Court File and Parties
COURT FILE NO.: CV-19-621177
DATE: 20191010
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: STEVEN E. SILVERBERG PROFESSIONAL CORPORATION, R. FORSTER PROFESSIONAL CORPORATION and DANIEL E. SHORT, Applicants
AND:
1422693 ONTARIO LIMITED, Respondent
BEFORE: J.E. Ferguson J.
COUNSEL: Stephen Schwartz, for the Applicants
Lauren Sigal and Christopher West, for the Respondent
HEARD: September 23, 2019
ENDORSEMENT
[1] This application involves the interpretation of a lease made on May 27, 2016 (the “lease”) between the applicants as tenant (the “tenant”) and the respondent as landlord (the “landlord”) relating to a property located at 4401 Bathurst Street, Ontario (the “property”). The applicants seek a determination of their rights under two provisions of the lease relating to parking and payment of additional rent.
[2] The property is currently rented to three commercial tenants: the applicants’ accounting firm; Stonebrook Dental (“Stonebrook”); and a branch of the Royal Bank of Canada (“RBC”). RBC occupies the first and second floors. Stonebrook and the applicants’ firm occupy the third floor.
[3] Below the building are 32 indoor parking spaces reserved for the exclusive use of the tenants, two of which are reserved for handicapped parking (the “indoor parking spaces”). Each tenant is prescribed a certain number of indoor parking spaces for their exclusive use pursuant to each lease. The applicants have four indoor parking spaces and have been allowed the use of one handicapped indoor parking space.
[4] There are 17 outdoor parking spaces, two of which are reserved for handicapped parking (the “outdoor parking spaces”).
[5] The applicants’ position is that the outdoor parking spaces are not just for the tenants' customers and clients exclusively, but anyone can park there on a first come first serve basis, meaning the applicants' employees can park in the outdoor parking lot. The respondent’s position is that none of the outdoor parking spaces are reserved for any employees and are for the exclusive use by the tenants’ customers and clients.
[6] At issue are paragraphs 16 and 2(d) of the lease, which read as follows:
- The Tenant shall have the exclusive use of 4 parking spaces in the underground parking area. The Landlord shall be responsible for providing appropriate signage at its own cost and expense, such signage to be marked “Reserved”[.]
The above ground parking area shall be used by the Tenant and other tenants, customers and visitors of the Building on a first come first served basis. The intention is that the above ground parking area will be used by customers and visitors of all of the tenants in the Building and as such the Landlord agrees that it may become necessary to enforce time restrictions on this parking area if requested to do so by the Tenant, acting reasonably.
The Landlord will ensure all signs in the parking areas will note that parking is for tenants and visitors to the building (i.e. remove RBC customers).”
2(d) The Landlord shall not, during the Term of this Lease, be required to make any payments in respect of the Premises other than charges for income and estate taxes, water charges, realty taxes and mortgage payments. The Landlord shall be responsible for maintenance of the common areas.
(i) and to effect the said intention of the parties the Tenant promises to pay, as additional Rent, his proportionate share of all expenses relating to the Premises, including, but without limitation:
- utilities, limited to gas and electricity, based on a separate meter, if possible.
The Law
[7] The parties agree on the law with respect to contractual interpretation. It is its application to these lease terms over which they disagree.
[8] In Nortel Networks Corp. (Re), the court states:
In interpreting the contract, the court must have regard to the objective evidence of the "factual matrix" or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. The court should interpret the contract so as to accord with sound commercial principles and good business sense and avoid commercial absurdity….[^1]
It is clear that the factual matrix that can be considered may not include evidence of the subjective intent of a party or what a party believed a contract to mean…While the scope of the factual matrix is broad, it excludes evidence of negotiations, except perhaps in the most general terms, and evidence of a contracting party's subjective intentions.[^2]
[9] Contracts are to be interpreted in a practical and common-sense manner that is focused on the intent of the parties and the scope of their understanding. This approach to contract interpretation is elaborated upon in Sattva Capital Corp. v. Creston Moly Corp. as follows:
…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.” [citations omitted]. 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 [citation omitted]”[^3]
[10] In Sattva Capital Corp v Creston Moly Corp, the Supreme Court stated a key principle of contract interpretation is that “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”.[^4]
[11] The court may rely upon the contra preferentum doctrine where the contractual terms are ambiguous.[^5]
The Parking Issue
[12] The applicants rely on conversations they had with the president of the respondent landlord, during which the applicants' advised the president that they needed 10 parking spaces. The applicants state that they were told that their firm would be entitled to park in the aboveground parking area, separate from their reserved underground parking spaces. The applicants also rely on an unexecuted lease agreement which stated they were allowed the use of 10 parking spaces on or about the premises.
[13] The respondent denies any knowledge of this unexecuted lease and further denies providing any representation that the applicants would be provided with more than four parking spaces for their exclusive use or that their employees could use the outdoor parking spaces for daily parking. In any event, I conclude that it is the executed lease that governs this tenancy and not any discussions or unexecuted documents.
