Court File and Parties

Citation: Fenwick v. Hotel Belvedere Inc., 2017 ONSC 768 Court File No.: CV-15-601-00 Date: 2017-02-03 Ontario Superior Court of Justice

Between: Martha Vosper Fenwick, Tom Vosper, Gretta Vosper and Rebecca Vosper Applicants

– and –

Hotel Belvedere Inc. and Donna Mallory Respondents

Counsel: Ryan D. Garrett, for the Applicants G. Edward Lloyd, for the Respondents

Heard: 27 January 2017, at Kingston

Before: Graeme Mew J.

Reasons for Decision

[1] 141 King Street East is one of several substantial houses located on that downtown thoroughfare in the City of Kingston. Like many of the older buildings in the neighbourhood, it dates back to the 19th century and has a heritage designation.

[2] By the early 1980s, the property had fallen into a state of disrepair. Its owner at the time, George Vosper, agreed to lease the property to Ian Walsh and Donna Mallory, in trust for a corporation to be incorporated. The plan was to renovate and repair the property and open it as a hotel. George Vosper took out a mortgage on the property which, along with heritage funding, enabled renovations to be completed. Since that time, until the present, the Belvedere Hotel has operated from the premises.

[3] The initial lease ran from 6 December 1985 for a term of 20 years. The tenants were responsible not only for paying rent but also for making payments towards the mortgage that had funded the renovations. The original lease was replaced by a second lease dated 5 May 2003, but said to have been executed sometime after that, between George Vosper as lessor and Hotel Belvedere Inc. as lessee. Ian Walsh and Donna Mallory were guarantors of the obligations of the lessee.

[4] George Vosper and Ian Walsh have both since died.

[5] The application now before the court concerns interpretation of the 2003 lease. It is brought by the beneficiaries of George Vosper’s estate, who succeeded him as lessors, against Hotel Belvedere Inc. and Donna Mallory.

[6] At issue is who is responsible for external repairs to the building.

[7] The Vosper family – the applicants – say that it was always the intention that the lessees should pay for all of the repairs to the premises, whether internal or external. They point to what they characterise as internal inconsistencies in the lease agreement, which, they say open the door for the court to examine the history of the parties’ dealings with each other and, hence, their true intentions.

[8] The respondents argue that there is no ambiguity and that the lease provides that external repairs are the responsibility of the lessors.

[9] The notice of application sets out nine grounds. However, a more succinct statement of what the court is being asked to determine is set out in paragraphs 40 and 41 of the applicants’ factum, namely:

a. whether the respondents are solely responsible for all repairs and maintenance of the buildings on the premises (comprising of the main house and a coach house), both internal and external; and

b. should it be determined that the repair and maintenance of the external walls are not the sole responsibility of the respondents, whether the respondents are nevertheless liable for any and all exterior maintenance and repairs to the roof of the house, including the associated soffits, fascia and chimneys.

[10] Before turning to the wording of the lease, suffice it to say that the parties have not always strictly followed its terms. The lessors, for example, have, at times, been slow to respond to concerns raised by lessee. And from time to time, the lessee has breached of its obligations under the lease by falling into substantial arrears in payments of rent or taxes owed to the City of Kingston. But it is also clear from the record that the relationship between the parties has been generally amicable. There has been a fair degree of “give and take”. Indeed, quite recently, the lessee exercised its option under the lease to extend it for another ten years.

[11] Both the first and second leases consist of pre-printed “Dye & Durham” forms that have each been amended and supplemented by an addendum containing additional clauses. The 2003 lease provides that the lessee is responsible to pay rent for and to repair the demised premises “excluding any part of the external walls” of the premises. Immediately after the statement of the obligation to repair, the preprinted, bracketed words “reasonable wear and tear, and damage by fire, lightning and tempest only excepted” is crossed out.

[12] On its face, the repair obligation is straightforward. It is the obligation of the lessee. And it includes wear and tear. But an obligation to repair what?

[13] The lessee says that its obligation is to repair “those certain premises excluding any part of the external walls known and described as 141 King St E., Kingston, Ontario”.

[14] The lessors acknowledge that preprinted language refers to the premises “excluding any part of the external walls” but say that this is not what the parties intended and, furthermore, that it is inconsistent with other obligations of the parties provided for under the lease.

[15] The lessors point to the addendum to the 2003 lease, which deals with the rent, renewal, provisions relating to the then outstanding mortgage, insurance, payment of taxes and heating costs, amongst other things.

[16] Clause 9 of the addendum provides:

The Lessees shall keep the subject premises fully insured at all times during the term of the lease, with the loss under all applicable policies payable to the Lessor, any mortgagees, and the Lessees as their respective interests may appear. PROVIDED THAT IF during the term herein or any renewal thereof, the premises shall be damaged or destroyed by fire or the elements, there shall be no abatement or ceasing of rent, and the Lessees shall use reasonable diligence to carry out the necessary repairs or reconstruction.

