Court File and Parties

COURT FILE NO.: CV-17-040-00 DATE: 2022 02 24

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

2059008 ONTARIO LIMITED Applicant/Plaintiff

- and -

C.M. WEICKER MEDICINE PROFESSIONAL CORPORATION; JASON TODD BLACK MEDICINE PROFESSIONAL CORPORATION; DR. CONSTANCE MARIE WEICKER, also known as CONSTANCE MARIE WEICKER; DR. JASON TODD BLACK, also known as JASON TODD BLACK Respondents/Defendants

BEFORE: Fragomeni J.

COUNSEL: Daniel Campoli, for the Applicant/Plaintiff Louis Vittas, for the Respondents/Defendants

HEARD: December 6, 2021

REASONS FOR JUDGMENT

[1] The parties agreed that the issues at this motion could be dealt with by way of a summary judgment motion. In Gordashevskiy v. Aharon, 2019 ONCA 97, the court set out the following at paras. 5 and 6:

[5] The motion judge notes simply: “The facts are not in dispute.” The motion judge does not advert to this plain conflict in the evidence, a conflict that should have been resolved at a minimum by way of a mini trial under the summary judgment rules. He does not explain the basis on which he accepted the evidence of Mr. Aharon. While the motion judge correctly instructed himself on the test for summary judgment, he did not apply it by turning his mind to whether the credibility issues could be resolved without viva voce evidence.

[6] The endorsement contains what appears to have become boiler-plate language that we often see in summary judgment decisions:

In this case, the parties have agreed that all of the evidence that I need to make the necessary findings of fact, to apply the law to the facts, and to achieve a fair and just adjudication of the case on the merits, is before me. Therefore, inferentially, neither party suggests that any additional steps are necessary.

On the evidentiary record before me, I am satisfied that the issues can be determined on a summary judgment motion.

[2] The Applicant/Plaintiff/Landlord seeks an order for summary judgment for the payment of the sum of $152,101.29 representing the payment of arrears of rent.

[3] In Hryniak v Mauldin, 2014 SCC 17, the Supreme Court of Canada set out the parameters for summary judgment motions at paras. 2, 28, and 33 as follows:

[2] Increasingly, there is recognition that a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.

[28] This requires a shift in culture. The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible — proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure.

[33] A complex claim may involve an extensive record and a significant commitment of time and expense. However, proportionality is inevitably comparative; even slow and expensive procedures can be proportionate when they are the fastest and most efficient alternative. The question is whether the added expense and delay of fact finding at trial is necessary to a fair process and just adjudication.

[4] At para. 66 of the Hryniak decision, the Court stated:

[66] On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[5] I am satisfied that the evidentiary record, which includes the Affidavits of the parties, extensive documentary evidence, and transcripts of examinations for discoveries, allows me to determine the issues without the need for a trial.

[6] As my reasons will demonstrate, the issues relate to the interpretation of a commercial lease and whether arrears of rent are owed to the Landlord by the Tenants. The Tenants’ position is, essentially, twofold:

• The Landlord is estopped from proceeding with its claim;
• The Landlord’s claim is statute barred.

INTRODUCTION & OVERVIEW

[7] The Landlord was, at all material times, the Landlord of the premises known as 170 McEwan Drive East, Suite 208, in the Town of Bolton, Ontario (the Leased Premises).

[8] The Respondents/Defendants/Tenants of the Leased Premises were C.M. Weicker Medicine Professional Corporation and Jason Todd Black Medicine Professional Corporation. At all material times they leased the premises. The Defendants Dr. Constance Marie Weicker and Dr. Jason Todd Black are officers, directors and persons in control of the affairs of the Tenants.

[9] On October 23, 2006, the Landlord and Tenants executed a Lease with a commencement date of March 1, 2007. The lease was for a period of 10 years.

[10] The following provisions of the Lease are relevant to this motion:

Section 1.01(vi) "Rentable Area of the Leased Premises" means the floor area of the Leased Premises measured conclusively by the Landlord's Architect in accordance with the Standard Method For Measuring Floor Area in Office Buildings issued by the Building Owners and Managers Association (BOMA).

Section 2.01. Leased Premises. In consideration of the rents, covenants, and agreements hereinafter reserved and contained on the part of the Tenant to be observed and performed, the Landlord demises and leases to the Tenant, and the Tenant rents from the Landlord the premises of approximately 1,689 square feet (subject to measurement pursuant to section 1.01(vi)) on the second floor of the Building outlined in red on Schedule "A" attached hereto, exclusive of any part of the exterior face of building walls, corridors and other permanent partitions (herein called the "Leased Premises").

