Southlake Regional Health Centre v. Beswick Group Properties Inc.

COURT FILE NO.: CV-14-117399-00 DATE: 2014-02-27 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: SOUTHLAKE REGIONAL HEALTH CENTRE Applicant

– and –

BESWICK GROUP PROPERTIES INC. Respondent

Counsel: B. Glaspell and D. Girlando, for the Applicant K. MacDonald, for the Respondent

HEARD: February 20, 2014

COURT FILE NO.: CV-13-117159-00 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: BESWICK GROUP PROPERTIES INC. Applicant

– and –

SOUTHLAKE REGIONAL HEALTH CENTRE Respondent

Counsel: K. MacDonald, for the Applicant B. Glaspell and D. Girlando, for the Respondent

HEARD: February 20, 2014

BEFORE: HEALEY J.

Nature of the Relief Sought

[1] Beswick Group Properties Inc. (“Beswick” or the “landlord”) and Southlake Regional Health Centre (“Southlake” or “tenant”) are parties to a commercial lease dated September 14, 2005, which was amended by three written lease agreements dated March 12, 2007, May 13, 2010 and December 17, 2010 (the “Lease”). The term of the Lease is 30 years, effective April 1, 2010; the leased premises is the Medical Arts Building (“MAB”) on Davis Drive in Newmarket, Ontario.

[2] Each party has commenced an application. By its application dated December 12, 2013, Beswick seeks:

a) A declaration that the tenant is default of the Lease;

b) A declaration that the tenant owes the landlord the sum of $1,130,766.96 in basic and additional rent, plus interest, pursuant to the terms of the Lease (“rental arrears”);

c) An interim order that the tenant pay its rental arrears and continue to pay rent in accordance with the Lease, without any deduction, abatement, set-off or compensation whatsoever, pending the final disposition of the application;

d) A final order that the tenant pay its basic and monthly rent in accordance with the Lease, without any deduction, abatement, set-off or compensation whatsoever;

e) An order that the landlord may seek directions or such further orders as may be required to implement any orders made in the application;

f) Costs of the application on a full indemnity basis in accordance with the Lease, payable by the tenant to the landlord as Additional Rent.

[3] By its application dated January 9, 2014, Southlake seeks declarations and orders with respect to the calculation and payment of basic and additional rents in respect of the Lease dating back to 2007, including a declaration that Beswick has been in in breach of the Lease since 2007.

[4] Beswick commenced a motion initially returnable January 23, 2014 seeking a stay of Southlake’s application and requiring Southlake’s claims to proceed to arbitration in accordance with terms of the Lease. At the time of argument Beswick was no longer seeking such relief, but instead was proceeding with a further motion to stay, or alternatively, dismiss, Southlake’s application, or in the further alternative, to convert Southlake’s application into an action. At the hearing, the primary position argued by Mr. MacDonald on behalf of Beswick was for an order dismissing the Southlake application. Further, Beswick seeks to strike various paragraphs of an affidavit of Gary Ryan sworn January 9, 2014, as contravening Rules 39.01 and 4.06(2) of the Rules of Civil Procedure.

Southlake’s 2011 Claim

[5] In 2011 a dispute arose between Southlake and a related corporation, Beswick Corporation, with respect to a development agreement, including an agreement of purchase and sale for lands upon which Beswick was to construct a health science and office building (the “HSC Project”). Beswick Corporation issued a Notice of Action with respect to the dispute on November 10, 2011. Before the issuance of Beswick’s Statement of Claim, Southlake commenced its own Claim (the “Southlake Action”) against Beswick and several related corporations in respect of the Lease for the MAB, in which it sought:

a) A declaration that the Beswick defendants held, jointly and severally, in trust for and on behalf of Southlake, all amounts paid by Southlake to the defendants purportedly under or arising from the Lease including without limitation rents, basis rents, additional rents, occupancy costs, taxes, interest, other costs, 15% “administrative and supervisory” fees, any other amounts paid and all exigible taxes on each of the aforesaid amounts (“Payments”);

b) An order appointing an inspector to inspect, review and audit Beswick’s books and records with regard to each of the Payments;

c) An accounting of all the Payments;

d) An order for recovery of personal property unlawfully detained from Southlake, being each Payment in respect of which Southlake was never liable (“Overpayments”);

e) An order that the defendants forthwith return Overpayments together with interest to Southlake;

f) In the alternative and without admission of liability, a declaration that Southlake may set-off Overpayments as against any future amount payable by Southlake to any one or more of the defendants;

g) In the further alternative, damages and/or equitable compensation in the amount of $3 million;

h) Punitive damages;

i) Prejudgment and post-judgment interest

j) Costs.

