Northwinds Brewery Ltd. v. Caralyse Inc., 2021 ONSC 7682

COURT FILE NO.: CV-19-1754

DATE: 20211126

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Northwinds Brewery Ltd.

Plaintiff/ Defendant by Counterclaim

– and –

Caralyse Inc.

Defendant/ Plaintiff by Counterclaim

COUNSEL:

Michael Hochberg, for the Plaintiff/ Defendant by Counterclaim

Bryan Fromstein, for the Defendant/ Plaintiff by Counterclaim

HEARD: May 17, 18, 19, 20, 2021

REASONS FOR JUDGMENT

McCARTHY J.:

Introduction

[1] The Plaintiff/Defendant by Counterclaim, Northwinds Brewery Ltd., is a commercial tenant (“the Tenant”) of the Defendant/Plaintiff by Counterclaim landlord Caralyse Inc. (“the Landlord”) in two units of a commercial plaza at 499 First Street in Collingwood (“the premises”). The parties entered into an agreement to lease followed by a 5-year lease of the premises (“the lease”) dated January 6, 2014. The lease term was to commence on July 1, 2014, after a fixturing period of approximately six months (“the fixturing period”).

[2] The first term of the lease expired on June 30, 2019. The Tenant purported to extend the lease for a five-year term on October 28, 2018. The Tenant continues to occupy the premises; it operates a restaurant, brewpub, and retail establishment.

[3] During the fixturing period, the Tenant constructed an internal mezzanine (“the mezzanine”) which measures 781 square feet. That mezzanine sits atop the office and washrooms also installed by the Tenant. During that same period, the Tenant installed some of its brewing equipment (a chiller and a compressor) on the exterior of the premises before housing that equipment in a 62 square foot wooden shed (“the exterior shed”). During the term of the lease, the Tenant removed three of the front windows and replaced them with three garage style roll-up doors (“the front windows”).

[4] The relationship between the parties was plagued by difficulties, disagreements, and misunderstandings from the outset. With disturbing regularity, they came to loggerheads over any number of issues including the construction of an enclosure for the garbage collection facilities, landscaping problems, the Landlord’s alleged obligation to fund roof and HVAC repairs, the rentable area of the premises and the proper calculation of additional rent. The present application was launched in October 2019 shortly after the Landlord issued a series of default notices culminating in a threat by the Landlord to engage a bailiff on September 1, 2019. The Tenant obtained a court order enjoining the Landlord from locking the Tenant out of the premises (“the injunction”). The injunction was renewed and remains in place pending the disposition of the application.

The Trial of Issues

[5] This matter proceeded as a trial of issues first framed within that application. The parties exchanged pleadings and the following issues were finally identified as requiring adjudication:

i) The validity of the Landlord’s notices of default;

ii) the rentable area of the leased premises for which the Tenant is required to pay rent;

iii) whether the Tenant is permitted to maintain the exterior shed and if so, if it is required to pay rent for the use of that common space;

iv) whether the changes to the front windows are permitted under the lease;

v) the taxes, maintenance and insurance (“TMI”) properly chargeable by the Landlord to the Tenant over the term of the lease;

vi) whether the Landlord breached its covenant to repair the premises;

vii) whether the Tenant properly exercised the option to extend the lease;

viii) whether the Landlord has the right to terminate the lease;

ix) whether the Landlord has waived any of its rights under the lease;

x) the amounts, if any, owed by the Tenant to the Landlord including any costs thrown away for a proposed application in 2020;

xi) whether the injunction should continue or be terminated.

[6] The court was referred to many documents. The parties relied upon a series of affidavits with attached exhibits. The court also received viva voce evidence from the principals of the competing parties: Geoff Conway on behalf of the Tenant and Henry Goldberg on behalf of Landlord. These two gentlemen were the principal and directing minds of the respective corporate parties.

Statutory Considerations

[7] Section 19(2) of the Commercial Tenancies Act, R.S.O. 1990, c. L.7 (“the CTA”) governs the enforceability of a commercial landlord’s right to re-entry or forfeiture. It reads as follows:

A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant in the lease, other than a proviso in respect of the payment of rent, is not enforceable by action, entry, or otherwise, unless the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.

The Tenant’s Position

[8] The Tenant seeks multiple orders and declarations ranging from a declaration that it properly exercised its option to renew the lease to a finding that the mezzanine, the front windows and the exterior shed are not structural in nature and need not be removed. The Tenant also seeks a declaration that the Landlord’s three notices of default were invalid. Lastly, the Tenant requests a finding that, as a result of non-compliance by the Landlord with certain articles of the lease, it is required to pay no more than $7.40 per square foot for additional rent from the commencement date to present.

[9] Broadly speaking, the Tenant’s position can be summarized by reproducing the passage it cited from the decision in DMX Plastics Ltd. v. Misco Holdings Inc., [2008] O.J. No. 4452 (Ont. S.C.), at para. 71, a case dealing with a landlord/tenant dispute:

It is readily apparent that from the outset, the relationship between the plaintiff and the defendant was problematic. This was because [the tenant] expected to adhere to the terms of the lease, as he was entitled to do, and the [landlord] appears to have had little concern about ensuring it complied with its obligations under the lease.

The Landlord’s Position

[10] For its part the Landlord’s position was stated as follows:

At its core, this action is about a sophisticated Tenant asking the Court to rewrite the lease drafted by the Tenant with the assistance of Tenant’s counsel. The Tenant, either intentionally or unintentionally, misunderstood many of the fundamental terms of the lease.

[11] In its counterclaim the Landlord seeks several orders and declarations including:

i) a declaration that the rentable area of the premises comprises 5600 square feet and that the Tenant should be obliged to pay rent based on that measurement plus the square footage of the exterior shed from the commencement date to present;

ii) judgment against the Tenant for the sum of $134,984.13 plus pre-judgment interest;

iii) a declaration that the Tenant’s installation of the front windows was not in compliance with the lease together with an order that those windows be removed;

iv) a declaration that the Tenant did not validly exercise its option to extend the lease;

v) an order dissolving the injunction and permitting the Landlord to re-enter the premises;

vi) a declaration that the Landlord is entitled to terminate the lease and;

vii) its costs thrown away for the Tenant’s threatened/abandoned applications.

Principles of Contract Interpretation

[12] A lease is first and foremost a contract. The Supreme Court of Canada set out the cardinal rule of contract interpretation in Manulife Bank of Canada v. Conlin, 1996 CanLII 182 (SCC), [1996] 3 S.C.R. 415, at para. 79:

the court should give effect to the intentions of the parties as expressed in their written document. The court will deviate from the plain meaning of the words only if a literal interpretation of the contractual language would lead either to an absurd result or to a result which is plainly repugnant to the intention of the parties.