Section 3.01 Fixed/Minimum Annual Rental: Subject to the provisions set out in Schedule "B", the Tenant agrees to pay the Landlord from the commencement of the term, at the office of the Landlord, or at such other place designated by the Landlord, in lawful money of Canada, without any prior demand therefore, and without any deduction, defalcation or setoff whatsoever, as fixed annual rent calculated on the basis of $19.95 per square foot of the Rentable Area of the Leased Premises...

Section 9.02 Past Due and Additional Rent: If the Tenant shall fail to pay, when the same is due and payable, any rent or additional rent as herein provided, the Tenant covenants to pay interest on such unpaid amounts from the due date thereto the date of payment at the rate of one and one half percent (1-1/2%) per month.

Section 25.01 Right to Re-Enter: In the event of any failure of the Tenant to pay any rental or any other charges due hereunder within ten (10) days after same shall be due and the Tenant having been notified by the Landlord thereof in writing, or any failure to perform or to observe any other of the material terms, conditions or covenants of this lease to be observed or performed by the Tenant [...] then besides any other rights or remedies, the Landlord may have, the current month's rent together with the rent for the three months net ensuing and taxes for the then current year, including local improvement rates and the Proportionate Share pursuant to Section 6.01 and 6.02 [...] shall immediately become due and payable and this lease or any renewal thereof shall at the option of the Landlord forthwith become forfeited and determined, and the Landlord shall have the immediate right of re-entry and may remove all persons and property from the Leased Premises and such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of the Tenant, all without service of notice or resort to legal process and without being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned hereby.

Section 29.08. Waiver: The waiver by the Landlord of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by the Landlord shall not be deemed to be a waiver with regard to any preceding breach by the Tenant of any term, covenant or condition of this lease, other than the failure of the Tenant to pay the particular rental so accepted, regardless of the Landlord’s knowledge of such preceding breach at the time of acceptance of such rent. No covenant, term or condition of this lease shall be deemed to have been waived by the Landlord unless such waiver be in writing by the Landlord.

Section 29.09. Accord and Satisfaction: No payment by the Tenant or receipt by the Landlord of a lesser amount than monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent nor shall any endorsement or statement on any cheque or any letter accompanying any cheque or payment as rent be deemed on accord and satisfaction and the Landlord may accept such cheque or payment without prejudice to the Landlord’s right to recover the balance of such rent or pursue any other remedy in this lease provided.

Section 29.10. Entire Agreement: This lease and the Schedules attached hereto and forming part hereof set forth all the covenants, promises, agreements, conditions and understandings between the landlord and the tenant concerning the Lease Premises and there are no covenants, promises, agreements, conditions or understanding, either oral or written, between them other than herein set forth. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this lease shall be binding upon the landlord or the Tenant unless reduced to writing and signed by them.

[11] Section 2.01 sets out that the square footage of the Leased Premises is approximately 1,689 square feet.

[12] From 2006 to 2015/16 Fengate Property Management Ltd. was the property manager for the Leased Premises.

[13] In or about December 2015, Two + One Property Management (Two + One) took over as property manager. Two + One re-measured the square footage of the Leased Premises to ensure that the Tenants were paying the correct rent.

[14] Two + One engaged the services of Extreme Measures Inc. and they determined that the rentable area of the Leased Premises was in fact 1,953.10 square feet and not 1,689 square feet.

[15] John Martin is Dr. Weicker’s husband. He was involved in the initial negotiations of the terms of the Lease and runs the day to day operations of the tenants.

[16] In February 2016, Manuela Ortolan, the property manager at Two + One advised John Martin of the rent discrepancy. In June 2016 the Landlord sent an e-mail to John Martin advising him that the actual size of the Leased Premises is 1,953 square feet. On June 20, 2016, at John Martin’s request, the Landlord sent John Martin a drawing and measurement of the Leased Premises.

[17] In or about May 31, 2016, the Landlord began negotiating a Lease renewal with John Martin on behalf of the Tenants.

[18] On June 6, 2016, the Landlord advised John Martin that if the Leased Premises were renewed it would not seek compensation for the past rent due to the square footage discrepancy.

