ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-15-519642
DATE: 20150812
BETWEEN:
BAYER INC.
Plaintiff (Moving Party)
– and –
BELFIELD INVESTMENT CORPORATION
Defendant (Plaintiff by Counterclaim) (Responding Party)
Douglas B.B. Stewart and Holly V.A. Cunliffe, for the Plaintiff (Moving Party)
Richard P. Quance, for the Defendant (Plaintiff by Counterclaim) (Responding Party)
HEARD: June 25, 2015
REASONS FOR DECISION
Firestone J.
Introduction
[1] The plaintiff Bayer Inc. (“Bayer”) brings this motion for summary judgment pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”). The moving party, Bayer Inc., seeks a determination that the defendant, Belfield Investment Corporation (“Belfield”) is obligated to follow the terms of an Overholding Agreement. The Overholding Agreement was made between the two parties in relation to Bayer’s tenancy at 77 Belfield Road (“the Property”). As a result of the Agreement, Belfield has no basis for refusing to reimburse Bayer. Specifically, Belfield is responsible for taxes, utilities, and insurance in the sum of $491,684.09. Belfield agrees that if Bayer is successful this is the sum which would be owing. These costs were incurred during Bayer’s tenancy in part of the Property. In addition, Bayer seeks a dismissal of Belfield’s counterclaim.
Background
[2] On September 11, 2013, Bayer sold the Property to Belfield. Pursuant to s. 4.6 of the Agreement of Purchase and Sale, Bayer agreed to lease-back a portion of the Property. On September 30, 2013, a lease was entered into between Bayer as Tenant and Belfield as Landlord (“the Lease”). The Lease commenced on September 30, 2013 for a one-year term. The Agreement of Purchase and Sale and the Lease were both signed by Belfield’s principal and sole officer and director, Issa El-Hinn (“Chris”).
[3] The Lease specified under ss. 3.01 and 5.01 that Bayer was required to pay the taxes and utilities for the whole Property, and Belfield was then obligated to reimburse Bayer the difference between the taxes and utilities for the whole Property and the proportionate share of those costs attributable to the portion of the Property occupied by Bayer and Bayer’s subtenants. Pursuant to s. 9.02 of the Lease, Bayer was also required to pay Belfield its proportionate share of the costs of the Landlord’s policies of insurance. Subsequent to providing Belfield with this payment, Bayer exercised three Options to Surrender Space, which created an overpayment of the insurance premium.
Relevant Portions of the Lease
Section 15.08 Overholding
If [Bayer] shall continue to occupy all or part of the Leased Premises after the expiration of the Term with the consent of the Landlord, and without any further written agreement, [Bayer] shall be a monthly tenant at one hundred and ten percent (110%) of the monthly Basic Rent payable during the last year of this Lease and otherwise on the terms and conditions herein set out except as to length of tenancy, which monthly tenancy may be terminated by either party on thirty (30) days prior written notice to the other and any overholding period shall end at the expiry of such notice period. [Emphasis added.]
15.14 Entire Agreement
The Tenant acknowledges that there have been no representations made by the Landlord which are not set out in the lease. The Tenant further acknowledges that the Lease constitutes the Entire Agreement between the Landlord and Tenant and may not be modified except as herein explicitly provided or by subsequent agreement in writing duly signed by the Landlord and the Tenant. [Emphasis added.]
Option to Extend – Schedule F of the Lease
First Option
So long as the Tenant is not then in default under this Lease and has given written notice to the Landlord of the exercise of this option at least three (3) months prior to the expiry of the Term, the tenant shall be entitled to extend the term of the lease for a period of six (6) months (commencing on the day after the expiry date of the Term) (the “First Extended Term”) on the same terms and conditions set out in this Lease, save and except there shall be no further option to extend the Term of the Lease except as set out below.
Overholding Agreement
[4] On June 25, 2014, LouAnne Strickland of Bayer emailed Chris a proposed agreement modifying the Overholding Agreement in section 15.08 of the Lease. This agreement proposed that:
(a) Bayer could overhold for any period of time up to four months beyond the expiration of the Term of the Lease (the “Overhold Period”)
(b) The rent to be paid during the Overhold Period would be the same amount as was payable during the last month of the Term
(c) Bayer was entitled to overhold for a partial month with pro-rated rent
(d) Bayer could terminate the overholding tenancy upon 15 days’ notice.
