COURT FILE NO.: CV-21-00667377-00CL
COURT FILE NO.: CV-21-00674331-00CL
DATE: 20220425
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BETWEEN:
Court file no. CV-21-00667377-00CL
2356802 ONTARIO CORP.
Applicant
– and –
285 SPADINA SPV INC.
RONALD HITTI also known as RONNY HITTI
Respondents
Court file no. CV-21-00674331-00CL
285 SPADINA SPV INC.
Applicant
– and –
2356802 ONTARIO CORP.
Respondent
Nicolas Canizares, for the Applicant
Email: equinoxgroup@bellnet.ca
Julian Binavince, for 285 Spadina SPV Inc.
Email: jbinavince@levyzavet.com
Ronald Hitti – Self-represented
Email: Rony@boagroup.ca
Arlen Sternberg/J. Toshach Weyman, for Rogers
Email: asternberg@torys.com tweyman@torys.com
Chloe Snider/Douglas Stewart, for Freedom Mobile Inc.
Email: chloe.snider@dentons.com
Julian Binavince, for the Applicant
Email: jbinavince@levyzavet.com
Nicolas Canizares, for the Respondent
Email: equinoxgroup@bellnet.ca
HEARD: February 17 and 18, 2022
Kimmel J.
TABLE OF CONTENTS
BACKGROUND: THE APPLICATIONS. 1
THE LEASE APPLICATIONS. 1
(a) The Perell Decision. 2
(b) The Issues Raised by the Lease Applications. 5
(c) The Disputed Provisions of the SPV Lease. 6
(d) Additional Factual Considerations. 6
DISCUSSION AND ANALYSIS - Lease Applications. 7
(a) The Construction Allowance Issue. 10
(i) The Tenant’s Work. 10
(ii) The Landlord’s Work. 10
(iii) The Construction Allowance. 10
(iv) Accounting for the Construction Allowance. 12
(v) Reimbursement of the Landlord for Construction Allowance Installments Paid. 14
(b) The Rooftop Credits Issue. 17
(c) The Rent Arrears Issue. 19
(i) Rent for the months of September to November 2021 – Validity of November 2021 Purported Termination of the SPV Lease by the Landlord. 19
(ii) Rent for the months of December 2021 and Beyond. 20
(d) The Relief from Forfeiture Issue. 20
(e) The Rooftop Access Issue. 22
(i) The Relevant SPV Lease Provisions Relating to the Rooftop Access Issue. 22
(ii) The Rogers Lease. 23
(iii) The Freedom Mobile Lease. 24
(iv) Standing of Rooftop Tenants. 25
(v) What Access are the Rooftop Tenants Entitled to under the SPV Lease?. 25
(vi) The Prioritization of Competing Leasehold Rights and Interests. 28
(vii) Assertions of Bad Faith on the Part of the Landlord Regarding the Rooftop Access 30
(viii) Outcomes Regarding Rooftop Access. 31
(f) The Rooftop Equipment Issue. 32
THE RELIEF SOUGHT. 33
FINAL DISPOSITION AND COSTS. 36
(a) Disposition by Issue. 36
(b) Costs 37
REASONS FOR DECISION
BACKGROUND: THE APPLICATIONS
[1] Three applications were heard together.
[2] The within two “lease applications” (Court file no. CV-21-00667377-00CL and Court file no. CV-21-00674331-00CL) involve the interpretation of a lease dated August 26, 2020 (the “SPV Lease”) of a heritage building (the “Building’) located at the intersection of Dundas and Spadina Streets in Toronto (the “SPV Premises”). The interpretation of the SPV Lease in turn will determine: (1) whether the tenant (285 Spadina SPV Inc., the “Tenant”) was in breach of the lease; (2) whether the landlord (2356802 Ontario Corp., the “Landlord”) was entitled to terminate the lease (as it purported to do in a letter to the Tenant dated November 18, 2021), or alternatively, whether relief from forfeiture should be granted in favour of the Tenant; and (3) what amounts are owing and will continue to be owing as between the Landlord and the Tenant under certain of the lease terms at issue.
[3] The issues in these lease applications are largely connected to issues arising from work on the roof of the SPV Premises undertaken after the decision of Perell J. in 285 Spadina SPV Inc. v. 2356802 Ontario Corp., 2020 ONSC 1645, in which a prior application by the Landlord to evict the Tenant was dismissed and certain declaratory relief sought by the Tenant was granted in part (the “Perell Decision”). The Perell Decision directed the Landlord and Tenant to negotiate terms relating to the work that needed to be done to the roof of the premises. The parties entered into the SPV Lease after the Perell Decision, which addresses, among other things, the replacement of the roof and related matters.
[4] These lease applications raise issues that impact the rights of two other tenants, Rogers and Freedom Mobile (the “Rooftop Tenants”), who had pre-existing leases for their antennae, cables, and other equipment situated on the roof of the premises (the “Rooftop”).
[5] The third application (CV-21-00662130-00CL) is an oppression remedy application that has been commenced by three individual investors (Devad (a.k.a. Alex) Seferovic — “Alex”; Reza Abedi — “Reza”; and Rodolphe Najm — “Rudy”) against the Tenant and the principal of the tenant, Ronald (or Ronny) Hitti (“Hitti”). The oppression remedy application was heard immediately after the lease applications and the decision in that application is being released contemporaneously with this one (Seferovic v. Hitti, 2022 ONSC 2429).
THE LEASE APPLICATIONS
[6] The lease applications depend upon the interpretation of the SPV Lease that was entered into following the Perell Decision. The findings in that earlier decision provide some important context to the present dispute.
(a) The Perell Decision
[7] Both the Landlord and the Tenant have referenced, and relied upon, the detailed findings of fact outlined in the Perell Decision. Not all of those facts are relevant to the within lease applications, but some of them are important background, such as:
[1] In 1921, a building was constructed at the corner of Dundas Street and Spadina Avenue, in Toronto. It was named The Standard Theatre, and it was a Yiddish language theatre. In 1935, the building was renamed the Strand, and it became a regular movie theatre. To celebrate the end of the Second World War, the name of the building was changed to the Victory, and it reopened as a burlesque stage, which lasted into the 1970s. In 1975, the building was purchased, renovated, and it was renamed the Golden Harvest Cinema. It became a Chinese language movie theatre. The Golden Harvest Cinema closed in 1994, and the building was converted into a commercial building. It had, among other tenancies, a pharmacy, a restaurant, and formerly a bank on the first floor. It is a heritage building under the Ontario Heritage Act.
[2] The current owner and landlord of the building is 2356802 Ontario Corp., which owns and manages commercial properties in the greater Toronto area. I will refer to 2356802 Ontario Corp. as the Landlord. Yong Jo, who is an experienced property owner and manager, is the director and principal of the Landlord. The Landlord purchased the building in December 2015 $9.8 million.
[16] The Tenant, 285 Spadina SPV Inc., is a corporation used by Mr. Hitti to develop his project for the building on the corner of Spadina Avenue and Dundas Street in Toronto. Mr. Hitti is an MBA graduate of York University. He is a diploma graduate of Hospitality and Culinary Arts from the Culinary Arts Academy in Montreaux, Switzerland. He has over thirty years’ experience in the hospitality industry.
[21] As already noted in the Introduction, Mr. Hitti’s plan is to develop the former Theatre Premises as an event venue for banquets, concerts, etc. His plans involve the Theatre Premises which has been vacant for decades, and the Restaurant Premises, which had an existing restaurant tenancy. In the narrative that follows, it shall be helpful to note that the municipal address of the Theatre Premises is on Spadina Avenue and the address of the Restaurant Premises is on Dundas Street.
[25] In their negotiations, Mr. Hitti and Mr. Jo both knew that there were signs of water damage through the roof of the building into the theatre auditorium. There was a significant amount of debris in the auditorium. Mr. Jo and Mr. Hitti discussed the need to remove the debris and to repair the roof. They also discussed the Tenant’s need for a a robust and quiet HVAC system and a sprinkler system. Given the age of the building there was no sprinkler system for the theatre. What the parties did not know was precisely how much work would be required to repair the roof or how much the Landlord’s Work would cost.
[38] Under the Theatre Agreement, the Tenant was to provide estimates for the Landlord’s Work and then to manage the execution of that work with the Landlord paying the contractors directly as invoiced in three staged payments to be made to the contractors. Thus, under the Theatre Agreement – as it was written – the Tenant could manage and coordinate the Landlord’s Work and the Tenant’s Work.
[41] On August 16, 2018, there was a meeting of Mr. Jo, Mr. Hitti, and Mr. Younes at the Theatre Agreement premises to discuss the quotes for the roof work and for the sprinkler and HVAC systems. The Tenant’s quotes for the Landlord’s Work obviously required very extensive work to be done on the roof amounting to a total replacement of the roof. Mr. Baek, the Landlord’s property manager, found the quotes vague, lacking specifics, from unfamiliar contractors, and overreaching in respect of what was required of the Landlord. The Landlord’s position that it was sufficient to satisfy its contractual obligation if it just added additional membrane to the roof structure to make the roof watertight. This fix was much cheaper than the Tenant’s submitted quotes. Thus, the parties did not agree about what was required for the roof, the Landlord seeking repair and the Tenant seeking further investigations and probably replacement of the existing roof.
[43] At this meeting, the Landlord told the Tenant that it wanted to coordinate the Landlord's Work with the Tenant’s Work and it wanted to manage the Landlord’ Work itself. As already noted, the Landlord found the Tenant’s quotes vague, beyond the scope of the Theatre Agreement and from unacceptable contractors. Mr. Baek deposed that he informed the Tenant that the Landlord did not want to use the contractors who had made the quotes. The Landlord wished to employ Stethan Contracting, a contractor that was familiar with the building because it had previously done work at the building for the pharmacy tenant.
[50] The Tenant was provided with Stethan Contracting’s construction plans to review. The Tenant, however, was not satisfied with the proposal for the HVAC system and with respect to the repair of the roof. It did not begin to pay additional rent.
[51] The Landlord attempted to proceed nevertheless without the Tenant’s concurrence about the plans for Landlord’s Work. The result was some theatre of the absurd that led to the first of the several court proceedings about the Theatre Premises.
[52] In November 2018, the Tenant, to control and secure the Theatre Premises, changed the locks. It did this without the Landlord’s permission, and the Landlord did not have keys to enter its own building, and it could only access the roof, where it rented space for the equipment of a telecommunications service provider, by climbing a ladder on the outside of the building.
[53] Stethan Contracting attempted without success to gain entry to the premises, but Mr. Hitti was imposing conditions to granting access, including payment of a security guard. Strathan went ahead without Mr. Hitti’s permission and gained entry to the premises by breaching a rear door, which Mr. Hitti regarded as a criminal break and enter and a civil trespass. An apparently enraged, Mr. Hitti ordered Stethan Contractor’s employees off the roof and out of the building.
[54] The parties continued to squabble, but Mr. Hitti would not allow the Landlord access to its own building. This absurd situation persisted until early December, when the Landlord brought the Application that is the predecessor of the two Applications now before the court. The Application record was part of the evidentiary record for the immediate case.
[71] The plans were forwarded to the Tenant in March 2019, and there was an exchange of correspondence on March 28, 2019 and April 2, 2019, but no agreement was reached because the Tenant persisted in its position that more needed to be done to address the deterioration of the roof of the building. Nevertheless, the Landlord applied for and received a building permit from the City of Toronto to proceed with its Landlord’s Work.
[72] The Tenant, however, refused to allow the Landlord access to the premises to begin construction because of its objections to the scope of the Landlord’s Work as proposed by the Landlord.
[8] The Prior Perell Decision found as follows:
[204] The penultimate question is: Has the Landlord Breached the Theatre Agreement or the Restaurant Agreement.
[205] The complex answer to this question has already been provided above. The answer is a “yes/but” answer.