[6] A Demand for Particulars was delivered by the defendants requesting particulars of, inter alia, paragraph 6 of the Statement of Claim, which stated:

6. All, or in the alternative some, Payments were never owing, were not owing when paid, or were not returned to the Hospital when determined to be not payable. Cumulatively, these amounts are the Overpayments, which the Hospital is claiming.

[7] In Southlake’s response to the demand for particulars, Mr. Glaspell wrote:

Costs of Operation & Rent: The Hospital is claiming all overpaid costs of operation (e.g., maintenance/insurance) and overpaid rent paid to Mr. Beswick’s various entities since 2007. The main issue re overpaid rent is overstatement of the Gross Rentable Area of the Building. On costs, the lease refers to costs “actually incurred, accrued or attributed” and requires the landlord to act “reasonably and equitably”. Despite repeated requests, the Hospital neither received the actual costs nor the annual reconciliations referenced in the lease. Only your clients presently have the detailed particulars that you (and we) are looking for to quantify this aspect of the Hospital’s claim.

[8] Beswick issued its Statement of Claim on December 12, 2011 (the “Beswick Action”).

[9] Discoveries were completed in the Beswick Action in September, 2012. Discoveries were never conducted in the Southlake Action. It was admitted by Southlake through the cross-examination of Mr. Ryan, who is Southlake’s current Chief Operating Officer, that Southlake decided to go to mediation without having first done a discovery. His evidence is that Southlake wanted to solve the issues and it was in the best interests of all parties to try to mediate them if they could. The evidence also makes clear that Southlake at no time withdrew any of its claims before the mediation.

The Settlement of the Beswick and Southlake Actions

[10] The chronology of events is largely uncontested and is as follows:

a) The parties both expressed interest in resolving the claims in both actions on an amicable basis;

b) In or about May, 2013 the owner decided to seek expressions of interest for the sale of the MAB. The owner knew that it was imperative that it resolve the Southlake Action because a potential purchaser would require a status certificate confirming that the Lease was in good standing and there were no outstanding claims;

c) On July 9, 2013, Larry Banack was appointed mediator and a full day mediation was scheduled for September 4, 2013;

d) In mid-July 2012, the owner’s real estate agent sought an expression regarding the purchase of the MAB, and the first bid deadline closed on August 28, 2013;

e) On August 20, 2013, Gary Ryan contacted David Beswick and advised that Southlake was interested in purchasing the MAB, for which it had a right of first refusal;

f) The mediation was successful and a settlement was reached on September 4, 2013. The Minutes of Settlement were drafted by Mr. Banack and presented for signature, and called for the dismissal of both actions. The Minutes of Settlement state:

The parties agree to settle these 2 Actions on the following basis:

1. In respect of court file number CV-11-107567-00

A. The Hospital will accept $2,400,000 in full and final satisfaction of its claims relating to realty tax payments, interest, administrative charges, taxes and costs payable to Southlake Regional Health Centre by certified cheque delivered no later than September 30, 2013.

B. The parties agree that this payment recognizes that the Hospital is not obliged to make a rental payment due on account of the rent for September 2013.

C. The claim shall be dismissed on consent without costs upon payment and the parties shall execute a mutual full and final release in a form satisfactory to counsel acting reasonably.

2. In respect of court file number CV-11-106895-00

A. Beswick will close the transaction and purchase the properties on or before December 3, 2013 by payment of $2,600,000 plus applicable taxes and usual adjustments.

B. The claim shall thereafter be dismissed on consent, without costs.

C. The parties shall exchange full and final releases in a form satisfactory to counsel acting reasonably.

3. In the event of any disagreement in the implementation of these Minutes of Settlement the parties agree to promptly return to Larry Banack as mediator to address such matters.

g) On September 5, 2013 the owner’s agents gave Southlake’s representatives complete access to the electronic data concerning the costs of the MAB, in connection to the potential purchase;

h) As the sale process unfolded and the settlement of the Southlake Action was completed, Southlake did not raise any concerns regarding any of the costing information it reviewed.