[17] How, the lessors ask, can it be the responsibility of the lessees to use reasonable diligence to carry out any necessary repairs or reconstruction if the premises are damaged or destroyed by fire, if they are not responsible for all repairs? Or, put differently, exempting the lessee from the responsibility of repairing the external wall of the building cannot be reconciled with the lessee’s responsibilities under clause 9 of the addendum.

[18] The true intention of parties, say the applicants, can be divined from an exchange of correspondence between solicitors that occurred in 1985, shortly before execution of the first lease. George Vosper’s lawyer advised the lawyer acting for Ms. Mallory and Mr. Walsh that “there are to be no exceptions with respect the obligation to repair.” The addendum to the first lease, in addition to containing a provision virtually identical to clause 9 in the addendum to the second lease also recorded, in clause 2:

The parties acknowledge that it is the intention of the Lessees to make substantial exterior and interior renovations to the subject premises at their own expense, then to operate a hotel the said premises. All such renovations may be made only with the consent and approval of the Lessor, which must not be unreasonably withheld…

[19] Subsequently, both parties point to documents which are said to support their belief that the other party was responsible for external repairs.

[20] On 24 October 2005, the applicant, Martha Vosper Fenwick, wrote to Mr. Walsh and Ms. Mallory:

During my recent squirrel mission, I noted significant wood rot and deterioration of the building’s soffits. As you know, you are obligated to maintain the Belvedere. Please provide me with a schedule of repairs identifying the work to be done and the time frame in which it will be completed. I propose to meet with you, at a mutually agreed-upon date, to conduct an inspection of the premises to identify areas of immediate concern.

[21] The schedule of repairs was never supplied. The meeting never took place. But, as evidenced by a schedule of “Exterior Expenses” incurred by the lessee, in June 2006, the tenant spent $1000 to “repair and replace brick”. The applicants point to other expenditures incurred by the lessee on such things as soffit repairs, stone pointing, exterior painting, roof repairs and replacement of roofs over rooms 305, 306 and 307 of the hotel, as evidence of the tenant’s acceptance of its responsibilities for exterior repairs.

[22] The respondents point to a letter to Velma Vosper, handwritten by Mr. Walsh dated 30 November 2009, but apparently never sent, in which he mentions the need to replace the roof above rooms 306 and 307, adding:

As landlord, you are responsible for the exterior of the building. My suggestion is that the Hotel Belvedere Inc. pay for the new roof and that the amount (as attached) be deducted from the outstanding debt.

[23] The letter goes on to suggest to Ms. Vosper that she consult with her lawyer, Richard McNevin. Beside the words “not sent” on this document is a notation “spoke with Richard McNevin”. There is no evidence as to whether Mr. Walsh in fact spoke to Mr. McNevin concerning the roof repairs and, if so, what the outcome was.

[24] Of the other external repairs carried out by the lessee, the respondents acknowledge that until 2012, the tenant did not demand reimbursement, and point to the total expenditure – $30,651.20 over a nine-year period – as being relatively inconsequential (equivalent to about a month’s rent per year), and part of the “give and take” of the relationship.

[25] In 2012, there was, however, a change in temperature in the relationship between the parties. The lessee had allowed substantial arrears of property taxes to mount up. Ms. Vosper Fenwick demanded that the arrears be paid. Ms. Mallory, while acknowledging that the lessors were entitled to make that demand, states that:

… in view of the changed relationship between the landlord and the tenant, Hotel Belvedere, we demanded that the Landlord comply with its repair and maintenance obligations under the Current Lease.

[26] Subsequent to that, there was correspondence from the respondents, or their solicitor, claiming that they had carried out certain external repairs through necessity, but expected the lessors to pay. And there was correspondence from the applicants, or their solicitors, saying that external repairs which they had carried out through necessity were the responsibility of the lessee.

[27] In 2013, there was this email exchange between Mr. Walsh and Ms. Vosper Fenwick:

11 June (Walsh to Fenwick)

… the roof is leaking into three of our rooms now. They will be put on hold, and on your account, until the you [sic] make the necessary roof repairs and we can repair the ceilings

11 June (Fenwick to Walsh)

I am truly sorry for not responding I’m waiting for property assessment to obtain financing and lawyers to advise. I am acutely aware that this situation cannot continue and would hope we can create a win win situation in the near future.

24 July (Walsh to Fenwick)

The deterioration of the building has gone on too long and I do not understand your lack of follow through over the past months. Please advise if I should undertake maintenance on your behalf or please start demonstrating that you are going to act on the repairs.

[28] After that exchange, repairs evidently were done by the landlord. But there was further correspondence between Mr. Walsh and Tom Vosper, the effect of which, the respondents claim, was an affirmation by the applicants that the tenant was responsible for interior repairs without any repudiation of the tenant’s assertions that exterior repairs were the landlord’s responsibility. Yet in her affidavit dated 10 November 2015, Ms. Vosper Fenwick claims that the landlord only carried out certain repairs over the previous two years to prevent deterioration to the house, given the tenant’s refusal to carry out exterior repairs.

