CITATION: Treats v. Burloak, 2017 ONSC 5692
COURT FILE NO.: CV-11-52193
DATE: 2017/09/27
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Treats International Development Corporation
Plaintiff
– and –
Burloak No. 3 Investment Limited Partnership
Defendant
Martin Diegel, counsel for the Plaintiff
Sharon M. Addison, counsel for the Defendant
HEARD: June 29, 2017
RULING ON MOTION FOR SUMMARY JUDGMENT
H. J. WILLIAMS J.
Overview
[1] This is a motion for summary judgment brought by the defendant to dismiss the plaintiff’s claim on two grounds:
(1) That the claim is statute-barred; and
(2) That the “entire agreement” clause in the parties’ lease is a complete defence to the plaintiff’s claim.
[2] For the reasons below, I have concluded that, on the basis of the evidence that was available to me, I cannot make a finding with respect to whether the claim is statute-barred. The limitation period is a genuine issue requiring a trial.
[3] I have also concluded that although the plaintiff had no evidence to suggest that the “entire agreement” clause should not be interpreted in accordance with its terms, because of the facts and issues common to the claim and the defendant’s counterclaim, in the context of the litigation as a whole, it would not be in the interest of justice to dismiss the plaintiff’s claim on this motion.
Background
[4] The plaintiff, Treats International Development Corporation, leased space in a building in Burlington, Ontario (“the building”) from the defendant, Burloak No. 3 Investment Limited Partnership.
[5] The plaintiff then sub-leased the space to a franchisee.
[6] Treats franchises sell coffee and other beverages, baked goods, light meals and snacks. The plaintiff describes the franchise in question as a “quick serve restaurant”.
[7] In an email dated November 21, 2008, before the plaintiff offered to lease the space, an agent of the defendant informed an agent of the plaintiff that the building had “19 tenants” and “1163 people in total”. The email provided similar information about six other buildings. The first line of the email included the words “please note that this is an approximation of numbers”.
[8] The lease was signed on May 6, 2009.
[9] After the lease was signed, the defendant informed the plaintiff’s franchisee that, contrary to the information provided by its agent on November 21, 2008, 350 to 400 people worked in the building.
[10] In its statement of claim, the plaintiff alleged that it had calculated projected revenue for the franchise based on what it described as the building’s “occupancy” or “population” of 1163. The plaintiff alleged that, had it known the true occupancy level of the building, it would not have leased the space unless the defendant had agreed to charge a low rent based on a percentage of sales revenue.
[11] The plaintiff alleged that the building’s true occupancy was not sufficient to support the franchise and that, as a result, the plaintiff did not earn the royalties it had expected and was facing claims from the franchisee.
[12] The plaintiff also alleged that the defendant had wanted a food services business in the building and that the defendant’s misrepresentation was intentional and aimed at inducing the plaintiff to lease the space. However, at the examination for discovery of the plaintiff, the plaintiff’s counsel said that the misrepresentation was not intentional and that the plaintiff had no reason to believe that an inaccurate number had been given to the plaintiff on purpose.
[13] The defendant admitted that it had provided incorrect occupancy information to the plaintiff. The defendant defended the plaintiff’s action on the basis that the plaintiff should have known that the occupancy information was incorrect, that the lease specifically stated that the parties’ agreement did not include any representations that were not expressly included in the lease, that the plaintiff had not made any efforts to incorporate into the lease any terms relating to the building’s occupancy and that the plaintiff had been aware of the defendant’s error since August 17, 2009 at the latest, two years and 12 days before the statement of claim was issued on August 29, 2011.
[14] According to the plaintiff’s affidavit evidence, the plaintiff’s franchisee terminated its agreement and sublease with the plaintiff on September 23, 2011.
[15] According to the defendant’s counterclaim, the plaintiff vacated the premises on or about July 27, 2012.
Issues
[16] The defendant argues that there is no genuine issue requiring a trial and that the plaintiff’s action must be dismissed because the statement of claim was issued after the applicable limitation period had expired and/or because the so-called “entire agreement” clause (hereinafter “the entire agreement clause”) in the lease is a complete defence to the plaintiff’s claim.
[17] The issues are:
Is the plaintiff’s action statute-barred?
Is the entire agreement clause in the lease a complete defence to the plaintiff’s claim?
[18] The defendant has a counterclaim against the plaintiff for rent arrears and for loss of rent resulting from the early termination of the lease. The counterclaim will not be resolved by this motion, regardless of its outcome. When considering whether summary judgment would be in the interest of justice in the context of the litigation as a whole, the counterclaim will be an additional issue to be considered.
