ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
GROSS REALTY GROUP
Plaintiff
- and -
SHOPPERS REALTY INC., SHOPPERS DRUG MART INC. and MILLER THOMSON LLP
Defendants
S. Brunswick,
for the Plaintiff
M.R. Kestenberg,
for the Defendant, Miller Thomson LLP
K. Prehogan and H. Book,
for the Defendants, Shoppers Realty Inc. and Shoppers Drug Mart Inc.
HEARD: November 24, 2014
F.L. Myers J.
REASONS FOR decision
Background
[1] The plaintiff seeks summary judgment of just under $800,000 plus interest and costs for back rent from its tenant, Shoppers Realty Inc., and its guarantor, Shoppers Drug Mart Inc. (together “Shoppers”). Shoppers’ obligation to pay the amount demanded turns on the interpretation of the lease between the parties and, in particular, an amending agreement that they signed. The plaintiff has also sued its former lawyers who acted on the amending agreement for negligence in the event that it is unsuccessful under the amended lease. Not surprisingly therefore, for this motion, the former lawyers support the plaintiff and ask for summary judgment dismissing the claim against them if the amended lease entitles the plaintiff to the money that it claims.
Preliminary Matter
[2] While what follows in an over-simplification, for the purposes of this motion it is sufficient to say that the plaintiff entered into an agreement with a company called Context Real Estate Inc., a real estate developer, to build the building that is the subject matter of the lease between the plaintiff and Shoppers. The President of Context swore an affidavit that was submitted into evidence by the plaintiff on this motion. At the time of the events in issue, I was a partner of the law firm representing Context in its development transaction. I never acted for Context and knew nothing of the matter. Counsel for each of the parties has waived any claim that I should not hear this matter.
The Outcome
[3] All of the parties agree that the motion should be decided one way or the other on the material before the court without the need for oral evidence. I agree. The material before the court is comprehensive. Cross-examinations have been held. There is sufficient evidence to fairly and justly adjudicate the dispute without access to oral evidence or the enhanced powers available under Rule 20.04(2.1). Moreover, summary judgment provides a timely, affordable and proportionate procedure for resolution of this matter. There are no material facts in dispute. Hryniak v. Mauldin, 2014 SCC 7, at para. 66; ThyssenKrupp Elevator (Canada) Limited v. Amos, 2014 ONSC 3910 at para 40.
[4] For the reasons that follow, the plaintiff’s action against Shoppers is dismissed. Shoppers paid the rent required of it under the amended lease as fairly and reasonably interpreted. The motion by the lawyers to dismiss the plaintiff’s negligence action against them is therefore dismissed as well.
The Facts
[5] In August of 2006, the plaintiff entered into a contract with Context whereby Context would construct a multi-use project in downtown Toronto located south of The Esplanade running between Market Street on the west and Lower Jarvis Street on the east. Other elements of the project were to be built and owned by Context. However, the plaintiff maintained ownership of the unit that was to be leased to Shoppers. Context was to build that building at the same time as it built the other elements of the project.
[6] The lease between the plaintiff and Shoppers is dated June 19, 2007. The lease provides for payment of minimum monthly rent of $72,066.44 at the outset. Section 2.3 provides that Shoppers was not required to open for business or to commence paying rent until certain opening conditions were met. One of the opening conditions was that the plaintiff had to provide Shoppers with 14 surface parking spaces pursuant to subsection 8.1(b) of the lease. While Shoppers was not required to open its store before the closing conditions were fulfilled, subsection 2.3(b) of the lease gave Shoppers the right to open prior to the completion of the opening conditions. If it chose to open before the plaintiff had fulfilled its conditions, Shoppers was required to pay only 50 percent of the minimum monthly rent until such time as the opening conditions were fulfilled.
[7] In view of their importance to the outcome, I recite the relevant provisions of the lease as follows:
2.3 Opening Conditions and Adjusted Minimum Rent
(a) Even if the Fixturing Period has expired, then notwithstanding any other provision of this Lease, the Term shall not commence nor shall the Tenant be required to open for business or pay any Rent (except that Tenant will pay for Utilities used in the Leased Premises) until all of the following conditions (the “Opening Conditions”) have been complied with:
(ii) Completion of the drive aisle running east and west as depicted on the site plan attached hereto as Schedule A and the minimum of twelve (12) parking spaces designated for the exclusive use of the Tenant pursuant to Section 8.1 of the Lease.