[13] The Supreme Court has more recently provided guidance to courts seeking to determine the intent of the parties and the scope of their understanding in the contractual setting. At para. 47 of Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 the court stated the following:

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 the formation of the contract. …

no contracts are made in a vacuum; there is always a setting in which they must 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] W.L.R. 989, [1976] 3 All E.R. 570 (U.K.H.L.) at p. 574.]

[14] The court warned however that “while surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of the agreement. The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract” (at para. 57).

Permitted Use of the Premises

[15] Section 6.1(a) of the lease sets out the permitted use of the premises by the Tenant:

The tenant may use the Premises for the purpose of a restaurant, including the preparation and service of food for on or off-Premises consumption, the production of beer and sale of alcoholic beverages, the operation of a seating area in the Premises and the operation of a retail store for the sale of beer and other merchandise related to and incidental to the Tenant’s busines. The Tenant may also use the Premises for any other restaurant use carried on by the Tenant in accordance with Applicable Laws.

Viva Voce Evidence

[16] The interpretation of the lease and how its provisions should be applied were the principle grounds of contention between the parties both during the period of their dealings as Landlord and Tenant and throughout the present litigation.

[17] The court principally focused on the wording of the lease, the law of both commercial tenancies and contract interpretation, and the evidence of surrounding circumstances. The viva voce evidence of the contending principals did assist the court in gaining an appreciation of why it was that the landlord/tenant relationship first sputtered and then disintegrated to the point where the parties felt themselves obliged to commence this litigation.

[18] Geoff Conway made for an excellent witness. I found him to be candid and concise. His evidence was cogent and generally consistent with the documentary evidence, including what was contained in the series of emails exchanged by the parties during the term of the lease. While it is clear that he provided only an uncertified measurement of the premises in April 2014, I accept that he was lulled into the belief that the Landlord accepted that measurement and was prepared to receive rent on that basis subject to a confirmation of the square footage at some later date. Most importantly, I accept his evidence that the Tenant continued to pay $7.40 per square foot under the lease for additional rent and the calculated rent of $9,422.82 because the Tenant never received proper audits, reconciliation statements or even estimates for the calendar years 2015, 2016 or 2017 until December 14, 2018.

[19] Henry Goldberg’s evidence was problematic. I found his testimony to be mostly muddled, vague and confusing. This was generally consistent with much of his conduct during the term of the lease and the with the content of many of his emails.

[20] Some examples will serve to illustrate the point:

1. Despite being asked by the Tenant for plans of the property on several occasions in 2014, he declined or neglected to do so. When he did finally provide a copy of a sketch, it was not of the demised premises.

2. Mr. Goldberg failed to provide a timely response to the Tenant after the latter provided him with the measurement in April 2014 which confirmed that the actual square footage of the premises was 5,106 square feet. He seemed confused with how the premises had originally been measured or on what basis rent would be calculated.

3. On September 23, 2014, Mr. Goldberg conveyed his agreement to an adjustment of the rent based upon on 5,106 square feet on the understanding that the adjustment would stay in place until he could ascertain the correct measurements to the exterior walls; yet the lease clearly called for square footage to be measured only to the interior walls.

4. Mr. Goldberg failed to raise a timely objection to the Tenant’s measurement being uncertified. The certification issue was not raised until 3 ½ years later, during the present litigation. While this might suggest an oversight or non-attention to detail on his part, I find that Mr. Goldberg was far too shrewd a businessperson not to have insisted upon a certification if he had harbored the least doubt as to the veracity of the measurement. I must unfortunately conclude that he only raised the certification issue to establish a broader base for his misguided and ill-judged decision to terminate the tenancy.

5. For much of the first term of the lease, Mr. Goldberg seemed oblivious to the Landlord’s obligation under Article 4.6 of the lease to provide written statements setting out estimates for taxes and operating costs, and detailed reconciliation statements. This despite that obligation being brought home to him via email and letter correspondence from the Tenant and/or its lawyer (emails of September 10, 2014 and June 24, 2015 from Geoff Conway and letters/emails from the Tenant’s lawyer dated September 26, 2014, June 10, 2015, June 29, 2015, June 30, 2015, and July 3, 2015). Indeed, the only genuine attempt to reconcile the rents paid versus rents owing for 2014 and 2015 came in the Tenant’s emails of November 16 and December 30, 2015 with attached detailed schedules. While that reconciliation was in no way binding on the Landlord, it is worth noting that the initiative was that of the Tenant; that the Tenant paid arrears of rent in accordance with that reconciliation; and that no timely response or challenge was received from the Landlord.

6. On December 14, 2018, in its purported notice of breach, the Landlord claimed not to have been provided with any evidence of the amount of space being occupied by Tenant. This is nothing short of mystifying. The Landlord acknowledged receipt of the architect’s measurements back in 2014 when the Landlord conveyed its willingness to accept them subject to later confirmation. Indeed, the Landlord retained Planit to measure the premises (something it was not permitted to do under the lease). This could only have been in response to receipt of the earlier measurements from the Tenant.

7. Mr. Goldberg could offer no compelling explanation as to why he did not discharge his duty to repair the premises even though the Tenant brought these concerns to his attention and went as far to claim credits against rent (letter of September 26, 2014, email of March 16, 2015).

8. Mr Goldberg failed to satisfactorily explain why, presumably with knowledge of the its rights under the lease, the Landlord would accept the Tenant calculated monthly rent over a period of more than 3 years (October 2015 to December 2018) when it lay within the Landlord’s power to challenge that calculation if it was dissatisfied with amount being paid. I find it revealing that the Landlord waited until after the Tenant had served its notice of extension in October 2018 to raise any serious concerns, all of which it could have and should have committed to writing much earlier. The court can only speculate as to the reason for the Landlord’s failure to act, protest, or complain in a timely fashion. I would not dismiss the possibility, however, that by late 2018 it was hoping to stymie the lease extension because the premises might have fetched a higher rent under a new lease with a different tenant.

