Court File and Parties

COURT FILE NO.: 3069-14S DATE: 2018/07/09 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Pattison Outdoor Advertising Ltd. Plaintiff – and – Winchester Real Estate Investment Trust Limited and 1096966 Ontario Ltd. Defendants

COUNSEL: S. Toth, for the Plaintiff C. Saleh, for the Defendants

HEARD: June 19, 2018

JUSTICE A.K. MITCHELL

Overview

[1] This action is governed by the rules of simplified procedure and the parties elected to have the matter proceed by way of a summary trial. On consent, 1096966 Ontario Ltd. was added as a defendant to the action.

[2] In this action the plaintiff, Pattison Outdoor Advertising Ltd. (“Pattison”), seeks reimbursement from the defendants, Winchester Real Estate Investment Trust Limited and 1096966 Ontario Ltd. (collectively, “Winchester”), of the sum of $45,332 together with HST which is alleged to have been paid to the defendants under a mistake of fact since 2007.

[3] The defendants defend saying they are entitled to retain the monies paid by Pattison as they were not paid under a mistake of fact, rather these payments constitute rent payable under a lease between them which was binding on the parties at the time of the payments. In the alternative, the defendant submits that the plaintiff does not meet the test for reimbursement of the monies pursuant to the doctrine of mistake of fact.

Factual Matrix

[4] Many of the facts are not in dispute. The facts are:

(a) Winchester is the owner of commercial property municipally known as 48 Sydenham Street located in Simcoe Ontario (the “Simcoe Property”); (b) the plaintiff operates an outdoor advertising business which includes advertising for its clients using billboards; (c) since 1983 Pattison had maintained billboards at the Simcoe Property through its affiliated company, Gould Outdoor Advertisements (“Gould”), and also at a location in Brantford, Ontario (the “Brantford Property”); (d) before the Simcoe Property was purchased by Winchester, the Brantford Property and the Simcoe Property were owned by the same entity; (e) at no time did Winchester own the Brantford Property; (f) in 1995 Winchester purchased the Simcoe Property and Gould and Winchester entered into a lease agreement signed on May 29, 1995 (the “Lease”). At the time the Lease was entered into, four billboards were in existence on the Simcoe Property; (g) the Lease had a 5 year term which automatically renewed unless Pattison or Winchester, as the case may be, notified the other of its intention to terminate the Lease. Both Pattison and Winchester had a right to terminate the Lease on or before 30 days prior to the end of the term; (h) in addition, Pattison had an exclusive right of termination under subclause 9(b)(i) of the Lease as follows:

[Pattison] may terminate the Lease Agreement: If, in the opinion of [Pattison], the advertising value of the location of the premises does not warrant continued use for advertising purposes.

(i) the Lease obligated Winchester to provide to Pattison “the sole and exclusive rights (sic) to erect and maintain four 10 x 20 poster-panel Billboard(s) on the [Simcoe Property]”; (j) as consideration for this right, Pattison was obligated to pay Winchester a lease fee of “15% of Gross Potential Revenue Dollars per year which fee was payable in two semi-annual instalments”; (k) Pattison was also responsible for paying the hydro charges associated with illuminating the billboards on the Simcoe Property; (l) the Lease is and has been the only contract between parties. At no time was Winchester the lessor under the Brantford Property lease; (m) the four billboards located on the Simcoe Property were removed by Pattison on March 15, 2003; (n) despite removing the billboards, Pattison continued to pay rent to Winchester on a semi-annual basis until 2013; and (o) to date, no written notice of termination of the Lease has been delivered by either Pattison or Winchester to the other.

[5] A representative of each of Pattison and Winchester testified at trial. Stephen Mazur testified on behalf of the plaintiff and Aurelio Baglione testified on behalf of the defendants. Regrettably for Pattison, Mr. Mazur was not employed by Pattison until 2007, long after the negotiation of the Lease and the removal of the Billboards from the Simcoe Property. Pattison was unable to provide evidence from any representative involved in negotiating the Lease and/or Pattison’s leasing relationship with Winchester pre-dating Mr. Mazur’s involvement in the matter.

