OTTAWA COURT FILE NO.: 13-57696
DATE: 2018/06/20
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
1550988 ONTARIO LIMITED o/a PREMIER DRYCLEANERS
Plaintiff
– and –
BURNFORD REALTY LIMITED
Defendant
David Debenham, for the Plaintiff
Andrew J.F. Lenz, for the Defendant
HEARD: December 19 and 20, 2017
REASONS FOR DECISION on mini-trial
corthorn j.
Background
[1] The plaintiff ("Premier") runs a dry-cleaning business, with a number of locations in the City of Ottawa. In November 2007, Premier became a commercial tenant of the defendant ("Burnford"). The parties entered into a month-to-month lease agreement for Unit 16 of a shopping mall, owned and managed by Burnford, located on Greenbank Road in the City of Ottawa (the "Mall").
[2] The landlord-tenant relationship continued from November 2007 until March 31, 2013. During that period, (a) Premier moved from Unit 16 to Unit 9B of the Mall, and (b) the parties executed several documents:
• In November 2007, a month-to-month lease for Unit 16 (the "2007 Lease");
• In December 2007, a document titled "Lease Agreement for Store No-16, 250, Greenbank Sq." (the "2007 Document"); and
• A lease dated March 18, 2008 for a term running from April 1, 2008 to March 31, 2013 for Unit 9B (the "2008 Lease").
[3] In March 2013, as the expiration of the term of the 2008 Lease approached, the parties communicated with respect to a lease for Unit 9B to run from April 1, 2013 to March 31, 2018. Ultimately, Burnford chose not to continue to lease Unit 9B to Premier. In late March 2013, Burnford entered into a lease for Unit 9B with a competitor of Premier, Brown’s Cleaners (the "2013 Lease"). Premier was required to vacate Unit 9B by the end of the day on March 31, 2013.
[4] Within two months following the termination of the 2008 Lease, Premier commenced this action. Premier’s pleading was amended in January 2015 to include reference to the final sentence of the 2007 Document, which reads as follows: "The Landlord agrees to provide a 5-year extension upon expiry of the lease". In addition, the prayer for relief was amended to include a request for rectification of the 2008 Lease to include "the extension of lease provisions of the December 3, 2007 document".
[5] Premier’s pleading was amended again in February 2015. The amendments made at that time provide particulars of the damages claimed and include detailed allegations with respect to breaches by Burnford of both the 2008 Lease and the 2007 Document.
[6] Premier brought a motion for summary judgment in 2016. That motion was dismissed and a mini-trial ordered with respect to the following two issues:
Is Premier entitled to rectification of the 2008 Lease to include the terms of the 2007 Document? and
If the answer to 1 is "No", are the parties bound by the terms of the 2007 Document, as a stand-alone document, independent of the 2008 Lease?
[7] The mini-trial was conducted in December 2017. The evidence on the mini-trial includes the affidavits filed on the motion for summary judgment, transcripts from cross-examination on those affidavits, the transcript of the examination for discovery conducted in January 2015 of Premier’s principal (Ms. Vedantam), affidavits sworn by Ms. Vedantam and her spouse ("Mr. Naidu") in August 2017, the affidavit of Burnford’s principal ("Ms. Aselford") sworn in December 2017, and cross-examination at the mini-trial of each of Ms. Vedantam and Mr. Naidu.
The Documents
a) The 2007 Document
[8] The 2007 Document was negotiated by Ms. Vedantam on behalf of Premier and by the late Garth Aselford on behalf of Burnford. Mr. Aselford’s successor in Burnford is his daughter, Karen Aselford. Ms. Aselford was not working at Burnford in 2007 and 2008. She became aware of the existence of the 2007 Document in 2015 during the discovery portion of this action.
[9] As a result, the only direct evidence with respect to the 2007 Document is that of Ms. Vedantam. Burnford does not take issue with Ms. Vedantam’s explanation of the genesis of the 2007 Document.
[10] In summary, the 2007 Document was created in the context of Premier’s move from Unit 16 to Unit 9B of the Mall. Unit 16 was previously leased to Pro-sketch Cleaners, who operated both a retail depot and dry cleaning plant on the premises. On November 1, 2007, Premier entered into a month-to-month lease with Burnford for Unit 16.