9. During Mr. Goldberg’s viva voce evidence, he offered the following commentary, answers, or positions, none of which I accept, and which undermined his overall credibility:

i) he claimed that the mezzanine ‘detail’ was lacking in the sketch of the premises sent to him on April 5, 2014, and then went so far as to suggest that the mezzanine was ‘cut out.’ I find this to be nothing more than a very transparent attempt to persuade the court that he was unaware of the existence or size of the mezzanine back in 2014.

ii) Rather too conveniently, Mr. Goldberg could not recall when he first brought his concerns about the exterior shed to the Tenant’s attention. He then sheepishly suggested that when he first discovered the exterior shed, he let it go because he wanted his Tenant to do well. This begs the question of why he ultimately made an issue out of it. I find that he knew about the exterior shed from the time of its installation onward but only raised it as part of his design to build a stronger foundation for termination and non-renewal.

iii) Mr. Goldberg claims to have sent a 2015 reconciliation statement to the Tenant in response to its request of May 30, 2016. The statement was sent “most likely by mail” since that was “what the staff was doing at the time.” That is simply not believable. There was no staff person called to verify that; no cover letter has ever been produced; and it was apparent that the predominant method of communication between Landlord and Tenant was email.

iv) Mr. Goldberg could provide no credible explanation as to why, on June 30, 2017, he was promising to forward the Tenant a 2016 reconciliation statement if the 2016 reconciliation statement dated June 19, 2017 already existed at the time and if, as he claims, it had already been sent out by mail. I find that the June 19, 2017 statement was back dated, no doubt as an attempt to later argue that it was completed and delivered in compliance with the time requirements in the lease.

v) I cannot accept Mr Goldberg’s evidence that when, on September 27, 2018, he suggested to the Tenant that they “meet to go over the reconciliation for rent and tmi” it was because the statement had already been sent to the Tenant. There is no independent, verifiable evidence that such a statement was created or sent. I accept Geoff Conway’s evidence that no such reconciliation was received by the Tenant.

vi) I cannot accept Mr Goldberg’s evidence that he failed to see the Tenant’s notice to extend dated October 28, 2018, because it might have “bounced around” and because he receives 400 emails per day. This is too implausible an explanation. I find it far more likely that he conveniently ignored the renewal notice so that he could later claim not to be bound by it.

vii) When he ultimately responded to the extension notice on December 14, 2018, Mr. Goldberg advised the Tenant that he had no evidence that the rentable area of the premises was 5,106 square feet. Previous correspondence confirms that he had received that measurement, conditionally accepted it and that the parties had calculated rent on that basis for several years. For Mr. Goldberg to then suggest that there had been “no evidence” of the square footage of the rentable area was nothing more than a transparent attempt not to be bound by either the measurement and or the lease renewal, the combined effect of which would pay him less rent for the premises than he was seeking.

viii) Mr. Goldberg used the square footage he had obtained from Planit as the basis to default the Tenant; yet he admitted that under the lease, he had no right to re-measure the premises. His admission that he was unaware at the time that the lease did not afford the Landlord this right is telling. It is apparent that the Mr Goldberg was either ignorant of, or indifferent to, many important aspects in the lease.

ix) When asked for details of charges of $2,389.96 related to “Julian” which he attempted to pass on to the Tenant, Mr. Goldberg suggested that what he provided would be sufficient for accounting or CRA purposes. He could not help but agree that the charge for Ness consulting did not even state what property it was related to. I find these to be examples of his neglect of duty as a Landlord to provide accurate and detailed statements and information to his Tenant.

[21] Overall, Mr. Goldberg’s evidence did not aid the Landlord’s case. Where there was a conflict between the evidence of Mr. Conway and Mr. Goldberg, I prefer the evidence of the former.

[22] It is against the backdrop of the above findings and the dense documentary record, that I now turn to a discussion of the issues.

Discussion of Issues

A) The Validity of the Notices of Default

[23] In its written submissions, the Landlord suggests that the issue of the validity of the notices of default delivered to the Tenant is moot and of no practical consequence to the parties.

[24] The Tenant disagrees. It contends that it was compelled to commence these proceedings and seek the injunctive relief following delivery of notices of default in which the Landlord threatened termination of the lease.

[25] I find it necessary to adjudicate on the issue. The validity of the notices may have some bearing on the other issues. Moreover, any finding on the validity of the notices may serve as a factor for the court to consider when determining costs.

[26] Under the Default and Termination section of the lease, Article 12.1 provides (in part) as follows:

12.1 Default by Tenant

If during the Term:

(a) any Rent is not paid within 10 days written notice from the Landlord: or

(b) the Tenant breaches any of its covenants or obligations under this Lease (other than in respect of the payment of Rent) and does not remedy the breach within 20 days after receipt by the Tenant of written notice of default from the Landlord (or, if any breach reasonably requires a longer period to remedy, the Tenant has not commenced to diligently remedy that breach within 20 days after receipt of the Landlord’s notice);

then the Landlord may, at its option, by written notice to the Tenant terminate this Lease and the Landlord may re-enter and repossess the Premises, without prejudice to any other rights or remedies which the Landlord may have (including any right to commence an action for damages for loss of the balance of the Term).

[27] I note that nothing in the above article would serve to nullify or supplant s. 19(2) of the CTA. The Landlord’s notices were therefore subject to both contractual and statutory provisions.

[28] The Court of Appeal described the purpose of such notice provisions in 780046 Ontario Inc. v. Columbus Medical Arts Building Inc., 1994 CanLII 1188 (ON CA), [1994] O.J. No. 2282 (Ont. C.A.), at p. 14:

Notice is a protection to the tenant. Its purpose is to warn the tenant that its leasehold is at risk and to give the tenant an opportunity to preserve that interest by remedying the breaches complained of and, where necessary by compensating the landlord. Because courts have not looked favourably upon the remedies of re-entry, forfeiture, and termination they have insisted that landlords strictly comply with the notice requirements in s. 19(2) of the [CTA].

[29] Since the Tenant’s attempt to renew the lease in October 2018, the Landlord has delivered three separate notices of default dated: December 14, 2018; June 26, 2019; and September 1, 2019.

[30] I find that all three purported notices to be invalid. One, none of the three notices contains wording “requiring the lessee to make compensation for the breach” as required by s. 19(2) of the CTA. Two, the Landlord failed to provide the Tenant with the requisite notice as required by both Article 12.1 of the lease (a ten day cure period for monetary defaults and a twenty day cure period for non-monetary defaults) and s. 19(2) of the CTA (which provides that a commercial landlord must give the tenant a “reasonable time” within which to remedy a purported breach). Finally, I am of the view that the post-notice conduct of the Landlord in accepting the rent was an unequivocal act recognizing the continued existence of the lease. This did not amount to a waiver of Landlord’s right to rely on the alleged defaults in the future or to seek higher rent going forward; but I find that the acceptance of the rent did serve to waive any right the Landlord may have had to terminate based upon the alleged breaches set out in those specific and respective notices. Authority for that proposition can be found in the decision of this court in 1328773 Ontario Inc. v. 2047152 Ontario Ltd., 2013 ONSC 4953, [2013] O.J. No. 3575, at para. 23. The Landlord’s acceptance of rent while in possession of knowledge of the facts upon which its right to re-enter might have arisen amounts to waiver of any rights to re-enter based upon the particular notices: see Delilah’s Restaurant Ltd. v. 8-788 Holdings Ltd., 1994 CanLII 3170 (BC CA), [1994] B.C.J. No. 1340 (B.C.C.A.), at para. 29. Like the court in that decision, I am of the view that the non-waiver clause in Article 17.3 of the lease would not apply in these circumstances.

