2021 ONSC 3040
COURT FILE NO.: CV-20-29503
DATE: 2021-04-23
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Windsor-Essex Catholic District School Board and Conseil Scolaire Catholique Providence
Applicants
– and –
2313846 Ontario Limited o/a Central Park Athletics
Respondent
Jessica A. Koper, for the Applicants
Jeffrey W. Nanson, for the Respondent
HEARD: March 31, 2021
RULING ON APPLICATION
MUNROE J.:
[1] The application before me concerns the proper interpretation of force majeure clauses in two commercial leases during the COVID-19 pandemic. Two school boards, Windsor-Essex Catholic District School Board (“WECDSB”) and Conseil Scolaire Catholique Providence (“CSCP”) (collectively “tenants”, or “school boards”), apply to this court for a declaration that the force majeure clauses apply and abate the rent for the tenancy period between March 17, 2020 through August 11, 2020 (the “time period”), when pandemic-induced government orders prevented the intended use of the premises. The landlord, 2313846 Ontario Limited o/a Central Park Athletics (“landlord” or “Central Park”), strongly disagrees, arguing that said clauses do not excuse the tenants from paying rent.
[2] Specifically, the school boards seek a declaration that: 1) the force majeure clauses in their leases apply from March 17, 2020 through August 11, 2020; 2) there are no rent arrears owed by the school boards to Central Park for this period of time; and 3) any rent amounts
paid by the school boards to Central Park for this period of time shall be applied as a set off to ongoing rent obligations under the leases.[^1]
Factual Background
[3] The facts are uncontested.
[4] Central Park operates a community sports complex. The complex includes both indoor and outdoor sports facilities as well as building space that can be used for classrooms. Central Park rents ice time and leases building space within said sports complex to various tenants. The tenants do not have separate or individual entrances to their leased premises; Central Park controls all common areas including those that access the leased spaces and the various sports facilities.
[5] The school boards are tenants of Central Park in this sports complex. Each has a long-term lease with Central Park for specifically identified space within the sports complex building. An ice rental agreement is included in the leases. The school boards use said space for sports academy programs for their students. These programs include both traditional classroom education as well as sports training.
[6] The use of the leased premises is contained in Article 10 of the leases. The permitted use is delineated in Clause 10.1.1 entitled, “Permitted Use of the Premises and Exclusivity.” This clause provides, in pertinent part, as follows:
The Leased Premises shall be used solely for the purpose specified herein, namely to educate students enrolled in [the respective school boards]: … in accordance with the applicable non-sport related education curriculum guidelines set by the Ontario Minister of Education … and … in hockey [and such other sports] subject to the Landlord’s prior written consent … Activities ancillary to any of the foregoing permitted uses, such as staff training, performance demonstrations by students, parent and public meetings, administrative meetings, shall all be deemed to be a permitted use. The Leased Premises or any part or parts thereof shall not be used or suffered or permitted to be used for any other purpose.[^2]
[7] The leases are virtually identical. They are for 10-year terms with renewal rights. The terms have both commencement and end dates. The leased premises are identified. The tenant has occupancy of the leased premises and covenants to pay rent[^3] for same. The lease contains a quiet enjoyment clause. The amount of the base or minimum rent is calculated annually on the basis of the square footage of the leased premises. It is paid in equal monthly installments.
[8] The school boards could not use their respective leased premises as intended from March 17, 2020 to August 11, 2020.
[9] In response to the COVID-19 pandemic, various levels of government impacting the Windsor-Essex County area, ordered “lockdowns” as follows:
• March 12, 2020: the closure of all public funded schools;
• March 17, 2020: the closure of all public places and establishments;
• March 20, 2020: the closure of all schools, community centres, pools, arenas and other community facilities;
• March 24, 2020: the closure of all non-essential workplaces;
• March 30, 2020: the closure of parks and outdoor recreational facilities;
• June 25, 2020: Stage 2 - reopening of outdoor recreational facilities and community centres (with limited or modified services) but with no locker rooms or change rooms); indoor recreational facilities remain closed; and
• August 12, 2020: Stage 3 – reopening of nearly all business and public spaces.
[10] The school boards and Central Park complied with all COVID-19 government “lockdown” orders.