[11] The parties understood that Premier did not require premises as large as Unit 16; Premier operated only a retail depot from Greenbank Plaza. It was understood that Premier would move to a smaller unit in the Mall when one became available. When Unit 9B became available, Ms. Vedantam discussed with Mr. Aselford the possibility of Premier moving to that unit. It is Ms. Vedantam’s evidence that Mr. Aselford was prepared to have Premier move from Unit 16 to Unit 9B; however, Mr. Aselford wanted Premier to clean Unit 16 as part of the move.
[12] Ms. Vedantam’s evidence with respect to the 2007 Document is as follows:
• Mr. Aselford asked Ms. Vedantam to draft a document for his review;
• In early December 2007, Ms. Vedantam and Mr. Naidu met with Mr. Aselford to review the document drafted by Ms. Vedantam;
• Mr. Aselford made some handwritten amendments to the draft document; and
• The parties executed the document after the handwritten changes were made.
[13] The 2007 Document sets out the services that Ms. Vedantam, as owner of Premier, agreed to provide. She agreed to remove all dry cleaning equipment and substances, the latter such as sludge and perk, left over from the dry cleaning operation, and to essentially empty the unit. Other than identifying the services to be carried out, the 2007 Document is limited to the following two paragraphs:
In view of the above mentioned services/agreement, the Landlord, Mr. Garth Aselford, c/o Burnford Realty Ltd, agrees to convert the existing monthly lease to a full 5 year lease as per the terms and conditions already agreed upon.
The Landlord agrees to provide a 5 year extension upon expiry of the lease.
[14] The final paragraph of the 2007 Document ("the Extension Provision") is at the heart of the dispute between the parties.
b) The 2008 Lease
[15] In March 2008, the parties entered into a lease for Unit 9B. The lease is 29 pages long and includes a number of schedules. Article 2.2 of the 2008 Lease defines the term of the lease:
TO HAVE AND TO HOLD the Premises for and during the term (the "Term") of five (5) years, days (sic), which shall commence from and including the 1st day of April, 2008 and from thenceforth next ensuing and fully to be completed and ended on the 31st day of March, 2013. YIELDING AND PAYING THEREFORE during the Term, the rents described in section 4 which shall be paid on the days and times in section 4.
[16] Article 12.7 of the 2008 Lease is titled "Entire Agreement" and provides:
No prior stipulation, representation, agreement or undertaking, verbal or otherwise of the parties or their agents shall be valid or enforceable unless embodied in the provisions of this Lease or made in writing and signed by all parties hereto.
[17] In addition, the 2008 Lease addresses the 2007 Lease, although not specifically. Article 15.1 of the 2008 Lease is titled "Prior Lease". It provides, "[t]he Landlord and the Tenant agree that the provisions of the lease dated November 1, 2007 between the same parties have been completely replaced by provisions of this Lease and therefore are of no further force and effect".
[18] The 2007 Lease is a 24-page typed document, with Schedules attached. Of note, it includes the identical Article 12.7 "Entire Agreement" provision that appears in the 2008 Lease.
[19] The 2007 Lease was on a month-to-month basis. It does not include any provision as to the term (or duration) of the lease. Article 2.2 (titled "Term") is scratched out of the 2007 Lease. It also does not include any provision for an extension of the lease.
[20] The 2008 Lease does not (a) include any term with respect to an extension of the lease beyond the five-year term, or (b) refer to the 2007 Document.
Positions of the Parties
[21] Premier argues that:
a) The failure to include the Extension Provision in the 2008 Lease is the result of a common mistake (i.e. on behalf of both parties); and
b) As a result, Premier is entitled to rectification of the 2008 Lease to include the extension provision.
[22] In the alternative, Premier submits that the 2007 Document is valid and enforceable because it is an agreement "made in writing and signed by all parties" within the meaning of Article 12.7 of the 2008 Lease.
[23] The parties agree that the burden of proof with respect to the equitable remedy of rectification is the civil burden—on a balance of probabilities. Burnford submits that (a) strong evidence is required to meet the civil burden of proof when the relief claimed is rectification, and (b) Premier is unable to provide evidence of that kind.
[24] On the other hand, Burnford acknowledges that the 2007 Document is the kind of document contemplated by Article 12.7 of the 2008 Lease. Burnford accepts that it is bound by the terms of the 2007 Document.