[11] With respect of the form of release, the following exchange occurred between counsel on September 26, 27 and 30, 2013:

Mr. Glaspell (Sept. 26):

“Just so I understand, what does the part you add mean? It talks about: all claims Southlake had or has pursuant to a sub-lease between Southlake and Group, as amended, and Group’s property manager, BGM. I don’t know what it means. It sounds far too broad. We have an ongoing lease with rights and obligations. We are obviously not releasing any ongoing rights under the lease. What are you getting at? It seems less certain, the way you have written it, not more. Give me a couple of examples of claims you are worried about. From my perspective, we have a right of first refusal for example, that we are not releasing obviously. We have a right to get information at the end of the year, as another example, we are not releasing that. When I review this with the client they are going to ask me why you need that added part.”

Mr. MacDonald (Sept. 26):

“Barry,

The intent is that all claims under the lease to September 30, 2013 are released, which was the deal struck as I understand it. BGM was added as it invoiced for TMI.”

Mr. Glaspell (Sept. 27):

“Southlake views your client’s failure to pay as agreed on September 30 to be a breach of the minutes of settlement. But in the interest of moving forward with resolution of the MAB tax/Roxborough issues, Southlake agrees to receive the certified cheque during the morning of October 1; Southlake will thereafter deposit the cheque and once it receives confirmation that it is in funds, Southlake will release a manual cheque for the October rents. I have adopted your proposed changes to the release with a few minor tweaks which I trust you will find satisfactory.”

Mr. Glaspell (Sept. 30):

“I am resending my Friday email and release approved by Southlake”.

[12] The Full and Final Release (the “Release”) was executed by the parties on September 30, 2013. The Release states, in part:

“IN CONSIDERATION of the consent by each of SOUTHLAKE REGIONAL HEALTH CENTRE, BESWICK GROUP PROPERTIES INC. [“Group”], BESWICK PROPERTIES INC., BESWICK CORPORATION, BESWICK GROUP MANAGEMENT INC. [“BGM”], 2000950 ONTARIO INC. and BESWICK GROUP HOLDINGS LTD. [“Parties”] to dismissals without costs of Action Nos. CV-11-106895 and CV-11-107567-00 [“Actions”] commenced in the Ontario Superior Court of Justice and for other good and valuable consideration stated in minutes of settlement dated September 4, 2013, SOUTHLAKE REGIONAL HEALTH CENTRE and its officers, directors, employees, servants, agents, partners, predecessors, successors, administrators, assigns and affiliates [“Southlake”] on the one hand and GROUP, BESWICK PROPERTIES INC., BESWICK CORPORATION, BGM, 2000950 ONTARIO INC. and BESWICK GROUP HOLDINGS LTD. and their respective officers, directors, employees, servants, agents, partners, predecessors, successors, administrators, assigns and affiliates [“Beswick”] on the other hand, do hereby mutually release and forever discharge each one from the other from any and all actions, causes of action, suits, claims and demands, whatsoever, for damages, loss of injury, howsoever arising, from any and all claims advanced in the Actions including, for greater certainty, all claims Southlake and/or Group had or has to the date hereof pursuant to the lease as amended between Southlake and Group, and Group’s property manager, BGM.

FOR THE SAID CONSIDERATION, SOUTHLAKE AND BESWICK [“we”] covenant, represent and warrant that we have no further claims against each other for, or arising out of matters that are the subject of this Release. In the event that we should make any further claims or demands or commence or threaten to commence any actions, claims or proceedings or make any complaints against each other, arising out of matters that are the subject of this Release, this Release may be raised as an estoppel and complete bar to any such claims, demands, actions, proceedings or complaints.

FOR THE SAID CONSIDERATION, WE agree and undertake that at all times we shall indemnify and save each other harmless against and from any and all actions, causes of action, suits, claims and demands whatsoever which may be made by ourselves or on behalf of any person, for damages, loss or injury, interest and costs pertaining to any matters that are the subject of this Release…

WE FURTHER ACKNOWLEDGE that we have received independent legal advice with respect to this Release.

WE FURTHER ACKNOWLEDGE that we have carefully read and understood this Release and have signed it of our own free will and without any form of duress being exerted upon us by anyone.