[6] Mr. Baglione denied having any knowledge that Pattison had removed its billboards from the Simcoe Property. His undisputed evidence supports this denial. He testified:

(a) He is and has always been the president of Winchester; (b) Winchester has been in business for 32 years and has 40 commercial properties under its control; (c) Winchester had only one contract with Pattison – the Lease relating to the Simcoe Property; (d) In his experience, for tenants paying rent calculated as a function of revenue, monthly rent would be calculated as a percentage of the previous month’s actual revenues with sales figures provided to Winchester on a regular basis to support the rent amount payable. Aside from the calculation sent by Pattison in May 1995, no calculation of Gross Potential Revenue was provided to Winchester during the term of the Lease. Instead, the lease payments were consistent year-over-year and did not fluctuate to any great degree which, in his experience, suggested a flat fee was being charged; (e) The head office for Winchester is approximately 1.5 hours from the Simcoe Property and, therefore, he attended at the property very infrequently; (f) he first became aware that the billboards were no longer on the Simcoe Property when Mr. Mazur visited his office in 2013; (g) he receives approximately 300 pieces of correspondence per month and will peruse all of them; however, has a staff to assist him respond directly; and (h) Winchester did not terminate the Lease nor provide notice to terminate the Lease.

Analysis

Bad Faith

[7] As a preliminary matter, the plaintiff submits that in all of the circumstances, Winchester has acted in bad faith in its dealings with Pattison. In his affidavit sworn May 3, 2018 Mr. Mazur, deposed that “Winchester was aware the billboard was no longer in place and knowingly and deliberately took advantage of Pattison’s mistake to accept money they were not entitled to.” At trial, Mr. Mazur admitted that he could not point to any evidence to support his conclusion.

[8] In addition, Pattison points to a letter written by Rachel Langton, Executive Assistant/leasing administrator for Pattison, dated February 12, 2008 to support its argument that Winchester was aware that Pattison was mistakenly paying monies to Winchester and knowingly (and in bad faith) took advantage of Pattison’s mistake. This letter specifically references the Brantford Property. No mention is made of the Simcoe Property. In this letter Winchester advises that it would no longer be paying Winchester directly for hydro relating to the Brantford Property. Handwriting at the top of the letter reads: “Simcoe Pattison signs.”

[9] Mr. Baglione testified the handwriting was not his. I note that the letter was not addressed to him rather to the property manager employed by the defendants. Pattison argues that having received this letter, Winchester knew or ought to have known that Pattison was paying rent in error and was obligated to alert Pattison that the property Winchester owned and in respect of which Pattison was obligated to pay rent, was not located in Brantford but rather Simcoe.

[10] I am unable to read anything sinister into the handwriting placed at the top of the letter or receipt of the letter itself. The Lease had not been terminated by either party. Winchester and Pattison had only the Lease outstanding between them. The Lease of the Simcoe Property comprised the full extent of the parties’ commercial dealings. It was reasonable for Winchester to have concluded that Pattison had merely made an incorrect reference to the address of the leased property. The evidence does not support a finding that Winchester ought to have concluded from this incorrect reference that Pattison was mistakenly paying rent for the Simcoe Property. As it expressly provides, the Lease granted to Pattison the exclusive right to erect (or remove) signage on the Simcoe Property at its discretion - a right which Pattison had exercised since 1983, well before Winchester acquired the property in 1995. It was therefore reasonable for Winchester to have believed that rent was being paid because Pattison continued to be of the opinion that the Simcoe Property had advertising value.

[11] Winchester had no knowledge that the billboards had been removed from the Simcoe Property and had received no notice of termination of the Lease. Accordingly, Winchester had no duty imposed on it to notify Pattison of the incorrect reference to the Brantford Property in circumstances where Winchester had no reason to believe it was a material mistake. I find there was no bad faith on the part of Winchester.

Contract Interpretation

[12] The plaintiff argues that it does not matter that the Lease was not properly terminated or that the defendants did not know that the billboards were no longer in existence on the Simcoe Property. Because rental payments are a function of the revenue generated by the billboards, if the billboards do not exist on the Simcoe Property, there is no potential revenue generation and therefore no rent payable to the defendants under the Lease. Any payment of rent was, therefore, paid under mistake of fact. Alternatively, Pattison says it believed that it was paying rent for its billboards on the Brantford Property which it mistakenly believed was owned by Winchester.

[13] The plaintiff submits that all contracts must be interpreted with regard to the surrounding circumstance and factual matrix even where there is no ambiguity in the language used in the contract. For this proposition, Pattison relies on the decision of the Supreme Court in Sattva Capital Crop v. Creston Moly Corp., 2014 SCC 53.