[206] More precisely, but still succinctly, the answer is that the Landlord has breached its obligations with respect to the Landlord’s Work, but this breach has been matched by the Tenant’s breach with respect to the Landlord’s Work and the Tenant’s Work. Both parties are responsible for the delay in the completion of the Landlord’s Work. There is a contractual enforcement stalemate.
[208] The contract logjam to date has been the parties’ departure from the provisions of the agreement that are to govern the management of the Landlord’s Work. It should have been the case and it still should be the case that the specifications for the sprinkler system and the HVAC system can be settled. As for the roof – which has been the predominant problem – there is ample evidence that “in order to ensure that the roof membrane shall be trouble and leak free at all material times during the term of the lease,” the roof should be replaced.
[209] In other words, I interpret the Landlord’s Work provisions as requiring a new roof at the Landlord’s expense. This is a binding finding in both Applications now before the court.
[210] The building is almost 100 years old. It should have come as no surprise to the Landlord that the roof would need to be replaced in order to provide a safe space for an event venue operation and for the other tenants in the building for that matter. This reality is part of the factual nexus for the interpretation of the language used by the parties in the Theatre Agreement and the Restaurant Agreement.
(b) The Issues Raised by the Lease Applications
[9] The issues raised by these applications for the court to decide are as follows:
a. The proper interpretation of Schedule “E” to the SPV Lease regarding the obligation of the Tenant to account to the Landlord for the use of amounts received under the “construction allowance” paid by the Landlord to the Tenant for the Landlord’s Work under Schedule “E” of the SPV Lease and the entitlement of the Landlord to be reimbursed for any unused amounts paid to the Tenant on account of the construction allowance (the “Construction Allowance Issue”).
b. The proper interpretation of clause 2 of Schedule “F” of the SPV Lease regarding the accounting by the Landlord to the Tenant for amounts received by the Landlord from the Rooftop Tenants (the "Rooftop Credits Issue").
c. The proper interpretation of the SPV Lease regarding alleged breaches by the Tenant for non-payment of rent (the “Rent Arrears Issue”):
i. The rental amounts owing by the Tenant to the Landlord for the months of September, October, and November 2021 (taking into account the determination of the Rooftop Credits Issue).
ii. The rental amounts payable by the Tenant to the Landlord from December 2021 onwards under the SPV Lease.
d. If the Tenant is found to have breached any obligations under the SPV Lease regarding rental amounts payable, whether the Tenant is entitled to relief from forfeiture (the “Relief from Forfeiture Issue”).
e. The proper interpretation of the SPV Lease regarding the Tenant’s obligation to allow the Rooftop Tenants to access the Roof through the premises (the “Rooftop Access Issue”).
i. The standing of the Rooftop Tenants to make submissions on the Rooftop Access Issue.
ii. Priorities as between the SPV Lease and the Rooftop Tenants’ leases regarding access to the Rooftop through the premises.
f. The proper interpretation of the SPV Lease regarding the Landlord’s obligations to arrange for the Rooftop Tenants to remove their equipment from the Rooftop and the Building while the roof was being replaced (the “Rooftop Equipment Issue”).
(c) The Disputed Provisions of the SPV Lease
[10] Following the Perell Decision, the Landlord and Tenant executed the SPV Lease that is now the subject of this application. Two versions of this lease were executed: (1) an “Original Version of the Lease” (with a watermark “Draft”) and (2) a “Trued Up Version.” The parties expressly agreed as follows regarding any conflicts between the two versions (the “Superiority Clause”):
If there is any conflict or discrepancy between any provision of the herein Executed Lease and Schedules and the hereto attached Executed Original Draft Lease and Schedules; the Original Draft version of such provision shall supersede the herein provision to the extent of such conflict or discrepancy without affecting this Lease and Schedules other than expressed herein.
[11] This Superiority Clause needs to be considered primarily in relation to the interpretation of clause 2 of Schedule “F” of the SPV Lease, which deals with the Rooftop Credits Issue. The remaining issues identified do not require resort to this Superiority Clause but do raise various other points of contract interpretation.
(d) Additional Factual Considerations
[12] The records on these applications are voluminous. There were affidavits filed on each application, but cross-examinations were conducted jointly. Counsel and the parties were reminded during oral argument that not everything in this voluminous record is necessarily relevant or admissible on every issue. In this type of joint proceeding on a voluminous written record, the court relies upon the parties to identify the relevant evidence for each issue to be decided and to raise concerns they have about admissibility and/or relevance.
[13] The parties were reminded in the Perell Decision (at paras. 18-20 that character, reputation, and speculation as to motives are not generally helpful to a contract interpretation analysis. The Landlord and Tenant representatives nonetheless persisted in raising (many of the same) accusations and disparaging comments in their affidavits on these lease applications. Those types of accusations and comments will be given a similar treatment on these lease applications as they were given in the earlier Perell Decision. They will be given little or no weight.
[14] Hitti raises factual contentions in his factum on these applications about a 2016 structural engineering report pertaining to the roof that was not disclosed in the context of the previous proceeding that resulted in the Perell Decision. This is raised solely for the purpose of attempting to discredit the Landlord. The report itself is not relevant to the issues to be decided on these applications.
[15] Facts specific to the issues will be addressed as they arise in the context of the court’s determination of the issues.
DISCUSSION AND ANALYSIS - Lease Applications
[16] The issues identified for the court’s determination on these lease applications will each be addressed in turn. The relevant provisions of the SPV Lease and other facts will be reviewed in connection with each issue, as applicable.
[17] The parties are in general agreement about the principles of contract interpretation to be applied to the interpretation of the SPV Lease (comprised of the Original Version of the Lease and the Trued-Up Version and the schedules appended thereto). As was the case in their previous lease dispute, their disagreement lies not in the principles to be applied but in how they should be applied in the circumstances of this case.
[18] Those recognized and accepted principles can be found in paras. 130 – 137 of the Perell Decision, and are as follows:
[130] The goal of contractual interpretation is to determine the intent of the parties and the scope of their understanding giving the words the parties used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.[Sattva Capital Corp. v. Creston Moly Corp., ](2014 SCC 53) at para. ; Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4 at paras. ; Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21 at para.
[131] The factual nexus is objective evidence of the background facts at the time of the execution of the contract; i.e., knowledge that was or that reasonably ought to have been within the knowledge of the parties at or before the date of contracting, including anything that would have affected the way in which the language of the document would have been understood by a reasonable person.[]([Sattva Capital Corp. v. Creston Moly Corp.](https://www.minicounsel.ca/scj/2020/1645)), [2014 SCC 53](https://www.minicounsel.ca/scc/2014/53)[ at para. ]([58](https://www.minicounsel.ca/scj/2020/1645))[.]
[132] In interpreting the contract, the court must have regard to the objective evidence of the factual matrix, the context underlying the negotiation of the contract, but the court must not have regard to the subjective evidence of the intention of the contracting parties about the negotiations and what was intended by them.[GoodLife Fitness Centres Inc. v. Rock Developments Inc., ](2019 ONCA 58); The Canada Trust Company v. Browne, 2012 ONCA 862 at para. ; Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673 at para. [.]](https://www.minicounsel.ca/scj/2020/1645)
[133] While evidence of the parties’ subjective intent is not admissible by the parol evidence rule, in interpreting a commercial contract, the court may have regard to the surrounding circumstances; that is, the factual background and the commercial purpose of the contract.[]([Sattva Capital Corp. v. Creston Moly Corp.](https://www.minicounsel.ca/scj/2020/1645)), [2014 SCC 53](https://www.minicounsel.ca/scc/2014/53)[ at paras. ]([58-61](https://www.minicounsel.ca/scj/2020/1645)); Canada Square Corp. v. VS Services Ltd. [(1981), ](https://www.minicounsel.ca/scj/2020/1645)[1981 CanLII 1893 (ON CA)](https://www.canlii.org/en/on/onca/doc/1981/1981canlii1893/1981canlii1893.html)[, ](https://www.minicounsel.ca/scj/2020/1645)[34 O.R. (2d) 250 (C.A.)](https://www.minicounsel.ca/scj/2020/1645); Reardon Smith Line v. Hansen-Tangen, [1976] 3 All E.R. 570 (H.L.); Prenn v. Simmonds, [1971] 3 All E.R. 240 (H.L.).
[134] The rules of contract interpretation direct a court to search for an interpretation from the whole of the contract that advances the intent of the parties at the time they signed the agreement.[Unique Broadband Systems Inc. (Re), ](2014 ONCA 538)[ at paras.83-90; Consolidated-Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., ](1979 CanLII 10 (SCC))[, ]([1980] 1 S.C.R. 888](https://www.minicounsel.ca/scj/2020/1645))[.]](https://www.minicounsel.ca/scj/2020/1645)
[135] Provisions should not be read in isolation but in harmony with the agreement as a whole.Scanlon v. Castlepoint Dev. Corp. , ](https://www.minicounsel.ca/scj/2020/1645)[1992 CanLII 7745 (ON CA)](https://www.canlii.org/en/on/onca/doc/1992/1992canlii7745/1992canlii7745.html)[, ](https://www.minicounsel.ca/scj/2020/1645)[11 O.R. (3d) 744 (C.A.)](https://www.minicounsel.ca/scj/2020/1645); Hillis Oil and Sales Limited v. Wynn's Canada, 1986 CanLII 44 (SCC)[, ]([1986] 1 S.C.R. 57](https://www.minicounsel.ca/scj/2020/1645)); McClelland and Stewart Ltd. v. Mutual Life Assurance Co. of Canada, 1981 CanLII 53 (SCC)[, ]([1981] 2 S.C.R. 6](https://www.minicounsel.ca/scj/2020/1645))](https://www.minicounsel.ca/scj/2020/1645)
[136] The court should interpret the contract fairly and broadly without being too astute in finding defects and rather to give effect to the intention of the parties by looking at substance and not form.Canada Square Corp. v. VS Services Ltd. , ](https://www.minicounsel.ca/scj/2020/1645)[1981 CanLII 1893 (ON CA)](https://www.canlii.org/en/on/onca/doc/1981/1981canlii1893/1981canlii1893.html)[, ](https://www.minicounsel.ca/scj/2020/1645)[34 O.R. (2d) 250 (C.A.)](https://www.minicounsel.ca/scj/2020/1645); Hillas & Co. Ltd. v. Arcos (1932), 147 L.T. 503 (H.L).](https://www.minicounsel.ca/scj/2020/1645)
[137] Where there are apparent inconsistencies between different terms of a contract, the court should attempt to find an interpretation which can reasonably give meaning to each of the terms in question and only if a consistent meaning cannot be found will the court rule one clause or the other ineffective. If reasonably possible, the meaning of inconsistent provisions may be reconciled by construing one term as a qualification of the other term and where there is apparent conflict between a general term and a specific term, the terms may be reconciled by taking the parties to have intended the scope of the general term to not extend to the subject-matter of the specific term.British Columbia Hydro and Power Authority v. BG Checo International Ltd., , ](https://www.minicounsel.ca/scj/2020/1645)[1993 CanLII 145 (SCC)](https://www.canlii.org/en/ca/scc/doc/1993/1993canlii145/1993canlii145.html)[, ](https://www.minicounsel.ca/scj/2020/1645)[99 D.L.R. (4th) 577](https://www.minicounsel.ca/scj/2020/1645)[ at pp. 581-2 (S.C.C.)](https://www.minicounsel.ca/scj/2020/1645)[.]](https://www.minicounsel.ca/scj/2020/1645)
[19] Many of these are re-summarized by the Tenant from basic tenets of contract interpretation taken from Geoff R. Hall, Canadian Contractual Interpretation Law, 4th ed. (Lexis Nexis Canada Inc., 2020), which include the commonly recognized goals of this exercise to:
a. Strive for an interpretation that accords with both the words used and the context that those words are used in.
b. Consider the factual matrix, regardless of whether there is ambiguity in the language of the contract.
c. Inform the interpretation of the contract with the organizing principle of good faith and the duty of honest performance.
d. Objectively interpret the contract.
e. Interpret the contract in accordance with sound principles and good business sense.
f. Find meaning in the words use in the contract.
g. Interpret the contract as of the date it was made.