Issue No. 1 – Rectification of the 2008 Lease
[25] Rectification is an equitable remedy which, if granted, addresses a mistake in the manner in which a transaction has been recorded; it does not address a mistake in the transaction itself (Snell’s Equity, 32nded. (London: Sweet & Maxwell, 2010), at para. 16-001, as quoted in McLean v. McLean, 2013 ONCA 788, at para. 5). An objective approach is required when a common mistake is alleged, as by Premier in this case. The applicable question is: What would a reasonable observer have believed the parties intended, taking into consideration the evidence of all the parties as well as the surrounding documentary evidence? (See McLean, at para. 10.)
[26] Rectification is a fact-driven remedy. Four elements must be established for entitlement to rectification (Thunder Bay (City) v. 1013951 Ontario Ltd. (2001), 2001 24065 (ON CA), 142 O.A.C. 361 (C.A.), at para. 37, quoting Snell’s Equity, 29th ed. (1990), at pp. 626, 628.).
[27] Burnford admits that Premier has established the first two of the four elements for entitlement to rectification:
There was a prior written agreement between the parties—the 2007 Document; and
That document was still effective when the 2008 Lease was executed.
[28] Burnford disputes, however, that the third and fourth elements for entitlement to rectification have been established by Premier. Those elements are:
By mistake the 2008 Lease fails to carry out the parties’ agreement with respect to the Extension Provision; and
If the 2008 Lease were rectified as requested by Premier, the lease would carry out the parties’ agreement with respect to the Extension Provision.
[29] For a number of reasons, I find that Premier has not established on a balance of probability that by mistake the 2008 Lease fails to carry out the Extension Provision of the 2007 Document.
[30] First, I consider Ms. Vedantam’s level of education (B. Comm., when living in India) and her work experience. The latter includes working in the marketing department of a hospital in India and her work in the dry cleaning business in Canada since 1998.
[31] Second, I consider Ms. Vedantam’s role as the President, the sole owner, and a Director of Premier. When cross-examined during the mini-trial, Ms. Vedantam admitted that she had worked hard to build the business and that it was important to her family.
[32] Third, there is the proximity in time between the execution of the month-to-month lease for Unit 16 (Nov. 1/07), the 2007 Document (Dec. 3/07), and the 2008 Lease (Mar. 18/08). In that regard, the two leases contain the identical "Entire Agreement" provision (Article 12.7 in both leases).
[33] On cross-examination, it was Ms. Vedantam’s evidence that when dealing with Mr. Aselford in late 2007 with respect to the move from Unit 16 to Unit 9B, she was aware that Mr. Aselford was asking something of Premier by requiring that it clean Unit 16. In response, Ms. Vedantam wanted something in return. Ms. Vedantam testified that she was careful that the 2007 Document clearly reflected what she wanted.
[34] At paragraph 10 of her August 2017 affidavit, Ms. Vedantam deposes the following with respect to her negotiations with Mr. Aselford of the terms of the 2008 Lease:
Garth assured me that it was a standard Lease that all tenants signed and that I should sign without any concerns. As I trusted Garth, I signed the Lease on behalf of the Plaintiff without any review or changes. Garth had experience with Leases and I did not. I was not aware that the right to the 5-year extension was not in the 2008 Lease, but I did know that the Plaintiff was entitled to a 5-year extension after the 2008 lease expired in 2013.
[35] When cross-examined about signing the 2008 Lease, Ms. Vedantam testified that she was not precluded from reviewing the document or from seeking legal advice before signing it.
[36] The 2008 Lease is similar to the 2007 Lease. As noted above, the "Entire Agreement" provision is identical in both documents (Article 12.7). There is also an important distinction between the two leases. In the 2007 Lease, Article 2.2, which defines the term of the lease, is scratched out—reflecting the month-to-month lease for Unit 16. I find that Ms. Vedantam was aware that Article 2.2 was scratched out of the 2007 Lease.
[37] Ms. Vedantam had had the 2007 Lease for over four months when she executed the 2008 Lease. By her own evidence, Ms. Vedantam was careful in December 2007 to include a matter that was important to her—the Extension Provision. With respect to the 2007 Document and 2008 Lease, I make the following findings:
• The 2007 Document was executed a number of weeks after the 2007 Lease was executed. Ms. Vedantam was aware that Article 2.2 ("Term") was scratched out of the 2007 Lease. The care that Ms. Vedantam exercised when negotiating the 2007 Document reflects her knowledge and understanding that without it, Premier did not have a fixed term for its lease of Unit 9B nor would Burnford be bound by the Extension Provision.