[14] The plaintiff argues that the Lease must be interpreted in the specific context of being a billboard lease agreement where the existence and location of a billboard advertisement creates revenue for Pattison and that revenue is in turn shared with the owner of the land on which the billboards are erected. To interpret the Lease as entitling the owner of the land to payment regardless of the existence of a billboard on the land would lead to a commercial absurdity.

[15] The defendants argue that there was no mistake of fact as Winchester was merely being paid for granting the exclusive right to erect signage on the Simcoe Property to Pattison. It did not matter whether Pattison exercised that right continuously throughout the term of the Lease, or sporadically throughout the term, or at all. Pattison enjoyed the exclusive right to do as it wished, when it wished. Moreover, the defendants say that it would be inequitable to order the return of the money paid by Pattison because they will have lost the ability to lease the Simcoe Property to another advertising/signage company for monetary compensation since 2007.

[16] The form of lease agreement was a standard template drawn on Gould letterhead. The document is entitled “Property Lease Agreement”. Although a capitalized term of the Lease, no definition of “Gross Potential Revenue Dollars” is contained in the Lease. This term was inserted into the Lease by the plaintiff. Under the Lease, the plaintiff was solely responsible for calculating the rent payable under the Lease.

[17] The only evidence available to the court to assist in assessing how the lease fee was calculated is a letter dated May 11, 1995 authored by Hamish Grant a leasing coordinator with Gould. He calculated the potential revenue for 1994/1995 as:

Estimated potential advertising value, per panel: $700\mo x 13 = $9,100.00/yr.
$9100 x 4 panels = $36,400 Gross Potential Revenue.
$36,400 x 15% = $5,460.

[18] In the same letter is stated “[u]nder this arrangement, at the beginning of each year of the lease, the value of the signs will be revued (sic) and 15% of the gross potential revenue of the signs as determined by the above calculation.” There is no evidence suggesting the plaintiff conducted a review of the potential revenue of the signs on an annual basis, or if it did, ever communicated its calculation of Gross Potential Revenue to Winchester. Rather, Pattison sent the lease fee together with the hydro costs associated with lighting the billboards to Winchester on a semi-annual basis.

[19] The Lease is ambiguous only insofar as the term “Gross Potential Revenue” lacks definition. The Lease was drafted by Gould (an affiliate of Pattison). Having inserted this capitalized term any ambiguity should be resolved in favour of Winchester. Having regard to the practice and conduct of Pattison after the Lease was entered into, I find that rent was not a function of revenue rather was fixed amount.

[20] Pattison could not explain why the billboards were removed in 2003 in circumstances where for the previous 20 years billboards had been erected by Pattison (or its predecessors) on the Simcoe Property. Surely there was revenue potential. Under the Lease, Pattison is expressly granted the exclusive right to maintain, remove, replace and reduce or increase the number of billboards on the Simcoe Property for so long as the Lease is in effect. The Lease envisions that Pattison’s rights under the Lease not only involved the right to maintain, inspect and repair the existing billboards but also extended to a general right to construct, install and remove the billboards.

[21] But for the calculation of Gross Potential Revenue, the Lease is clear and unambiguous. Pattison’s exclusive right to construct, inspect, maintain, replace, and remove billboards from the property is expressly stated in the Lease. The parties’ rights of termination are similarly expressly stated. There is no need to go beyond the contract to interpret its terms. The plaintiff suggests that if the parties had intended rent to be payable despite the removal of the billboards it would lead to a commercial absurdity. I disagree. If Pattison had intended a deemed termination or a right to cease payment of rent upon removal of the billboards, it would have (and should have) included an express term to that effect in the Lease.

[22] The parties intended what they expressly stated in the Lease. That is, that Pattison retained the right to terminate the Lease if there was no longer any advertising value associated with the Simcoe Property. The fact that Pattison did not avail itself of its right to terminate does not transform an otherwise fair and reasonable contract into a commercial absurdity.

Mistake of Fact

[23] The law with respect to the right to recover money paid under mistake of fact was set out in Royal Bank v. The King, [1931] 32 D.L.R. 685 (Man K.B.) and accepted by the Ontario Court of Appeal in Pinnacle Bank, N.A. v. 1317414 Ontario Inc., [2002] O.J. No. 281 (C.A.) at para. 10 as requiring:

(i) That the mistake must be honest. There must be on the part of the person paying the money the genuine bona fide belief that certain facts exist which really do not exist. It is not what he ought to believe or what he ought to have learned. Knowledge will not be imputed to him or inferred against him, unless he wilfully abstains from inquiry. (ii) The mistake must be as between the person paying and the person receiving the money. The receiver must in some way be a party to the mistake, either as inducing it, or as responsible for it, or connected with it. (iii) The facts as they are believed to be, imposed an obligation to make the payment. This obligation must be legal or equitable or moral. (iv) The receiver of the money has no legal or equitable or moral right to retain the money as against the payor.