[14] There is evidence of signs and changes to signs that have been erected in the outdoor parking lot and the various interpretations of these signs by the applicants and respondent in their materials. Again, neither these signs nor the parties’ “spin” on these signs are relevant. It is the wording of the lease that is relevant to the issue of parking.
Analysis on Parking
[15] The parties agree that the two sentences of the second paragraph of section 16 can be read in harmony and that the second sentence wording does not negate the first sentence in any way. As a result, I need not make a finding that those two sentences create an ambiguity which gives rise to the application of the contra preferentum rule.
[16] The lease reads that the above‑ground parking shall be used on a "first come first served basis." The clear intention as set out in the lease states that “the intention is that the aboveground parking area will be used by customers and visitors of all of the tenants in the Building”. It is clear that the intended users of the aboveground parking area do not include the tenants’ employees.
[17] I agree that the intention of section 16 was to make it clear that the indoor parking spaces were for the employees of the tenants while the outdoor parking spaces were to be used by customers and visitors of all of the tenants and not by civilians attempting to park freely. I agree that this is an essential term of the lease, as the outdoor parking lot is small in comparison to the volume of customers and clients who attend the property with business with its three tenants, placing high demand on the outdoor parking spaces. If the applicants wanted a guarantee for more reserved parking spaces, they needed to do so under the terms of the executed lease.
[18] There is considerable correspondence between the applicants and respondent in the materials about the parking situation. There are also several complaints from the two other tenants regarding the regular use of the outdoor parking spaces by the applicants’ employees. Eventually a parking restriction sign of a 90‑minute maximum for all vehicles parked in the outdoor parking spaces was installed. This restriction was enforced by a third-party security company who ticketed offending vehicles, including the applicants’ employees. I accept the respondent’s evidence that all offenders were ticketed and that the applicants’ employees were not targeted.
[19] The respondent’s interpretation of section 16 is correct and commercially reasonable. The lease does not include the use of any spaces in the outdoor parking lot for employees of any of the tenants on a first come first serve basis.
[20] The applicants are not entitled to be reimbursed for paid parking tickets that they or their employees were issued for using the outdoor parking spaces, nor are they entitled to the exclusive use of any of the outdoor parking spaces.
Additional Rent
[21] The applicants’ position is that they are responsible to pay for utilities used in their premises. The respondent’s position is that the applicants are obliged to pay a proportionate share of the property’s utilities based on square footage.
[22] The respondent landlord installed meters for electrical use in April of 2017, which recorded electrical use by each of the two tenants on the third floor, the applicants' accounting firm, and the dental office. Those meters were removed by the respondent landlord on November 16, 2018.
[23] The bills issued by the respondent landlord since April of 2017 were based on square footage and not actual use, which has clearly caused confusion because of the installation of the meters.
[24] The respondent landlord submits that the definition of premises, as based on square footage, is clearly defined in the lease, which states “containing 38450.4 square feet” as being the premises. Confusion was created by the respondent landlord because of the installation of the two meters that measured electrical use on the third floor. The contra preferentum rule applies in these circumstances and the clause is construed against the landlord. I agree that the tenants’ interpretation with respect to electricity use is commercially reasonable, as it uses less electricity than the other tenant on the same floor (the dentist) and less than RBC, who occupies two floors.
[25] The respondent landlord submits that the applicants continue to pay their proportionate share of the building’s gas bill without issue, which is calculated using the same proportionate method as the electricity bill, and they submit that I should use this “payment practice” to conclude that the applicants are not paying the correct amount for electricity. I do not agree. This lease is not clear and sets out the use of a separate meter, if possible. There was a meter installed in April of 2017, which was subsequently removed by the respondent landlord.
[26] I agree that the applicants should continue to pay actual usage for electricity.
[27] The parties have provided their bills of costs. Partial indemnity costs for the applicants is set out at approximately $19,000 and approximately $31,000 for the respondent. This disparity is questionable in view of the fact that the two parties argued the same motion and one party did not do more work than the other. Additionally, the respondent did not need two lawyers on this motion. In any event, the parties should bear their own costs of this motion because of the divided success unless they want to make submissions. If the parties want to make submissions, they should advise my assistant at: lorie.waltenbury@ontario.ca.
J.E. Ferguson J.
Date: October 10, 2019
[^1]: Nortel Networks (Re), 2015 ONSC 2987, at para. 52, citing Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673, at para. 16 [Nortel].
[^2]: Nortel, ibid, at para. 57, citing The Canada Trust Company v. Browne, 2012 ONCA 862, at para. 71.
[^3]: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 47 [Sattva], citing Reardon Smith Line Ltd. v. Hansen-Tangen, [1976] 3 All E.R. 570, at p. 574.
[^4]: Sattva, supra note 3 at para. 47.
[^5]: Bryfam Enterprises Inc. v. Harbour Carrick Holdings Inc., 2018 ONSC 6623, para. 25.