(b) Provided that in the event that Tenant at its sole option does open for business prior to the date on which the Opening Conditions have been complied with, the Lease Commencement Date shall occur on the date the Tenant opens for business on the Leased Premises, and during the period from the Lease Commencement Date until all of the Opening Conditions have been complied with, Tenant shall only be required to pay an adjusted Minimum Rent (the “Adjusted Minimum Rent”) equal to fifty percent (50%) of the Minimum Rent, together with Utilities consumed in the Premises, and all components of Additional Rent.
8.1 Operation of Leased Premises:
The Retail Lands shall contain a minimum number of 14 surface level parking spaces so as to comply with municipal parking standards in force from time to time and shall contain handicap parking facilities in compliance with municipal requirements. The fourteen (14) surface level parking spaces shall be for the sole and exclusive use of the Tenant and the Tenant will have the right to place signage designating the parking spaces for the exclusive use of their customers in accordance with all municipal requirements. …
[8] It is common ground that the reference to twelve (12) parking spots in subclause 2.3(a)(ii) above was an error. It should have said “fourteen (14)” to match the parking spots that the plaintiff was obliged to provide under subsection 8.1(b). The 14 parking spots are shown specifically in the plan that is Schedule “A” to the lease (see pages 67 and 68 of the Record). The spots are right outside the southeast main door to the proposed store.
[9] The plaintiff was required by the lease to provide approximately 30 other parking spots for Shoppers on the second floor of a proposed parking building. It is apparent from subsection 8.1(b) and the fact that the existence of the 14 surface spots as specifically delineated on the schedule are an opening condition under subclause 2.3(a)(ii), that those spots were of some importance to Shoppers.
[10] The next part of the story is undisputed. There was a global market crash in late 2008 and 2009. Context determined that in light of its economic circumstances, it could not complete the construction of the project as contemplated. The plaintiff and Context were aware that Shoppers had a drop dead date in the lease. If the Fixturing Period (as defined in the lease) had not commenced by December 31, 2012, Shoppers could terminate the lease at any time before Substantial Completion of the Landlord’s Work.
[11] Michael Gross, for the plaintiff, attests to the following in his Affidavit sworn June 4, 2014.
…Context and [the plaintiff] realized that if the Project proceeded as planned i.e. both components being constructed at the same time, the time requirements could not be met and Shoppers would not be in a position to commence fixturing of the Store by December 31, [2012] and could terminate the Lease even while construction was underway. I was adverse to taking such a risk and, therefore, the Project had to be redesigned.
In order to meet the December 31, 2012 fixturing date, it was decided that construction should proceed in two phases. The Phase I Development in which the Store would be located would be completed in time. I anticipated when the Phase 1 Development was completed and the Store opened, construction would be underway for the Phase II Development and as a result, the 14 Spaces would not be available but only become available when construction of the Phase II Development was completed.
Amending Agreement
In light of the revised Project and the fact that during the construction of the Phase II Development Shoppers would be unable to use the 14 Spaces, the Lease had to be amended to deal with the unavailability of the 14 Spaces during that period of construction.
I discussed this issue with representatives of Shoppers at one or more meetings and we agreed that when construction of the Phase II Development commenced and the 14 Spaces became unavailable due to that construction, [the plaintiff] would make reasonable efforts to provide alternative 14 Spaces for Shoppers at parking facilities located in the area. It was recognized that notwithstanding [the plaintiff]’s efforts, alternative parking spaces might not be available during that construction period. It was agreed that, provided [the plaintiff] made reasonable efforts to seek out such alternative parking spaces, Shoppers would continue to pay the Minimum Monthly Rent without deduction. [emphasis added]
[12] Under cross-examination, Mr. Gross admitted that there was only one meeting between the plaintiff and representatives of Shoppers. He also admitted that, despite his sworn affidavit, at that meeting there was, in fact, no agreement made concerning the payment of minimum rent. Put another way, there was no agreement that Shoppers would be relieved of or would waive its right to pay only 50% of base minimum rent in the event that the 14 surface parking spaces agreed to be provided as an opening condition by the plaintiff were not ready when Shoppers opened its store. In fact, the plaintiff’s former lawyer’s notes of the meeting make no reference to any discussion at all of rent at the meeting. His affidavit makes no mention of the agreement claimed by the plaintiff or any discussion of opening conditions under section 2.3. In cross-examination the former lawyer said that he viewed the agreement between the plaintiff and Shoppers to waive Shopper’s right to pay 50% rent as being “implicit” and ”self-evident” in the amendment discussed.