[20] Sattva, which is recognized to be the leading authority from the Supreme Court of Canada on contract interpretation, reminds us that evidence of surrounding circumstances is not permitted to add to, subtract from, vary, or contradict the words of a written contract: at paras. 59 – 61.
[21] The above principles of contract interpretation have been used to inform and guide the contract analysis in the remainder of this decision.
(a) The Construction Allowance Issue
[22] As summarized in the outline of issues, the Construction Allowance Issue requires the court to interpret Schedule “E” to the SPV Lease. The court must determine whether the Tenant has an obligation to account to the Landlord for the use of amounts received under the “construction allowance,” which is paid by the Landlord to the Tenant for the Landlord’s Work under Schedule “E” of the SPV Lease, and whether the Landlord is entitled to be reimbursed for any unused amounts paid to the Tenant on account of the construction allowance.
[23] The court found at para. 209 of the Perell Decision that the Landlord’s Work included replacing the roof of the SPV Premises at the Landlord’s expense. At para. 25, the Perell decision recognized that “the parties did not know … precisely how much work would be required to repair the roof or how much the Landlord's Work would cost.” The parties negotiated the SPV Lease after the Perell Decision, which included terms about the Tenant’s Work and Landlord’s Work in general and the replacement of the Rooftop in particular.
[24] During the negotiation of the SPV Lease, an estimate was provided from the Landlord’s general contractor for the contemplated Landlord’s Work, for “$4,000.000 +/- 20%.”
(i) The Tenant’s Work
[25] The Tenant’s Work is defined in Article 4.3 of the SPV Lease, which requires the Tenant to install all fixtures, improvements, equipment, and all other “Works” (including the Landlord’s Work), it being agreed, however, that notwithstanding the foregoing, the Landlord shall compensate the Tenant for the cost of the Landlord’s Work as set out in the SPV Lease up to the maximum amount prescribed herein.
[26] Clause 2 of Schedule “E” requires the Tenant to complete the [Landlord’s] Work "on its own account, but subject to the payment of the Construction Allowance." Clause 5 of Schedule “E” confirms that the Tenant is responsible to pay all costs of the Landlord’s Work in excess of the Construction Allowance.
(ii) The Landlord’s Work
[27] Article 3.1(gg) of the SPV Lease defines the Landlord’s Work to have the meaning given to it in Schedule “E”. Schedule “E” contains the details of the Landlord’s Work.
[28] The scope of the Landlord’s Work is defined in clause 1 of Schedule “E” to include the repair and replacement of the roof, and a new HVAC system and sprinkler system, among other enumerated items.
(iii) The Construction Allowance
[29] Clause 4 of Schedule “E” states as follows:
The Landlord shall pay to the Tenant the amount of FOUR MILLION DOLLARS ($4,000,000.00) (plus applicable taxes) (the “Construction Allowance”) on account of costs incurred by the Tenant with respect to the Landlord’s Work, payable as follows:
a. each of the draws below (Not including the Retainer) shall be subject to the Landlord's retention of the holdback amounts pursuant to the Construction Act;
b. the "Retainer" shall be payable by wire transfer to the Tenant's RBC Bank account (the Tenant is to provide all relevant banking information to the Landlord) within 24 hours of the date of receipt by the Landlord of written demand from the Tenant, which may only be given following mutual execution of this Lease;
c. all other draws, set out in the table below shall be payable by the Landlord within 5 days of written confirmation from the Payment Certifier to the Landlord that the applicable milestone in the table has been achieved.
The Milestone table provided for the payment of a $1 million Retainer, and $500,000.00 installments thereafter payable upon:
Building permit issuance by the City, GC retained, roof demo started
Electrical & Plumbing are complete, HVAC Units ordered
All roof demo is complete and roof replacement underway
Roof replacement 75% complete
Roof is substantially complete + hvac & sprinkler started
The Balance less a 10% holdback is due when all work is 95% substantially performed (as defined in the Construction Act) and the 10% holdback is due when all work is 100% complete and satisfactory and all applicable lien periods have expired under the Construction Act without registration of any lien against title to the Building.
Without in any way affecting the Landlord's obligation to pay the Construction Allowance, the Landlord and the Tenant agreed upon a reasonable budget with respect to the Landlord's Work that was set out in Schedule “E”, totaling just over $4 million, of which $2 million was allocated to the new roof (including deck) and the balance was allocated to other items such as drawings and permits and fees, HVAC, sprinkler, restoration of historic ceiling, and electrical and water supplies.
[30] The Payment Certifier is not engaged to conduct any financial or other analysis. The Payment Certifier simply certifies to the Landlord that the applicable milestone in the table for which payment is being requested by the Tenant has been achieved.
[31] As of the hearing of the lease applications, the Landlord had paid to the Tenant $3,164,000.00 in Construction Allowance installments for the Retainer and subsequent Milestones certified by the Payment Certifier. The Tenant has requested the last $500,000.00 installment (for the substantial completion of roof and HVAC and the sprinkler, which was started). The Landlord is requesting an accounting of monies spent to date before paying any further installments of the Construction Allowance.
(iv) Accounting for the Construction Allowance
[32] Schedule “E” to the SPV Lease also provides that:
Prior to any payment of the Construction Allowance, the Tenant shall provide Landlord with a certificate of an officer of the Tenant confirming that there are no registered liens in respect of the Landlord's Work completed to date and that all of the Tenant's contractors, subcontractors, workers and suppliers have been paid in full for all invoiced amounts which have fallen due as of such date (together with copies of such invoices and proof of payment of same), save and except invoices which are to be paid with funds from that part of the Construction Allowance the Tenant is requesting be paid (the Tenant covenanting to provide the Landlord with copies of such invoices and proof of payment of same immediately following such payment), and subject to any amounts that the Tenant, acting reasonably, has disputed, for work completed in such date. The Landlord shall have no obligation to pay the Construction Allowance if an Event of Default is outstanding.
[33] The Landlord did not request, and the Tenant did not provide, any officer’s certificate prior to any of the previous installment payments of the Construction Allowance (the “Tenant’s Certificate”). The Landlord is now insisting upon such. The Landlord is also now asking for the Tenant’s certification: that all of the Tenant's contractors, subcontractors, workers and suppliers have been paid in full for all invoiced amounts which have fallen due as of such date (together with copies of such invoices and proof of payment of same), which the Landlord says it is entitled to under the corresponding provision of Schedule “E” above (also italicized for ease of reference).
[34] The Tenant attests that there are no registered liens in respect of the Landlord’s Work completed to date, and it would be willing to provide a certificate to that effect. The Tenant does not agree that it is required to provide the invoices and proof of payment for all of the work done to date. The Tenant has hired a general contractor, Modern Upgrades, and has paid that general contractor for both the Tenant’s Work and the Landlord’s Work to date. The Tenant has provided the invoices and proof of payments made to its general contractor. The Tenant argues that it has no obligation to provide the underlying invoices and proof of payment by the general contractor for any of the Landlord’s Work.
[35] As summarized earlier in this decision, the court should strive to give the words the parties used in the SPV Lease and Schedule “E” their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time they entered into this agreement. The court should also strive to read the contract and its schedules together, as a whole, with consistent meaning.
[36] Reading the SPV Lease and Schedule “E” together and giving meaning to the relevant contractual provisions in the commercial context in which they were negotiated, I find that the Tenant is required to provide the invoices and proof of payment to the Landlord for the Landlord’s Work undertaken and for which the Construction Allowance was intended to be applied. The Tenant’s Certificate deals with construction liens, but it is not restricted to that purpose. The italicized words (above) contained in the provision of clause 4 of Schedule “E” that provide for the Tenant’s Certificate expressly identify what is to be included in, and attached to, the Tenant’s Certificate such as the invoices and proof of payment of same. They are not limited to work in respect of which liens have been registered but are clearly indicated to be for all work for which the Tenant is certifying that its: “contractors, subcontractors, workers and suppliers have been paid in full.”
[37] The concept of the Tenant’s subcontractors is not defined, but an objective and plain reading of that phrase would include contractors or trades engaged by the Tenant’s general contractor, Modern Upgrades, to undertake work on the Tenant’s behalf. The production of invoices from, and proof of payment to, Modern Upgrades does not satisfy the Tenant’s obligations with respect to the Tenant’s Certificate. The Landlord is entitled to receive a compliant Tenant’s Certificate certifying all amounts paid to any contractor, subcontractor, worker, or supplier (whether by the Tenant directly or by its general contractor Modern Upgrades or anyone else on the Tenant’s behalf) in respect of the Landlord’s Work completed to date, together with invoices rendered and proof of payment of same.
[38] The fact that the Landlord has not insisted upon receipt of the Tenant’s Certificate in advance of paying any of the prior installments of the Construction Allowance does not preclude the Landlord from insisting upon receipt of the Tenant’s Certificate now and before paying any further installments of the Construction Allowance.
[39] This interpretation of the Tenant’s obligation to account to the Landlord for the Landlord’s Work undertaken is also consistent with the Tenant’s obligation to reimburse the Landlord for any advances made under the Construction Allowance that turned out not to be required for the completion of the Landlord’s Work, discussed in the next section of these reasons.
(v) Reimbursement of the Landlord for Construction Allowance Installments Paid
[40] Properly read in context, the Construction Allowance was to be used to fund the Landlord’s Work that the Tenant agreed to undertake on the Landlord’s behalf (s. 4.3 of the SPV Lease), the costs of which the Landlord agreed to compensate the Tenant for, up to the maximum amount prescribed (clause 4 of Schedule “E”). The prescribed (agreed) amount of $4 million (represented by the total Construction Allowance provided for in Schedule “E”) is consistent with the quote that the parties had received from the Landlord’s general contractor during their negotiations, which was provided with a margin of error of +/- 20%.
[41] The parties expressly provided (in clause 5 of Schedule “E”) that if the Landlord’s Work ends up costing more than the maximum amount prescribed ($4,000,000.00 plus applicable taxes) then that additional cost will be borne by the Tenant. The Construction Allowance was “fixed” with $4 million as the upward limit.
[42] The Tenant argues that the only commercially reasonable interpretation is that the parties also intended that the Tenant got to keep the entire Construction Allowance paid by the Landlord, even if the Landlord’s Work costs less than the maximum prescribed amount of $4,000,000.00. The Tenant argues that any “cost savings” achieved in the completion of the Landlord’s Work were to be retained by the Tenant.
[43] There is no express provision in the SPV Lease or any of its schedules that speaks to cost savings or provides for this benefit to be retained by the Tenant. While the Tenant has given subjective evidence of its intention and understanding, that subjective evidence is not admissible.
[44] In my view, the words of the SPV Lease and Schedule “E”, when read together and in harmony, are clear that the Landlord is providing advances to the Tenant to cover the costs incurred by the Tenant to complete the Landlord’s Work on the Landlord’s behalf. Compensation for costs incurred up to a maximum amount is consistent with the Construction Allowance installments being treated as advances for payment of these costs, which the Tenant’s Certificate and accompanying documents will eventually reconcile and account for.
[45] There is a budget in Schedule “E” of what each aspect of the Landlord’s Work might cost, but the Tenant is not obligated to follow the budget. There are certain Milestones that have been certified by the Payment Certifier to have been achieved. That does not alter the Landlord’s right to insist upon receiving the Tenant’s Certificate before being required to make any further Construction Allowance installment payments.
[46] The SPV Lease and Schedule “E” do not expressly provide for a final reconciliation and accounting of the use of the Construction Allowance. However, the Tenant’s Certificates are a mechanism by which such an accounting and reconciliation can be accomplished, retroactively.
[47] The SPV Lease does not contain any express requirement that the Tenant reimburse the Landlord if the actual cost of the Landlord’s work is less than the $4,000,000.000 Construction Allowance. However, it is a logical extension of this scheme of compensation and reimbursement of the Tenant for costs incurred that if there were funds advanced under the Construction Allowance that turn out not to be needed to reimburse or compensate the Tenant for (or fund the cost of) the Landlord’s Work undertaken by the Tenant, the court can, and I will in this case, imply a term into the SPV Lease and Schedule “E” thereto requiring that the Tenant reimburse any such overpayments to the Landlord.