[11] At the beginning of the “lockdown” period, the school boards paid rent to Central Park. Subsequently, both school boards provided notice to Central Park that the rent was abated pursuant to the force majeure clauses and ceased paying rent for the balance of the “lockdown” period.
[12] Employees of both school boards accessed the sports complex during this COVID-19 lockdown a few times primarily to secure and obtain property belonging to the school boards, the staff, and the students. Each access time necessitated a prior arrangement to gain entry into the sports complex because the facility was closed.
[13] Central Park disagrees with the force majeure rent abatement position of the school boards which prompted this application.
Force Majeure Clauses
[14] The clause in question is identified in each lease as “15.14 FORCE MAJEURE” and provides:
Notwithstanding anything to the contrary in this Lease contained and without limiting the generality of clauses 11.1[^4] and 11.2[^5], if either party hereto shall be bona fide delayed or hindered in or prevented from the performance of any term, covenant or act required hereunder by reason of strikes, labour troubles, inability to procure materials or services, failure of power without fault attributable to the either party, restrictive governmental laws or regulations, riots, insurrection, sabotage, rebellion, war, act of God, or other reason whether of a like nature or not, not the fault of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such term, covenant or act shall be excused for the period of the delay and period for the performance of any such term, covenant or act shall be extended for a period equivalent to the period of such delay. In the event the Landlord claims a Force Majeure has prevented the Landlord from enabling the Tenant to make use of the Leased Premises or operate its programs in the Centre, Rent and Additional Rent shall fully abate during such period until the Landlord has restored the ability of the Tenant to use the Leased Premises and operate its programs in the Centre. For clarification, a temporary disruption or series of disruptions cumulatively totaling less than 30 days in Tenant’s use of facilities shall not constitute a force majeure condition, provided that the Landlord keeps the Tenant reasonably informed as to the nature and extent of the disruption and the remedial plan with the timetable, and the Landlord uses its continuing commercially reasonable best efforts to remedy the disruption within a reasonable time.
[15] Another related clause, “11.1.4 – Abatement subject to 15.14”, provides:
As provided by section 15.14, there shall be an abatement of rent and additional rent if the force majeure provisions of that section are applicable, and no abatement otherwise nor shall the Tenant be entitled to damages, losses, costs or disbursements from the Landlord, caused by or on account of fire or other catastrophic loss (except as above), for lack of water, sprinkler systems, water, partial or temporary failure or stoppage of heat, light, elevator, live steam or plumbing service in or to the said Leased Premises or Centre, whether due to acts of God, strikes, accidents, the making of alterations, repairs, renewals, improvements, structural changes to the said Lease Premises or buildings or the equipment or systems supplying the said services, or from any cause whatsoever; provide that the said failure or stoppage be remedied within a reasonable time.[^6]
Positions of the Parties
Applicants
[16] The school boards assert that the COVID-19 pandemic and the resulting government orders prevented Central Park from allowing them to make use of their respective leased premises. They were locked out. This presented a classic force majeure situation that squarely fits within the force majeure clause in their leases. Thus, in keeping with the plain language of the lease provisions, the rent owed should be abated during the time period in which they were unable to use the leased premises for its intended purpose.
Respondent
[17] Central Park asserts, pursuant to the lease provisions, that the inability of the school boards to operate in their leased premises during the COVID-19 pandemic lockdown does not excuse them of their rent obligations. Correctly interpreting the lease clearly establishes that the rent abatement provision was not triggered because Central Park never claimed a force majeure. Neither the lease nor any governmental law excused the school boards from paying rent. The case of Durham Sports Barn Inc. Bankruptcy Proposal, 2020 ONSC 5938, is controlling.
Legal Principles
[18] In the leading case of Atlantic Paper Stock Ltd. v. St. Anne-Nackawic Pulp and Paper Co., 1975 CanLII 170 (SCC), [1976] 1 S.C.R. 580, at p. 583, Dickson J., for the Court, stated that force majeure clauses are contractual provisions designed to:
… discharge a contracting party when a supervening, sometimes supernatural, event, beyond control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill.