Law and analysis
[19] Summary judgment motions must be granted whenever there is no genuine issue requiring a trial (Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 20.04(2)(a) (“Rules”)). (Hryniak v. Mauldin, 2014 SCC 7, [2014] S.C.R. 87, at para. 47.)
[20] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process: (1) allows the judge to make the necessary findings of fact; (2) allows the judge to apply the law to the facts; and (3) is a proportionate, more expeditious, and less expensive means to achieve a just result. (Hryniak, at para. 49.)
[21] These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication. (Hryniak, at para. 50.)
[22] The enhanced fact-finding powers granted to motion judges in rule 20.04(2.1) may be employed on a motion for summary judgment unless it is in the “interest of justice” for them to be exercised only at trial. The “interest of justice” is not defined in the Rules. (Hryniak, at para. 52.)
[23] On a summary judgment motion, the evidence need not be equivalent to that at trial, but must be such that the judge is confident that she can fairly resolve the dispute. A documentary record, particularly when supplemented by the new fact-finding tools, including ordering oral testimony, is often sufficient to resolve material issues fairly and justly. (Hryniak, para. 57.)
[24] The “interest of justice” inquiry considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach. (Hryniak, para 60.)
[25] It is trite law that both parties on a summary judgment motion are required to put their best foot forward. Summary judgment motions are decided by evidence of the facts and by inferences drawn from those facts and not by speculation about the facts. (Chernet v. RBC General Insurance Co., 2017 ONCA 337, 11 M.V.R. (7th) 1, at para. 12.)
Issue #1: The limitation period
[26] A chronology of some key events follows:
• On November 21, 2008, the defendant’s agent informed the plaintiff that the building population was 1163.
• According to the statement of claim, the defendant signed an offer to lease on November 21, 2008; the plaintiff signed the offer to lease on December 6, 2008.
• The lease was signed on May 6, 2009.
• On August 5, 2009, a representative of the defendant, Suzanne Webb,[^1] sent an email to one of the plaintiff’s franchisees in which she confirmed that there were “approx. 350-400 employees working in 1100 Burloak [the building in which the leased space was located].”
• The plaintiff’s area representative, Doug Lippay, received a copy of Ms. Webb’s August 2009 email on either August 14, 2009, or August 17, 2009; Mr. Lippay saw the email by August 17, 2009, at the latest.
• On August 17, 2009, a signing officer of the plaintiff, Paul Gibson, wrote the following email to an agent of the plaintiff:
We have a problem with Burloak.
As you are aware the Landlord represented the building population for 1100 Burloak was 1163. The sales are tracking less than 50% of where the franchisee and Treats believed the numbers should be based on the building population represented to us. The Landlord was aware that the number provided was critical to our investment in the development costs of this store.
In light of the customer transactions our franchise owners asked Suzanne Webb to confirm the building population and she sent an email to the (sic) confirming 350 to 400.
Obviously if this is an accurate number it explains why the sales are very soft.
I have left a message for Suzanne.
• On September 17, 2009, one of the plaintiff’s franchisees sent an email to Mr. Gibson, requesting information about what the plaintiff and the defendant would do to deal with the building occupancy issue. The email read as follows:
We had a meeting with Mr. Lippay on thrusday (sic) August 19, 2009 regarding the information and email from Ms Susan Webb property manager which suggested that the population of the building was 350-400 persons.
This is less than half of the building population forwarded to us prior to our discussions to proceed with the project. I understand that there has been some discussion with the landlord regarding this matter with the goal to address the rent moving forward. At this moment we need to know the plans from the landlord and from Treats to allow the store continue [sic].
• On October 9, 2009, Mr. Gibson sent the following email to Allison Marsales of Dundee Realty Management Corp.:
Further to our discussions and my email of September 25th we need to discuss a remedy to the variance of forecasted sales to the current sales volume resulting from the incorrect building population information.
Today our Area director was advised by our franchisees that they will not survive based on the performance of the store and they intend to retain legal counsel if the company does not take steps to address the matter. Currently we have negotiated a six month restructuring of their debt which has reduced their debt service on a cash flow basis by approximately 70%. In addition we have provided products for in store promotion.
I appreciate your frustration with respect to this issue. I am equally exasperated however respectively Treats can only rely on the information provided and the bottom line is the building population was misrepresented.