[19] On August 17, 2016, the Landlord explained to the Tenants that they were in breach of the Lease with respect to rent arrears. The Tenants requested until September 15, 2016, to advise the Landlord if they intended to renew the lease and the Landlord agreed to that timeline.

[20] On September 15, 2016, the Tenants advised the Landlord that they did not wish to renew the lease.

[21] The Landlord seeks the following summary judgment:

a) payment of the sum of $152,101.29 representing the 10 years of rent for the complete measured area of the Leased Premises, inclusive of interest.

[22] The Tenants deny that they have breached the lease and submit that the Landlord’s claim for damages is based on the unreasonable exercise of a discretionary provision under the lease and in bad faith.

[23] The Tenants submit the Landlord’s claims are precluded under the doctrine of estoppel. The Landlord made representations confirming the rentable area and the Tenants relied on those representations and paid rent in accordance with those representations for a period of nine years and four months of a ten-year lease.

[24] The Tenants also argue that the Landlord’s claims are statute barred pursuant to section 17 of the Real Property Limitations Act, R.S.O. 1990, c. L.15.

ANALYSIS & CONCLUSION

Issue – Issue Estoppel

[25] The Landlord confirmed the measurement of the Leased Premises, namely, 1,689 square feet both before and after the lease was executed.

[26] In his affidavit sworn June 30, 2021, John Martin sets out the numerous occasions when the measurements of the Leased Premises were confirmed to be 1,689 square feet and the rent payable was based on that measurement. The following paragraphs in his affidavit are relevant:

39. The commencement date of our lease was March 1, 2007. Not long after we moved into the Goodfellow Building, the property manager Amy Brown (“Ms. Brown”) of the property management company Fengate Property Management contacted us. Ms. Brown told us that she had measured our suite. Ms. Brown suggested that our rent calculation and the figure of 1,689 sq ft for the area of our suite were incorrect. I do not have a copy of her original letter, however, I did forward it to Mr. Durigon and followed up with an email on March 21, 2007. My email to Mr. Durigon stated it was Ms. Brown who had erred. I confirmed that our rent was completely gross including GST and that our space was, in fact, 1,689 sq ft. Furthermore. there were no other gross ups or charges as they had been intentionally deleted from our lease. Attached as Exhibit “23” is a copy of my email to Mr. Durigon dated March 21, 2007.

40. Mr. Durigon emailed both Ms. Brown and myself on March 23, 2007 to provide his response to Ms. Brown’s comments regarding the rent and measurement of the area of our leased premises. Mr. Durigon stated that the lease was gross, and the rate was fixed and invited me to call him to discuss. Attached as Exhibit “24” is a copy of Mr. Durigon’s email to Ms. Brown and myself.

41. Having held my discussion with Mr. Durigon about our monthly gross rent and the measurement of the area of our leased premises, Mr. Durigon wrote again to Ms. Brown and myself on March 27, 2007 dismissing Ms. Brown’s concerns. Mr. Durigon instructed Ms. Brown to pick up and continue with the cheques we provided for 1,689 sq ft. Attached as Exhibit “25” is the email communication of March 27, 2007.

42. When Mr. Durigon was asked at his examination whether at this point in time, in March 2007, did he take any steps to confirm the unit’s square footage, he responded: “No, it’s not my job to do that”. Attached as Exhibit “26” is Durigon’s Examination at questions 335-336.

43. It is important to note that Mr. Durigon’s statements to Ms. Brown contained in his email were consistent with and accurately reflected our discussions prior to the execution of the final draft of our lease.

44. Mr. Durigon’s March 27th email to Ms. Brown [see Exhibit 25] confirmed to us that the final measurement and size of our suite was set and agreed upon and fixed for the remainder of our ten-year term. It put an end to any residual ambiguity regarding the size of our leased premises.

[27] The March 27, 2007 e-mail is at Exhibit 25 and it states as follows:

Hi Amy,

I understand as per Boma how you arrived at the Dr Weiker amount however I pulled out the Weiker lease and it reads as per below.

Dr Weiker gave me her cheques back I have them here at the office, please have them picked up and please continue with Dr Weiker as per the cheques we have received already.

Thanks

Paul

ARTICLE II Grant and Term Section 2.01. Leased Premises: In consideration of the rents, covenants and agreements hereinafter reserved and contained on the part of the Tenant to be observed and performed, the Landlord demises and leases to the Tenant, and the Tenant rents from the Landlord the premises of approximately 1,689 square feet ( subject to measurement pursuant to section 1.01(vi)) on the second floor of the Building outlined in red on Schedule "A" attached hereto, exclusive of any part of the exterior face of building walls, corridors and other permanent partitions. (herein called the "Leased Premises").