[19] Force majeure has no set or specialized meaning; it is not a term of art. Whether a clause is triggered and, if so, its effect, depends on the proper interpretation of the particular clause: Domtar Inc. v. Univar Canada Ltd., 2011 BCSC 1776, 98 B.L.R. (4th) 316, at para. 78. To paraphrase the trial judge in Atcor Ltd. v. Continental Energy Marketing Ltd. (1996), 1996 ABCA 40, 178 A.R. 372, at para. 6: one “cannot over-emphasize” that each case turns on the wording found in the contract.
[20] Contract interpretation involves a practical, common-sense approach without the domination of technical rules but with the overriding concern to determine the intent of the parties and the scope of their understanding: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47. The Supreme Court continued:
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.
Principles Applied
[21] Each force majeure case turns on the specific wording found in its contract. This case is no different.
[22] The analytical framework articulated by the Alberta Court of Appeal in Atcor, at para. 12, as modified[^7], is helpful to assist in the interpretation of the clause before me. Three questions focus my analysis. First, was there a triggering event? Second, was there the required impact from the triggering event? And third, what is the effect or consequence of the impact on the contractual obligations? Each question will be reviewed. In conclusion, the contract will be read as a whole, giving the words used their ordinary and grammatical meaning.
1. Triggering Event
[23] Clause 15.14 of the leases sets out the triggering events, in pertinent part, as follows:
by reason of … restrictive governmental laws or regulations, … act of God, or other reason whether of a like nature or not, not the fault of the party delayed in performing work or doing acts required under the terms of this Lease ….
[24] On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The world has not experienced such a pandemic in over 100 years. It continues to rage over a year later. Although a characterization of the COVID-19 as an act of God is, in my opinion, accurate, within the meaning of our contract, it is not a triggering event. The pandemic itself is not the reason for the prevention of the performance of a term of the contract and, thus, is not a triggering event.
[25] The prevention of the performance of a contract term was caused by government laws and regulations, most notably ordered lockdowns or closures of businesses and other facilities, designed to stop or slow the transmission of COVID-19 infections.
[26] It is uncontroverted that the COVID-19 pandemic-caused government lockdowns happened during the period at issue and that such events were not the fault of the parties to the leases. The school boards could not use their respective leased premises as contracted or intended from March 17, 2020 through August 11, 2020 because of government orders forbidding same in response to the COVID-19 pandemic. I find Central Park could not provide the leased space to the school boards as required by the leases because of governmental laws and regulations. This was the triggering event within the meaning of the leases.[^8]
2. Required Impact
[27] The required impact, pursuant to Clause 15.14, provides:
… if either party hereto shall be bona fide delayed or hindered in or prevented from the performance of any term, covenant or act required hereunder by reason of [the triggering event] ….
[28] It is uncontested that during the time period, Central Park could not provide the school boards with the leased space for its intended and contracted use because of the governments’ pandemic lockdown orders preventing same.
[29] Although conceding the impact as framed, Central Park makes two arguments asserting that the impact ended on June 30, 2020, and not on August 11, 2020, because of the partial government-mandated opening at the end of June and, alternatively, because the school boards never used the leased premises for its sports academies during the summer months of July and August. I reject both positions. The partial opening at the end of June 2020, was just that, it was partial. The facility remained closed and was unavailable to the contracted use intended. In addition, the lease was for all 12 months of the year including July and August. Simply put, Central Park, through no fault of its own, was unable to provide the leased space to the school boards during that period of time.
[30] For these reasons, I find the required impact under the leases was satisfied.
3. Effect on Contractual Obligations
[31] Contractually, the consequences of the impact on the contractual obligations are found in both Clauses 15.14 and 11.1.4. They provide, in pertinent part, as follows:
Clause 15.14
[If either party is prevented from performance of any term] then performance of such term … shall be excused for the period of the delay and period for the performance of any such term … shall be extended for a period equivalent to the period of such delay. In the event the Landlord claims a Force Majeure has prevented the Landlord from enabling the Tenant to make use of the Leased Premises or operate its programs in the Centre, Rent and Additional Rent shall fully abate during such period until the Landlord has restored the ability of the Tenant to use the Leased Premises and operate its programs in the Centre. ….
Clause 11.1.4
As provided by section 15.14, there shall be an abatement of rent and additional rent if the force majeure provisions of that section are applicable ….
[32] This question identifies the primary issue before me.