B) Rentable Area of the Premises

[31] The parties disagree on what constitutes the rentable area of the premises upon which the Tenant must pay rent.

[32] The Tenant argues that, as far back as 2014, it secured architectural drawings which established that the rentable area was 5,106 square feet. Barill Engineering Limited has now certified this as an accurate measurement of the rentable area. The parties never intended that the mezzanine would form a part of the rentable area. Moreover, in the notices of default from both 2015 and December 2018, the Landlord demanded payment of rent in accordance with new measurements which did not depict or included the mezzanine. The exterior shed was constructed in 2014. At no time prior to the commencement of the present litigation did the Landlord suggest that square footage of the shed should be included in any measurement of the rentable area of the premises.

[33] The Landlord contends that the Tenant’s 2014 architectural drawings were not certified and therefore did not comply with the strict requirements of the lease. As well, it argues that the 781 square footage of the mezzanine should be added to the rentable area of the premises. Unlike in the offer to lease, the mezzanine was not specifically excluded from the measurement of square footage in the lease. This serves as proof of a mutual intention that any mezzanine would be added to any square footage calculation. There is no doubt that the exterior shed sits upon the common area and outside of the demised premises. The Landlord argues that while section 6.1 of the lease grants the Tenant a broad right to operate its business, this should be confined to the premises and not the exterior of the premises. Should the court find that the Tenant is permitted under the lease to house its brewing equipment on the exterior of the premises, then the Tenant ought to pay rent for the use of that space.

[34] The issue of the square footage of the rentable area was complicated by the fact that the precise area of the rentable premises remained uncertain for some time. The parties now agree that the floor area of the rentable premises is between 5,106 square feet and 5,112 square feet, while the mezzanine comprises 781 square feet and the exterior shed measures 62 square feet. The question remains: what square footage the Tenant should have been paying rent on for the term of the lease.

[35] In the offer to lease, the terms “Premises” and “Leasable Area” are defined as follows:

Premises: Shown as Units 1 & 2 on the site plan (the ‘Site Plan’) attached hereto as Schedule ‘A’ advertised as 5,600 square feet of leasable area in the Shopping Centre.

Leasable Area(s): The Landlord and Tenant agree that, should the actual square footage of the Premises differ from the area stated herein, the minimum and additional rent shall be adjusted to reflect the measurement to be certified by an architect to inside face of walls of the Premises excluding any mezzanine areas.

[36] In section 1.2 of the lease itself, the term “Rentable Area of the premises” is stated to mean “the rentable areas of the Premises, expressed in square feet, measured from (a) the inside surface of all walls, doors, and windows of the Premises.”

[37] At the same time, section 1.1(e) of the lease provides merely an approximation of the square feet (5,600) which was however, “subject to certification in accordance with Section 3.7.”

[38] Section 3.7 of the lease provides as follows:

The Tenant may have the Rentable Area of the Premises measured and certified by the Tenant’s architect or surveyor, and upon any such certification, will provide the Landlord with a certificate of measurement setting out the Rentable Area of the Premises. If the certified Rentable Area of the Premises is different than that set out in Section 1.1 (e), the Rent will be adjusted in accordance with the measured area, which adjustment will retroactive to the later of: (a) the Commencement Date; and (b) the date of any change or alteration in or to the Premises, which increases the Rentable Area of the Premises.

[39] Availing itself of the certification option in section 3.7, the Tenant delivered architectural drawings to the Landlord in April 2014 which purported to establish that the rentable area of the premises was only 5,106 square feet.

[40] Subject to what is set out below in respect of the exterior shed space only, I find that the rentable area of the premises as defined in the lease does not include either the mezzanine or the exterior shed. The Tenant is not required to pay rent under the lease for either. I find that Tenant is only required to pay rent on 5,106 square feet under the lease.

[41] First, there is reliable evidence in the 2014 architectural drawings that the premises from the inside surface of all walls, doors and windows measured 5,106 square feet. I am not troubled by the fact that these architectural drawings were not initially certified. While, strictly speaking, section 3.7 required certification by an architect or surveyor, that is only one factor that I would consider in assigning weight to that evidence. In the absence of evidence that those measurements are flawed or unreliable, I find that the lack of certification does not impact the reliability of those 2014 measurements. As well, those measurements were certified as accurate by Barill on December 31, 2019.

[42] Second, I would interpret section 1.2 of the lease to simply mean the square footage measured at the ground floor encompassed within the walls of the building structure. I find that “rentable area of the premises” cannot bear the interpretation suggested by the Landlord. I am not persuaded that I should strain its meaning to do so. There is simply nothing in the lease or any other document to suggest that a mezzanine installed by the Tenant (above washrooms and an office also installed by the Tenant) should be added to the calculation of square footage of the rentable premises.

[43] Third, while of significant benefit to the Tenant, the mezzanine differs from cupboards and shelves only in terms of dimension and use. That the Tenant has installed and utilized a mezzanine as part of its business operations attests to its efficiency and resourcefulness. Moreover, the Tenant installed the mezzanine during the build out period. Since it did not exist at the time of the execution of the lease and was erected solely by the Tenant, the mezzanine was not rentable space for the Landlord to lease and garner income from in the first place.

[44] Fourth, when the Landlord retained Planit to measure the square footage of the premises, the diagram/sketch produced and dated July 21, 2015, includes the following note: “Mezzanine: Not Measured (as per client’s instructions).” In the covering email enclosing that Planit diagram, the Landlord states that, “I am attaching the measurements to set out the amount of space you currently occupy.” Had the Landlord really believed that he was entitled to charge rent on the square footage of the mezzanine, he would hardly have instructed Planit not to measure it. As well, I find that the Landlord’s choice of the words, “the amount of space you currently occupy”, simply confirms its understanding that the mezzanine was not space to be included in calculating the square footage of the premises.

[45] Fifth, while the offer to lease was not binding upon the parties, it forms part of the circumstances surrounding the execution of the lease. This helps to shed light upon the subjective beliefs of the parties at the time. The mezzanine was specifically excluded in the offer to lease. It would make sense that, if a future mezzanine were to be included in the rentable area definition, it would have been specifically referenced in section 1.2 or elsewhere in the lease. The respective documents were relatively close in time to each other. I find that the Landlord would have been alive to the potential for, or the contemplation of, a mezzanine because of it being referenced in the offer to lease. In my view, its omission represents a mutual understanding that it was not to be included.