LouAnne indicated in her email that Bayer intended to terminate the Lease by October 31, 2014.
[5] On July 3, 2014, Chris and LouAnne met at the Property to discuss the Overholding Agreement. Chris reviewed the Overholding Agreement and signed it in LouAnne’s presence without requesting or making any changes to the document.
[6] Chris alleges in his Affidavit that he viewed this agreement as a draft. He signed it on the basis that he and Belfield’s lawyers would review, consider, approve and finalize the agreement prior to it becoming binding. Chris also alleges in his Affidavit that he ultimately decided not to proceed with the Overholding Agreement.
Subsequent Events
[7] On September 10, 2014, Bayer advised Chris that it would be vacating the Property during approximately the first week of November 2014. On September 25, 2014, Bayer representatives met with a representative of Belfield to review the equipment located on the Property that needed to be transferred to Belfield.
[8] A written notice of termination of the Lease was provided to Belfield on October 23, 2014. Pursuant to the Overholding Agreement, this termination would be effective 15 days later, on November 7, 2014. Chris signed the notice of termination on October 24, 2014 and returned it to Bayer.
[9] Bayer began vacating the premises throughout October 2014 and had fully vacated by November 7, 2014. At no time during this process did Chris indicate he had any issue with Bayer’s notice of termination or its vacating the Property.
[10] On August 22, 2014, Bayer emailed an invoice for $388,906.15 to Belfield. This amount covered Belfield’s portion of the utilities for January to June 2014, Belfield’s portion of the taxes for 2014, and the partial reimbursement of costs paid to Belfield for the insurance. Chris responded on September 28, 2014, and advised he would make payments “toward the end of October.” On October 22, 2014, he advised the amount owing would be paid during the second week in November. On November 4, 2014, he advised the payment would be provided on November 14, 2014.
[11] When no payment was made on November 14, 2014, LouAnne spoke to Chris by telephone. He confirmed that Belfield would pay the total outstanding amount the following week. This would include a subsequent Bayer invoice for $107,140.54 for utilities for the period of June to October 2014. On November 18, 2014, Chris acknowledged receipt of the invoice and by email advised he was hoping to send payment by the end of the week. On November 20, 2014, Chris said that payment would “most likely” be at the end of the month. No payment was made.
[12] On December 1, 2014, Bayer’s counsel wrote to Chris demanding payment by Belfield. Chris advised by email on December 10, 2014 that his lawyers took the position that the notice period for termination of the Lease should have been six months in accordance with the Option to Extend, and that Bayer improperly vacated the property one month into the alleged six month term.
[13] Belfield also counterclaimed for the value of security cameras and related systems at the Property, which Belfield contends were wrongfully taken by Bayer.
Issues
Is this an appropriate case for summary judgment?
Did Bayer validly overhold its tenancy and terminate the Lease in accordance with the Overholding Agreement?
Positions of the Parties
1. Is this an appropriate case for summary judgment?
[14] Bayer argues that this case is appropriate for summary judgment: the judge can make the necessary findings of fact from the record, the law can be applied to the facts, and a just result will be achieved in an expeditious fashion. Bayer argues that there is no genuine issue requiring a trial and that determination can be made based on the evidence in the motion record. A mini-trial, it submits, is not required under rule 20.04(2.1) in order to determine any credibility issues and arrive at a just determination.
[15] Belfield disagrees and argues that there is a genuine issue that requires a trial in this matter. It submits that a mini trial is required in order address the credibility issues between the parties. Additionally, Belfield argues, a mini trial is necessary to determine whether the need for a trial can be avoided. Specifically, it argues that two determinations cannot be made in the absence of a mini trial: whether or not the Overholding Agreement was entered into by the defendant, and whether it constitutes a valid and enforceable modification of paragraph 15.14 of the Lease (i.e. the Entire Agreement Clause).
2. Did Bayer validly overhold its tenancy and terminate the Lease in accordance with the Overholding Agreement?
[16] Bayer argues that the parties are bound by the terms of the Overholding Agreement. Bayer and Belfield’s intention that the Overholding Agreement was to be binding is evident from the record. The Overholding Agreement is a straightforward document with no ambiguities. Chris raised no concerns about it when he signed it or afterwards. Both parties proceeded to act in accordance with its terms. Chris also signed and acknowledged the notice of termination Bayer provided to him, notice which was given in accordance with the terms of the Overholding Agreement.