[28] Paras. 52 to 54 of Mr. Martin’s affidavit state as follows:

52. On December 3, 2015, Kendra Doherty (“Ms. Doherty”), the new Property Administrator, emailed me a 2016 Statement with a revised calculation that increased our monthly rent payment. Attached as Exhibit “30” is this Statement along with the email. Ms. Doherty’s email contained some factual inaccuracies. First, she claimed we were previously paying rent based on an area of our unit being 1,593.40 sq ft and not 1,689 sq ft as indicated on our lease. Next, she failed to read paragraph 5.5a of our lease that confirmed the monthly rent amount included GST/HST (HST replaced GST on July 1, 2010). Furthermore, she failed to read section 12.01 (maintenance by tenant) of our lease that clearly stipulated the day-to-day repairs and maintenance of our unit were the responsibility of the landlord at its own expense. In fact, Mr. Durigon had previously confirmed the landlord’s obligations in his email to me of October 30, 2006 [see Exhibit 14] wherein he stated: “if there is a maint issue you would call the management company, they would come and fix it, and it would be paid by the building under common area (of which you are capped).” Interestingly, all of the issues raised by Ms. Doherty were addressed in our lease that she had attached to her email.

53. As a result of Ms. Doherty’s inaccuracies, I wrote to Mr. Durigon on December 7, 2015 clarifying the terms of our lease and correcting her misinterpretation of the provisions referenced in her email. As also outlined in this email to Mr. Durigon, I couldn’t help but feel that the tone taken with us by the new property administrator appeared more accusatory and inflammatory than our past dealings with management. A copy of this email is attached as Exhibit “31”.

54. In our subsequent email communications, Ms. Doherty’s tone was more conciliatory but there was still some confusion about our rent payable at that time and the applicable rate of GST/HST. Ultimately, the correct amount of rent including GST/HST was determined and confirmed by Ms. Doherty in an email to Mr. Durigon and myself dated December 14, 2015. It turns out that we had been overpaying our rent by $0.12 per month for several years. It is also important to note throughout all these emails exchanged among Ms. Doherty, Mr. Durigon, and myself during this period of time when the new property management company took over, they confirmed that the area of our leased premises consistently held to be 1,689 sq ft in accordance with our lease. Attached as Exhibit “32” is the subsequent email communications referenced herein.

[29] The e-mail from Kendra Doherty to John Martin of December 14/15 9:36 a.m. attached as Exhibit 32 sets out the following:

Hi John,

After speaking with Manuela (the accountant for Two+One) the calculation below is not correct.

The 6% GST should be removed from the per square foot amount, not the yearly amount. Below is the correct collection;

$19.95ps* – 6% GST = $18.82ps*

$18.82ps* x 1689sq* = $31,786.98 per year

$31,786.98 / 12 months = $2,648.92

$2,648.95 + 13% HST = $2,993.27

Please let me know if you will be replacing your current cheques are they are in the amount of $2993.39.

Thanks John, have a great day!

Kendra Doherty Property Administrator

[30] At para. 66 of his Affidavit, John Martin states:

66. An examination of the measurement document shows the method the landlord used to claim the suite was 1,953.10 sq ft. Attached as Exhibit “36” is a copy of this document. Our suite, number 208, was measured to have 1640.25 sq ft of occupant area and usable area. Only by adding a proportionate share of the building service area and the floor service and amenity area, was the landlord able to gross up our occupant and allowed area to 1774.10 sq ft. By multiplying that new grossed-up number by the R/O ratio factor of 1.1008921, the landlord grossed up our space a second time to 1953.10 sq ft. The provisions that would have permitted Mr. Durigon to gross up our occupant and usable area were all intentionally deleted from our lease by him. Below are the calculations of the various measurements and the intentional deletions from our lease:

Calculation of first gross up attributed to suite 208 :

2,557.93 sq ft (Building Service Areas) + 1,012.16 sq ft (Floor Service and Amenity Areas) = 3,570.09 x 3.749205118% = 133.8499995 sq ft.

1,640.25 sq ft (Occupant Area and Usable Area) + 133.8499995 sq ft = 1,774.10 sq ft (Occupant + Allocated Area).