[24] This case may be decided by considering only the fourth condition. Here, Winchester had a legal right under the Lease to receive the payments until such time as the Lease was terminated. There is no evidence, documentary or otherwise, to establish that the Lease was terminated by Pattison upon the removal of the billboards in 2003 or any time thereafter. Likewise, there is no evidence, documentary or otherwise, to establish that the Lease was terminated by Winchester.

[25] The Lease was drafted by Pattison; Pattison was responsible for calculating and remitting the rent payable under the Lease and was entitled, upon determining there was no advertising value to maintaining the billboards on the Simcoe Property, to terminate the Lease. The facts here are far different than the facts facing the Supreme Court of Canada in Rural Municipality of Storthoaks v. Mobil Oil Canada Ltd., [1976] 2 S.C.R. 147 (S.C.C.). In that case Mobil continued to pay royalties after surrendering the leases. When it was discovered Mobil demanded repayment from the defendant. Mobil was successful after appeal and recovered the money paid to the defendant. Here, the Lease was not terminated. The defendant in Mobil had no legal entitlement to the money received. Here, Winchester was legally entitled to receive the money paid by Pattison under the Lease. The outcome of this case would have been far different had Pattison terminated the lease.

[26] The reasoning of the court in Hollinger Consolidated Gold Mines Ltd. v. Northern Ontario Power Co., [1940] O.J. No. 311 (C.A.) at para. 22 applies to the case at hand. In Hollinger the payor paid monies pursuant to a contract with the recipient for services which had not been discontinued. In refusing recovery to the payor, the court held:

…It is clear from the evidence that they were not paid under any mistake of fact which might support a claim for repayment, nor do I think, they were paid under circumstances amounting to compulsion or duress. The plaintiff company might have paid or tendered payment for power at the rate or rates at which it claimed it should have been charged. Furthermore, no notice of discontinuance of service was given as provided under Clause 15, nor is any threat to discontinue the service disclosed in the evidence. The alleged overpayments were apparently made voluntarily under no mistake of fact, and, in my opinion, without compulsion or duress, and therefore cannot be recovered.

[27] To return the monies paid to Winchester because Pattison failed to exercise its right of termination would lead to an inequitable result. The court will not intervene to assist Pattison in the circumstances where to do so would result in Winchester having been denied the opportunity to generate advertising revenue from the property for a period of five years.

[28] There is no basis in law or equity to order the return of the payments made by Pattison to Winchester. Both parties are sophisticated commercial entities. Winchester received the rents on the Simcoe Property during the period 2003 through 2013 [^6] to which it was lawfully entitled under the Lease. Pattison made the payments based on various internal errors or oversights of which Winchester was entirely unaware and for which at law there is no recourse. Quite simply, the only mistake made was Pattison failing to terminate the Lease when the billboards were removed. Pattison, alone, was the author of such mistake and, alone, must bear the consequences. [See Corporate Properties Ltd. v. Manufacturers Life Insurance Co. et al., (1989), 60 O.R.(2d) 263 (H.C.J.) at para. 2 (a) where in denying recovery the court noted: “The plaintiff had its own resources, facilities and personnel to deal properly with the issue of calculation of rent. It failed to do an adequate job. The plaintiff is simply the author of its own misfortune.”]

Disposition

[29] Action dismissed.

Costs

[30] If costs of the action cannot be agreed upon by the parties, I will receive written cost submissions as follows:

(a) the defendants shall serve and file their written costs submissions not exceeding 5 pages in length (exclusive of time dockets, costs outline and case law) within 15 days; (b) the plaintiff shall serve and file its written costs submissions not exceeding 5 pages in length (exclusive of time dockets, costs outline and case law) within 15 days thereafter; and (c) any reply submissions not exceeding 2 pages in length shall be served and filed 7 days thereafter.

“Justice A.K. Mitchell” Justice A. K. Mitchell Released: July 9, 2018

[^6]: Although the plaintiff has restricted its damages to the payments made to the defendants during the period 2007 to 2013.