IN WITNESS WHEREOF, WE has executed this Release by setting our hands this 30th day of September, 2013.”

[13] The settlement funds were paid to Southlake on October 1, 2013.

[14] On October 10, 2013, the owner entered into a conditional agreement of purchase and sale with a third party to sell the MAB for $85M subject to the Southlake right of first refusal.

[15] The Southlake Action was dismissed on October 16, 2013 through a consent order.

[16] On November 1, 2013, Southlake claimed that as a result of their review of the documentation provided by Beswick in respect of the sale of the MAB they discovered additional rent had been overpaid by $665,192.02 for 2011 and 2012.

[17] Southlake stopped paying rent effective November 1, 2013 until the matter came before the Court on December 13, 2013, at which time an interim order was made by O’Connell, J. that rent owing was to be paid in trust to Beswick’s counsels’ firm for arrears currently then owing and for each month when due.

[18] The MAB purchaser withdrew from the transaction because of the issue of timely payment of rent.

[19] The settlement of the Beswick Action was completed on December 4, 2013 through the transfer of the HSC project lands.

[20] Southlake has not taken any steps to set aside the settlement or the consent dismissal order in the Beswick and Southlake Actions.

Issue No. 1 – Should Southlake’s Application be Dismissed?

[21] Southlake’s contention is that the settlement of its action in the fall of 2013 was, unknown to it, premised upon misrepresentation and deceit on the part of Beswick. Mr. Glaspell argued that it is a triable issue as to when Southlake examined the documents that were provided to them in relation to the right of first refusal, and by whom, such that the alleged overpayment was brought to light. While Southlake paid under the budgets provided for 2007 to 2011, no certified statements were ever given to Southlake by the landlord as required by the Lease that would have permitted them to do their annual reconciliations. Southlake contends that this failure to produce the certified material and to show the actual costs should provide relief from the Release, and provide Southlake with the remedies sought in its current application.

[22] The evidence given in relation to this during the cross-examination of Mr. Ryan is that the nature of the alleged misrepresentation was that “we were not told the actual amounts owed each year under the maintenance versus what we were paying”. He also testified that Southlake went to mediation being aware that there had not been any reconciliation. When asked whether he could have obtained the information had he gone to discovery, Southlake’s counsel instructed him not to answer the question, as it was hypothetical.

[23] The answer to that question is straightforward in the view of this Court; at any time prior to entering into mediation Southlake could have demanded the information, either through the discovery process or as part of documentary disclosure in connection with the mediation. It was entitled to such information under the terms of the Lease; that it had failed to obtain such information in the preceding years is surprising, to say the least. Southlake made the decision to proceed without those annual cost reconciliations when they knew or should have known that they had never received them during the term of the lease. It is unreasonable for Southlake to now take the position that Beswick’s conduct amounts to misrepresentation or deceit, for its failure to produce that which was within Southlake’s power and control to demand before settling its claim.

[24] In the view of this court, there are no triable issues raised by the Minutes of Settlement or the Release, particularly as there is no proceeding by Southlake to set aside those documents. I find that the issue of the scope of the Minutes of Settlement and Release can be decided on the evidence filed on these applications, as it involves only an interpretation of these contractual documents and the application of the relevant law.

[25] Southlake raises three arguments in relation to the settlement of the Southlake Action. First, it points to paragraph 1(A) of the Minutes of Settlement, wherein it is stated that the payment of $2.4M is in full and final satisfaction of its claims relating to realty tax payments, etc. Mr. Glaspell argues, therefore, that the scope of the Minutes and Release is restricted only to the issue of overpayment of realty taxes.

[26] Second, he argued that a clause was removed from the initial draft of the Release which read “[…] do hereby mutually release and forever discharge one from the other […], from any and all claims advanced or which could have been to the date hereof advanced in the Actions”. The underlined clause was deleted from the final version of the Release signed by the parties. The Release also does not bar all claims known or unknown, or future claims.

[27] Third, Mr. Glaspell argues that any settlement and release did not relate to Southlake’s right to a reconciliation for 2013, as such right had not yet crystalized under the Lease as of September 30, 2013.