I am currently of [sic] the office until the 14th. I have some thoughts on a business solution to the current dilemma and would like to discuss them upon my return to the office on the 14th. As time is a concern I would appreciate if you could email me some times that you will be available on Tuesday the 14th and I will contact you upon my return.
• The statement of claim was issued on August 29, 2011.
[27] The relevant sections of the Limitations Act, 2002, S.O. 2002, c. 24 (“Limitations Act”) follow:
Definitions
Section 1:
In this Act,
“claim” means a claim to remedy an injury, loss or damage that occurred as a result of an act or omission;
Basic limitation period
Section 4:
Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
Discovery
Section 5:
(1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24, Sched. B, s. 5 (1).
Presumption
(2) A person with a claim shall be presumed to know of the matters referred to in clause 5(1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
a. The defendant’s position with respect to the limitation period issue:
[28] The defendant’s position is that the plaintiff had or ought to have had knowledge of its claim by August 17, 2009, at the latest.
[29] The defendant argues that, because the plaintiff’s statement of claim was not issued until August 29, 2011, 12 days after the second anniversary of August 17, 2009, the plaintiff’s action is statute-barred.
[30] The defendant argues that it is not necessary for a plaintiff to have full knowledge or appreciation of its damages before the limitation period starts to run; it argues that a cause of action accrues for limitation period purposes once a plaintiff knows that some damage has occurred and has identified the possible wrongdoer and the acts of the possible wrongdoer as the potential cause. (MacPherson v. Samuel, 2017 ONSC 2024, 278 A.C.W.S. (3d) 270, at para. 23, citing Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549).
[31] The defendant also argues that even if the plaintiff did not have knowledge of the four matters listed in s. 5(1)(a) of the Limitations Act by August 17, 2009, the similarly-situated reasonable person of s. 5(1)(b) of the Limitations Act would have had knowledge of the matters as of that date, in other words, the plaintiff first ought to have had that knowledge as of that date.
b. The plaintiff’s position with respect to the limitation period issue:
[32] The plaintiff argues that it did not “discover” its claim against the defendant until after August 29, 2009 and that, consequently, its action is not statute-barred.
c. Law and analysis with respect to the limitation period issue:
[33] To discover a claim, a person must know of all four of the matters listed in s. 5(1)(a) of the Limitations Act.
[34] The person with the claim is presumed to know of all of these matters on the day the act or omission on which the claim is based took place. (Limitations Act, s. 5(2).)
[35] A claim is discovered on the earlier of the day the person with the claim discovered the claim and the day “a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have” discovered the claim (Limitations Act, s. 5 (1)(b).)
[36] The statement of claim in this case was issued on August 29, 2011. Therefore, if the plaintiff discovered or first ought to have discovered its claim before August 29, 2009, the claim is statute-barred.
[37] I will begin my analysis by considering when the plaintiff knew or first ought to have known of the matter in s. 5(1)(a)(i) of the Limitations Act, “that the injury, loss or damage had occurred”.
[38] The plaintiff’s Mr. Gibson swore the affidavit filed by the plaintiff in response to the defendant’s motion.
[39] Mr. Gibson said that after receiving Ms. Webb’s email of August 5, 2009, the email that referred to the 350 to 400 figure, he did some “due diligence”. Mr. Gibson said that he did not know what to make of the 350 to 400 figure because it was so dramatically different from the November 2008 representation of 1163.
[40] In his affidavit, Mr. Gibson said that the plaintiff, its franchisees and the defendant’s agent, Ms. Webb, had an initial conversation on August 27, 2009 but that he did not obtain any numbers he could rely on until after he spoke with Allison Marsales of Dundee Realty Management Corp. in September, 2009.
[41] However, in the statement of claim, the plaintiff pleaded that the 350 to 400 figure was confirmed “in or about August 2009”. Further, at his 2013 examination for discovery, Mr. Gibson had said that Ms. Webb was “the first one that clarified what the actual building population was. In order to verify that everything was correct I wanted to speak to her directly. She was my first point of contact. Then after that I spoke to Allison and there was an email exchange between Allison and I.”
[42] I find that Mr. Gibson knew by August 27, 2009 at the latest, when he spoke with Ms. Webb, that the 350 to 400 figure was accurate. His examination for discovery evidence was clear on this point. On discovery, he said that he spoke with Ms. Webb, that she clarified the actual building population and that he subsequently spoke with Ms. Marsales. There was no evidence that this answer was ever corrected. The September, 2009 emails between Mr. Gibson and Ms. Marsales attached to Mr. Gibson’s affidavit do not contain any references to on-going efforts to confirm the building occupancy numbers. Further, the statement of claim said that the 350 to 400 figure was confirmed “in or about August 2009” and not “in or about September 2009.”