[46] Sixth, there is further conduct by the Landlord during the term of the lease which is consistent with its understanding that the mezzanine would not form part of the rentable area : (i) for more than a year, it did not dispute or challenge the Tenant’s 2014 architectural drawings and square footage measurements. Those architectural drawings depict the mezzanine. I must infer from this conduct that the Landlord accepted that the mezzanine would not be included in any calculation of rentable area; (ii) the Landlord demanded rent in notices of default in both 2015 and December 2018 based upon measurements it obtained which did not depict or include the mezzanine.

[47] In respect of the exterior shed, I find that it falls outside of the definition of “rentable area of the premises” because it is not located within the inside surface of all walls, doors, and windows of the premises. It cannot therefore be considered as part of the rentable area for the purposes of calculation of rent.

[48] The question of whether of whether the Tenant should be obligated to compensate the Landlord for the use of that shed space will be addressed in paragraph (I) below.

C) Structural Alterations or Alterations, Additions, and Improvements?

[49] I turn now to the question of whether the construction of the shed, the installation of the front windows and the erection of the mezzanine constitute structural alterations or merely alterations, additions and improvements as defined in Article 10.2 of the lease.

[50] I note with interest that the Landlord, in its counterclaim, does not seek an order compelling the Tenant to remove either the exterior shed or the front windows. Rather it seeks a declaration that the construction of the shed and the front windows are structural in nature and/or that the Tenant ought to pay rent for the use of the shed space from the commencement date. Only in its written submissions does it seek an order that the Tenant “return the windows to their original state at its expense.” There is no similar request for the removal of the exterior shed or the equipment it houses.

[51] Article 10.2 deals with the Tenant’s right to make alterations to the premises. That article reads (in part) as follows:

a) The Tenant may, at its expense, make, or permit any assignee or subtenant to make, any alterations, additions, and improvements to the Premises as the Tenant, acting reasonably, considers suitable or necessary

b) Before proceeding with any structural alterations to the Premises or any alteration affecting the base building systems of the Premises, the Tenant will submit the design and details of the proposed alterations to the Landlord for its approval (not to be unreasonably withheld or delayed).

[52] The word “structural” is not defined in the lease. In the context of a commercial lease, it has been described as, “one which is necessary to hold the building together, such as foundations, walls, roofs and floor, as opposed to an element which is necessary only for the use made of the building such as internal wall, stairways and windows or merely decorative such as carpeting, mirrors, murals and planters”: see Richard Olson, A Commercial Tenancy Handbook (Toronto: Thomson Reuters Canada, 2004) (loose-leaf updated 2020) at 3-60.

[53] While the Landlord did not seek a declaration that the erection of the mezzanine constituted a structural alteration, for the sake of completeness, I find it necessary to consider that issue. The mezzanine represents nothing more than the Tenant making better use of the empty space within the rentable area of the premises. There is no evidence that the mezzanine has in any way impacted the foundation, walls, roof, or floor of the structure. While a 781 square foot mezzanine does alter the quality of the leased premises, it does not serve to expand the cubic dimensions of the space. The evidence fails to persuade me that the erection of the mezzanine has had any impact on what holds the building together. In my view, the mezzanine falls withing the broad category of “alterations, additions and improvements” envisaged under Article 10.2(a) of the lease.

[54] I am not prepared to find that the brewing equipment or exterior shed represent a structural alteration to the premises. They are certainly an addition and from the Tenant’s viewpoint, no doubt, they are an improvement; but they cannot reasonably be considered structural alterations or alterations affecting the base building systems of the premises.

[55] I find that the three front windows do not qualify as structural in nature. These were custom made roll up garage doors which simply replaced pre-existing windows in the same space. According to Geoff Conway, those windows had become prone to drafts in the cold weather and the conduction of heat in the warm weather. Their replacement was motivated by customer complaints. The evidence establishes that the bars running horizontally along the length of the outside of those windows were inserted for aesthetic and safety reasons. They are held in by two screws on either end. They do not expand the rentable area of the premises.

[56] There is no evidence that the above additions and modifications threatened, altered or compromised the structural integrity of the building, for example by affecting the load bearing capability of the floor or reducing or enlarging the square footage of the rentable area of the premises by gouging out or shifting walls. Nor would I consider them to have had any impact upon the base building systems.

D) TMI and Operating Costs

[57] Article 4 of the lease governs how taxes, utilities and operating costs were to be dealt with over the term of the lease.

[58] The term “Operating Costs” is defined in the definitions section of the lease. The definition encompasses such expenses as cleaning, repair and maintenance of the common areas, parking lot resurfacing and lot lighting. It also includes, “an administration fee equal to 15% of the costs referred to above. No other administrative, supervisory or management fee will be payable in respect of any other amounts payable under this lease.”

[59] Article 4.3 of the lease provides that during the term, the Tenant will pay the Landlord Proportionate Share of Real Property Taxes assessed or levied in respect of the Centre. “Centre” is defined in the definitions section as, “the Landlord’s Lands, the Building and all other buildings and improvements from time to time located on the Landlord’s Lands.”

[60] Section 4.5 of the lease stipulates that during the term of the lease, the Tenant will pay to the Landlord the Tenant’s proportionate share of operating costs in accordance with the terms of section 4.6.

[61] Section 4.6 of the lease reads as follows:

4.6 Payment of Proportionate Share

a) The Landlord will, acting reasonably and in good faith, estimate in advance the Proportionate share of Real Property Taxes and the Proportionate Share of Operating Costs for each Calendar Year or each Year of the Term, as the Landlord may decide, and prior to the commencement of the applicable period, the Landlord will provide the Tenant with a written statement setting out the Landlord’s estimate for that period. Prior to the Commencement Date, the Landlord will provide written evidence to the Tenant from the Landlord’s architect or surveyor confirming the Rentable Area of the Centre.

b) The Tenant will pay to the Landlord the estimated amounts in monthly instalments in advance together with each payment of Minimum Rent.

For the First Year of the Term, the Tenant’s Proportionate Share of Real Property Taxes and Tenant’s Proportionate Share of Operating Costs are estimated to be $7.40 per square foot of the Rentable Area of the Premises in the aggregate.

[62] Article 4.7 contains the following provisions for “Adjustments”:

(a) Within 150 days of the end of the relevant Calendar Year or Year of term, as applicable, the Landlord will deliver to the Tenant a Statement or Statement of Real Property Taxes and Operating Costs.