[28] Addressing these arguments in turn, the Minutes of Settlement and Release cannot be read in isolation of one another. First, it is clear from Southlake’s Statement of Claim that the issues in dispute went beyond realty tax payments, and included the same issues in relation to base and additional rents that are before the Court in Southlake’s present application, including calculations of square footage. There is no doubt that tax overpayments were a pressing issue for Southlake at the mediation. In his May, 2012 response to Beswick’s Demand for Particulars, Mr. Glaspell noted that “the Hospital will be moving for partial summary judgment, as a minimum, on the tax overpayments”. This statement indicates both the priority of that issue, as well as the fact that other issues were alive in the litigation.

[29] Southlake includes in its application record both parties’ mediation statements that were submitted for the mediation. Counsel submits that these were included to illustrate that the concerns of the parties at the mediation centred around the overpayment of realty taxes and the HSC Project. This is not evidence that can be considered on this application. The mediation agreement entered into by the parties prior to mediating the matter to resolution provides a complete bar to the production of documents produced in the mediation for any purpose, including to establish the meaning of any settlement or alleged settlement arising from the mediation. The confidentiality of the mediation process must be recognized and enforced by the Court so that the integrity and usefulness of such an alternative dispute mechanism remains intact. Further, the mediation statements are an outline for the benefit of defining the issues for the mediator; however, they do not limit the scope of the mediation in any way. Anyone familiar with the mediation process knows that the topics raised and discussed during the mediation can expand or restrict or change altogether during this dynamic process. What was discussed at the mediation remains, and must remain, known to only those who participated.

[30] Second, the Release makes clear that regardless of the content of the Minutes of Settlement, the parties were releasing one another from “any and all claims advanced in the action, including, for greater certainty, all Claims Southlake and/or Group had or has to the date hereof pursuant to the lease as amended between Southlake and Group and Group’s property manager, BGM”. (Emphasis added)

[31] Had Southlake not meant to fully compromise and settle all of the issues in the Beswick and Southlake Actions, the Release should have delineated those remaining issues. But the fact that Southlake’s entire claim was dismissed signals a clear intent to the outside world to end its pursuit of the further claims made in the Southlake Action as they existed to September 30, 2013. Similarly, Beswick compromised its own claims in the Beswick Action and likewise agreed to a full dismissal of all claims made in its action.

[32] The Release goes on to provide in the second full paragraph as follows:

For the said consideration, Southlake and Beswick [“we”] covenant, represent and warrant that we have no further claims against each other for, or arising out of the matters that are the subject of this Release. In the event that we should make any further claims or demands or commence or threaten to commence any actions, claims or proceedings or make any complaints against each other, arising out of matters that are the subject of this release, this release may be raised an estoppel and complete bar to any such claims, demands, actions, proceedings or complaints.

[33] As agreed, the dismissal order was thereafter taken out for the Southlake Action on October 16, 2013. The money was paid to Southlake in accordance with settlement and the closing on the HSC Project lands proceeded in December, 2013. The settlement was therefore fully performed and, rather than moving to set aside the Minutes of Settlement and Release after the dispute came to light on November 1, 2013, Southlake affirmed the agreement.

[34] In interpreting these contractual documents, an objective analysis is required. The law is not concerned with the parties’ intentions, but rather with their apparent intentions. In the Law of Contract in Canada, 5th ed. (Toronto: Carswell, 2006), at p. 15, Professor G.H.L. Fridman describes the approach to contractual interpretation as follows:

Constantly reiterated in the judgments is the idea that the test of agreement for legal purposes is whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. The law is not concerned with the parties’ intentions but their manifested intentions. It is not what an individual party believed or understood was the meaning of what the other party said or did that is the criterion of agreement; it is whether a reasonable man in the situation of that party would have believed and understood that the other party was consenting to the identical terms. As Fraser C.J.A. said in Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co.:

The parties will be found to have reached a meeting of the minds, in other words be ad idem, where it is clear to the objective reasonable bystander, in light of all material facts, that the parties intended to contract and the essential terms of that contract can be determined with a reasonable degree of certainty.

[35] These principles of contractual interpretation were discussed in Lacroix v. Loewen, 2010 CarswellBC 1125 (B.C.C.A.), at paras. 35 and 36. Also see Picavet v. Clute, 2012 ONSC 2221 (S.C.J.) at para. 10, and additional cases cited therein.

