find that the Agreement provides IOOF with the final decision-making authority to make additions, deletions or amendments to the Rules and Regulations. The Agreement is clear on this point and I reject any suggestion that the expectations of the parties outside of the written contract are to be considered upon the interpretation of the terms and conditions of the Agreement.

[44] Accordingly, I find the Agreement is clear and unambiguous that IOOF is authorized to change the pet free provision in Schedule C.

Issue No. 2 - Whether IOOF breached the Agreement by not acting in good faith when changing the pet free provision?

[45] It is submitted on behalf of the Giroux’s that IOOF breached its duty to consult in good faith and did not act reasonably or with regard to how Mr. and Mrs. Giroux’s interest would be affected because of the change of the pet free policy. While Mr. and Mrs. Giroux admit that IOOF retained the final decision-making authority to change Schedule C of the Rules and Regulations, they submit that IOOF needed to act reasonably, honestly and in good faith in exercising its discretion. It should have acted with regard to how their interests were affected. It is submitted on behalf of Mr. and Mrs. Giroux that IOOF did not act in good faith and did not consider how their interests would be affected. On behalf of Mr. and Mrs. Giroux it is submitted that the decision was made without consultation and, in effect, was an arbitrary and unilateral decision.

[46] IOOF disagrees. There was a complaint received on behalf of Mr. and Mrs. Giroux. The objection was considered along with a petition received from certain residents. A decision was taken by the Board, reconsidered and upheld. IOOF submits that the decision to change the pet free policy was not an arbitrary decision. Further, IOOF submits there was no absence of good faith and there were legitimate reasons why the decision was taken with those legitimate reasons being communicated to Mr. and Mrs. Giroux and the residents of the third floor of 90 Dean Avenue.

[47] I was taken to the evidentiary record contained in the Application Record, Supplementary Application Record and Second Supplementary Application Record of Mr. and Mrs. Giroux and the Responding and Supplementary Application Records of IOOF.

[48] I find on my review of the complete evidentiary record that IOOF acted in good faith in dealing with the change to the pet free provision contained in the Schedule C of the Rules and Regulations.

[49] The evidentiary record clearly sets out the authority retained by IOOF to make the change. The final decision-making authority was retained by IOOF. The prohibition on pet ownership contained within the Rules and Regulations was not a permanent prohibition. I find the record demonstrates that the decision taken by IOOF to change the pet policy was not an arbitrary one. Neither was the decision made in the absence of good faith. Rather, the record shows that the IOOF determined that a change was appropriate due to analogous residential tenancies legislation, accessibility issues, marketability, and heightened tensions caused by a visiting pet. I find that IOOF obtained input from the residents through the Residents’ Advisory Association confirmed this decision.

[50] The record clearly shows that upon receiving the objection and objection from Mr. and Mrs. Giroux and upon receiving the petition from the residents of the third floor, both were dealt with by the Residents’ Liaison Committee on August 29, 2011. The Board of IOOF considered the issue further at its Board meeting on September 22, 2011. The Board considered the fact that there was a pet dog visiting the third floor and there was no rule denying visiting pets. The Board also discussed whether a rule precluding pets was enforceable or desirable. The Board agreed to proceed with the change to the Rules and Regulations to eliminate the prohibition on pets. At the meeting, there was a motion to support the CEO and Management in whatever decision was made regarding allowing or not allowing pets on the third floors of The Terraces. The Board considered the input of the Residents Liaison Committee and determined that it would support Management with respect to the repealed rule prohibiting pets.

[51] Further, by letter dated November 18, 2011, the Board communicated to all the residents of The Terraces to advise of the changes with respect to the pet free provision. This letter outlined the reasons for which the Board made this decision, including statutory provisions relating to residential tenancies that cause similar such provisions to be unenforceable. The amendment to the pet prohibition was considered again by the Board at a meeting of December 8, 2011. At that meeting, the Board once again determined that the pet free decision would remain unchanged. Notwithstanding, the matter was pursued by Mr. and Mrs. Giroux who retained counsel. Counsel for Mr. and Mrs. Giroux directed correspondence to IOOF dated May 23, 2012. IOOF responded by letter dated June 8, 2012. In the end, notwithstanding further discussions, the Board considered and reconsidered the issue but did not change its decision.

[52] In respect of the second issue, I find that IOOF did not breach the Agreement by somehow acting arbitrarily or not in good faith when it changed the pet free policy set out in Schedule C, Rules and Regulations.

[53] To the contrary, I find that IOOF acted on reasonable grounds in making the change. I agree with the submissions on behalf of IOOF that it would be prejudicial to IOOF for the court to impose a pet prohibition as a permanent condition for the third floor. Doing so would be inconsistent with the Agreement and also might diminish marketability or require IOOF to refuse residency to a person with a service dog contrary to accessibility requirements.

[54] This is not a case in which IOOF has imposed on Mr. and Mrs. Giroux a prohibition on owing a pet, as would be the case in proceedings under the Condominium Act. Mr. and Mrs. Giroux are not prohibited from doing anything. Rather, the amendment to the Rules and Regulations lifts a prohibition and allows the neighbours of Mr. and Mrs. Giroux to own a pet. IOOF submits that lifting the prohibition is consistent with principles under the Accessibility for Ontarians Act and the Residential Tenancies Act.

[55] While Mrs. Giroux had written to Ms. MacDougall, Director of Housing, on July 26, 2011 to advise that she has allergies to all animals, there is no evidence that the existence of a pet within an adjacent unit or other unit on the third floor would cause any medical issues for either Mr. or Mrs. Giroux.

[56] Even though the parties acknowledge that no legislative regime applies to Life Lease Occupancy Agreements, it is apparent that IOOF attempts to conduct its affairs with reference to analogous situations to which the Condominium Act or the Residential Tenancies Act apply.

[57] Nevertheless, it is still the Agreement between the parties in this case that determines their rights and obligations.

[58] I find that there are justifiable reasons for the deletion of the pet prohibition and, ultimately, this is not a case of bad faith or arbitrary conduct.

[59] In respect of the second issue, for the reasons given, the Application also fails.

CONCLUSION

[60] For the reasons given, this Application is dismissed.

[61] In addition to oral submissions made in respect of costs on the hearing of this Application, counsel for the parties shall exchange and deliver their written submissions within the next 14 days to my judicial assistant at Barrie. Those written submissions shall be contained in a concise statement not exceeding two pages in length together with copies of Offers to Settle, if any.

DiTOMASO J.

Released: December 30, 2013

[^1]: KPMG Inc. v. Canadian Imperial Bank of Commerce, 1998 CarswellOnt 4422 at para. 5(C.A.)

[^2]: Civiclife.com Inc. v. The Cora Franchise Group Inc., 2013 ONSC 3099

[^3]: 2130679 Ontario Inc. v. The Cora Franchise Group Inc., 2013 ONSC 3099 at para. 15