[43] However, knowing that the November, 2008 building occupancy number was wrong and knowing that “an injury, loss or damage had occurred” are two different things.
[44] There was no clear evidence before me that the plaintiff knew or ought to have known of “an injury, loss or damage” before August 29, 2009.
[45] Mr. Gibson said that the plaintiff did not know that it had “damages and a claim” until October, 2009.
[46] Mr. Gibson asserted that, because the plaintiff was the franchisee’s landlord, the plaintiff would not suffer “material damages” as long as the franchisee continued to operate at the location and was paying rent and franchise fees.
[47] As of September 17, 2009, the date of one of the emails reproduced in paragraph 26, above, it appeared that the plaintiff and its landlord, the defendant, were discussing how much rent would be payable by the plaintiff “moving forward” and that the franchisees, in turn, were looking for a rent reduction from their landlord, the plaintiff. In another email the same day, Mr. Gibson told Ms. Marsales that the franchisees “were looking for a constructive solution otherwise they will consult with their solicitor.”
[48] On October 9, 2009, Mr. Gibson sent a further email to Ms. Marsales, which is also reproduced in paragraph 26, above, in which he said that the franchisees had informed the plaintiff that, based on its performance, the franchise would not survive. Mr. Gibson also said, as he had in his email of September 17, 2009, that the franchisees would be retaining legal counsel if steps were not taken to address the matter. Mr. Gibson said that he wished to discuss some thoughts he had about a “business solution” to the problem.
[49] In his affidavit, Mr. Gibson said that it was only in October, 2009, when the franchisees threatened to retain counsel, that the plaintiff realized that it would suffer damages and that the damages would likely be substantial. However, Mr. Gibson had already told Ms. Marsales in his email of September 17, 2009 that the franchisees would be consulting their lawyer if the problem were not solved. The October, 2009 message from the franchisees does not appear to be substantially different from the message of September 17, 2009; on both occasions the franchisees appeared to be saying that unless something was done to help them, the franchise would go under and they would be talking to their lawyer.
[50] Although Mr. Gibson said that the plaintiff did not know that it had damages until October, 2009 and the evidence suggests that it may in fact have had this knowledge by September 17, 2009, the evidence left open the possibility that the plaintiff may have known of “injury, loss or damage” earlier. For example:
• When in his affidavit Mr. Gibson said that the plaintiff would not suffer “material damages” so long as a franchise was operating at the location, what did he mean? Did he mean that the plaintiff either would or did suffer “some” damages? If so, when would these damages be suffered or when were they suffered? If damages were suffered, when did the plaintiff know or when ought it to have first known about them?
• In his email to the plaintiff’s agent dated August 17, 2009, reproduced in paragraph 26, above, Mr. Gibson, while apparently not yet certain that the 350 to 400 figure was accurate, referred to sales that were at 50 per cent of the anticipated level and said that the 1163 number provided by the defendant had been critical to the plaintiff’s investment in the development costs of the store. However, there was no evidence that the low sales figures or the plaintiff’s investment in the development costs translated into an “injury, loss or damage” to the plaintiff; as noted in the preceding paragraph, the plaintiff’s evidence was that it would suffer no material damages as long as a franchise was operating at the location.
[51] Mr. Gibson was not cross-examined on his affidavit.
[52] Based on the available evidence, I am unable to find that the plaintiff knew before August 29, 2009 that “the injury, loss or damage had occurred”, that the plaintiff first ought to have had this knowledge before August 29, 2009 or that the plaintiff did not have this knowledge before this date.
[53] With respect to the matter in s. 5(1)(a)(ii) of the Limitations Act, “that the injury, loss or damage was caused by or contributed to by an act or omission”, I have already found that the plaintiff knew by August 27, 2009 at the latest that the 1163 building population number it had been provided in November, 2008 was incorrect.
[54] With respect to the matter in s. 5(1)(a)(iii) of the Limitations Act, “that the act or omission was that of the person against whom the claim is made”, although it did not know that the information was incorrect until August of 2009, the plaintiff knew in November, 2008 that it
was the defendant’s agent who had informed the plaintiff that the building’s population was 1163.
[55] Section 5(1)(a)(iv) of the Limitations Act provides that, in order to discover a claim, a person must know that “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.”