[33] Central Park argues that under the lease provisions, the triggering event excused the landlord from providing the leased premises but did not excuse the tenants from paying rent. The school boards’ obligation to pay rent was not impacted by any pandemic order. Consequently, under the lease, there is no basis to cease paying rent. To bolster this position, Central Park emphasizes the language in Clause 15.14: “In the event the Landlord claims a Force Majeure has prevented the Landlord from enabling the Tenant to make use of the Leased Premises or operate its programs …” (emphasis added), asserting that Central Park does not claim, and never has claimed, a force majeure. This fact, according to Central Park, negates the following rent abatement provision. This wording clearly intends to protect the landlord by reducing its liability but does not intend to relieve the tenants from their contractual obligation to pay rent. In support, Central Park cites Durham Sports Barn, at paras. 50-57.[^9]
[34] The school boards read the lease quite differently. According to them, the language of Clauses 15.14 and 11.1.4 is quite clear. Clause 15.14 provides: when a triggering event prevents Central Park from “enabling the Tenant to make use of the Leased Premises or operate its programs … [rent] shall fully abate during such period ….” Clause 11.1.4 repeats this conclusion: “there shall be an abatement of rent … if the force majeure provisions [of 15.14] are applicable ….” It is uncontested that pandemic-induced government laws and regulations prevented Central Park from allowing the school boards to use the leased space for their sports programs as contracted. Thus, the lease is clear: there shall be an abatement of the rent for that time period. To the Central Park argument that it never claimed a force majeure, the school boards challenge the accuracy of the claim. According to the school boards, Central Park does assert that it followed all pandemic laws and regulations thus preventing the school boards from the contracted use of the leased premises for its sports programs. This is a force majeure claim; a formal intonation of the phrase, “force majeure,” is unnecessary.
[35] I agree with the school boards. One party, the landlord, because of the pandemic-induced government lockdown orders, was prevented from its performance of a term of the lease, namely providing the leased premises for its contracted use. As plainly written, the consequences of this triggering event impact are twofold under the lease: 1) the landlord is excused from its contractual obligation to provide the leased space; and 2) the contractual rent obligation of the tenants is abated or ended. Both of these contractual consequences are for the period of the government order-induced prevention, in this case from March 17, 2020 through August 11, 2020.
[36] Central Park’s argument that because it never claimed a force majeure, the rent abatement provision was never engaged, is without merit. There is no magic in the usage of the French phrase, force majeure. Force majeure is defined in Clause 15.14 and includes “restrictive governmental laws or regulations.” Central Park concedes, as it must, that it was unable to provide the school boards with the leased space for its contracted use because the pandemic-induced government laws and regulations prevented it from doing so. In my view, that is a force majeure claim within the meaning of the lease.
[37] I also do not find the Durham Sports Barn decision helpful to Central Park. It is a commercial lease/COVID-19 force majeure case involving a tenant seeking to forestall various landlord actions against it, including lease termination and distraint. In addition, the tenant sought abatement of rent for the period in which it was prohibited from operating by the government’s pandemic shutdown orders: Durham Sports Barn, at para. 3. The court declined to relieve the tenant of any portion of the rent, most notably concluding, “The force majeure clause in the lease relieves the Landlord from providing quiet enjoyment … but does not relieve the Tenant from the obligation to pay rent.” Durham Sports Barn, at para. 57. Although the opinion does not include the language of the force majeure clause at issue – always a problem for reliance on an opinion in which the specific wording is the deciding factor – the decision does include the tenant’s position: the force majeure clause excludes the landlord from its obligation to provide quiet enjoyment, thus the tenant “should correspondingly be relieved of its obligation to pay rent.” Durham Sports Barn, at para. 53. The tenant makes no mention of any lease wording relieving the rent obligation. From the court’s conclusion and its recitation of the tenant’s position, it seems reasonable to conclude that the force majeure clause in that case specifically did not relieve the tenant of its duty to pay rent. That is dramatically different from the case now before me. The clause before me does include a rent abatement provision as a consequence of the application of force majeure.
[38] For these reasons, I find the effect or consequences of the triggering event impact on the contractual obligations of the parties under the lease were twofold: 1) Central Park was excused from its contractual obligation to provide the leased space to the school boards; and 2) the contractual rent obligation of the school boards was abated or ended. Both of these contractual consequences were from March 17, 2020 through August 11, 2020.