Calculation of second gross up attributed to suite 208:

1,774.10 sq ft (Occupant + Allocated Area) x 1.1008921 (R/O Ratio) = 1,953.10 sq ft (Rentable Area).

See Intentional Deletions and changes in our lease:

• Proportionate share Article 1 section 5;
• Minimum annual rent Article III;
• Article IV Net Lease;
• Article V Taxes;
• Article VI Cost of operating and maintaining the common areas and facilities and the building;
• Article VII Proportionate share;
• Article XI Utilities; and
• Article XII Maintenance of the leased premises.

It is important to remember that these were the terms the landlord bargained away for us to come to their new building and provide them with much needed support for their ancillary services in 2006 and 2007.

[31] In Kiki Kapalua Inc. v. 1203840 Ontario Limited, 2014 ONSC 6298, Justice Chiappetta set out the following at paras. 33-36:

[33] The landlord seeks by way of counterclaim an amount of arrears from 2005 which includes both the base rent and the additional rent calculated in 2013 on the 2011 measurements of the premises and the building done by Measure Masters. It is unconscionable to me that this request is being made.

[34] On March 31, 2013, the landlord used its 2011 measurement of 3,894 and 22,060 square feet respectively, to recalculate the amounts owing to it by the tenant pursuant to the lease for the tenant’s base rent and proportionate share of operating costs for the years 2005 to 2012. These amounts were previously calculated and charged to the tenant in the applicable year, using 3,485 and 19,737 respectively. The landlord then calculated the tenant’s base rent and proportionate share of operating costs going forward for the last year of the lease based on the new measurements Measure Masters completed almost 9 years into the 10-year lease.

[35] The landlord submits that the language of the agreements between the parties is such that the landlord’s contractual right to measure the premises and alter the contractual consideration crystallizes when the parties dispute the approximate measurement as set out in the agreements. I disagree. The language does not contemplate a re-measurement upon dispute. Rather, it reads that the measurement therein is an approximate number and that the landlord may confirm the number with the use of a qualified architect or surveyor. The measurement impacts the payment by the tenant of both base and additional rent; implicit in the right granted is its timely exercise. It is not commercially reasonable to conclude that the untimeliness in this case was the intention of the parties in 2003 when they agreed to defer actual measurement of the premises to the landlord. Considering the circumstances up to and including March 2013, the landlord’s retroactive recalculation was not a reasonable exercise of a contractual right. Rather it a was reactive uppercut to the tenant’s reasonable, yet unprecedented, efforts to review the TMI supporting documentation.

[36] For 9 years of a 10-year lease the calculations of the tenant’s base rent and proportionate share of TMI was governed by the only square footage of the premises specifically stated in the agreement to lease and the lease at 3,485 and the square footage of the building at 19,737. The agreements defer the exact measurement to the landlord’s architect or surveyor. A variation to the measurement as estimated has a resultant variation to the tenant’s consideration as contracted as it impacts the tenant’s obligation to pay both base rent and additional rent. As a variation impacts an essential term(s) of the commercial agreement, in my view, implicit in the granting of the right to the landlord is the obligation of the landlord to exercise its right within a reasonable time after the commencement of the lease; 9 years into a 10-year lease is not reasonable.

[32] In Terrace Manor v. Sobeys, 2012 ONSC 2657, Justice Flynn noted the following at para. 54:

In my view, the Lease is clear and unambiguous. It requires that the parties use their reasonable and diligent efforts to determine what the allocation of taxes to Sobeys would have been had a separate assessment with respect to the Sobeys store been made. The information necessary to perform such a calculation is available to the parties and, in fact, was used by the Landlord to allocate taxes to Sobeys for the tax years 2004 to 2009. For six years between 2004 and 2009, the Landlord used the MPAC valuation records to determine the assessed value for the Sobeys store and apportioned taxes to Sobeys accordingly. It is untenable for the Landlord now to take the position that the MPAC valuation record cannot be used to determine Sobeys’ share of the taxes.

[33] The Tenants submit that within the context of those principles set out in the cases just referred to, the Landlord is precluded from claiming any damages for breach of the lease on the basis of the doctrine of estoppel.

[34] In Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50, Justice Sopinka for the Court stated the following at p. 57:

The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position.