[56] In its recent decision in Pepper v. Sanmina-Sci Systems (Canada) Inc., 2017 ONCA 730, the Court of Appeal considered the issue of when it is “appropriate” to start a legal proceeding and confirmed that it is when a claim is “fully ripened”:
On that date, the respondent had, in the language of the Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218 – a “fully ripened claim.” That was the “appropriate” time to commence litigation. As Sharpe J.A. noted in Markel:
…the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened…would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.
[57] A person cannot, obviously, have a “fully ripened” claim before it knows or ought to know “that the injury, loss or damage had occurred.” As I cannot conclude, based on the evidence before me, when the plaintiff knew or first ought to have known “that the injury, loss or damage had occurred”, I cannot come to any conclusion about when it knew that a proceeding was appropriate beyond the rather unhelpful observation that it was on or before the day the statement of claim was issued on August 29, 2011.
[58] There was no evidence before me with respect to when the plaintiff first ought to have known that a proceeding was appropriate.
d. Conclusion with respect to the limitation period issue:
[59] In a summary judgment motion, the onus is on the moving party. In a summary judgment motion based on a limitation period, the defendant has the onus[^2] of proving that the plaintiff’s statement of claim was issued more than two years after the plaintiff discovered, or first ought to have discovered its claim and that, therefore, there is no genuine issue requiring a trial.
[60] The defendant has failed to prove that, before August 29, 2009, the plaintiff knew or first ought to have known of the matter in s. 5(1)(a)(i) of the Limitations Act, “that the injury, loss or damage had occurred” or of the matter in s. 5(1)(a)(ii) of the Limitations Act, “that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.”
[61] Because the plaintiff’s statement of claim was issued on August 29, 2011, the defendant has failed to prove that the plaintiff’s claim is statute-barred.
[62] I am also unable to resolve the limitation period in favour of the plaintiff based on the evidence that was before me.
[63] In conclusion, the limitation period is a genuine issue requiring a trial.
[64] I have specifically found that the plaintiff knew by August 27, 2009 at the latest that the 350 to 400 building occupancy figure was accurate. In making this one finding, I have relied upon Rules 20.04(2.1) and 20.05(1) of the Rules.
Issue #2: The entire agreement clause
[65] The May 6, 2009 lease includes the following clause:
15.10 Lease Entire Agreement: There are no covenants, representations, warranties, agreements or conditions expressed or implied, collateral or otherwise forming part of or in any way affecting or relating to this Lease or the Premises save as expressly set out in this Lease and this Lease constitutes the entire agreement between Landlord and Tenant and may not be amended or modified except by subsequent agreement in writing of equal formality executed by Landlord and Tenant. The submission of this Lease for examination does not constitute an offer, a reservation of or option for the Premises, and this Lease becomes effective as a lease only upon execution and delivery thereof by both Landlord and Tenant.
[66] The parties agree that the defendant’s misrepresentation was not intentional and was “negligent” and not “fraudulent”.
a. The defendant’s position with respect to the entire agreement clause:
[67] The defendant argued that the purpose of an entire agreement clause is to confirm that an agreement, in this case, the lease, is binding and that all of the contractual terms are found in the document and not elsewhere.
[68] The defendant noted that its misrepresentation about the building’s occupancy was made prior to the execution of the offer to lease and the lease and argued that the plaintiff was a sophisticated party in that it was a corporation with experience in leasing.
[69] The defendant argued that the plaintiff could have sought to include terms in the lease relating to the building’s occupancy, such as a term that would guarantee a minimum occupancy for the term of the lease, but did not do so. The defendant questioned the true importance of the building’s occupancy to the plaintiff and the extent to which the plaintiff actually relied on the defendant’s misrepresentation on the basis that the plaintiff did not take any steps to ensure that terms dealing with building occupancy were included in the lease.
b. The plaintiff’s position with respect to the entire agreement clause:
[70] The plaintiff argued that where a material misrepresentation has been made that is fundamental to a contract, an entire agreement clause will not constitute a defence to a claim. The plaintiff also argued that where there is a fundamental mistake arising from a misrepresentation, the entire agreement clause does not apply and that, by implication, the parties to a contract would not expect such a clause to apply when there was a fundamental error such that there was no “consensus ad idem”.