4. Conclusion
[39] The specific wording of these leases drives the interpretation. The parties to these leases explicitly allocated the risks between them in the event of an occurrence beyond their control. They listed the events that would engage the clause and the effect that the triggering event would have on the contractual obligations of each. These leases were not loosely drafted.
[40] Reading each lease as a whole, giving the words used their ordinary and grammatical meaning, I conclude as follows:
There was a force majeure event through no fault of any party to the leases, namely governmental laws and regulations closing businesses and facilities in response to the COVID-19 pandemic from March 17, 2020 through August 11, 2020;
Central Park was prevented from providing the leased space to the school boards for their contracted and intended use because of governmental laws and regulations in response to the COVID-19 pandemic from March 17, 2020 through August 11, 2020; and
The effect or consequences of Central Park being prevented from providing the leased space due to this force majeure, from March 17, 2020 through August 11, 2020, excused Central Park from its obligation to provide said space during said time period and abated the rent obligations of the school boards during the same time period.
Ruling
[41] For the above reasons, the lease between Windsor-Essex Catholic District School Board and 2313846 Ontario Limited o/a Central Park Athletics, and the lease between Conseil Scolaire Catholique Providence and 2313846 Ontario Limited o/a Central Park Athletics, are interpreted as follows:
The force majeure clauses in both leases apply from March 17, 2020 through August 11, 2020;
The rent is abated from March 17, 2020 through August 11, 2020; and
Any rent paid by either school board to Central Park for the time period between March 17, 2020 through August 11, 2020, should be refunded to the school boards or applied as a set off to the ongoing rent obligations under the leases.
Costs
[42] If the parties are unable to resolve the issue of costs, the school boards shall provide me with their bill of costs, costs outline, and submissions (no longer than three pages) within 15 days of the date of the release of this ruling. Central Park shall respond in 15 days of service of the costs submissions with the same page limit.
Original signed by Justice Kirk Munroe
Kirk W. Munroe
Justice
Date: April 23, 2021
2021 ONSC 3040
COURT FILE NO.: CV-20-29503
DATE: 20210423
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Windsor-Essex Catholic District School Board and Conseil Scolaire Catholique Providence
Applicants
– and –
2313846 Ontario Limited o/a Central Park Athletics
Respondent
RULING ON application
Kirk W. Munroe
Justice
Released: April 23, 2021
[^1]: The parties specifically do not seek a ruling on which party owes what money to another party. They seek only an interpretation of the leases. [^2]: The wording of CSCP’s clause 10.1.1 differs in part. Notably, the WECDSB lease specifically includes figure skating; the CSCP lease does not. The CSCP lease also includes that the education shall be “primarily in the French Language.” [^3]: The leases identify the rent obligations as Minimum Rent and Additional Rent. The distinction is unimportant for this decision. Consequently, I simply use the general term “rent” to encompass both. [^4]: Destruction of Leased Premises [^5]: Expropriation [^6]: The wording of CSCP’s clause 11.1.4 differs in one respect. In the wording “if the force majeure provisions of that section”, CSCP’s clause uses the word “article” instead of “section.” [^7]: The significant modification is the elimination of the focus on the invoking party regarding the second factor. The Alberta Court of Appeal framed the second question, at para. 12: “what impact must those events have on the party who invokes the clause.” [Emphasis added.] In sharp contrast to this case, the contract in Atcor had specific limitations on the invoking party: Atcor, at paras. 3, 7 & 8. In that context, the second question necessarily must include the impact on the invoking party. There being no comparable limitation in the contract before me, a focus on the “invoking party” makes no sense. [^8]: Although not argued orally, in its written submissions, Central Park asserts that COVID-19 is not a justification for the invocation of a force majeure clause, citing Durham Sports Barn, at paras. 50-57. I respectfully disagree that this case stands for the proposition that the COVID-19 pandemic, and the ensuing government restrictions, can never be the type of event encompassed by a force majeure clause. Rather, the decision concerns the effect or consequences of the triggering event on contractual obligations, not on the existence of a triggering event. [^9]: The only other Canadian COVID-19 force majeure case provided to me, Hengyun International Investment Commerce Inc. c. 9368-7614 Quebec Inc., 2020 QCCS 2251, is not helpful because its decision relied, in important part, on Quebec law.