[35] In Shoppers World Co. v. 808602 Ontario Ltd., [2006] O.T.C. 206 (S.C.) Justice Wright set out the following at paras. 11, 19 and 20:

[11] The tenant submits that the landlord forced the tenant to move to the new space. If the tenant had been allowed to remain in the original space it would have been a capped tenant. The tenant relies on the fact that the landlord treated the tenant as a capped tenant for the years prior to 2001 and 2002, and the tenant relied on the landlord’s promise that if the tenant relocated the landlord would pay all of the costs of the relocation.

[19] This case meets the criteria set out for promissory estoppel. There was an existing legal relationship between the parties in the form of the lease covering the original units 34 and 29. There were clear and unambiguous representations that the landlord would “pay for all the costs of the relocation”. There was also the representation that the defendants would be treated as a capped tenant, even after a tax consultant was hired. The plaintiff used the frozen assessment amount provided by the municipality and then applied the legislated “tenant cap” to the defendant’s space for 1998, 1999 and 2000. The defendant relied on being treated as a capped tenant, and acted upon it to its detriment when it signed the formal lease in July of 2002.

[20] The plaintiff claims that at the time the lease was executed, the defendant or defendant’s counsel knew, or ought to have known, that the capping provisions did not apply to Unit 101. The plaintiff argues that the tenant should have negotiated tax allocation before signing the lease and relies on Orlando Corp. v. Zellers Inc., [2002] O.J. No. 4284 at para.22 for this assertion. However, that case did not involve representations, reliance or the tax capping provisions.

[36] Exhibit 42 sets out the following:

From: Kendra Doherty kdoherty@twoplusone.ca Subject: 170 McEwan Drive - Estoppel - URGENT Date: August 31, 2016 at 11:07 AM To: John Martin jczmartin@rogers.com Hi John, Please see attached Estoppel that we require you to sign. Please let me know if you would like Michael to pick up a signed copy Monda y, or if you would like to send back via email. Thanks!! Kendra Doherty | Property Administrator 2770 14th Avenue, Suite 102, Markham, ON L3R 0J1 O:905.475.6030 x412 | F:905.470.2836 | C:416.996.4299 twoplusone.ca Wei c ker.do c

[37] The Tenants also point out and rely on representations made in the Estoppel Certificate dated September 1, 2016, prepared by the Landlord. At paras. 70 and 71 of his affidavit John Martin stated:

70. While our negotiations were ongoing (and after being told we were allegedly paying for the incorrect square footage), Ms. Doherty presented us with an Estoppel Certificate that we were told required the doctors’ signature. The email was accompanied by a document entitled: “Tenant Certificate/Acknowledgement” that was addressed to First National Financial LP. Attached as Exhibit “42” and Exhibit “43” are Ms. Doherty’s August 31st email and the draft Estoppel Certificate.

71. A signed copy was delivered to Ms. Doherty dated September 1, 2016. Of particular note regarding the provisions of this Estoppel Certificate were at paragraphs 5 and 6 which are reproduced as follows:

72. The Lease is in full force and effect and has not been modified, altered or varied either orally or in writing.

73. There has been no material default or breach under the terms of the Lease by either the Landlord or the Tenant.

[38] The Landlord remeasured the space in February 2016.

[39] Exhibit 44 of John Martin’s affidavit is the Tenant Certificate/Acknowledgment and it sets out the following at paras. 5 and 6:

5. The Lease is in full force and effect and has not been modified, altered or varied either orally or in writing.

6. There has been no material default or breach under the terms of the Lease by either the Landlord or the Tenant.

[40] In response to this position on the estoppel issue the Landlord points to the lease and in particular clause 2.01. The Landlord submits that the Tenants were obligated to compensate the Landlord for the difference in the measurement of the Leased Premises.

[41] The Landlord submits that the rentable area was subject to the final determination of the Landlord’s architect. In support of this position the Landlord refers to the decision in Southlake Regional Health Centre v. Beswick Group Properties Inc., 2015 ONSC 5527, at para. 47 which states:

I also reject the suggestion that what is to be measured was subject to a final determination by the architect. The interpretation of the lease “that accords with sound commercial principles and good business sense” is that the parties understood and agreed that the projected measurement of the Gross Rentable Area/Gross Floor Area required final determination by the architect. The architect was not to provide a final determination of what was to be measured, but what the final measurement was, the “as-built” measurement, as Mr. Rom Colthoff explained it. Before being built, the GRA was projected to be 135,000. After being built the GRA may very well have changed, as a result of agreed upon change orders, or simply as a result of the imprecision and adjustments made by the builders. Hence the need for final determination by the architect.