[71] The plaintiff also argued that the entire agreement issue should not be resolved in the absence of the full record that would be available at a trial.
c. Law and analysis with respect to the entire agreement clause issue:
[72] The issue in Soboczynski v. Beauchamp, 2015 ONCA 282, 125 O.R. (3d) 241, leave to appeal to S.C.C. refused, 36489 (November 19, 2015), was the effect of an entire agreement clause on representations that were made after an agreement of purchase and sale was signed. (The representations of the defendant in Soboczynski were, therefore, “post-contractual”, while the building occupancy representation in the case before me was, of course, “pre-contractual”.) In Soboczynski, Epstein J.A. considered the general purpose of entire agreement clauses and wrote the following:
[43] An entire agreement clause is generally intended to lift and distill the parties' bargain from the muck of the negotiations. In limiting the expression of the parties' intentions to the written form, the clause attempts to provide certainty and clarity.
[44] In Inntrepreneur Pub Co. Ltd. v. East Crown Ltd., [2000] 41 E.G. 209 (U.K. Ch.), Lightman J. colourfully described the purpose of an entire agreement clause as follows:
The purpose of an entire agreement clause is to preclude a party to a written agreement threshing the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty ... For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere.
[Emphasis added.]
[45] Legal commentators appear to be united in their view that entire agreement clauses are, generally speaking, retrospective in nature. According to Angela Swan, “An “entire agreement” clause deals only with what was done or said before the agreement was made and seeks to exclude those statements and acts from muddying the interpretation of the agreement; it is a contractual invocation of the parol evidence rule”: Canadian Contract Law, 3d ed. (Markham: LexisNexis Canada, 2012), at p. 600 (emphasis in original); see also John D. McCamus, The Law of Contracts, 2d ed. (Toronto: Irwin Law Inc., 2012), at p. 733.
[46] Justice P.M. Perell agrees. He says that “[t]he parol evidence rule then directs that the written contract may not be contradicted by evidence of the oral and written statements made by the parties before the signing of the contract. The entire agreement clause is essentially a codification of the parol evidence rule”: “A Riddle Inside an Enigma: The Entire Agreement Clause” (1998) The Advocates' Q. 287 at 290-91 (emphasis added).
[73] In D.L.G. & Associates v. Minto Properties Inc., 2015 ONCA 705, 391 D.L.R. (4th) 505, the Court of Appeal considered a motion judge’s decision to strike a claim for pre-contractual negligent misrepresentation under Rule 21 of the Rules on the basis of an entire agreement clause. Doherty J.A. listed a number of the factors courts have considered in interpreting entire agreement clauses:
[37] […] The courts have looked to a variety of interpretative aids in considering the potential application of an “entire agreement” clause to pre-contractual misrepresentations: see J.D. McCamus: The Law of Contracts, 2nd ed 2012, Irwin Law Inc., at 365-66. The courts have considered:
• the language used in the entire agreement clause;
• the relationship of the parties when the contract was consummated;
• the sophistication of the parties;
• the nature of the negotiations;
• the language of other terms of the contract and specifically the extent to which allowing or precluding a negligent misrepresentation claims would be inconsistent with the other terms of the agreement.
[38] Taurus[^3] provides a good example of the kind of analysis that that has led courts to conclude that an “entire agreement” clause forecloses a party to the contract from successfully advancing a negligent misrepresentation claim. In holding that the “entire agreement” clause foreclosed the plaintiff from successfully advancing a claim that it had been induced to enter into the contract by negligent misrepresentations, the court said, at para. 59:
The parties were both sophisticated, commercial entities. Mr. Houghton had extensive experience in real estate development, was a “player” in the Whistler real estate market, and had dealt extensively with Intrawest. The contract was not a “standard adhesion contract”. It included, in the Disclosure Statement, a detailed description of not only lot 13, but the Kadenwood development and the responsibilities and obligations of the various parties involved in the development including Intrawest, the owners of the lots in the development, and the strata corporation. Mr. Houghton read the disclosure statement before Taurus entered into the contract. He had personal contact with Intrawest representatives both before and after he purchased lot 13. He had ample opportunity to ask questions and seek answers to any concerns he had about the details of the development of Kadenwood. In these circumstances, where the contract was clearly intended to govern the relationship between the parties, it would not accord with commercial reality to give no effect to the entre agreement clause in determining whether Taurus can claim a tort remedy.
[74] In the motion before me, the plaintiff’s counsel conceded that the plaintiff and the defendant were “reasonably sophisticated” parties.