[13] What is indeed self-evident, is that there was no discussion at all between the parties of section 2.3 of the lease, Shoppers’ entitlement to a rent reduction, or how rent would be affected, if at all, by the amendment under consideration. It simply was not raised, discussed, or made the subject of any express agreement.
[14] After that meeting, the plaintiff’s former lawyer provided the first draft of an amending agreement. In it, he made no mention of any terms regarding parking spots. It was Shoppers’ counsel who raised the issue of parking in response to the first draft which led to the drafting of a new clause by the plaintiff’s former lawyer. Ultimately, by lease amending agreement dated June 4, 2009, the parties agreed to the following term among other things:
- Tenant acknowledges that the 14 surface level parking spaces (“Surface Parking”) referred to in section 8.1(b) of this Lease will be located along the northerly boundary on that part of the Lands on which the Phase II Development is to be constructed. The Tenant further acknowledges that part or all of the Surface Parking may not be available during the construction of the Phase II Development until its completion. Landlord shall use commercially reasonable efforts to find suitable alternative parking to replace the Surface Parking during the construction of the Phase II Development and Tenant agrees to cooperate with the Landlord regarding the location and availability of such alternative parking. Tenant agrees not to make any claim against the Landlord in the event the Landlord, despite its commercially reasonable efforts, is unable to find suitable alternative parking during the construction of the Phase II Development. After completion of the construction of the Phase II Development, the Landlord agrees to provide the Surface Parking in accordance with the provisions of the Lease. Notwithstanding anything to the contrary herein, prior to the commencement of construction of the Phase II Development, the existing parking facility on the Phase II Development shall not be reduced in size or materially altered in any manner and shall remain a public short-term parking facility and no parking spaces within such facility shall be dedicated to monthly or other long-term paid parking spaces. …
[15] Section 15 of the lease amending agreement confirmed that the terms of the original lease remained in force except as amended by the lease amending agreement.
[16] Construction ensued. On June 30, 2011, Shoppers took possession of its store. It opened to the public in October, 2011. Construction of Phase II was still underway so that plaintiff was unable to provide Shoppers with the 14 agreed upon parking spots at that time. It did offer several alternatives in a letter to which Shoppers never responded. The plaintiff says that Shoppers’ failure to respond prevents it from contesting the reasonableness of the plaintiff’s efforts to find alternatives. (Shoppers does not do so in any event.)
[17] The plaintiff sent an invoice to Shoppers for rent for October. Shoppers paid all but the Minimum Monthly Rental. Shoppers paid only 50% of that amount, purportedly under subsection 2.3(b) of the lease. Shoppers continued to pay only 50% of base rent until April, 2013 when the plaintiff was finally able to provide the 14 agreed upon surface parking spots to Shoppers.
[18] Each side accuses the other of “lying in the weeds” as neither told the other anything about their respective expectations for rent. Shoppers never said that despite the amending agreement it planned to pay only 50% of base rent if the original 14 surface parking spots were not provided at opening. The plaintiff never said that it was expecting 100% of base rent in light of the amending agreement.[^1]
[19] At approximately $36,000 per month, the plaintiff claims nearly $800,000 in the aggregate in unpaid rent for the period October, 2011 to April, 2013.
Interpretive Principles
[20] Much of the evidence relied upon by both parties concerning the intention of the contract was given as the subjective intentions or beliefs of individuals – especially the lawyers for both sides. It is well beyond doubt in 2014, that the meaning of a contract is to be discerned from the parties’ intentions as objectively determined from the wording of the contract itself and the surrounding circumstances at the time it was made. The plaintiff’s counsel on the motion argued that a person’s unexpressed, internal belief can help provide part of the factual matrix of surrounding circumstances that are to be considered as part of the interpretive exercise. That is not consistent with a number of Supreme Court of Canada decisions, the latest of which, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, expresses the rules as follows:
[57] While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract (Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 1997 4085 (BC CA), 101 B.C.A.C. 62).
[58] The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” (Investors Compensation Scheme, at p. 114). Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.
(c) Considering the Surrounding Circumstances Does Not Offend the Parol Evidence Rule
[59] It is necessary to say a word about consideration of the surrounding circumstances and the parol evidence rule. The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing (King, at para. 35; and Hall, at p. 53). To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties (Hall, at pp. 64-65; and Eli Lilly & Co. v. Novopharm Ltd., 1998 791 (SCC), [1998] 2 S.C.R. 129, at paras. 54-59, per Iacobucci J.). The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract (United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., 1993 88 (SCC), [1993] 2 S.C.R. 316, at pp. 341-42, per Sopinka J.).