• As of March 2008, Ms. Vedantam had not forgotten the circumstances surrounding Premier’s move from Unit 16 to Unit 9B of the Mall, including the negotiation of the 2007 Document. Early 2008 was the second time, in less than six months, that Ms. Vedantam was negotiating the terms of a multi-page lease with Mr. Aselford.
• Ms. Vedantam was no less careful in early 2008 than she was in late 2007 in her negotiations with Mr. Aselford.
• Ms. Vedantam had sufficient education and experience to understand the 2007 Lease and the 2008 Lease, including how the documents were similar and how they differed.
• She was aware of Article 15.1 of the 2008 Lease—a term which made it clear that the 2008 Lease was replacing the 2007 Lease in its entirety.
• Had Ms. Vedantam intended that the 2008 Lease include the Extension Provision, she would have discussed its inclusion with Mr. Aselford. By her own admission, Ms. Vedantam did not do so.
[38] Mr. Naidu also gave evidence with respect to the 2007 Document. His evidence supports the importance of the 2007 Document to Ms. Vedantam and to the operation of Premier both in late 2007 and early 2008.
[39] I find that there was no mistake on Ms. Vedantam’s part, let alone on the part of both Ms. Vedantam and Mr. Aselford, in leaving the Extension Provision out of the 2008 Lease. Premier has not established the third of the four elements for entitlement to rectification of the 2008 Lease. The claim for rectification fails.
Issue No. 2 – The 2007 Document as a Stand-Alone Agreement
[40] Burnford’s position with respect to Issue Nos. 1 and 2 includes an acknowledgement that the 2007 Document is a stand-alone agreement within the meaning of Article 12.7 of the 2008 Lease. On that basis, Issue No. 2 is determined in Premier’s favour. That determination does not, however, resolve the parties’ dispute.
Remaining Issue
[41] As March 31, 2013 approached, did Burnford fulfil its obligations pursuant to the 2007 Document? Burnford submits that it did so by providing Premier with lease documents in February 2013. Premier argues that something more was required.
[42] In the context of the mini-trial, Premier asks the Court to find that the 2007 Document created an option, exclusive to Premier, precluding Burnford from entering into a lease with Brown’s in early 2013 until Premier had decided whether or not to exercise the option. Only if Premier chose not to exercise that option could Burnford enter into the 2013 Lease.
[43] Burnford argues that the issue of whether the 2007 Document created an option is outside the scope of the mini-trial. I agree.
[44] In the event the parties are unable to resolve this issue through negotiation, counsel shall request the opportunity to make submissions as to the steps to be taken to bring this matter to a conclusion.
Costs
[45] Following the release of my ruling on Premier’s motion for summary judgment, I determined that costs of the summary judgment motion are payable in the cause (2017 ONSC 4407). In doing so, I accepted Premier’s argument that the outcome on the motion for summary judgment is analogous to the completion of the first period of the three periods in a hockey game.
[46] The outcome of the mini-trial is analogous to the completion of the second period of the hockey game that is this litigation. That does not necessarily mean, however, that costs of the mini-trial are to be treated in the same manner as are costs of the motion for summary judgment.
[47] In the event the parties are unable to agree upon costs of the mini-trial, they may make written submissions as follows:
a) The submissions shall be limited to a maximum of four pages, exclusive of a bill of costs;
b) Written submissions shall comply with r. 4.01(1) of the Rules of Civil Procedure;
c) Hard copies of any case law or other authorities relied on shall be provided with the submissions and shall comply with r. 4.01(1), item 2 of the Rules of Civil Procedure with respect to font size;
d) The submissions, the documents referred to therein, case law, and other authorities, shall be on single-sided pages;
e) Written submissions shall be delivered by 5:00 p.m. on the twentieth business day following the date on which this Ruling is released; and
f) In the event any party wishes to deliver a reply to the costs submissions of an opposing party, the reply submissions shall be delivered by 5:00 p.m. on the twenty-fifth business day following the date on which this Ruling is released. Reply submissions shall comply with paragraphs (a) to (d) above.
Madam Justice Sylvia Corthorn
Released: June 20, 2018
OTTAWA COURT FILE NO.: 13-57696
DATE: 2018/06/20
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
1550988 ONTARIO LIMITED o/a PREMIER DRYCLEANERS
Plaintiff
– and –
BURNFORD REALTY LIMITED
Defendant
REASONS FOR DECISION on mini-trial
Madam Justice Sylvia Corthorn
Released: June 20, 2018