(b) The Statement(s) will:

i) be in reasonable detail.

ii) be certified to be correct by the chief financial officer for the Landlord; and

iii) show the calculation of the Tenant’s Proportionate Share of Real Property Taxes and the Proportionate Share of Operating Costs.

(h) If the Landlord has not delivered to the Tenant the Statement within 9 months after the end of the Calendar Year or Year of Term, as applicable, the Landlord will not be entitled to recover any additional amounts from the Tenant on account of Operating Costs with respect to the applicable period. Notwithstanding anything to the contrary, in no event may the Landlord seek an adjustment to any Statement provided to the Tenant unless requested in writing within 2 years of the delivery of the Statement the Landlord is seeking adjustment for.

[63] Article 4.8 of the lease provides the Tenant with the right, “for a period of 2 years after receipt of the Statement(s) set out in Section 4.7, to audit the Landlord’s records to verify the accuracy of the Statement.”

[64] I find that the Landlord had a mandatory, strict, ongoing, annual obligation to provide the statement of taxes and operating costs to the Tenant under Article 4.7 (a) failing which the Landlord would forfeit the right to collect any additional amounts from the Tenant for operating costs for that period. Put another way, the Landlord’s failure to comply with the strict wording of Article 4.7 would have the effect of leaving the Tenant’s proportionate share of operating costs and taxes for the previous year unchanged. This is consistent with sound commercial practice and expediency. A Tenant would want to know as soon as possible about the estimate of additional rent for the purposes of budgeting and setting prices for its own retail sales.

[65] The safeguard for the Tenant is then two-fold: one, within 150 days of the relevant calendar year or year of term, the Landlord must furnish a reasonably detailed and certified statement containing the calculations of the Tenant’s share of operating costs and taxes for that period; two, the Tenant is afforded a two-year window within which to audit the Article 4.7 statements.

[66] The evidence in this case persuades me that the Landlord has never provided an estimate of additional rent in advance of any lease year, has never reconciled estimated versus actual additional rent within 150 days of the end of any lease year and has never diligently responded to Tenant’s audit requests made for the years 2014, 2018 and 2019.

[67] I do not accept the Landlord’s assertion that he delivered reconciliation statements for 2015, 2016 and 2017 in compliance with the lease..

[68] One, the first “paper” record of these statements being delivered under cover is December 14, 2018. There are no covering letters, proof of delivery or accompanying communications for these statements prior to December 14, 2018. This is well beyond both the 150-day period [Article 4.7(a)] within which the reconciliations statements were due for those years and the 9-month period after term for at least the years 2015 and 2016 [Article 4.7(h)], which nullifies any right of the Landlord to claim additional amounts for operating costs for those years.

[69] Two, even if the statement dated June 18, 2017 was provided to the Tenant on or near to that date (which I do not accept), then for the purposes of additional rent for the year 2015 it is, in any event, dated beyond both the 150-day period called for in Article 4.7(a) and the 9 month period found in Article 4.7(h), rendering the statement a nullity for the purpose of claiming additional rent for that period.

[70] Three, I do not accept the Landlord’s suggestion that he would have sent the statements out by regular mail. Electronic mail is a far more efficient, expedient, and inexpensive mode of communication; and it was overwhelmingly the preferred method by which the parties corresponded in the course of their dealings.

[71] Four, the Landlord failed to adequately explain why he would advise the Tenant by email on June 30, 2017, that he would forward a reconciliation statement for 2016 to the Tenant the following month given that the 2016 statement is dated June 19, 2017 (i.e. eleven days earlier).

[72] Five, and in any event, the purported TMI statements provided by the Landlord do not contain reasonable detail, were not certified to be correct by the chief financial officer for the Landlord, and do not contain a proper calculation of the Tenant’s Proportionate share of real property taxes and operating costs. They are therefore not in compliance with the lease and are invalid. In the case of the May 21, 2015 reconciliation statement pertaining to 2014, this was expressly brought home to Landlord in the days and weeks after its delivery. The line for “Operating Expenses 2014 Your Share – for the full year” is supported by absolutely no back-up, detail, or calculation of how the figure of $40,050.55 was arrived at.

[73] Six, in the case of the January 30, 2019 statement, it claims base rent at $13 per square foot for all of 2019; the base rent increase was not to begin until the next term which would only commence on July 1, 2019.

[74] Finally, I accept the evidence of Mr. Conway that the Tenant never received these statements prior to December 14, 2018. The inexorable conclusion to which I am drawn is that the Landlord failed to comply with its positive obligations in Article 4.7 to provide an estimate in advance, to provide reconciliation statements and, on at least three occasions, to allow for an audit for the lease years in question.

[75] In conclusion, the cumulative failure of the Landlord to adhere to the procedures set out in the articles above served to deprives it of the right to claim any additional rent for the lease year in question beyond the $7.40 per square foot stipulated for year one. Concomitantly, that failure served to relieve the Tenant from any obligation it might have had to pay additional rent at more than $7.40 per square foot. Since the Tenant was never contractually obligated to pay what the Landlord demanded for additional rent, his decision not to do so did not result in a default on the lease. Nor should the Tenant’s agreement to pay the demanded increased additional rent from time to time (as it did conditionally on September 19, 2014) or to pay disputed amounts into its lawyers’ trust account (from June 27, 2019) serve to establish that those amounts represent properly constituted additional rent owing under the lease.

E) The Landlord’s Covenant to Repair

[76] Article 9.2(b) of the lease sets out the Landlord’s obligation to maintain, repair and replace the building in which the leased premises were located. It reads as follows:

the Landlord will at all times during the Term maintain, repair and replace the Centre and all Common Areas and facilities in good condition, repair and working order as would a prudent owner, having regard to the age, location, and condition, except for reasonable wear and tear. For clarity, this obligation includes, without limitation, maintenance and repairs to and replacements of all doors, plate glass loading docks, floors, roofs fixtures, electrical, mechanical, plumbing, heating, air-conditioning, sprinkle and other systems and equipment forming part to the Centre of the Common Areas and not located within the interior of the Premises, all structural components of the Building and driveways, sidewalks, curbs, landscaped areas and parking lots.

[77] The evidence establishes that the Tenant has incurred costs of $29,352.53 to effect repairs and maintenance to the roof and HVAC systems since the commencement of the lease. In its written submissions, the Tenant parses out eight of those expenses as having been incurred and paid for within two years of the commencement of these proceedings by way of application. Those items total $7,159.04.