[48] Such an implied term is necessary to give business efficacy to the SPV Lease, and objectively I find it to be a term that the parties would have said at the time they had obviously assumed: M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., 1999 CanLII 677 (SCC), [1999] 1 S.C.R. 619, at para. 27. An implied term makes sense in the overall scheme of the arrangements between the parties reflected in the SPV Lease that resulted in the Tenant assuming responsibility for the management and control of the Landlord’s Work (including the roof repair/replacement that the Perell Decision found was to be included in the Landlord’s Work), while the Landlord remained responsible to pay for it (in the case of the roof, up to the estimated amount of $4 million after which the Tenant would be responsible for any cost overages).
[49] Having regard to all of the terms in the SPV Lease and the factual matrix noted above, I find that the objective intention and understanding at the time that the SPV Lease was entered into was that the Landlord would fund this work in advance through the Construction Allowance installments based on the Milestones having been certified by the Payment Certifier and also based on the contemplated Tenant’s Certificates. This was on the implied understanding and agreement that any advances so funded that were not required for the Landlord’s Work would be returned to the Landlord, and/or applied towards ongoing and future Landlord’s Work as a deduction against current or future installments of the Construction Allowance.
[50] The Tenant argues that this is not a commercially reasonable term to imply because it would create too much uncertainty and require a complex accounting exercise given the intermingling of the Landlord’s Work and the Tenant’s Work. However, that accounting exercise would have been more straightforward if the Tenant’s Certificates had been provided as the installments were requested. The fact that the Tenant did not provide them, and the Landlord did not insist upon them, creating a larger accounting exercise for the Tenant on the back end, is not a reason not to imply this term. The contractual framework made sense; it was just not followed. But the failure to follow it does not mean that the underlying premise should be ignored. Fundamentally, this was a reimbursement exercise and that is what the Tenant now needs to account for and reconcile.
[51] The evidence in the record before the court does not allow the court to determine whether there are amounts that will need to be reimbursed by the Tenant to the Landlord on account of installments paid (or to be paid) in respect of the Construction Allowance that are not required to fund the cost of the Landlord’s Work. The Landlord has attempted to allocate the amounts paid to what has been disclosed regarding the Landlord’s Work, and its assessment is that $756,356.00 has been paid by the Tenant thus far on account of the Landlord’s Work, against over $3.1 million in Construction Allowance installments paid to date. The Tenant disputes this calculation. Hitti insists that, based on the disclosure (tied to payments to Modern Upgrades) the amount spent is at least $1.7 million. This still does not add up to the total installments paid to date.
[52] The Tenant’s Certificate with supporting documents will enable a more accurate accounting and reconciliation of what costs the Tenant has incurred in respect of the Landlord’s Work. The Tenant is ordered to deliver a Tenant’s Certificate(s) and supporting documents on account of all of the Landlord’s Work that has been undertaken by the Tenant or on the Tenant’s behalf whether by Modern Upgrades or any other person or company within forty-five days of this decision.
[53] That process needs to run its course and then the parties can figure out what amount, if any, has not been spent from the Construction Allowance on account of the Landlord’s Work carried out by the Tenant and whether there were amounts paid in the past that should be reimbursed or reallocated to (or deemed to have been paid on account of) future unpaid Construction Allowance installments, as a matter of accounting. If the Tenant had provided the Tenant’s Certificate before each installment paid under the Construction Allowance, then, as a practical matter, past over-payments might have been rolled over into subsequent installments once certified. However, since most of the installments have already been paid, to the extent that the overpayments exceed the subsequently certified remaining installments under the Construction Allowance, it is reasonable to imply as a term of the SPV Lease and Schedule “E” that any such overpayments shall be reimbursed to the Landlord, and I so order.
[54] The relief sought by the Landlord goes beyond the delivery of Tenant’s Certificates and supporting documents. The Landlord is asking the court to order a forensic accounting of all bank accounts into which the Construction Allowance advances were paid and is also asking for an order that Hitti personally pay back the sum of $2,164,000.00 (the amount that the Landlord says is unaccounted for), until a proper accounting for the use of the Construction Allowance is provided. In the alternative, the Landlord requests an order for repayment of all amounts not proven to have been expended on account of the Landlord’s Work.
[55] I am not prepared to order the forensic accounting and tracing that has been requested by the Landlord, nor to make a disgorgement order at this time. The parties set out in their agreement how the accounting would be done, and that is what should be done now, even if after the fact. As stated above, I am ordering the Tenant to provide a Tenant’s Certificate(s) and supporting documents for all of the Landlord’s Work undertaken by the Tenant on the Landlord’s behalf to date and any work that remains to be done. That work will need to be accounted for by invoices and proof of payment in connection with past work. The Tenant may need to obtain much of this documentation from Modern Upgrades to “prove” the expenses incurred.
[56] The Tenant is required, and ordered, to repay to the Landlord any amounts not proven through the Tenant’s Certificate(s) and supporting documents (that I have now ordered be provided) to have been expended by the Tenant on account of the Landlord’s Work, except to the extent of any credit to be applied to the remaining installments of the constructions allowance for which milestone(s) have been confirmed by the Payment Certifier, within forty-five days of the delivery of the Tenant’s Certificate(s).
[57] Rather than having money paid in a circle, the Tenant may withhold and not repay to the Landlord an amount equal to the next installment under the Construction Allowance if the Payment Certifier has certified that the applicable Milestone for that payment has been met. This is not likely to carry on for much longer given that most of the Milestones have already been certified and the corresponding Construction Allowance installments paid, but this might be relevant in the short term. Ultimately, the Tenant (and anyone not at arms-length to the Tenant who received the Construction Allowance installments) will be required to repay or disgorge the net overpayments in respect of unused amounts from the Construction Allowance for the Landlord’s Work.
[58] A final accounting and reconciliation shall be done once substantial completion of the Landlord’s Work in respect of the roof has been achieved. If concerns arise about the ability of the Tenant to pay and a tracing order and disgorgement is still sought, that relief is adjourned and can be renewed at a later time.
[59] The Tenant’s failure to account for the Landlord’s Work completed is one of the grounds upon which the Landlord seeks to terminate the SPV Lease (the other is for non-payment of rent). I am not ordering that now but if the Tenant fails to provide the Tenant’s Certificate(s) as now ordered within forty-five days of the release of this decision or fails to repay the amounts not proven through the Tenant’s Certificates(s) or properly credited towards future installments within forty-five days of the delivery of the Certificate(s), then that may be grounds upon which the Landlord may seek the court’s permission to terminate the SPV Lease.
(b) The Rooftop Credits Issue
[60] As summarized in the outline of issues, the Rooftop Credits Issue requires the court to interpret clause 2 of Schedule “F” of the SPV Lease regarding the Landlord’s obligation to account to the Tenant for amounts (rent) received by the Landlord from the Rooftop Tenants.
[61] The parties agree that the Tenant is entitled to the Rooftop Credits. The dispute is in relation to when that entitlement commenced under the SPV Lease.
[62] There is an inconsistency between the Original Version of the Lease and the Trued-Up Version relating to the accounting for amounts received by the Landlord from the Rooftop Tenants:
a. Clause 2 of Schedule “F” of the Original Version of the Lease states: “Landlord shall pay Tenant any amount it is receiving from Cell Cos.”
b. Clause 2 of Schedule “F” of the Trued-Up Version states: “Tenant agrees to pay base rent for area D as per this Lease, such amount to abate by the amount received by the Landlord from the Cell companies.”
[63] The previously referenced Superiority Clause specifies that the Original Version of the Lease takes precedence over the Trued-Up Version in the event of any inconsistency.
[64] The Tenant argues that the Superiority Clause renders clause 2 of Schedule “F” of the Original Version of the Lease to be the operative clause. When read plainly, this required the Landlord to pay any and all amounts it received from the Rooftop Tenants, at any time during the pendency of the SPV Lease, irrespective of the Tenant’s rental payment obligations. That means that the Landlord should have been paying to the Tenant all of the rental payments received by the Landlord from the Rooftop Tenants, even during the Tenant’s rent-free period under the SPV Lease as this is not specified to be a rent abatement. This is in contrast to the Trued-Up Version that was rendered ineffective by the Superiority Clause.
[65] In the period from August 26, 2020 to November 1, 2021, the Landlord received $46,454.45 (plus HST) from the Rooftop Tenants under their leases, as follows:
a. $25,279.45 plus HST on December 1, 2020 from Rogers.
b. $1,512.50 plus HST per month from Freedom Mobile, for a total of $21,175.00 plus HST for the period of 14 months between August 26, 2020 and November 1, 2021.
[66] The Tenant maintains that, since these amounts were not paid by the Landlord when received and as required, they can be applied towards (or set-off against) past, current, and future rents owing by the Tenant under the SPV Lease and should be accounted for in any analysis of alleged defaults by the Tenant in the payment of its rent.
[67] The Landlord maintains that clause 2 of Schedule “F” was changed in the Trued-Up Version for the very reason that the rental payments received by the Landlord from the Rooftop Tenants were not intended to be a profit centre for the Tenant. The Rooftop Credits were intended all along to be applied as rent abatements once the Tenant’s rent-free period(s) ended, and that intention was simply clarified in clause 2 of Schedule “F” of the Trued-Up Version.
[68] The Landlord’s intentions are not relevant to the contract interpretation exercise. There is no objectively apparent reason in the record before the court for the Tenant to be the ultimate beneficiary of the rental amounts received by the Landlord from the Rooftop Tenants that would support one version of clause 2 of Schedule “F” over the other. It would only make sense for an abatement of rent to start when the rent became payable by the Tenant. However, if the purpose for flowing the rents paid by the Rooftop Tenants through to the Tenant is to compensate for the inconvenience of having to deal with the presence of the Rooftop Tenants, that inconvenience persisted throughout, and was not tied to the rent-free period(s) under the SPV Lease.
[69] The Superiority Clause is clear and specifies that clause 2 of Schedule “F” of the Original Lease is the operative provision. That version of clause 2 does not mention abatement and states clearly that the Landlord shall pay to the Tenant any amounts it receives from the Rooftop Tenants. In the absence of a specified commencement date, that clause must be read as applicable from the beginning of the SPV Lease term.
[70] The Landlord is directed to pay to the Tenant the aggregate sum of $46,454.45 (plus HST) that it has received to date from the Rooftop Tenants.
(c) The Rent Arrears Issue
[71] As summarized in the outline of issues, the Rent Arrears Issue requires the court to determine whether the Tenant breached it obligation to pay rent to the Landlord under the SPV Lease (which, in turn, will inform the declarations sought by both parties regarding the validity of the Landlord’s purported termination of the SPV Lease and locking the tenant out of the SPV Premises on November 28, 2021):
a. In respect of any of the months of September, October, and November 2021 (after taking into account the determination of the Rooftop Credits Issue); and
b. In respect of the month of December 2021 and onwards (after the Tenant’s rent-free period for its Area D on the Rooftop ended).
[72] Article 1 of the SPV Lease sets out the rent-free periods and the quantum of rent payable upon the expiry of each rent-free period. The Tenant’s rent-free period ended on May 15, 2021 and the amount of rent payable commencing June 1, 2021 was $14,356.49 per month. The Tenant paid this monthly rent under protest, albeit not always on time.
(i) Rent for the months of September to November 2021 – Validity of November 2021 Purported Termination of the SPV Lease by the Landlord
[73] The Landlord complains that the Tenant was late or intentionally delayed or withheld payment of rent earlier in 2021. On November 18, 2021, the Landlord locked the Tenant out of the Premises and purported to terminate the SPV Lease for non (eventually late) payment of November’s rent owing, in the amount of $14,356.49. Pursuant to an interim without prejudice order the monthly rental amounts were thereafter paid by the Tenant into its solicitor’s trust account.