[75] The affidavit of Mr. Gibson, which was the only affidavit filed on behalf of the plaintiff, did not refer to the entire agreement clause. Mr. Gibson’s affidavit did not refer to any specific events pre-dating the execution of the lease, even though Mr. Gibson himself had executed the lease on behalf of the plaintiff. Mr. Gibson’s affidavit did not include any facts relevant to any of the interpretive aids listed in the McCamus text relied upon by Doherty J.A. in D.L.G. & Associates Ltd. There was no evidence before me, for example, with respect to the offers to lease, the negotiations relating to the offers and the lease, any communications between the parties before the offers and the lease were signed, whether the parties had had previous dealings with each other, or whether the parties were represented by lawyers.
[76] Unless a certain volume of potential customers either pass through a building to get from one place to another or regularly visit a building without actually working in it, it is difficult to imagine that a building’s “occupancy” or “population” would not be an important factor for a quick service restaurant to consider when deciding whether to lease space in a building. However, the evidence before me suggested that, in this case, the plaintiff relied exclusively on an email that included the number of tenants and “people in total” in six buildings as well as a warning that the numbers were “an approximation”. The lease signed by the parties did not include any terms relating to the number of tenants or “people in total” in the building at the time the lease was signed or in the future.
[77] The plaintiff did not offer any evidence to explain why the information it says it relied on was not incorporated into the lease or to support any basis upon which the entire agreement clause could be circumvented.
[78] As noted above, it is “trite law” that both parties on a summary judgment motion are required to put their “best foot forward.”
[79] The entire agreement clause, which is reproduced in its entirety above, is unambiguous in that it clearly states that there are no express or implied representations “forming part of or in any way affecting or relating to this Lease or the Premises save as expressly set out in this Lease and this Lease constitutes the entire agreement between Landlord and Tenant…”
[80] On the evidence before me, there was a clearly-worded entire agreement clause in a lease that was signed by parties acknowledged to be at least reasonably sophisticated and was intended to govern the relationship between those parties. There was no evidence before me to suggest that the entire agreement clause should be interpreted to mean anything other than what it says it means.
The effect of the counterclaim:
[81] If the defendant had no counterclaim, I would conclude that there is no genuine issue requiring a trial in relation to the application of the entire agreement clause.
[82] The defendant has a counterclaim, however, and, because of the counterclaim, deciding this case on a motion for summary judgment would not represent, to cite the third criterion in paragraph 49 of Hryniak, “a proportionate, more expeditious and less expensive means to achieve a just result.”
[83] Dismissing the claim will not conclude the litigation and, perhaps more to the point, because of facts and issues that are common to the claim and the counterclaim, could lead to an unfair and anomalous result.
[84] The gist of the pleadings, after backing out the limitation period issue, is as follows:
• The statement of claim: The plaintiff tenant says that it never would have entered into a lease if the defendant landlord had told it how few people actually worked in the building. By entering into the lease, it suffered damages.
• The statement of defence: The defendant landlord admits that it gave the plaintiff tenant inaccurate information but says that the plaintiff tenant cannot complain because the lease included an entire agreement clause and besides, the plaintiff tenant could have asked for a term dealing with the building’s occupancy to be included in the lease but did not.
• The counterclaim: The plaintiff by counterclaim (the defendant landlord) says that the defendant by counterclaim (the plaintiff tenant) failed to pay all of the rent it owed and then vacated the leased property before the end of the lease and that, as a result, the plaintiff by counterclaim (the defendant landlord) suffered damages.
• The reply and defence to the counterclaim: The defendant by counterclaim (the plaintiff tenant) says that it never would have entered into the lease if the plaintiff by counterclaim (the defendant landlord) had told it how few people actually worked in the building. It should not, therefore, be required to pay the plaintiff by counterclaim (the defendant landlord) any damages.
[85] It is evident that the effect of the defendant’s misrepresentation on the contractual obligations of the parties is an issue common to the claim and the counterclaim.
[86] In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, the Court of Appeal set aside the summary judgment dismissal of an action in which two related counterclaims would be proceeding to trial. The Court of Appeal concluded that the motions judge had failed to assess the advisability of the summary judgment process in the context of the litigation as a whole.
[87] In Baywood, the Court of Appeal cited paragraph 60 of Hryniak (which is also reproduced at paragraph 24 of these reasons):
[60] The “interest of justice” inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.