[17] The Lease imposed strict formalities for modifying its terms. Both the Tenant and the Landlord were to sign any subsequent agreement modifying the Lease. Bayer argues that Chris’ actions on behalf of Belfield waived this requirement. Belfield’s actions gave Bayer the reasonable expectation that strict compliance with the Lease was waived and Belfield is now estopped from insisting otherwise.
[18] Finally, Bayer submits that the fact that the Overholding Agreement was not provided to Belfield’s lawyers is not sufficient to set the contractual obligation aside. More than an absence of independent legal advice must exist in order to set a contractual obligation aside – specifically, unconscionability, duress, or non est factum are required.
[19] Belfield argues that the Entire Agreement clause in the Lease required any written modifications to the Lease to be signed by both Landlord and Tenant. Belfield argues that the Agreement is invalid because it is only signed by Chris for the Landlord, Belfield.
[20] Belfield also points to an email sent by LouAnne to Chris on June 25, 2014, in which she forwarded a copy of the Overholding Agreement and stated that “attached is the paper work our lawyers would like to have in place for the extension of our lease after June 30, 2014. If you are good with the details, please print on your letterhead, sign and return….” There is no evidence that there was ever a signed copy of the agreement printed on Belfield’s letterhead.
Analysis
1. Is this an appropriate case for summary judgment?
[21] Rule 20.04 of the Rules reads:
(2) The Court shall grant summary judgment if:
(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or
(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.
[22] This is an appropriate case for summary judgment. In Hryniak v. Maudlin, 2012 SCC 7, the Supreme Court of Canada wrote at para. 4:
… a trial is not required if a summary judgment can achieve a fair and just adjudication, if it provides a process that allows the judge to make the necessary findings of fact, apply the law to those facts, and is a proportionate, more expeditious and less expensive means to achieve a just result than going to trial.
[23] The court in Hryniak emphasized that “the standard for fairness is not whether the process is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute” (at para. 50).
[24] In Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, aff’d. 2014 ONCA 878, at paras 33-34, the court provided the following overview of the approach to be taken summary judgment motion:
(1) The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial;
(2) On the basis of this record, the court decides whether it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits;
(3) If the court cannot grant judgment on the motion, the court should:
(a) Decide those issues that can be decided in accordance with the principles described in(2) above;
(b) Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;
(c) In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion.
[25] I am of the view that the evidentiary record provides the necessary evidence to adjudicate this dispute in a timely, affordable and proportionate procedure under rule 20.04(2)(a). A mini-trial is not required to fairly weigh the evidence, evaluate the credibility of the deponents, (namely LouAnne Strickland [Bayer] and Chris Hinn [Belfield]), or to draw any reasonable inferences from the evidence.
[26] On this motion, I am to first determine if there is a genuine issue requiring a trial only on the evidence in the motion records filed on behalf of the parties, without using the fact-finding powers under Rule 20. I am to determine whether there is a genuine issue requiring a trial on the basis of the factual record. I must assess whether there is sufficient evidence to fairly and justly adjudicate the dispute and whether summary judgment would be a timely, affordable and proportionate procedure: Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008 para 40.
[27] If there is a genuine issue requiring a trial, I am to determine if the need for a trial can be avoided by using the powers under rule 20.04(2.1) and (2.2). Those powers, as a matter of discretion, may be used provided such use is not against the interest of justice. Their use is not against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole: Landrie at para. 41.
[28] The motion records filed in this case contain sufficient evidence to ground the necessary findings of fact. The records also provide a sufficient basis for evaluating the credibility of the deponents. Specifically, the deponents’ credibility as to what their intentions were when they signed the Agreement can be evaluated on the basis of the motion records the parties filed. As stated by G.H.L. Fridman in The Law of Contract in Canada, 6 ed. (2011) at pp. 15-16, “the test of agreement for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract to the terms of such contract.” There is sufficient evidence of the parties’ objective behaviour, mostly in the form of correspondence, for the court to adjudicate what this objective behaviour indicates about their intentions regarding the Overholding Agreement.