[42] The Tenants submit that the Southlake decision does not apply to the circumstances of the case at bar. The Tenants point to the following:

• Southlake does not state that the landlord is entitled to retroactive rent arrears
• Justice Corkery was clear that the rental amount in dispute was from October 2013, the year the action was commenced
• Justice Corkery stated that when a lease is signed before a building is constructed, square footage measurements are subject to change
• in the case at bar Dr. Weicker and Dr. Black signed their lease after the Goodfellow Building was constructed and fully operational. Mr. Durigon was or should have been aware of the square footage of his rental units as the owner, developer and landlord.

Analysis and Conclusion

[43] I agree with the position of the Tenants on this issue.

[44] In all of the circumstances of this case, the Landlord is estopped from proceeding with his retroactive claim for arrears of rent.

[45] Even if the Landlord’s strict interpretation of the terms of the lease permitted him to re-measure the square footage, the negotiations leading up to the execution of the lease considered the square footage of the Leased Premises to be 1,689 square feet. The Tenants signed the lease on that basis.

[46] The square footage of 1,689 was confirmed even after the execution of the lease and for nine years and four months into a ten year lease the Tenants paid in accordance with that measurement. The Tenants were not in breach of the lease and the Certificate Estoppel confirmed this on September 1, 2016.

[47] The fact that the Landlord did not confirm the exact measurements of the Leased Premises until Two + One took over as property manager does not lie at the feet of the Tenants. The Tenants bear no responsibility or liability for the Landlord’s conduct in that regard.

[48] At paras. 56 and 57 of their Factum the Tenants set out the following:

56. The Plaintiff’s discretionary right to remeasure the leased premises was exercised to unilaterally alter and unfairly undermine the Defendants’ right of renewal under the lease. Section 2.04: Renewal under the lease, provided the Defendants the right to renew this lease for an additional term of five (5) years. Instead, the Plaintiff demanded that any renewal agreement include additional rent for taxes, maintenance and common area expenses, which were entirely absent from the parties’ existing lease and, in particular, contrary to the right of renewal provided under section 2.04.

57. The Plaintiff’s discretionary right to remeasure the leased premises was a contractual right to be exercised honestly, reasonably, and not capriciously or arbitrarily. A discretionary power, even if unfettered, is constrained by good faith.

Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, para. 62.

[49] Paras. 62 and 69 of the Wastech decision states:

[62] One may well ask — as courts and scholars have on occasion — how the exercise of an apparently unfettered contractual discretion could ever constitute a breach of contract since one could argue that a party, in exercising such a discretionary power, even opportunistically, is merely doing what the other party agreed it could do in the contract (D. Stack, “The Two Standards of Good Faith in Canadian Contract Law” (1999), 62 Sask. L. Rev. 201, at p. 208). The answer can best be traced to the “standard” that underpins and is manifested in the specific legal doctrine requiring that where one party exercises a discretionary power, it must be done in good faith. Expressed as an organizing principle, this standard is that parties must perform their contractual duties, and exercise their contractual rights, honestly and reasonably and not capriciously or arbitrarily ( Bhasin, at paras. 63‑64). Accordingly, a discretionary power, even if unfettered, is constrained by good faith. To exercise it, for example, capriciously or arbitrarily, is wrongful and constitutes a breach of contract. Even unfettered, the discretionary power will have purposes that reflects the parties’ shared interests and expectations, which purposes help identify when an exercise is capricious or arbitrary, to stay with this same example. Like the duty of honest performance considered in Bhasin and Callow, the duty to exercise discretionary power in good faith places limits on how one can exercise facially unfettered contractual rights. When the good faith duty is violated, the contract has been breached. The question is what constraints this particular duty puts on the exercise of contractual discretion.

[69] Thus, beyond the requirement of honest performance, to determine whether a party failed in its duty to exercise discretionary power in good faith, one must ask the following question: was the exercise of contractual discretion unconnected to the purpose for which the contract granted discretion? If so, the party has not exercised the contractual power in good faith.

Issue – Section 17 of the Real Property Limitations Act

[50] Section 17 states:

17 (1) No arrears of rent, or of interest in respect of any sum of money charged upon or payable out of any land or rent, or in respect of any legacy, whether it is or is not charged upon land, or any damages in respect of such arrears of rent or interest, shall be recovered by any distress or action but within six years next after the same respectively has become due, or next after any acknowledgment in writing of the same has been given to the person entitled thereto or the person’s agent, signed by the person by whom the same was payable or that person’s agent.