[74] The Tenant argues that, on any reading of clause 2 of Schedule “F” of the SPV Lease, the Rooftop Credits would have been payable by the Landlord to the Tenant during any period in which the Tenant was paying rent (after the end of its rent-free period), although the monthly amounts paid by the Rooftop Tenants to the Landlord under their leases would not have offset the entire monthly amount payable by the Tenant, the past accrued Rooftop Credits (which the court has now determined the Landlord was required to pay to the Tenant and may be applied to offset past, current, or future rental amounts owing by the Tenant) would have been sufficient to cover the rent for November that was late.
[75] In any event, the past rent arrears had all been brought current by the time these lease applications were heard, subject to any additional rent owing in respect of the Rooftop commencing December 1, 2021 when the rent-free period for area D (the Rooftop) expired. Accordingly, I find that the Landlord did not validly terminate the SPV Lease and was not entitled to lock out the Tenant in November 2021.
(ii) Rent for the months of December 2021 and Beyond
[76] The parties agree that if the SPV Lease was not validly terminated, the rent amount increased in December 2021 and they will be able to calculate what is owing under the SPV Lease for those months, after accounting for the monthly amount of $14,356.49 paid by the Tenant into its solicitor’s trust account under the without prejudice interim arrangement. The court is not being asked to come to a final determination of the amount owing. The precise calculation is not needed to see that, even after applying the Rooftop Credits that the court has ruled the Tenant should be paid, there will still be a deficiency in the amounts owing under the Lease by the Tenant from and after December 2021.[1]
[77] The Tenant is ordered to pay the calculated amount of rent owing for the rental period from and after December 2021 to the current month (April 2021) net of the Rooftop Credits and the amounts to be paid to the Landlord from the Tenant’s solicitor’s trust account within 30 days of this decision.
[78] Given the uncertainty that existed regarding the Rooftop Credits until that issue was determined by the court on these applications, I will not go so far as to declare, as the Tenant asks me to do, that the Landlord’s purported termination of the SPV Lease on or about November 18, 2021 was unlawful. With the benefit of hindsight, it was premature.
(d) The Relief from Forfeiture Issue
[79] As summarized in the outline of issues, the Relief from Forfeiture Issue requires the court to determine whether, if the Tenant is found to have breached any obligations under the SPV Lease regarding rental amounts payable, it is entitled to relief from forfeiture.[2]
[80] The Tenant’s late payment of rent in November 2021 was remedied. The Tenant’s underpayment of rent from and after December is a function of the parties having not adverted to the increase in the monthly rent due from and after December 1, 2021 when the rent-free period for Area D on the Rooftop ended and they entered into the interim without prejudice arrangement, which was reached when they were before Penny J. in the fall. These were technically breaches by the Tenant of the SPV Lease. Even the payment of rent under protest and into a solicitor’s trust account does not satisfy the Tenant’s obligations under the Lease, although the Landlord was protected at least to that extent.
[81] The full extent of the Tenant’s breaches for late or non-payment of rent is complicated by the fact that the court has now ruled that the Tenant is entitled to the Rooftop Credits, which was properly put to the court for its determination. In hindsight, the Tenant may not have been late or underpaying rent in November and December 2021, but in fact may have overpaid rent once the Rooftop Credits are applied, in which case relief from forfeiture would not be required for rent payable in those months at least.
[82] To be granted relief from forfeiture, the Tenant must establish the following criteria (as specified in the case of Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490, at p. 504), and has done so for the reasons indicated:
a. The Tenant’s conduct was reasonable in the circumstances. The Tenant eventually remedied the late payment of rent and paid its rent under protest into a solicitor’s trust account under the interim without prejudice arrangement that was entered into. It was raising legitimate questions about the Rooftop Credits and also had concerns about the delays being caused by the need to co-ordinate the movement of the Rooftop Tenant’s equipment to complete the roof work being undertaken by the Tenant on the Landlord’s behalf, which it argues ought to have extended its rent-free period.[3]
b. The breaches were not grave either by their nature or by their impact on the Landlord: Ontario (Attorney General) v. 8477 Darlington Crescent, 2011 ONCA 363, 333 D.L.R. (4th) 326, at para. 91. When the Landlord purported to terminate the SPV Lease in November 2021 the rental default amount was less than $20,000.00. Even the subsequent amounts paid under protest into trust that were less than the amounts owing were not significant, particularly once the Rooftop Credits are accounted for.
c. There is a substantial disparity between the value of the property forfeited and the damage caused by the breach. The loss of the SPV Lease over the long term would be significant to the Tenant. It has invested significant time and effort into the SPV Premises and would lose that investment over the relatively insignificant amounts of overdue rent that will now be cured through a combination of the release of funds from the solicitor’s trust account, the Rooftop Credits, and the payment by the Tenant of any difference owing (as ordered earlier in this decision).
[83] If such relief is needed, this is an appropriate case in which to grant relief from forfeiture, and it is granted.
(e) The Rooftop Access Issue
[84] In the lead up to the commencement of these applications, the Tenant changed the locks at the SPV Premises and refused to give the Landlord a key. The Tenant also did not agree to provide unfettered access to the Rooftop for the Rooftop Tenants. Initially, the Tenant threatened not to allow the Rooftop Tenants access through the Building at all, but there was some loosening of that in the context of negotiated interim arrangements.
[85] As summarized in the outline of issues, the Rooftop Access Issue requires the court to interpret the SPV Lease regarding the Tenant’s obligation to allow the Rooftop Tenants to access the Roof through the premises. It also requires the court to determine:
a. The standing of the Rooftop Tenants to make submissions on the Rooftop Access Issue; and
b. the priorities as between the SPV Lease and the Rooftop Tenants’ leases regarding access to the Rooftop through the premises.
(i) The Relevant SPV Lease Provisions Relating to the Rooftop Access Issue
[86] The SPV Lease contains three provisions that have been identified as potentially relevant to the question of the Landlord’s (and through the Landlord, the Rooftop Tenant’s) ability to access the Rooftop through the SPV Premises:
a. Clause 8.5 of the SPV Lease, entitled "Access by Landlord” states: “For certainty, tenants or licensees having antennae apparatus on the roof of the Building, shall be permitted to access the roof through the Premises through the outdoor emergency metal staircase which the Tenant hereby agrees to repair and make safe.”
b. Schedule “F” of the SPV Lease deals with the Rooftop and paragraph 3 (d) states that “[n]otwithstanding the Tenant’s rights in respect of the Patio Area [Area D on the Rooftop], the Landlord shall be entitled to access the rooftop area in order to exercise its rights and comply with its obligations under this Leases (sic) and under the Antenna Leases referred to above (provided Landlord complies with its obligations hereunder with respect to accessing the Premises).”
c. Clauses 4.1 and 4.4 of the SPV Lease provide that “the Tenant is entitled to exclusive and quiet possession of the Premises.”
(ii) The Rogers Lease
[87] For over 30 years, Rogers has leased space on the Rooftop, as well as an equipment room on the floor below, for purposes of installing, operating, and maintaining certain equipment it uses to provide telecommunication services. This site is a downtown hub and an integral part of Rogers’ cellular network, servicing hundreds of thousands of customers and the 911 emergency dispatch services in the area. To do this, Rogers needs to have uninterrupted access to its equipment in order to perform both planned (i.e., scheduled) and emergency (i.e., urgent) maintenance and repairs. Emergency access can be necessary in the event of unplanned outages and equipment issues, which can occur at any time.
[88] The Rogers Lease has a current term that runs until November 30, 2022. Rogers has options to extend and renew its lease for multiple terms until 2037.
[89] The Rogers Lease includes the following provisions:
- The LANDLORD hereby leases to the TENANT [i.e. Rogers] the Leased Premises and the TENANT shall have the right:
(c) to enter upon the Landlord's Lands and the Leased Premises at all reasonable times for the purpose of the installation, operation and maintenance of the equipment; [ ... ]
(e) (i) to rights of way (but such rights of way shall not establish easements) for the TENANT'S access over those portions of the Landlord's Lands and the buildings thereon necessary to enable the TENANT to gain access to the Leased Premises, and to the TENANT'S utilities which shall include those portions of the Landlord's Lands as designated by the LANDLORD from time to time, available for common access and egress for occupants of the building such as driveways, walkways, hallways and exits and entrances, and; [ ... ] ."
[90] The words of the Rogers Lease unambiguously provide Rogers with the right to access the Rooftop through the Building. The purpose, surrounding circumstances, and historic use also support the same conclusion, in the event those factors need to be considered. The purpose of this right of way is to provide Rogers with effective access to the Rooftop and its equipment room in order to install, operate, maintain, and replace its telecommunications equipment, consistent with clauses 2, 5(a), 5(b), 5(c), 5(e), and 13( c) of the Rogers Lease.
[91] The terms of the Rogers Lease — notice of which has been continuously registered on title since 1991 — entitle Rogers to access its leased premises and provides Rogers a right of way over portions of the building (including the SPV Premises) in order to do so. Rogers maintains that the only effective means of access to the Rooftop is through the interior of the Building, and Rogers has always accessed its equipment on the Rooftop this way.
[92] Rogers has consistently over the years exercised its access rights through the interior of the Building. Rogers' personnel and contractors have done so by walking through the former theatre space and taking stairs at the top of it up to the roof, which is the only means of internal access. Rogers has never used the exterior ladder as a means of access. As far as Rogers is aware, its personnel and contractors have always accessed the Rooftop in this way. Until recently, Rogers accessed the Rooftop this way, even during the period in which the Tenant was occupying the SPV Premises.
[93] Where specific uses of a right of way have been exercised consistently for an extended time — as is the case here — this signifies that both parties to the grant intended for such uses to be conveyed: see Square-Boy Limited v. The City of Toronto, 2017 ONSC 7178, paras. 27 – 29; Boone v. Brindley (2003), 2003 CanLII 20920 (ON CA), 179 O.A.C. 50 (C.A.), paras. 1 – 2. Rogers and the Landlord agree on this.
(iii) The Freedom Mobile Lease
[94] Freedom’s Mobile’s Lease was entered into between a prior landlord and Freedom’s predecessor on October 11, 2009. It expires on August 31, 2024, but Freedom has an option to renew for a further term.
[95] The Freedom Mobile Lease provides (in clause 1) for its access to the Rooftop "twenty four (24) hours a day, seven (7) days per week.” This right of access has been exercised through the Building (including the SPV Premises) since 2009. Like Rogers, Freedom needs to access the Rooftop to operate, maintain, and repair its equipment. The only current (and historic) access is through the SPV Premises in the Building.
[96] Like Rogers, Freedom Mobile (“Freedom) considers it to be imperative that it continue to have access to the Rooftop. If it does not and is therefore unable to maintain or repair its equipment, this will result in loss of cellular coverage to tens of thousands of customers, including 911 dispatch services. Freedom needs access to the Roof to operate, maintain, repair, and replace its equipment on a regular basis, and to attend to emergencies. This work requires heavy equipment to be brought to the Rooftop (in the range of 80 – 100 pounds), including laptop computers.
[97] Although not registered on title, the Tenant was aware and had actual notice of the Freedom Lease and its terms prior to entering into the SPV Lease because of previous litigation that they were involved in during 2018 regarding Freedom’s access to the Rooftop.
(iv) Standing of Rooftop Tenants
[98] The Tenant objected to the standing of the Rooftop Tenants to appear and make written or oral submissions on this aspect of the lease applications.
[99] The Landlord has clearly requested relief that impacts the Rooftop Tenants, as has the Tenant.
[100] Although the Rooftop Tenants have not been joined as parties under r. 5 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, they could have been. Similarly, although they have not sought intervenor status under r. 13 of the Rules of Civil Procedure, they could have and would have been granted intervenor status on the Rooftop Access Issue because the relief requested by both the Landlord and the Tenant affects their rights.