[78] Without conceding the point, the Tenant is tacitly admitting that, since its claim for these expenses arises indirectly out of the Landlord’s breach of its covenant to repair, its remedy would lie in damages within an action that would be subject to the Limitations Act, 2002, S.O. 2002, c. 24. There is no right under the lease for the Tenant to claim set off against unproven damages for unpaid rent. That being the case, and so I find, that any claim for Tenant borne repairs which should have been the responsibility of the Landlord, but which predate December 2017, are statute barred.

[79] In respect of the surviving items, the invoices filed do support the claims made. I find that they relate to items which were within the responsibility of the Landlord to repair and maintain. There is no evidence that any of the repairs were unnecessary or unwarranted. I find it highly unlikely that the Tenant would undertake these repairs and maintenance if they were unnecessary. I find it equally unlikely that the Tenant would absorb these charges with a view to claiming them as set-off against rent or advancing them as a defence to any future default proceedings. The cost of these repairs should have been borne by the Landlord; it follows that they should fall on the Landlord’s side of the balance sheet as an amount owing to the Tenant. While I would stop short of finding that these failures to repair constitute a breach of the covenant of quiet enjoyment, they do constitute a breach of the terms of lease on the part of the Landlord and are deserving of a remedy. I would therefore award the Plaintiff its damages for the cost of these repairs in the amount of $7,159.04.

F) The Exercise of the Option to Renew the Lease

[80] I accept that the option to renew was exercised by the Tenant in accordance with Article 15.1 of the lease by way of its notice of October 28, 2018. That notice was given well before the deadline of six months prior to the end of the lease term. The notice was clear, explicit, unambiguous, and unequivocal. I am unable to agree with the Landlord that the notice was invalid because the option was being exercised on conditions. The Tenant was doing nothing more than confirming the extension based on the provisions of the lease (including an increase in base rent to $13) and the reality on the ground (that the rentable area of the premises was 5,160 square feet). Had the Landlord felt that the notice was insufficient or irregular, the time to advise the Tenant of that position was immediately upon receipt of it. One can only imagine the chaos that would ensue if a commercial Landlord were permitted to challenge the sufficiency of a notice to renew months after it was given, all the while accepting rent from a Tenant who, in choosing to renew the lease, had not only committed to its continuing obligations under the lease but no doubt would be operating its business with the assurance that its tenancy was secure. Finally, I have found that the Tenant was not in default under the lease and was therefore fully within its contractual and legal rights to exercise the option.

[81] The court declares that the Tenant validly exercised its option to renew the lease and is entitled to continue quiet enjoyment and possession of the premises in accordance with the lease.

G) Breach of the Lease by the Landlord

[82] The Landlord failed to adhere to the provisions of the lease requiring it to provide the estimates and statements for operating costs envisaged in Article 4.7. This constitutes a breach of contract.

[83] The Landlord also breached its covenant to repair for the reasons set above.

[84] For these breaches, the Tenant is entitled to the remedies I have outlined above: there can be no increase in the additional rent until those articles are complied with. In terms of the breach of the covenant to repair, the Tenant is entitled to recover its cost of repairs by way of damages as outlined above.

[85] I am not prepared to find any negligent administration of the lease by the Landlord. In my view, it is a somewhat pointless exercise to embark upon in any event. The parties’ relationship was at all times governed by contractual terms. To the extent there is a breach by one party or the other, the remedy to the aggrieved party is either available under the terms of the lease of under the law of contract.

[86] Nor I am prepared to find a breach by the Landlord of the Tenant’s right to quiet enjoyment of the premises. A breach of this nature would require a finding that the Landlord’s interference with that right has been both grave and permanent such that it renders the premises substantially less fit for the purposes for which it was leased: see London Prestige Ltd. v. Wellington Harlech Centre Inc., 2019 ONSC 2364, at para. 31.

[87] There is insufficient evidence to find that the Landlord’s failure to repair left the premises substantially less fit for the purposes for which they were leased. The evidence suggests that the Tenant’s business has been highly successful and has suffered little because of the Landlord’s actions. The Landlord’s threat to lock it out was certainly baseless, obtuse and no doubt unsettling for the Tenant; but the evidence fails to establish that there was any loss of revenue, reputation, or opportunity because of it. Whether out of ignorance, stubbornness or the receipt of poor advice, the Landlord remained under the mistaken belief that the Tenant had defaulted and that this gave the Landlord the right to lock the Tenant out the premises. It was wrong; but I am not persuaded that this rises to the level of a breach of the right to quiet enjoyment.

[88] Finally, the discussions over the potential for a patio during the first summer of the COVID-19 pandemic did not bear fruit; but there is nothing in the lease or at law which served to compel the Landlord to accede to or cooperate with the Tenant’s plans in that regard. Undoubtedly, the Landlord’s apparent reluctance to assist his Tenant during a difficult time was a source of disappointment but I find it has no bearing on the issues that I must decide.

H) The Landlord’s Claim for Pre-Litigation Costs

[89] I am not prepared to award an amount to the Landlord for any pre-litigation legal costs which pre-date the commencement of the proceedings. I am not aware of any motion which was brought or abandoned; the application was converted into this present action. I find that, in the face of the Landlord’s threats to terminate the lease, engage a bailiff or otherwise re-enter the premises, the Tenant was justified in holding out legal action as a recourse. Faced with an existential threat to its business, the Tenant was entirely within its right to brandish the weapon of a civil process. To the extent that the parties have incurred recoverable costs throughout these proceedings, they will have the opportunity to address that issue with the court at a later date.

I) Allowable Non-Lease Based Rent for the Shed Space

[90] As set out above, I am not prepared to stretch the meaning of “rentable area of the premises” to include any portion of the exterior or common areas. There is nothing that would permit me to do so in the lease and that definition cannot support a more liberal interpretation.

[91] However, the Landlord does seek rent in lieu of a declaration that the exterior shed forms part of the rentable area of the premises or constitutes a structural alteration.

[92] This seems only fair. The Tenant has made bold with an exterior space which does not form part of the demised premises under the lease. The exterior shed is an “addition” for the purposes of Article 10.2 of the lease since it sits outside of the premises. Nonetheless, that shed space occupies a portion of the common areas for which the Landlord pays taxes and insurance. In the face of such unilateral action on the Tenant’s part, the task of the court is to first determine whether rent would be fair recompense for the unauthorized use of a small portion of the common area. In doing so, I bear in mind that the exterior shed space abuts the premises and does not appear to be in a location which would serve any useful purpose or would otherwise be a source of revenue for the Landlord.

[93] I am prepared to assess and impose rent for the Tenant’s unauthorized use of the exterior shed space. In my view, the Tenant’s obligation to pay rent for that space is independent of the lease itself such that the “Entire Agreement” Article 17.6 does not apply. It constitutes rent outside of the lease or what I would term “non-lease-based rent.” This imposed obligation is justified based upon fairness, equity, and commercial exigencies.