[21] The Court of Appeal has provided clear guidance as to the process for assessing the meaning of a contract in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205 at para. 24 as follows:
[24] Counsel accept that the application judge correctly outlined the principles of contractual interpretation applicable in the circumstances of this case. I agree. Broadly stated -- without reproducing in full the relevant passages from her reasons (paras. 29-34) in full -- she held that a commercial contract is to be interpreted,
(a) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;
(b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the "cardinal presumption" that they have intended what they have said;
(c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract),
(d) in a fashion that accords with sound commercial principles and good business sense, and that avoid a commercial absurdity. [Footnotes omitted]
[22] Both sides submit that the interpretation put forward by the other leads to an absurdity. Counsel for the plaintiff, supported by its former lawyers, says that the whole purpose of the lease amendment was to protect the landlord from its inability to provide the 14 surface parking spots once it was determined that Context could not develop the property all at once as initially intended. They say that the landlord would have had no reason to take on the burden to make efforts to find alternative parking spots for Shoppers if Shoppers could cut its rent in half anyway.
[23] Shoppers says that it simply never agreed to amend section 2.3 no matter what the plaintiff may have hoped, wished, or have internally intended but never put on the table for amendment. It would be absurd, Shoppers says, to agree to pay 100% more rent at a time when it was not getting the spots it wanted and had specifically bargained for. The plaintiff’s covenant to use commercially reasonable efforts to find alternative parking at Front and Jarvis Streets had no real economic value and certainly not $36,000 per month. It was an effort to try to help convenience and placate Shoppers in light of the plaintiff’s inability to perform its agreement.
Analysis
[24] I am unable to find the meaning alleged by the plaintiff in the words of the contract used by the parties when considered as a whole in light of circumstances known to them at the time. Nothing in section 10 of the amendment purports to amend section 2.3(b) of the original lease.[^2]
[25] Section 10 of the amendment does make specific reference to the 14 spots required by section 8.1 of the lease. Subclause 2.3(a)(ii) sets the opening condition with reference to the spots referred to in section 8.1. However, the mere reference to section 8.1 does no more than identify the spots being replaced during the construction of Phase II. But taken together, the creation of alternative spots during construction in the amendment does not undermine or contradict the creation of opening conditions and the rights set out in subsection 2.3(b).
[26] Section 10 of the amendment provides alternatives to the original spots during the Phase II construction. The plaintiff queries - what else could be meant other than that the plaintiff no longer had to provide the original spots during the construction phase? But the words do not say that. Recall that the plaintiff was worried that Shoppers would be able to terminate the lease because Context could not finish the full construction on a timely basis. The plaintiff went to Shoppers to tell it the plaintiff’s problem and to try to keep Shoppers in the deal. Offering to use commercially reasonable efforts to find alternatives was a way to ameliorate the inconvenience – or to try to do so to some extent. But it does not excuse the failure to provide that which was agreed – the 14 spots that Shoppers bargained for and for which it had obtained an expensive concession from the plaintiff. Section 10 of the lease amendment can live together with subsection 2.3(b). Nothing in section 10 compels a conclusion that the parties must have agreed or intended that Shoppers was waiving its right to open without the 14 spots and to pay just 50% of base or minimum rent. Section 10 just requires the plaintiff to try to replace the 14 spots that it could not deliver during the Phase II construction.
[27] The plaintiff points to the release language bolded in section 10 of the amendment above. Shoppers released all claims as a result of any failure of the plaintiff to provide alternative spots despite its commercially reasonable efforts to do so. Counsel for the plaintiff’s former lawyers argues that when Shoppers paid 50% of its rent, it was “claiming an abatement”. Therefore, as a “claim” the abatement in subclause 2.3(a)(ii) falls within the release language. Moreover, they argue that Shoppers had no other remedies available to it in any event. The release could only be a reference to subsection 2.3(b) since that section provided an express and the only remedy open to Shoppers if the plaintiff failed to deliver the 14 parking spots.
[28] The plaintiff and its former lawyers recite legal dictionary definitions for the word “claim” such as a Black’s definition “a demand for money, property, or a legal remedy to which one asserts a right”. But when I asked to be shown any evidence that Shoppers asserted a claim against the plaintiff, its counsel agreed that there was none apart from Shoppers’ act of paying 50% of the base rent. I do not read the word “claim” in para. 10 as applying to a rent calculation under the lease. Shoppers looked at the lease to see what rent it was required to pay. Rent numbers often change over time under a lease. A party can look at its contract and calculate its payment obligation. That is not making a claim. It is performing one’s obligations. Performing one’s obligations is not making a claim.