[101] It is ultimately in the court’s discretion to control its process and determine who should be heard. It is a matter of form over substance to suggest that the Rooftop Tenants and/or the Landlord should have brought motions under either r. 5 or 13 for the Rooftop Tenants to be permitted to make submissions about matters that so clearly affect their rights under their leases. Furthermore, the scheduling orders in advance of the hearing of these lease applications clearly contemplated that the Rooftop Tenants would be participating.
[102] Rule 1.04 requires the court to construe the Rules in such a way as to secure the just, most expeditious, and lease expensive determination of every proceeding on its merits. It is just, most expeditious, and least expensive for all involved for the court to consider the submissions made by the Rooftop Tenants, whose interests the Landlord may also be advancing but who should have the opportunity to speak for themselves. If needed, on the court’s own initiative, I deem them to have been granted intervenor status under r. 13.
(v) What Access are the Rooftop Tenants Entitled to under the SPV Lease?
[103] The Rooftop Tenants are insisting that the Landlord ensure that they have safe and effective access to the Rooftop, consistent with their lease rights. The Landlord says that these pre-existing obligations to the Rooftop Tenants take priority over the SPV Lease and the Tenant’s rights thereunder.
[104] The concern first arose in November 2018 when the Tenant changed the locks to the premises and neither the Landlord nor the Rooftop Tenants were able to access the Rooftop without the Tenant’s co-operation. After this incident, the Landlord asked the Tenant for a key to ensure that the Rooftop Tenants can gain access when needed, which the Tenant has refused to provide to the Landlord.
[105] The Rooftop Tenants are concerned about this happening again. They have important equipment on the Rooftop that could require emergency repair and they require 24/7 access, which cannot be at the whim of the Tenant. Further, they require access for the routine maintenance and repair of their equipment, and they maintain that this access cannot be consistently and safely achieved through the external metal ladder on the side of the Building. The Rooftop Tenants maintain that they are entitled to access their leased premises through the SPV Premises as they have done throughout the terms of their respective leases that pre-date the leasing arrangements between the Landlord and the Tenant for the SPV Premises.
[106] As between the Landlord and the Tenant, the SPV Lease provisions adverted to the need for the Rooftop Tenant to access their equipment on the Rooftop, provided that they would do so by way of the exterior ladder (once it had been made safe by the Tenant for them to do so) and did not make any express provision allowing the Rooftop Tenants to access the Rooftop through the SPV Premises.
[107] Until the Tenant has complied with its covenant under clause 8.5 of the SPV Lease to repair and make the exterior ladder safe, the only commercially reasonable and harmonized reading of the relevant clauses of the SPV Lease would be to imply a term that the Rooftop Tenants shall be given access to the Rooftop in accordance with their rights under their leases through the SPV Premises.
[108] The implication of such a term is consistent with the other provisions of the SPV Lease and is necessary to reconcile the various terms and provisions. This is a term that I find the parties to the SPV Lease would have said at the time they entered into the SPV Lease they obviously assumed. It is the only way to make sense of agreeing that the Rooftop Tenants should access the Roof by way of the exterior ladder but requiring the Tenant to make it safe and saying nothing further about how and when that would happen and what the access rights would be in the meantime: see M.J.B. Enterprises, at para. 27.
[109] The external ladder on the outside of the SPV Premises does not form part of the demised premises under the SPV Lease or under either of the Rooftop Leases. It is the position of Rogers and Freedom Mobile that this exterior ladder that is affixed to the side of the building, beginning ten feet off the ground and extending for multiple stories off the ground, is unsafe and inaccessible and does not provide a reasonable means of access to the Rooftop. It is also currently in a state of disrepair.
[110] The Tenant concedes that the exterior ladder is not currently safe, and it has not been to date. Therefore, the position of the Landlord and the Rooftop Tenants is historically justified.
[111] I find that the Tenant did not have the right to prevent the Rooftop Tenants from accessing the Rooftop through the SPV Premises. Furthermore, even under the terms of its own SPV Lease, while the exterior ladder remains unsafe as a means of accessing the Rooftop, the Tenant does not have the right to prevent (and shall be enjoined from preventing or restricting) the Rooftop Tenants from accessing the Rooftop through the SPV Premises.
[112] This leads to the next question: can the Tenant ever make the exterior ladder safe for purposes of the access to the Rooftop that the Rooftop Tenants enjoy under their own leases and/or as a matter of law? The exterior ladder does not currently comply with the Canada Labour Code, R.S.C., 1985, c. L-2, and the Canada Occupational Health and Safety Regulations, SOR/86-304, which it would have to in order to meet the minimum safety standards for entry and exit from the workplace for employees of Rogers and Freedom Mobile who need to access the Rooftop from time to time.
[113] The Tenant says it is prepared to undertake work on that ladder to bring it into compliance with ANSI Standard A14.3-9-1984 (a regulatory standard that the Tenant acknowledges applies). The Landlord and the Rooftop Tenants maintain that it is not possible to construct an exterior access ladder that is safe for all of the Rooftop Tenants access needs and circumstances. In other words, they say that what the Landlord and Tenant agreed to under s. 8.5 of the SPV Lease (without consulting with the Rooftop Tenants) is not possible to achieve.
[114] The Rooftop Tenants insist that the exterior ladder is not a suitable or safe means of access for a number of reasons, not limited to ANSI Standard A14.3-9-1984. They are concerned that the primary objective of seeking to eliminate fall hazards under s. 122.2 of the Canada Labour Code cannot ever be achieved by using the external ladder for the full spectrum of their access needs and given the potential conditions that will be faced. They also point to a number of other regulatory requirements that have to be met, including construction standards and the need for any such exterior ladder to be deemed safe to support the load of a fall arrest system (in addition to the requirements of Rogers' and Freedom’s internal safety policies). There are concerns about inclement weather and the need to transport heavy equipment up and down. Another concern is that the exterior ladder cannot be used for access because of the requirement of three points of contact when climbing and descending a ladder.
[115] The Tenant argues that if the court’s determination of this issue ultimately requires the court to find that the Tenant could never construct an exterior access ladder that would afford the Rooftop Tenants safe access to their equipment on the Rooftop, this involves "complex issues requiring expert evidence; and/or a weighing of the evidence" that favours determination by way of trial/action: see Somerleigh v. Lakehead Region Conservation Authority, 2005 CarswellOnt 8205 (S.C.), at para. 10, citing Fort William Indian Band v. Canada (Attorney General), 2005 CanLII 28533 (ON SC), 2005 CarswellOnt 2288 (S.C.). The Tenant objects to the court making this finding based only on the evidence of the safety manager from Rogers, who was cross-examined for purposes of these lease applications at the request of the Tenant. The Tenant argues that neither side put forward expert testimony, and it requests that the court order a trial of this issue and the parties be afforded the opportunity to lead expert evidence about it.
[116] I do not need to decide the lease applications on the basis of this point of impossibility. As will be discussed in the next section, as a matter of law, the Rooftop Tenants are entitled to continue to access the Rooftop through the SPV Premises. If that creates an issue for the Landlord and the Tenant under the SPV Lease (in that their intention that there eventually be an exterior access route created, at the Tenant’s expense, has been defeated by the legal rights of the Rooftop Tenants that take priority), that is an issue as between the Landlord and the Tenant.
(vi) The Prioritization of Competing Leasehold Rights and Interests
[117] The Rooftop Tenants and the Landlord argue, outside of what the SPV Lease may say or provide for, that the Rooftop Tenants have rights at law to access the Rooftop through the SPV Premises.
[118] The words of the Rogers and Freedom Lease unambiguously provide rights of access to the Rooftop through the Building, and this interpretation is supported by the surrounding circumstances, and historic use. The Rogers Lease expressly grants it access, as necessary, over the Landlord’s lands and buildings, whereas the Freedom Lease does so by implication, for the obvious purpose of accessing their equipment installed on the Rooftop: see Markowski v. Verhey, 2020 ONCA 472, at paras. 26 – 32; Square-Boy Limited, at paras. 27 – 29.
[119] The Rooftop Tenants were not involved in any of the SPV Lease negotiations and did not see the SPV Lease until the access issues first arose in the fall of 2021. The Rooftop Tenants did not agree to any provisions in the SPV Lease that could be read to limit or restrict their own rights under their respective leases or at law. They have never agreed to use the exterior ladder as a means of accessing the Rooftop and this had never been suggested to them as a means of access to the Rooftop by the Landlord prior to the dispute giving rise to these lease applications.
[120] Conversely, the Tenant had deemed and actual knowledge of the Rogers Lease and had actual knowledge of the Freedom Lease.
[121] The Tenant had deemed knowledge of the contents of the Rogers Lease because it was registered on title, by virtue of s. 111(5) of the Land Titles Act, R.S.O. 1990, c. L.5: see 5009678 Ontario Inc. v. Rock Developments Inc., 2020 ONSC 630, para. 65; Russo v. Field, 1973 CanLII 10 (SCC), [1973] S.C.R. 466, pp. 479 – 481. The Tenant also had actual knowledge of the Rogers Lease and its contents: Hitti acknowledges that he was provided with a copy and reviewed it in the summer of 2020 before signing the SPV Lease.
[122] Under s. 111(7) of the Land Titles Act, the Rogers Lease takes priority over the unregistered SPV Lease.
[123] The Tenant had actual knowledge of the Freedom Lease, as a result of having received it during prior litigation in which they were involved in 2018. The litigation was over that very lease and the access rights it afforded Freedom to the Rooftop under the Freedom Lease.
[124] Freedom argues that the Tenant’s actual knowledge of the Freedom Lease affords it the same priority over the SPV Lease at common law as the Rogers Lease enjoys under the Land Titles Act: see United Trust v. Dominion Stores et al., 1976 CanLII 33 (SCC), [1977] 2 S.C.R. 915, at pp. 951 – 952, 956 – 957.
[125] The Landlord (supported by the Rooftop Tenants) contends that the common law principle of “first in time, first in right” applies to give priority to the Rooftop Tenants’ rights to access the roof under their leases over whatever rights were granted by the Landlord to the Tenant under the SPV Lease. Under this principle, the Rooftop Tenants could only be required to access the Rooftop through means other than through the SPV Premises if the Tenant can demonstrate that there are alternative means that are safe and suitable for access.
[126] Freedom also argues that it has an implied easement of necessity to use the Building, including the SPV Premises, to access the Rooftop. An easement of necessity is an easement without which the grantee cannot make use of the land granted to it. The way of necessity must be suitable for the grantee's business: see B.O.J. Properties Ltd. v. Allen's Mobile Home Park Ltd. (1979), 1979 CanLII 2796 (NS SC), 96 D.L.R. (3d) 431, (N.S.S.C.), at pp. 439 – 440, citing 11 Hals., 2nd ed., pp. 326 – 329, aff'd 1979 CanLII 2583 (N.S.C.A.).
[127] In Aircraft Maintenance Enterprises Inc. v. Aerospace Realties (1986) Ltd. et al, 1992 CanLII 7349 (N.L.S.C.), at paras. 36, 40, 79 – 82, the court found that an easement of necessity was an implied term of the subject lease in order to give business efficacy to the lease.
[128] The unique issue in this case is that easements of necessity are typically being considered as between the landlord (or sub-landlord) and tenant, and not between two tenants with arguably conflicting lease provisions. That distinction may give rise to rights as between the Landlord and the Tenant, but it does not, in my view, alter the analysis of the easement from the perspective of the Rooftop Tenants.
[129] An easement runs with the land and can be applied to protect the rights of a tenant. There are four characteristics of an easement: (1) there must be a dominant and servient tenement; (2) the easement must accommodate the dominant tenement; (3) the owners of the dominant and servient tenements must be different persons; and (4) the right must be capable of forming the subject matter of a grant: see Siegel v. 22 Shallmar Inc., 2004 CanLII 43911 (Ont. S.C.), at paras 6 – 10, citing Canadian Pacific Ltd. v. Paul, 1988 CanLII 104 (SCC), [1988] 2 S.C.R. 654.