2. Did Bayer validly overhold its tenancy and terminate the Lease in accordance with the Overholding Agreement?
[29] The evidence overwhelmingly supports Bayer’s position that Belfield and Bayer entered into an Overholding Agreement, which both parties intended would govern the extension of Bayer’s lease. There is no evidence, besides statements by Chris in his Affidavit, to support the contention that he did not sign the Overholding Agreement intending that Belfield would be bound by it. Rather, Chris’ subsequent actions all confirm his acceptance of the Agreement. He accepted the notice of termination issued in accordance with the Agreement. He attended the Property to review the equipment to return to Belfield. Finally, he responded to Bayer’s requests for payment by repeatedly promising that such payment was forthcoming.
[30] The case law answers Belfield’s contention that the Overholding Agreement is invalid because it is not signed by both the Tenant and the Landlord, in contravention of the entire agreement clause of the Lease. The Court of Appeal in Colautti Construction Ltd. v. Ottawa (City) (1984), 1984 1969 (ON CA), 46 O.R. (2d) 236 (C.A.) at paras. 28-30 affirmed that parties can, by their conduct, waive strict requirements with contractual terms such that any later attempt to enforce those strict requirements can be estopped:
The City relies upon the provisions of the contract which require all additional costs to be duly authorized in writing. It is true that the contract imposes heavy burdens on the contractor.
… The problem with contracts such as these is that they are so rigid and so restricting that the parties tend to amend them by their actions during the course of the contract. That was the situation in this case. There were several significant changes and additions as to the work ordered by the City during the contract. None of these were in writing. All but the items in dispute in this case were paid for by the City.
In these circumstances the parties, by their conduct, have varied the terms of the contract which require extra costs to be authorized in writing. As a result, the City cannot rely on its strict provisions to escape liability to pay for the additional costs authorized by it and incurred as a result of its errors.
[31] The essentials of the doctrine of waiver are set out by the Ontario Court of Appeal in Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, 354 D.L.R. (4th) 516, at para. 63, summarizing Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 100 (SCC), [1994] 2 S.C.R. 490:
Waiver occurs when one party to a contract (or proceeding) takes steps that amount to foregoing reliance on some known right or defect in the performance of the other party. It will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of the deficiency that might be relied on and (2) an unequivocal and conscious intention to abandon the right to rely on it. The intention to relinquish the right must be communicated. Communication can be formal or informal and it may be inferred from conduct. The overriding consideration in each case is whether one party communicated a clear intention to waive a right to the other party.
[32] In the present case, Chris’ actions in signing the Overholding Agreement and then proceeding to act in accordance with it have effectively varied the Entire Agreement clause of the Lease. As a result, Belfield cannot rely on its strict provisions.
[33] Finally, Belfield’s contention that there was never a signed version of the Overholding Agreement printed on letterhead as per LouAnne’s request does not change this outcome. LouAnne’s email was dated June 25, 2014. Subsequently, LouAnne and Chris met on July 3, 2014, and Chris signed the Overholding Agreement at that time. Consequently, LouAnne’s email requesting that the Overholding Agreement be printed on letterhead was superseded by the meeting between Chris and LouAnne and the representations and discussion that occurred at that meeting when the Overholding Agreement was signed.
[34] The Overholding Agreement was validly signed and it governed Bayer’s final months of tenancy at the Property. As such, Bayer did not occupy the Property contrary to the terms of the Lease and there is no reason for Belfield to withhold the taxes, utilities, and insurance premiums that are properly owed to Bayer pursuant to the terms in the Lease.
Disposition
[35] The plaintiff’s motion for summary judgment is granted. There is no evidence in the record to support the allegations in Counterclaim. The Counterclaim is therefore dismissed. A party is required to put its best foot forward, and for the purposes of this motion I am to assume that Belfield has placed before me, in some form, all of the evidence that will be available at trial.
[36] I encourage the parties to agree on the issue of costs. If they cannot, Bayer may submit written submissions with a costs outline totaling no more than four pages by August 28, 2015. Belfield may submit the same by September 4, 2015. Bayer’s reply, if any, is to be submitted by September 10, 2015.
[37] I wish to thank counsel for their oral and written submissions which were of great assistance to the court.
Firestone J.
Released: August 12, 2015
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BAYER INC.
Plaintiff (Moving Party)
– and –
BELFIELD INVESTMENT CORPORATION
Defendant (Plaintiff by Counterclaim) (Responding Party)
REASONS FOR DECISION
Firestone J.
Released: August 12, 2015