[29] Here, Shoppers determined that it was required to pay 50% and it did so. It made no demand for money. It made no assertion. It did not make a claim for damages under section 16.1 of the lease or at common law arising out of any alleged failure of the plaintiff to provide the alternative spots.[^3] Shoppers just complied with its contract as written dealing with the effect on the quantum of rent due based on the failure of the plaintiff to provide the 14 surface spots as agreed.
[30] Counsel for the plaintiff’s former lawyers says that section 10 of the amendment would have been unnecessary if Shoppers could pay 50% rent in any event. That is an application of hindsight. At the time, the plaintiff was trying to keep its deal on foot and it had offers to make to Shoppers. It never asked Shoppers to waive the 50% right in subsection 2.3(b) in return. It never raised the issue. It may be disappointed in hindsight. It obviously is unhappy with its former lawyers whom it is suing. But that does not make the agreement as amended say more than it says. Nor do the undisclosed intentions or desires of one side mean that there is a bilateral agreement with the other. Looking at the deal as a whole – the importance of the 14 spots as per sections 8.1 and 2.3 of the lease, the actual wording of section 10 of the amendment, the circumstances known to both as disclosed in the evidence (ignoring each side’s secret hopes) – I have no hesitation in finding that Shoppers did not agree to waive its right to pay 50% of base rent if it opened prior to the 14 agreed upon spots being provided.
[31] In all, I see no ambiguity in the wording of section 10 of the amendment. The clause makes sense in its words and in the contemporaneous circumstances. There is no need to go further.
[32] The action against both Shoppers entities is therefore dismissed. The remaining claims as between the plaintiff and its former lawyers, while related, are independent of the issues that are resolved in this motion. As such, I am not inclined to see the efficiency or proportionality of seizing myself with that aspect of the case despite the dismissal of the lawyers’ motion for summary judgment. The dismissal flows from the dismissal of the claims against Shoppers and not from anything intrinsic to the claims as between the plaintiff and its former lawyers. See Hryniak, supra, at paras. 77 and 78.
[33] The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v. Public Accountants Council (Ontario), 2004 14579 (ONCA), (2004), 71 O.R. (3d) 291, at paras 26, 37.
[34] The plaintiff seeks costs on a partial indemnity basis for $69,354.25 all-in. These are costs for the entire action and not just for this motion. The costs claimed by the other two parties are somewhat less. However, Ms Book cogently argued that there were two firms against them and the total of their fees significantly exceeded the fees claimed by Shoppers. Even allowing for some duplication between the two firms, I cannot say that the amount sought is beyond the expectation of the plaintiff and its former lawyers in the circumstances. This is hardball commercial litigation – all or nothing - among well-funded parties using top flight counsel on all sides. I have looked at the hours and rates claimed by Shoppers and they are certainly reasonable.
[35] Courts are quick to criticize counsel who are unprepared. It is hard to then accept criticism of the hours of counsel who are completely prepared. The hearing of this case went much quicker than it might have had counsel been less prepared and less focused. The court thanks all counsel for their excellent oral and written materials.
[36] The plaintiff and the defendant law firm are jointly and severally liable to pay costs to the two Shoppers defendants jointly and severally of $69,354.25 all-in within thirty (30) days. I make no comment on the ultimate sharing of this liability as between the plaintiff and its former lawyers. This order is without prejudice to any arguments either of them may wish to make concerning the allocation of responsibility for these costs in the ongoing action between them.
F.L. Myers, J.
DATE: November 26, 2014
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
GROSS REALTY GROUP
Plaintiff
- and -
SHOPPERS REALTY INC., SHOPPERS DRUG MART INC. and MILLER THOMSON LLP
Defendants
REASONS FOR DECISION
F.L. MYERS J.
Released: November 26, 2014
[^1]: Neither side raised an argument in acquiescence as a result of the silence of the other.
[^2]: The former lawyer for the plaintiff confirmed under cross-examination that when he drafts amendments, he invariably refers to clauses in a lease that he intends to amend. The argument that there can be no amendment because the lawyer did not intend there to be one strikes me however as the type of subjective argument that should not be considered. The fact is that the words of the amending agreement do not refer to section 2.3 of the initial lease agreement. That is an objective fact that goes some distance on its own.
[^3]: The release speaks only to a failure of the plaintiff to provide alternative spots. Shoppers never raised that issue as noted above.