[36] The Court must consider all of the surrounding circumstances when interpreting an agreement in order to be able to consider the context in which it was made: Hi-Tech Group Inc. v. Sears Canada Inc., 2001 CanLII 24049 (ON CA), 2001 CarswellOnt 9 (Ont. C.A.) at para. 23; Dumbrell v. Regional Group of Companies, 2007 ONCA 59, 2007 CarswellOnt 407 (Ont. C.A.) at para. 54; and Komal v. Bronfman, 2001 CarswellOnt 4266 (Ont. S.C.J.).

[37] Accordingly, in addition to the contractual documents it is also important to consider the email exchange between counsel regarding the drafting of the Release, as set out earlier. When Mr. MacDonald indicated that the intent of the wording of the Release was that “all claims under the lease to September 30, 2013 are released, which was the deal struck as I understand it”, Southlake never thereafter indicated that it disagreed with such a position until it delivered its letter of November 1st.

[38] The principle of res judicata, in addition to the terms of the Release, apply in this case to bar any claims made in this action arising out of the Lease prior to September 30, 2013. The test for res judicata was stated in Genesee Enterprises Ltd. v. Abou-Rached, 2001 CarswellBC 84 (B.C.S.C.) at paras. 214 and 215, where Levine, J. explained:

Res judicata is a general principle which precludes the re-litigation of matter already judicially adjudicated. The principles of res judicata not only to prevent the re-litigation of causes of action, but also to estop arguments on issues already decided, by means of issue estoppel. The test for issue estoppel, formulated by the House of Lords in Carl-Zeiss-Stiftung v. Rayner & Keeler Ltd. (No. II), [1966] 2 All E.R. 536 (U.K.H.L.), at 565 and applied in Canada in Angle v. Minister of National Revenue (1974), 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248 (S.C.C.) at 254, requires:

i) That the same question has been decided;

ii) That the judicial decision which is said to create the estoppel was final; and

iii) That the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

[39] The leading decision on whether a consent judgment is a final judgment for the purposes of the doctrine of res judicata is the Ontario Court of Appeal case of Re: Ontario Sugar Co., at para. 10, where the principle is stated as follows:

It is not now questioned that a judgment by consent may raise an estoppel inter-parties. That it is as abiding and conclusive between the parties and privies as any other judgment (subject perhaps to certain exceptions in cased of fraud or mistake) is well established by the authorities referred to by the learned Chief Justice to which may be added the case of Hardy Lumber Co. v. Pickerel River Improvements Co. (1898). 1898 CanLII 16 (SCC), 29 S.C.R. 211.

[40] The binding nature of a consent judgment has also been confirmed more recently by the Ontario Court of Appeal in Mohammed v. York Fire & Casualty Insurance Co., 2006 CarswellOnt 829 (Ont. C.A.) at paras. 34-36.

[41] The facts of Segal v. Plazavest, 2004 CarswellOnt 4527 (Ont. Master) bear a strong similarity to the facts before this Court, the plaintiffs having sought to amend their claim to add new accounting items after minutes of settlement had been signed, based on an argument that they were unaware of the new items at the time of settlement but could have been had the defendants provided all relevant documents in their possession. In finding that that the two additional claims had been released by the settlement, Master Kelly wrote, at para. 26:

If the plaintiffs had wanted an opportunity to revisit the settlement, in the event that documents obtained thereafter raised issues not previously seen or capable of being seen, and not exempted, they should have made full documentary disclosure a condition in the Minutes and the Release, and in the consent to dismissal with prejudice. A settlement, followed by dismissal with prejudice based on the settlement, is analogous to a court finding and triggers the principle of res judicata.

[42] With respect to Mr. Glaspell’s argument that no part of the 2013 reconciliation of additional rents was released, I agree. Mr. MacDonald argued that from his client’s perspective, September 30, 2013 was the date that “wiped the slate clean” so that no money would change hands for any matter under the Lease for periods prior to September 30. Again, what was in his client’s mind is not the concern of the Court, but rather what can be objectively interpreted from the documents and all surrounding context. The email exchange is again important. Mr. Glaspell points out that Southlake is not releasing the right to get information at the end of the year. Mr. MacDonald’s response is that “all claims to September 30, 2013 are released”.