[130] The four requirements are met in this case. The Rooftop Tenants have easements of necessity over the SPV Premises for purposes of accessing their equipment on the Rooftop. Given the actual (and deemed) knowledge of the Tenant of the Rogers and Freedom Leases, the Tenant is not an innocent third party whose rights have been affected by these easements.
[131] The Tenant maintains that it would not be "necessary" for the Rooftop Tenants to access the Rooftop through its premises if it designs what it describes as a “Compliant Exterior Access Ladder,” constructed and installed in the alley adjacent to the east side of the Building. The Tenant has indicated that it will undertake to retain qualified professionals to design, construct, and install a Compliant Exterior Access Ladder in the alley adjacent to the east side of Building, provided the Landlord requires the Rooftop Tenants to use such ladder.
[132] However, it seeks some assurance that the work it does will be sufficient to satisfy the Tenant’s obligation to “make it safe” under s. 8.5 of the SPV Lease and to satisfy the Rooftop Tenants to the extent that they have the right to require any further safety requirements for their access to the Rooftop if it is to be by way of the exterior ladder.
[133] The Rooftop Tenants point to the previously identified concerns regarding the inability to make the exterior ladder safe for all of their access needs and circumstances. The suggested alternatives to avoid these concerns and hazards are not considered by the Rooftop Tenants to be suitable means by which to gain access, as opposed to doing so through the SPV Premises.
[134] Ultimately, the onus is on the Tenant to prove that there is or could be another safe means of access to displace the Rooftop Tenants’ easements of necessity. It is acknowledged that the existing external ladder is not viable. The Tenant’s proposal to build a new external ladder is not sufficient where it has not been demonstrated that it would or could provide an alternative means of safe access: see B.O.J. Properties Ltd, at p. 442. The fact that a party has some other theoretical form of access does not defeat the grant of easement of necessity: see Dobson v. Tulloch, 1994 CanLII 7239 (ON SC), 1994 CarswellOnt 691 (Gen. Div.), at paras. 51, 56 – 57; aff'd (1997) 1997 CanLII 14542 (ON CA), 33 O.R. (3d) 800 (Ont. C.A.).
[135] Each side argues that the other had the onus in this case and that the failure to meet the onus is fatal to their opponent’s position on this issue:
a. The Tenant argues that the Rooftop Tenants had the onus to establish that access through the SPV Premises is necessary, and that a compliant ladder cannot be fabricated and installed.
b. The Rooftop Tenants argue that it is the Tenant’s onus to establish that a compliant ladder could be fabricated and installed.
[136] The law supports the position of the Rooftop Tenants that, once the easement of necessity is engaged, it is the Tenant’s onus to demonstrate that there is an alternative safe and viable means of access, and the Tenant has not done so. An easement of necessity exists in this case by virtue of the continuous historic access to the Rooftop through the SPV Premises and the acknowledgment that the exterior metal ladder has never been, and is not currently, a safe or viable means of access.
[137] I find that the Rooftop Tenants have easements of necessity over the SPV Premises to access their equipment on the Rooftop on the basis provided for in their respective leases, which means that they shall be guaranteed access through the SPV Premises at all reasonable times (which includes 24/7 emergency access, as needed). To be clear, the corollary of this is that the Tenant’s request for a declaration from the court that it is not “necessary” for the Rooftop Tenants to access their leased premises through the SPV Premises is dismissed.
(vii) Assertions of Bad Faith on the Part of the Landlord Regarding the Rooftop Access
[138] The Tenant complains that, while it was given a copy of the Rooftop Tenants’ Leases before signing the SPV Lease, the Landlord failed to disclose the Rooftop Leases to it prior to the commencement of the Landlord and Tenant relationship for the SPV Premises, which began with the offers to lease that were the subject of the Perell Decision (that, in turn, was the catalyst for the SPV Lease being entered into).
[139] The Tenant argues that the Landlord’s failure to disclose the Rooftop Leases in the context of their original business relationship was a breach by the Landlord of its duty of good faith and honest performance under the organizing principles laid down by the Supreme Court of Canada in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at paras. 62, 72, 92 – 93.
[140] Very little time was spent on this argument. I do not consider the issue of concern here, namely the Landlord and Tenant’s failure to account for the actual terms of the Rogers and Freedom Leases when they negotiated the wording of the SPV Lease, to invoke the organizing principles of good faith in contractual performance. The Tenant’s actual knowledge of both the Rogers and Freedom Leases at the time of this negotiation has been established, so there can be no suggestion that the Landlord misled the Tenant about the rights of the Rooftop Tenants.
[141] The Tenant further argues that the terms of the SPV Lease (which contemplates the possibility of limiting the Rooftop Tenants access to the exterior metal ladder if the Tenant could make it safe) cannot be reconciled with the Rooftop Tenants’ pre-existing rights and entitlements to access the Rooftop through the Tenant’s SPV Premises.
[142] Given the findings herein, the status quo under the SPV Lease is that the Tenant must allow the Rooftop Tenants to access the Rooftop through the SPV Premises. Unless and until the Tenant can establish that it could build a viable external access ladder that is safe for all of the Rooftop Tenants’ access needs under all circumstances their easement of necessity remains in place. This is not inconsistent with s. 8.5 of the SPV Lease that made allowance for the Tenant to fix or rebuild a safe exterior metal ladder. The fact that it may not be viable from a safety perspective simply keeps the status quo. This does not amount to “bad faith” on the part of the Landlord or frustration of the contractual intent, which always had a safety requirement.
(viii) Outcomes Regarding Rooftop Access
[143] The Tenant suggested that there might be a negotiated amendment to the SPV Lease, whereby part of its leased SPV Premises, namely the stairwell immediately to the south of the main theatre entrance on Spadina Avenue and part of the third floor of the SPV Premises, be converted into common area. The Tenant is prepared to enter into negotiations for such but does not agree that it should be forced to grant that access without any accommodation to it under its SPV Lease. The Tenant does not have the upper hand here, given the findings of the court. It might make good sense for the parties to negotiate something along these lines, but the current lease agreements (the SPV Lease, the Rogers Lease, and the Freedom Lease) have been reconciled and do not require amendment from the court’s perspective.
[144] That type of solution would only be acceptable to the Rooftop Tenants if it would enable suitable access to the Rooftop at all times, and if they are not expected to construct or fund the construction of the conversion. The Landlord has not indicated its position on this point of further negotiation.
[145] Since the SPV Lease has not been terminated (for reasons discussed earlier in this decision), the Landlord seeks an order prohibiting the Tenant and Hitti from interfering with or preventing access to the Rooftop by Rogers and Freedom Mobile through the SPV Premises. The Rooftop Tenants seek a declaration that under the terms of their leases, they are entitled to access the Rooftop (and any interior equipment rooms leased to them) through the SPV Premises, and not by way of the exterior ladder. The court so orders.
(f) The Rooftop Equipment Issue
[146] As summarized in the outline of issues, the Rooftop Equipment Issue requires the court to interpret the SPV Lease regarding the Landlord’s obligations to arrange for the Rooftop Tenants to remove their equipment from the Rooftop and the Building while the roof was being replaced.
[147] Pursuant to clause 2 of Schedule “F” of the SPV Lease, the Landlord was required to cause the Rooftop Tenants to remove all of their equipment during the roof work, and it would be reinstalled once all roof work was done. The Landlord’s representative acknowledges that the Rooftop Tenants were not asked to remove their equipment from the roof.
[148] The Rooftop Tenants were unaware of this provision in the SPV Lease, and never agreed to remove and reinstall their equipment, nor do their leases require them to do so. To the contrary, the removal of all of their equipment at any given time from the Rooftop would be contrary to their leases and would have significantly interfered with their downtown network operations. The practical solution that the parties reached to facilitate completion of the roof repair work required Rogers [and Freedom Mobile] to temporarily move equipment from one location on the Rooftop to another multiple times, at their own expense. The Rooftop Tenants maintain that they could not remove their equipment entirely for a period of time without interrupting their services, including vital cell tower service to downtown core emergency response.
[149] It is curious that the Landlord and Tenant included this obligation in clause 2 of Schedule “F” to the SPV Lease, when both were aware of the provisions of the Rogers and Freedom Leases, and neither approached the Rooftop Tenants to ask them whether this would be feasible. As between the Landlord and the Tenant, it makes sense that that it would fall on the Landlord to make the necessary arrangements with the Rooftop Tenants to facilitate the work that needed to be done on the Rooftop, since the Landlord was the one with the contractual relationship with the Rooftop Tenants. It does not make commercial sense that the Landlord and Tenant would agree that the Landlord had to do something that was within the control of third parties to block. While the Landlord may have technically been in breach of this obligation, nothing flows from it.
[150] The Tenant purported to claim damages in its lease application herein for the cost of delays in the completion of the work to the roof (which it was undertaking at the Landlord’s expense) resulting from the movement of the Rooftop Tenants’ equipment (as opposed to its removal). No evidence was led on this damages point. The Tenant seeks an order that the Tenant's claim for damages with respect to the Landlord failing to clear the Roof of all of the Rooftop Tenants’ equipment during the Roof work proceed by way of trial of an issue.
[151] I decline to order a trial of this issue. The fact that the damages have not been proven is not a reason in and of itself to order a trial of an issue. I would expect that some of these “damages” are covered by alleged increased costs for completing the Roof replacement. However, at this point in time, the Tenant has not provided the required Tenant’s Certificate and supporting documents. Based on my earlier finding herein that the Tenant is not entitled to retain any “cost savings” under the Construction Allowance, unless there is a cost overrun (in excess of the Construction Allowance), I fail to see what damages the Tenant could have suffered. There is no evidence to suggest a cost overrun in excess of the $4 million Construction Allowance.
[152] There is no evidence or argument about other damages associated with alleged “delays” resulting from the movement of equipment on the Rooftop. I am not going to order a trial of an issue that has no factual foundation.
THE RELIEF SOUGHT
[153] The court’s findings and orders in respect of the relief sought by the Landlord is indicated after the recitation of each request for relief, as follows:
a. The termination of the SPV Lease — the SPV Lease is not terminated.
b. (In the alternative, if the SPV Lease is not terminated) remittance of all rents held by the Tenant’s counsel under the interim without prejudice arrangement — so ordered.
c. A forensic analysis and tracing of the Construction Advances paid by the Landlord and the uses to which they were put — ordered in part: the Tenant shall provide the Tenant’s Certificate and supporting documents for all the Landlord’s Work completed by the Tenant to date.
d. Disgorgement or damages equal to the amount of all of the Construction Advances to date, in the amount of $3,164,000.00, payable by Mr. Hitti personally — not ordered. This request is premature in advance of production of the Tenant’s Certificate and supporting documents. If appropriate, in the future the Landlord may request an order for disgorgement of any overpayments of the Construction Allowance and possibly a tracing order.
e. (In the alternative, if the SPV Lease is not terminated) a declaration and mandatory order prohibiting the respondents from interfering with the access of Rogers and Freedom through the premises to the Rooftop where their antennae and other equipment are situated — so ordered.
[154] The court’s findings and orders in respect of the relief sought by the Tenant is indicated after the recitation of each request for relief, as follows:
a. A declaration that the Tenant is entitled to all amounts received by or to be received by the Landlord, in the period after August 26, 2020, from the Rooftop Tenants — so ordered.
b. A declaration that the Landlord's purported termination of the SPV Lease on or about November 18, 2021 was unlawful — not ordered, although it was found to be premature.
c. In the alternative to the relief set out in subparagraph b. above, relief from forfeiture with respect to the purported termination of the SPV Lease on or about November 18, 2021 — so ordered, if necessary.
d. A declaration that it is not "necessary" for the Rooftop Tenants to access their leased premises through any part of the SPV Premises — not ordered.
e. A set-off against rent payable by the Tenant under the SPV Lease with respect to all amounts received by or to be received by the Landlord from the Rooftop Tenants, in the period after August 26, 2020 — so ordered (as a practical matter).
f. An order that the Tenant's claim for damages with respect to the Landlord failing to clear the roof of equipment proceed by way of trial of an issue — not ordered.