[88] In Baywood, the motions judge had concluded that a release, referred to as “the Third Release”, was valid and binding. The Court of Appeal found that the Third Release and some promissory notes were “part and parcel of the same series of transactions” and that it had been inappropriate for the motions judge to attempt to extract the Third Release from a “web of paper”. The Court of Appeal concluded, at paragraph 37 of its decision, that summary judgment had not been appropriate in the circumstances:
In the complex situation in this case, it is therefore entirely possible that the trial judge who hears the trial of the issue on the validity of the promissory notes will develop a fuller appreciation of the relationships and the transactional context than the motions judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motions judge’s find that the Third Release is fully valid and effective, even though the parties would be bound by that finding. The process, in this context, risks inconsistent findings and substantive injustice.
[89] In Baywood, the Court of Appeal concluded that because of the factual connection between the promissory notes, the Third Release and the testimony of one of the witnesses, it had been an error in principle for the motions judge to have referred the enforceability of the notes to trial while summarily deciding that the release was binding.
[90] The case before me is similar in that the defendant’s misrepresentation and its effect on the parties’ obligations under the lease are issues common to the claim and the counterclaim.
d. Conclusion with respect to the entire agreement clause issue:
[91] A counterclaim will not always be a barrier to summary judgment. In this case, however, because of the facts and issues common to the claim and the counterclaim, granting summary judgment to the defendant on the basis of the entire agreement clause would not only not resolve the “litigation as a whole” (Hryniak, at para. 60) but would also risk “inconsistent findings and substantive injustice” (Baywood, at para. 37). In these circumstances, to circle back to paragraph 49 of Hryniak, granting summary judgment would not be “a proportionate, more expeditious and less expensive means to achieve a just result” and, consequently, the application of the entire agreement clause is a genuine issue requiring a trial.
Conclusion
[92] To summarize:
(a) I am unable to decide, based on the available evidence, whether the plaintiff’s claim is statute-barred; the limitation period is a genuine issue requiring a trial.
(b) I have, however, specifically found that the plaintiff knew by August 27, 2009 at the latest that the 350 to 400 building occupancy figure was accurate. In making this one finding, I have relied upon Rules 20.04(2.1) and 20.05(1) of the Rules.
(c) In the context of the litigation as a whole, it would not be in the interest of justice to dismiss the plaintiff’s claim on this motion on the basis of the entire agreement clause. Although the plaintiff, despite its obligation to put its “best foot forward”, presented no evidence to suggest that the entire agreement clause should not be interpreted in accordance with its terms, the defendant has a counterclaim against the plaintiff. Dismissing the plaintiff’s claim at this time would not eliminate the need for a trial and, depending upon the nature of the evidence presented at the trial, could lead to unfairness and an anomalous result. The application of the entire agreement clause is a genuine issue requiring a trial.
(d) The defendant’s motion for summary judgment is dismissed on both grounds.
Next steps
[93] Because of my familiarity with this matter as a result of this motion, I propose to remain seized of it and, for scheduling and trial management purposes, I direct counsel to make a 90-minute appointment with me, through the trial coordinator, to discuss the matters in rule 20.05(2) of the Rules.
[94] Counsel may attend this appointment by telephone.
Costs
[95] Counsel provided me, at my request, with written costs outlines in sealed envelopes, which I have not yet opened. Although the defendant’s motion was unsuccessful, because of the reasons for its dismissal, I have concluded that it would be inappropriate to decide the issue of costs at this time. The costs of the motion are, therefore, reserved to be decided at the conclusion of the trial.
Madam Justice H.J. Williams
Date: 2017/09/27
CITATION: Treats v. Burloak, 2017 ONSC 5692
COURT FILE NO.: CV-11-52193
DATE: 2017/09/27
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Treats International Development Corporation - Plaintiff
AND
Burloak No. 3 Investment Limited Partnership - Defendant
BEFORE: Madam Justice Williams
COUNSEL: Martin Diegel, Counsel for the Plaintiff
Sharon M. Addison, Counsel for the Defendant
HEARD: 2017/06/29
RULING ON MOTION
FOR SUMMARY JUDGMENT
Madam Justice H.J. Williams
Released: 2017/09/27
[^1]: Ms. Webb is the deponent of the affidavit the defendant filed in support of its motion; by the time she swore the affidavit, she had changed her last name to Wells. [^2]: Although the plaintiff had the onus under s. 5(2) of the Limitations Act to prove that its claim was not discovered on the day the act or omission took place, this was a non-issue in this case because the defendant’s misrepresentation “took place” in November, 2008 but there was no suggestion that the plaintiff knew that it was a misrepresentation before August, 2009. [^3]: No. 2002 Taurus Ventures Ltd. v. Intrawest Corp., 2007 BCCA 228, [2007] B.C.J. No. 812.