[43] The applicable section of the Lease is 4.02 Additional Rent, that provides as follows:

The Tenant shall also pay to the Landlord yearly and every year during the Term as rent the aggregate of the Costs of Operation and all other items of Additional Rent without any deduction, abatement, set-off or compensation whatsoever. Whenever the Landlord performs work or supplies services pursuant to this Lease, or causes the same to be performed or supplied, which is or are the responsibility of the Tenant or Additional Rent, in addition to the amount otherwise payable to the Landlord in respect thereof pursuant to this Lease, a charge (the “Administrative Charge”) equal to 15% of all costs, fees and expenses incurred by the Landlord in connection therewith.

Landlord may from time to time by notice to Tenant estimate or re-estimate all or any portion of Additional Rent for the current or upcoming calendar year or part thereof. The amounts so estimated shall be payable by Tenant in advance in equal instalments on the same days as the payments of Basic Rent. As soon as practical after the expiration of each calendar year or part thereof, and in any event within three (3) months thereof, Landlord shall furnish to the Tenant a statement certified by an officer of Landlord of the actual amounts payable by Tenant with reasonable details in support thereof. Within fifteen (15) days after delivery of such statement, Tenant shall pay to Landlord the amounts shown on the statement to be owed to Tenant, or in the alternative, if an Event of Default of a monetary nature has occurred, at Landlord’s option, Landlord may credit Tenant’s Rent account with any overpayment.

Tenant shall have the right upon notice to Landlord given within three (3) months after receipt of the aforementioned statement to verify the accuracy of the methodology for calculation of all amounts shown or omitted from such statement by auditing Landlord’s documentation in respect thereof and by requiring Landlord to provide to Tenant appropriate explanations related to such statement. In the event there exists a dispute, such dispute shall be determined pursuant to the arbitration provisions set out in Schedule “B” of this Lease. If within such three-month period, Tenant does not audit as aforesaid or having audited does not dispute the statement or part thereof, Tenant shall be deemed to have accepted Landlord’s statement or such parts thereof which it does not dispute.

[44] It is only, therefore, on March 31, 2014 at the latest that the landlord must provide the certified statement indicating what was actually paid for 2013 in relation to the budgeted amount. It is only then that the tenant’s obligation to pay more, or the landlord’s obligation to reimburse, is triggered, to be satisfied within 15 days thereafter subject to some modifications provided in the Lease. It was premature to know whether Beswick or Southlake were indebted, let alone had a claim against the other as of September 30, 2013, and therefore neither was in a position to know what, if any, potential claim it was releasing.

[45] In summary, this Court finds as follows:

1. The Release and order dated October 16, 2013 are bars to any claims made by Southlake in their application arising out of the Lease which existed at September 30, 2013;

2. The right to a reconciliation for the entire 2013 year, and to receive a certified statement from the landlord to be provided by March 31, 2014 in accordance with the Lease, along with the other rights and obligations set out in section 4.02 of the Lease are not barred by the settlement; and

3. The Release and order dated October 16, 2013 do not affect any of the parties’ ongoing rights and obligations under the lease as at October 1, 2013 and ongoing.

[46] As a result of the foregoing decision, it is unnecessary to consider the issue of whether Southlake’s application is statute-barred, and in particular whether the applicable limitation period is that set out in s. 4 of the Limitation Act, 2002 S.O. 2002 C. 24 Sch. B, or, as advanced by Southlake, ten or six years as prescribed by s. 4 or s. 17(1) of the Real Property Limitations Act, R.S.O. 1990, c.L.15.

[47] Also, as result of the foregoing decision regarding the effect of the settlement, it is apparent that both parties breached the Lease following November 1, 2013. Southlake should have not have withheld any basic or additional rent; Beswick should have paid the maintenance and utilities. Both engaged in strong-armed tactics to attempt to bend the other to its view of the matter. Making a declaration stating the obvious is unnecessary in the circumstances. However, should any aspect of the parties’ current dispute continue to percolate into similarly disruptive behaviour, for the purposes of any judge called upon to adjudicate these matter in the future, it is the view of this Court on the evidence filed that Beswick deliberately undertook a course of action by ceasing hydro payments and siphoning diesel fuel from tanks fueling the back-up generators used by MAB, which had the potential of serious repercussions for patient’s safety and the needs of the community served by Southlake. Further, this conduct by Beswick occurred after Southlake fully complied with the order of December 13, 2013, which required it pay the rent to Mr. MacDonald’s firm in trust. It appears obvious that Beswick was displeased that the order was not varied when the matter came before Mullins, J. on December 20, 2013, and decided to take matters into its own hands. All of that said, it also recognized by this Court that Southlake initiated matters by acting precipitously in withholding rent prior to any ruling that it had the right to do so.