[155] The court’s findings and orders in respect of the relief sought by Hitti (who is not an applicant, but is a respondent to the Landlord’s application against the Tenant) is indicated after the recitation of each requested finding and order, as follows:
a. Findings:
i. A finding that the Landlord breached the Lease on September 1, 2020, by failing to cause the temporary removal of antennae and equipment of the cellular providers — a finding of technical breach but that nothing flows from it was made.
ii. A finding that the Tenant was not at default for their failure to pay monthly rent because the Landlord was in breach of its obligations — no such finding was supported on the record or made, although the Tenant was granted relief from forfeiture if necessary.
iii. A finding that the Landlord, and his employees and agents, by their bad faith acts, harassed and coerced the Tenant and Hitti — no such finding was supported on the record or made.
iv. A finding that the Landlord, by its actions with the litigants in the "companion" Application [Court file CV-21-00662130-00CL], acted in a manner inconsistent with its obligations, and improperly interfered in the business of the Tenant and Hitti — no such finding was supported on the record or made.
b. Orders:
i. An order declaring the Termination of the Tenant's Lease unlawful and void — not ordered; relief from forfeiture and a declaration that the SPV Lease was not validly terminated was ordered pursuant to the request of the Tenant.
ii. An order dismissing the Application of the Landlord — not ordered.
iii. An order that the funds held in trust by Mr. Binavince's firm be released to the Tenant — not ordered.
iv. An order that the Landlord must, in accordance with the Lease, apply all rents paid by the Rooftop Tenants since September 1, 2020, as an abatement to the Tenant’s Rent when it becomes lawfully due — not ordered in these precise words, but effectively ordered by granting the Tenant’s request for set-off.
v. An order that the Landlord reimburse $71,282.45 to the Tenant for the unlawfully collected rents since June 1, 2021 — not ordered.
[156] The court’s findings and orders in respect of the relief sought by the Rooftop Tenants are as follows:
a. A declaration that, under the terms of their leases Rogers and Freedom are entitled to access the Rooftop (and any interior equipment rooms) through the Building, including the SPV Premises, and not by way of a ladder on the Building's exterior — so ordered.
b. An order that the Landlord shall ensure Rogers and Freedom have access at all times, and that the respondents (the Tenant and Hitti) shall not interfere with or frustrate their access to the Rooftop (or to its equipment room) through the Building and the SPV Premises — so ordered.
FINAL DISPOSITION AND COSTS
(a) Disposition by Issue
[157] For the foregoing reasons, the following declarations and orders are made in respect of the identified Issues:
a. The Construction Allowance Issue: The Landlord is entitled to receive a compliant Tenant’s Certificate(s) certifying all amounts paid to any contractor, subcontractor, worker, or supplier for the Landlord’s Work completed to date. This is required to be provided along with invoices and proof of payment for all of the Landlord’s Work undertaken for which the Construction Allowance applies. The Tenant’s Certificate(s) will allow for an accounting and reconciliation of the Construction Allowance. I imply a term into the SPV Lease and Schedule “E” requiring the Tenant to reimburse any overpayment of the Construction Allowance to the Landlord. Within 45 days of this decision, the Tenant is ordered to deliver a Tenant’s Certificate(s) and supporting documents for all of the Landlord’s Work that has been undertaken by the Tenant or on its behalf to date. Within 45 days of the delivery of the Tenant’s Certificate(s), the Tenant is ordered to repay to the Landlord any amounts not proven through the Tenant’s Certificate(s) and supporting documents to have been expended by the Tenant for the Landlord’s Work, except amounts to be applied towards pending certified further installment(s). If the Tenant fails to provide the Tenant’s Certificate(s) or repay the overpayments, that may be grounds upon which the Landlord may seek the court’s permission to terminate the SPV Lease. If appropriate, in the future the Landlord may request a tracing order and/or disgorgement.
b. The Rooftop Credits Issue: The Rooftop Credits must be read as applicable from the beginning of the SPV Lease term. The Landlord owes the Tenant the aggregate sum of $46,454.45 (plus HST) that it has received to date from the Rooftop Tenants. Accordingly, I order a set-off against past rent payable by the Tenant under the SPV Lease with respect to all amounts received by or to be received by the Landlord from the Rooftop Tenants, in the period after August 26, 2020.
c. The Rent Arrears Issue: The Landlord did not validly terminate the SPV Lease and was not entitled to lock out the Tenant in November 2021. The Tenant is ordered to pay the calculated amount of rent owing to the Landlord net of the Rooftop Credits.
d. The Relief from Forfeiture Issue: This is an appropriate case in which to grant relief from forfeiture, and it is granted if necessary.
e. The Rooftop Access Issue: It was appropriate for this Court to consider the submissions of the Rooftop Tenants and if necessary, the Rooftop Tenants are deemed to have been granted intervenor status under r. 13. The Tenant did not have the right to prevent the Rooftop Tenants from accessing the Rooftop through the SPV Premises. The Rooftop Tenants have easements of necessity over the SPV Premises to access their equipment on the Rooftop, which means they shall have guaranteed access through the SPV Premises at all reasonable times. The easements of necessity will remain unless and until the Tenant can establish that it could build a viable external access ladder that is safe for all of the access needs of the Rooftop Tenants. In the meantime, the Rooftop Tenants are entitled to access the Rooftop through the Building, including the SPV Premises. I also order that the respondents shall not interfere with or frustrate the Rooftop Tenants’ access to the Rooftop through the SPV Premises, and the Landlord shall ensure the Rooftop Tenants have access at all times to the Rooftop.
f. The Rooftop Equipment Issue: The Landlord may have technically been in breach of the obligation in clause 2 of Schedule “F” to the SPV Lease, but nothing flows from it.
[158] These applications sought a multitude of declarations and orders which have now been disposed over a lengthy decision. The above summary may not be exhaustive of all relief granted. There may be a need for further directions from the court to properly implement what has now been decided. If such a need arises, counsel may contact the commercial list scheduling office and schedule a case conference before me for this purpose.
(b) Costs
[159] The Landlord and Tenant both sought substantial indemnity costs of these lease applications from each other. They have agreed that the appropriate quantum of substantial indemnity costs that the loser shall pay to the winner is $45,000.00 (inclusive of all fees, disbursements, and applicable taxes). They have indicated that the court may determine which party was the more successful one, or otherwise how to allocate these costs as between them, depending on the court’s rulings on the various issues.
[160] Overall, the Landlord succeeded on issues that were more complex, to which more time was devoted, and that were potentially more significant in value. However, the Tenant did succeed on one very important issue, which was to nullify the purported termination of its SPV Lease. Further, a number of the issues arose as a result of a lack of clarity in the wording of the SPV Lease and/or a failure on the part of both the Landlord and the Tenant to properly take into consideration the rights of the third-party Rooftop Tenants, which they were both aware of.
[161] On balance, I consider there to have been divided success on the important issues. In the exercise of my discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, and r. 57 of the Rules of Civil Procedure, the court orders that there be no costs payable by either the Landlord or the Tenant to the other in respect of these lease applications.
[162] Hitti seeks costs based on lost opportunity for his time spent on these matters, which he suggests should be valued at between $250 – $400 per hour. No evidence is offered in support of these hourly rates. He claims to have spent 107 hours on these lease applications, 20 of which were devoted to issues raised by the Rooftop Tenants. This translates into a request for costs in the range of approximately $26,000 to $42,000.
[163] While there are circumstances in which a self-represented litigant may seek costs of a proceeding, they do not arise in this case. Hitti chose to file a factum and seek findings and relief that predominantly overlap with the relief sought by/against the Tenant, who was represented by counsel and whose costs have been determined (above). Technically, Hitti had no standing to seek relief as he was not an applicant or counter-applicant in any proceeding.
[164] Hitti was named as a personal respondent by the Landlord because of a concern about the use of funds that have been paid under the Construction Allowance (and the possibility that those funds have been appropriated for purposes other than the Landlord’s Work by either the Tenant or Hitti). This issue has effectively been deferred, pending the Tenant’s compliance with its obligation to account for amounts received and spent in respect of the Landlord’s Work. It cannot be said that Hitti was successful in resisting this relief sought against him personally, as it was simply deferred.
[165] Relief was also sought against Hitti personally, as the Tenant’s representative. The Rooftop Tenants wanted to ensure that if the court granted them the access they sought, Hitti would not interfere with that access, given prior dealings on this point. The order requested in this regard has been made. While it remains to be determined whether this entitles the Rooftop Tenants to any costs (against the Tenant or Hitti personally), it certainly does not create an entitlement for Hitti to be awarded any costs.
[166] I am denying Hitti’s request for any costs of these lease applications. Even if he could claim costs as a self-represented litigant (which I am not deciding for these purposes) he is not entitled to costs based on the outcome of the issues in which he was implicated personally.
[167] The Rooftop Tenants seek their costs payable by the Tenant and Hitti. They requested the opportunity to make brief submissions after the outcome of the issues affecting them was known. They acknowledge that as non-parties they would be seeking an order that would be entirely within the court’s discretion under s. 131 of the Courts of Justice Act. While they were granted standing, that should not be taken as a direct pathway to an entitlement to receive costs, since they did not seek that standing in advance of the hearing and did not put themselves at risk of exposure to costs awards against them by joining as parties or intervenors.
[168] The court indicated that the opportunity would be afforded to the Rooftop Tenants to make cost submissions, and so it will be. They shall deliver their submissions in writing within two weeks of the date of this endorsement. They may each deliver a submission of no more than five pages double spaced. Their respective costs outlines (which, by agreement, should have been provided to the other parties on or before February 25, 2022) may be attached. Any party against whom they seek costs shall deliver their responding submission within two weeks of receiving the submission of either Rooftop Tenant requesting costs from them. Such responding submissions shall be no more than five pages double spaced. The Rooftop Tenants may each deliver a brief reply submission, of no more than two pages double spaced, to any party who responds to their request, within one week of receipt of that responding submission.
[169] The parties are encouraged to try to reach an agreement on the issue of costs sought by the Rooftop Tenants. It is noted that their involvement has not been entirely due to the Tenant’s conduct. Much of the problem originates from provisions of the SPV Lease that the Landlord agreed to.
[170] If the parties reach an agreement on the costs of the Rooftop Tenants, such that a ruling is not required from the court, they are asked to advise the court within the outside date contemplated for the exchange of their cost submissions. The parties may agree to extend these deadlines, in which case the court shall be advised by email to my assistant linda.bunoza@ontario.ca
Kimmel J.
Released: April 25, 2022
COURT FILE NO.: CV-21-00667377-00CL
COURT FILE NO.: CV-21-00674331-00CL
DATE: 20220425
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Court file no. CV-21-00667377-00CL
2356802 ONTARIO CORP.
Applicant
– and –
285 SPADINA SPV INC.
RONALD HITTI also known as RONNY HITTI
Respondents
Court file no. CV-21-00674331-00CL
285 SPADINA SPV INC.
Applicant
– and –
2356802 ONTARIO CORP.
Respondent
REASONS FOR DECISION
Kimmel J.
Released: April 25, 2022
[1] This assumes that the monthly amount payable as of December 2021 under the SPV Lease was $43,769.16 as the Landlord’s representative attested to.
[2] The non-payment of rent was the focus of the request for relief from forfeiture. The Tenant was also alleged to have breached the SPV Lease when it changed the locks and would not guarantee unfettered access to the Rooftop by the Rooftop Tenants. The Rooftop Access Issue is addressed in the next section of these reasons. If the Landlord was relying upon this as a purported ground for its termination of the SPV Lease, the court would have granted relief from forfeiture given the complexity of the Rooftop Access issue and the inconsistent lease terms that the Landlord agreed to with the Tenant and the Rooftop Tenants, which were the source of the problem.
[3] The denial of access to the Rooftop Tenants could have been grave and could have caused substantial damage, but that scenario was avoided by the interim arrangements entered into. The Tenant’s obligations in relation to the Rooftop Tenants will be addressed in the next section of this decision.