[94] The question then becomes: what is the appropriate rate for that non-lease-based rent? What would a reasonable tenant in the position of the Plaintiff pay to house important brewing equipment safely on the exterior of the leased premises? What would he expect to be charged? How much would a reasonable landlord expect to receive?

[95] These questions are difficult to answer but suffice to say that one could anticipate a square footage rate at something less than the minimum and additional rent combined. The space occupied by the shed is small and essentially appurtenant to the leased premises. I cannot conceive of a means by which it could otherwise serve as a source of revenue for the Landlord. There was certainly no evidence introduced in that regard. On the other hand, the exterior shed space has been put to profitable use by the Tenant while the Landlord continues to own it, insure it and pay taxes on it. Geoff Conway went as far as to state that the brewing equipment is 100% essential to his business.

[96] I conclude that the amount for the non-lease-based rent for the exterior shed space should be 50% of the combined rent for the premises of $20.40 per square foot, or $10.20 per square foot. There is no evidence before me that the Landlord has in any way had to maintain or service that shed space; indeed by first installing that brewing equipment in the space and building the enclosure which houses it, the Tenant has effectively appropriated the shed space and with all, taken on the care, control and maintenance of it. I find this is a fair and reasonable rate for the use of a space which is vital to the Tenant but of no utility to the Landlord.

[97] For the 62 square feet, that equates to $632.40 per month. The Defendant issued its counterclaim on January 29, 2021, claiming in subparagraph 32(i) (alternative to other relief) for rent for the exterior shed retroactive to the commencement date.

[98] I would award the Landlord non-lease-based rent retroactive only to February 1, 2019. As of that date, the evidence establishes that the Landlord certainly knew about the existence of the exterior shed and the equipment which it housed. The 2-year limitation period in the Limitations Act, which I have found operates to disentitle the Tenant to claim damages for breach of the covenant to repair for more than two years beyond the commencement of its application, should similarly operate to disentitle the Landlord to claim arrears on non-lease-based rent beyond 2 years from when the counter-claim was issued.

[99] Calculated over the 34 months between February 1, 2019, and December 1, 2021, this yields the sum of $21,501.16.

[100] The Landlord is entitled to recover that amount for non-lease-based rent for the exterior shed space from the Tenant by way of judgment. There shall also be a declaration that, commencing December 1, 2021, the Tenant shall pay the Landlord monthly the amount of $632.40 as non-lease based rent for the exterior shed until such time as the Tenant ceases to utilize that space, the parties agree otherwise or the end of the term, whichever comes first.

The Issue of Waiver—Article 17.3

[101] I find the waiver clause in the lease cannot serve to revive, maintain, or advance any rights in the present litigation that the respective parties once had or might otherwise have had. The Tenant was never in breach of the covenants of the lease so there is no default for the Landlord to waive. The Landlord failed to comply with the provisions of the lease related to advanced estimates, reconciliation statements and audits; accordingly, he was not contractually entitled to levy or collect additional rent at the higher rate that he now seeks. It is true that the Tenant often paid higher rent than he might have had to because it was demanded of him by the Landlord but I am not prepared to find that the waiver clause should now serve to entitle him to recover monies paid under the lease. The Tenant is presumed to have known of his rights, duties, and obligations under the lease. Had the Tenant opted to seek direction from the court rather than accede to the Landlord’s rent/arrears demand, he might have received the lease interpretation he was looking for or an earlier declaration that disputed funds could be paid into court pending adjudication of contentious issues by the court.

[102] The funds paid into court to the credit of the application/action are a different matter. Those amounts were paid as a condition of the injunction and to the credit of the application/action. Those funds should be made available first to satisfy any net judgment owing to the Landlord. The balance of those funds should then be returned to the Tenant because it has prevailed on the twin issues of square footage and additional rent; it was largely based upon those disputed issues that the additional funds were paid into court.

[103] I have found as a fact that the square footage of the rentable space was 5,106. The mezzanine is not rentable area under the lease; nor is the exterior shed. The Landlord never had any right to collect any lease-based rent for those two spaces so there was nothing for it to waive. Waiver did not extinguish a portion of the Tenant’s claim for repair costs or the Landlord’s claim for non-lease-based rent; the operation of the Limitations Act did.

Orders and Declarations

[104] For the foregoing reasons, there shall be the following orders and declarations:

a) The lease was validly extended by way of the notice to renew given by the Tenant October 28, 2018, and the Tenant is entitled to quiet enjoyment of the Premises under the lease for the balance of its term.

b) The Landlord’s notices of default are not valid. The Tenant is not in default under the lease and the Landlord shall continue to be enjoined from locking the Tenant out or terminating the lease based upon the invalid default notices in question.

c) The Rentable Area of the Premises is 5,106 square feet and shall not include the mezzanine, the exterior shed or the front windows.

d) The Tenant’s alterations/additions of the mezzanine, the exterior shed, and the front windows are not structural and do not require the approval of the Landlord. The Tenant need not remove them.

e) The Landlord’s TMI reconciliation statement dated January 30, 2019, is invalid.

f) The Landlord’s TMI reconciliation statements for the years following 2014 are invalid.

g) The Tenant shall continue to pay additional rent at the rate of $7.40 per square foot until such time as the Landlord complies with the relevant articles of the lease.

h) The Tenant shall pay arrears of non-lease-based rent for the exterior shed space to the Landlord in the amount of $21,501.16 to November 30, 2021.

i) The Landlord has breached its covenant to repair. The Landlord shall pay the Tenant its damages for repairs in the amount of $7,159.04.

j) In order to satisfy these competing judgments, the amount of $14,342.56 shall be paid out of the monies currently being held in court to the credit of the action to the Landlord forthwith.

k) The payment set out in sub-paragraph (j) above shall serve to satisfy the competing judgments set out in (h) and (i) above.

l) The Tenant shall continue to pay to the Landlord the monthly sum of $632.40 as non-lease-based rent for the exterior shed space until the earlier of the Tenant ceasing to utilize that shed space, the parties agreeing otherwise, the termination of the lease or further court order.

m) The balance of the monies currently being held in court to the credit of the application/action shall be remitted to the Tenant forthwith.

n) The balance of the claims for damages or other relief are dismissed.

[105] Should the parties be unable to agree on the issues of costs, pre-judgment interest or the form and content of any judgment, they shall take out an appointment to appear before me on a date to be assigned by the trial coordinator at Barrie to address those outstanding issues. I thank counsel for their excellent presentation of their parties’ competing positions.

Justice J. R. McCarthy

Released: November 26, 2021