[48] As a result of the foregoing discussion with respect to the settlement, it is likely moot to strike various paragraphs of the affidavit of Mr. Ryan sworn January 9, 2014, yet the Court will do so for certainty.

[49] The applicable Rule provides as follows:

4.06(2) An affidavit shall be confined to the statement of facts within the personal knowledge of the deponent or to other evidence that the deponent could give if testifying as a witness in court, except where these rules provide otherwise.

[50] Accordingly, the following paragraphs of the Ryan affidavit should be struck as addressing the subjective intent of the parties, which is irrelevant to the issue of contractual interpretation where there is no ambiguity in the documents, as is the case here: the last sentence in paragraph 46, paragraph 47, and paragraph 48.

[51] Of the issues remaining in the applications, the following issues will be ordered to proceed to trial:

1. A determination of the square footage of the MAB and quantum of related basic rent; and

2. The interpretation of the lease with respect to the square footage of the ambulatory treatment centre and quantum of basic rent.

Order

[52] This Court orders that Judgment shall issue in the following terms:

1. On a final basis, this Court adjudges and declares that the Release and order dated October 16, 2013 are bars to any claims made by Southlake in their application that existed at September 30, 2013, arising out of the Lease;

2. On a final basis, this Court adjudges and declares that the parties’ right to a reconciliation for the entire 2013 year, and the right of Southlake to receive a certified statement from the landlord to be provided by March 31, 2014 in accordance with the Lease, along with the other rights and obligations set out in section 4.02 of the Lease are not barred by the settlement;

3. On a final basis, this Court adjudges and declares that the Release and order dated October 16, 2013 do not affect any of the parties’ ongoing rights and obligations under the lease as at October 1, 2013 and ongoing;

4. This Court orders that the sum of $1.5M remaining in Mr. MacDonald’s trust account shall be released to Beswick forthwith, except for $30,000, which shall be released to Southlake forthwith in accordance with the following paragraph;

5. This Court orders that Beswick shall pay to Southlake the sum of $30,000, being the amount the hospital paid to Newmarket Hydro on February 3, 2014, forthwith, and orders that no 15% administrative fee shall be exigible under the lease on the said amount;

6. This Court orders that Beswick shall pay all MAB expenses as they become due and shall fulfill its obligations as landlord under the Lease;

7. This Court orders that Beswick shall cease and desist from obstructing Southlake’s capacity to rely upon emergency MAB power sources and shall cease and desist from any other act or omission that puts patient care and safety at risk;

8. This Court orders that effective March 1, 2014, Southlake shall pay the presently disputed basic rent amount as the amount become due under the lease directly to Beswick, without prejudice to Southlake’s right to contest such amounts at trial for the period commencing October 1, 2013;

9. This Court orders that effective March 1, 2014, Southlake shall pay the presently disputed additional rent, without prejudice to Southlake’s rights under section 4.02 of the lease, and subject to the additional rent being adjusted at April 1, 2014 based on the 2014 MAB additional rent budget, without prejudice to Southlake’s right to contest such amounts at trial for the period commencing January 1, 2013;

10. This Court orders that Beswick shall provide, on or before March 31, 2014, the 2014 MAB additional rent budget based on 2013 MAB actual costs, expenses and disbursements;

11. This Court orders that the parties shall comply with all provisions of the lease; and

12. This Court orders that pursuant to Rule 38.10 the following issues raised in the applications shall proceed to trial, and that these two proceedings shall hereinafter be treated as actions to be heard contemporaneously:

i. The square footage of the MAB and quantum of basic rent payable from October 1, 2013 onward;

ii. An interpretation of the Lease with respect to the square footage of the ambulatory treatment centre and basic rent payable from October 1, 2013 onward;

iii. The quantum of additional rent from January 1, 2013 onward.

[53] The issue of costs shall be resolved either on consent, or failing agreement between the parties, they may make brief submissions in writing not exceeding three pages in length plus a Bill of Costs. Beswick’s submissions are due by March 14, 2014 and Southlake’s submissions by March 21, 2014, any reply by March 26, 2014, to be filed with my judicial assistant in Barrie.

HEALEY J.

Released: February 27, 2014