[29] The parties both argue that from their correspondence over the years, the court should be able to distil the true expectations which the parties had concerning responsibility for repairs. Sadly, this judge cannot. The practices of the parties have fluctuated too much over the thirty plus years of the lessor/lessee relationship. Whereas at the outset, the renovation of the entire property was the responsibility of the tenant, since then both the landlord and the tenant have, at different times, and perhaps for different reasons, either undertaken exterior work or expressly or implicitly acknowledged a measure of responsibility for doing so. But the respective actions of the parties have rarely been unequivocal or of long duration.

[30] While the lease could quite easily have more clearly set out the repair obligations of the parties, I do not find the lease to be ambiguous at its face. Clause 9 of the addendum to the 2003 lease provides, with greater precision, that in the event of an insurance claim, there shall be no abatement or ceasing of rent, and the tenant shall use reasonable diligence to carry out the necessary repairs or reconstruction. But I do not read this as a provision ascribing an all-encompassing repair obligation on the tenant, over and above what is already provided for in the lease.

[31] Accordingly, I do not accept that there is ambiguity on the face of the lease as to where the repair obligation falls. That said, even where the language of a contract is unequivocal, but its application to the facts is uncertain or difficult, a latent ambiguity may be said to exist: Warren H.O. Mueller, D. Morgan, Canadian Encyclopedic Digest – Contracts (Toronto: Carswell, looseleaf) at IX.2.(b).

[32] The debate about ambiguity is, perhaps, a distraction: a finding of ambiguity is no longer a prerequisite to reviewing and considering what the parties intended. In Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, the Supreme Court reflected, at paras. 47-48 that:

… the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine "the intent of the parties and the scope of their understanding" (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744 (S.C.C.), at para. 27 per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways), 2010 SCC 4, [2010] 1 S.C.R. 69 (S.C.C.), at paras. 64-65 per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed.... In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

(Reardon Smith Line [v. Hansen-Tangen, [1976] 1 W.L.R. 989, [1976] 3 All E.R. 570 (U.K. H.L.)], at p. 574, per Lord Wilberforce)

48 The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement (see Geoffrey L. Moore Realty Inc. v. Manitoba Motor League, 2003 MBCA 71, 173 Man. R. (2d) 300 (Man. C.A.), at para. 15, per Hamilton J.A.; see also Hall, at p. 22; and McCamus, at pp. 749-50). As stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society (1997), [1998] 1 All E.R. 98 (U.K. H.L.):

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. [p. 115]

[33] The terms of the lease clearly exclude from the definition of the leased premises “any part of the external walls” of the Belvedere Hotel. Accordingly, in my view, the lessee’s repair obligation, which is confined to the leased premises, does not extend to the external walls, and is the responsibility of the lessors.

[34] But what, in the circumstances, is the meaning of the words “external walls”? Is it just the vertical structures visible from outside?

[35] Photographs of the Hotel Belvedere show external chimney breasts on the east and west walls. There are mansard roofs from which dormer windows emerge. Some of the building, at least, appears to be topped off with a flat roof which is connected to the exterior walls by the mansard roofs.

[36] The landlord points to the Canadian Oxford English Dictionary definition of “walls”:

A continuous and usually vertical structure of little thickness in proportion to its length and height, enclosing, protecting, or dividing a space or supporting a roof.

[37] The tenant argues that the landlord is responsible for all exterior repairs, and that a common sense interpretation of the phrase “external walls” must necessarily incorporate the external features of the chimneys, the roof and anything attached to the external walls or the roof.

[38] I observe, again, that if that is what the parties have intended, the lease could easily have said so.

[39] I do not see how the phrase “external walls” can be contorted to include flat roofs. However, looking at the photographs of the Hotel Belvedere, the externally exposed portions of the chimneys appear to be an integral part of the external walls of the building. And the mansard roofs, although clad with tiles or shingles (it is difficult to tell which from the photographs) and particularly the dormer window structures which thrust out from the mansard roofs, have characteristics which would appear to me to be more akin to walls than roofs.

[40] Accordingly, I conclude that the external aspects of the chimneys as well as the mansard roofs are part of the “external walls” of the building.

[41] I would add that, logically, anything attached to the “external walls”, such as soffits or fascia, should also be part of the repair obligation for external walls.

[42] I would therefore answer the questions as follows:

1. the lessee is responsible for all repairs except repairs to the “external wall” of the premises;

2. repair of the “external walls” is the responsibility of the lessors and incorporates all vertical or near-vertical structures on the outside of the building, including the mansard roofs, and all materials attached to the external walls, including soffits and fascia.

[43] I should add that I do not, through these reasons, purport to make a judicial finding that, for all purposes, the phrase “external walls”, appearing on a Dye & Durham pre-printed commercial lease form, will include mansard roofs or soffits. But that is my finding in this case, having regard to the surrounding circumstances and the configuration of the structures comprising the Hotel Belvedere.

[44] It is unfortunate that the parties could not resolve their differences through mediation or negotiated settlement.

[45] If the parties are unable to agree on the disposition of costs within fourteen days of the release of these reasons, each party should serve and file costs submissions with the court, to be no more than four pages in length, plus any costs summary a party wishes to rely on.

Graeme Mew J.

Released: 3 February 2017