Exception as to action for redemption

(2) This section does not apply to an action for redemption brought by a mortgagor or a person claiming under the mortgagor.

[51] The Tenants submit that the Landlord knew or ought to have known what the accurate measurements were at the time the lease was negotiated or at least at the time of the commencement of the lease, namely, March 1, 2007, or reasonably thereafter.

[52] In Grant Thornton LLP v. New Brunswick, 2021 SCC 31, Justice Moldaver for the Court set out the following at paras. 42 and 44:

[42] In my respectful view, neither approach accurately describes the degree of knowledge required under s. 5(2) to discover a claim and trigger the limitation period in s. 5(1)(a). I propose the following approach instead: a claim is discovered when a plaintiff has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn. This approach, in my view, remains faithful to the common law rule of discoverability set out in Rafuse and accords with s. 5 of the LAA.

[44] In assessing the plaintiff’s state of knowledge, both direct and circumstantial evidence can be used. Moreover, a plaintiff will have constructive knowledge when the evidence shows that the plaintiff ought to have discovered the material facts by exercising reasonable diligence. Suspicion may trigger that exercise (Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 42).

[53] The evidentiary record establishes that the issue of the square footage came up after the lease was signed but at no time did the Landlord take steps to actually re-measure the square footage of the Leased Premises until Two + One took over as property managers.

[54] The Tenants were only advised of the square footage increase on June 6, 2016, nine years and four months into a ten-year lease.

[55] I am satisfied that this action is statute barred.

Issue – Renewal of the Lease

[56] Both the Landlord and the Tenants allege bad faith against the other in the negotiations relating to a renewal of the lease. The parties failed to reach an agreement.

[57] In his affidavit sworn May 4, 2021, Paul Durigon stated the following at paras. 26 and 27:

26. In fact, on August 17, 2016, after a meeting with John Martin and the Defendants, wherein the Plaintiff explained to them that they were in breach of their Lease with respect to the Rent Arrears, they continued to negotiate a Lease renewal, and asked if they could confirm in writing until September 15, 2021 if they intended to renew the Lease. The Plaintiff agreed;

27. On September 15, 2016, the Defendants advised that they were not renewing the Lease;

[58] In his affidavit, John Martin sets out the following at para. 65:

65. We were informed for the first time that our suite was 1,953 sq ft on June 6, 2016. Mr. Durigon had the suite measured in February 2016. The results of these measurements had been held back by the landlord until we began to renegotiate for a future term.

[59] I am satisfied on the evidentiary record before me and considering my analysis relating to the lease, that the Tenants were justified in their position not to renew the lease. I agree with the position of the Tenants that the proposed lease renewal agreement was not an extension of the Tenants’ gross lease that was in place and had been in place for almost 10 years.

[60] The Landlord submits that it was really a business decision to forgive any arrears of rent if the Tenants renewed the lease. That may or may not have been the motive of this Landlord, however, it was, in my view, an unreasonable and untenable position to take 9 years and 4 months into a 10-year lease. That position ultimately resulted in a breakdown of negotiations in relation to a new lease or an extension of the existing lease. The Tenants position to move on was justified.

[61] At paras. 100 and 106 John Martin summarizes the circumstances as follows:

• In June 2016 the lease was in good standing;
• All of the rent payments were up to date;
• The Tenants were not responsible for payment of any building common area or operating expenses;
• Those provisions were intentionally deleted from the lease;
• The 1953 square foot re-measurement was arrived at by grossing up the space and including common area charges and operating expenses. The lease prohibited this; and
• The only way the Tenants could avoid the Landlord’s claim for rent arrears was to agree to a new lease on unsatisfactory terms and on terms deleted from the existing lease.

[62] In all of these circumstances:

a) The Landlord is estopped from making his claim for rent arrears for the subsequent period, and b) His claim is statute barred.

DISPOSITION

[63] Order to issue as follows:

1. The Applicant’s summary judgment motion is hereby dismissed.
2. In the event that the parties cannot resolve the issue of costs, the following timetable applies: a. The Respondents shall serve and file their costs submissions within 20 days; b. The Applicant shall serve and file its responding costs submissions within 20 days; c. The Respondents shall serve and file any reply within 7 days.

Fragomeni J. Released: February 24, 2022