COURT FILE NO.: CV-22-940
DATE: 2022-11-28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Envision Foods (Hyde Park) Ltd.
Applicant
– and –
Purple Knights Development Inc.
Respondent
Monica Unger Peters, for the Applicant
Gasper Galati, for the Respondent
HEARD: November 15, 2022
REASONS FOR DECISION
C. ChaNG J.
Preliminary Issue
[1] In this application, the applicant tenant, Envision Foods (Hyde Park) Ltd. (the “Tenant”), seeks declaratory relief in respect of a commercial lease agreement between it and the respondent landlord, Purple Knights Development Inc. (the “Landlord”).
[2] In CV-22-2249-000, the Landlord has brought its own application for declaratory relief on issues identical to those raised in the Tenant’s application herein.
[3] Both applications were scheduled to be heard together.
[4] Neither party filed any materials in the Landlord’s application (i.e., CV-22-2249-0000); electing, instead, to file everything in the Tenant’s application (i.e., this one).
[5] Despite the imprecise wording in both notices of application, counsel confirmed during oral argument that what both parties seek is an interpretation, pursuant to rule 14.05(3)(d) of the Rules of Civil Procedure, of a specific term used in the subject lease agreement.
[6] The Landlord’s counsel advised that, given the effective duplication in both applications, he “probably didn’t have to bring [his] application, but did out of an abundance of caution”.
[7] For the sake of efficiency, both counsel agreed that the application in CV-22-2249-0000 would be discontinued on a without costs basis and that the findings and determinations made in this application (i.e., CV-22-940-000) would bind both parties.
[8] Based on the above, the hearing proceeded in this application only.
Nature of Application
[9] Per the above, the Tenant brings this application for an interpretation of a term used in a commercial lease agreement between the parties dated June 8, 2020 (the “Lease”).
[10] The specific issue in dispute is the meaning – relating to square footage only – of the term “Rentable Area of the Premises”. The parties have agreed that the applicable determination is to be a binary one: “Rentable Area of the Premises” means either 2,035 square feet or 2,314 square feet.
Facts
[11] The facts are undisputed:
a) the Lease is binding on the parties and enforceable in accordance with the terms contained therein;
b) the Tenant and the Landlord each had legal representation during the Lease negotiation and execution;
c) during the Lease negotiation, the Tenant sought to revise or remove various provisions in the draft Lease, but did not seek revision or removal of:
i) the definition of “Rentable Area”,
ii) clause 7.08(a),
iii) clause 7.08(b), or
iv) the notation in the Basic Lease Terms (the “BLT”) respecting any conflict between the BLT and the Lease’s other provisions (see para. 11(k) of these reasons);
d) Article 3 of the Lease contains the provisions relating to the payment of rent by the Tenant, including, among others, clauses 3.01 and 3.02, which set out the Tenant’s obligation to pay minimum rent and additional rent, respectively;
e) the parties have agreed that the manner of determining “Additional Rent” under the Lease is not relevant to this application;
f) the amount of minimum rent is calculated on an annual basis at the rates set out in clause (E) of the BLT as follows:
Minimum Rent (Section 3.01)
An annual rate per square foot of the Rentable Area of the Premises as follows:
Based on the approximate Rentable Area of 2,001 square feet (subject to re-certification under Section 7.08 of this Lease).
Year of Term
Minimum Rent/ square foot
Monthly Minimum Rent
Annual Minimum Rent
*Years 1 to 5
$31.00
$5,169.25
$62,031.00
Years 6 to 10
$35.00
$5,836.25
$70,035.00;
g) the Lease does not define “Rentable Area of the Premises”;
h) the Lease defines “Rentable Area” as:
in respect of any rentable Retail Premises, the area in square feet or, at the option of the Landlord, in square metres, calculated utilizing the Landlord's architectural drawings of the Retail Premises or the Development or both of them, of all floor space on every floor or level therein measured from:
(1) the exterior surface of all exterior walls;
(2) the exterior surface of all interior walls separating the Retail Premises from any portion of the Common Facilities; and
(3) the centre line (determined without regard to any finished treatment on the wall) of all interior walls separating the Retail Premises from adjacent rentable premises;
but shall exclude any mezzanines located within premises in the Development ten thousand (10,000) square feet or larger. No deductions shall be made for vestibules inside the standard storefront line or exterior building line, as the case may be, or for columns or projections necessary to the Development. The Rentable Area shall include the Tenant's share, as attributed or allocated by the Landlord, of those areas, facilities and improvements which serve or are for the benefit of the Development, including but not limited to any sprinkler, mechanical, transformer, electrical or garbage rooms;
i) the Lease defines “Premises” as:
the rentable premises in the Development containing approximately the Rentable Area set out in paragraph BLT (A) and shown cross-hatched on Schedule "B", which Premises shall include the inside surface of the walls surrounding the Premises, the exterior doors and windows and the Leasehold Improvements. The Premises shall also include the concrete floor finish and shall extend up to and include the underside finish of the concrete deck above the ceiling;
j) clause (A) of the BLT states as follows:
Premises:
a. Rentable Area: 2,001 square feet (approximately)
b. Unit No.: 1D.1
c. Municipal Address: 2501 Hyde Park Gate Oakville, Ontario L6H 6G6
The approximate location of the Premises is shown cross-hatched on the plan of the Development attached as Schedule "B" and the unit plan attached as Schedule "B-I";
k) the following is set out immediately below the BLT heading in the Lease:
The following are certain basic lease terms, which are part of and are referred to in subsequent provisions of this Lease. Any conflict or inconsistency between these basic lease terms and the provisions contained elsewhere in this Lease will be resolved in favour of the provisions contained elsewhere in this Lease;
l) clause 7.08 of Lease provides as follows:
7.08 Determination of Areas of Premises
(a) The Rentable Area of the Premises are agreed to be as set out in paragraph BLT (A), subject to adjustment under Sections 7.08(b) and 7.08(c).
(b) If it is determined at any time during the Term, on measurement, by the Landlord or the Architect in accordance with the definition of Rentable Area herein contained that the Rentable Area is other than as set out in paragraph BLT (A), then:
(1) Minimum Rent shall be adjusted accordingly as of the Term Commencement Date;
(2) Additional Rent, where applicable, shall be adjusted accordingly as of the Term Commencement Date; and
(3) such area shall thereafter be the Rentable Area of the Premises.
(c) Intentionally deleted;
m) on January 7, 2021, the Landlord retained Space Database Inc. (“Space Database”) to, among other things, measure and certify the “Rentable Area” of the “Premises”; and
n) Space Databases measured and certified that area to be 2,314 square feet – 2,035 square feet for the Tenant’s specific unit plus 279 square feet for the Tenant’s share of common areas.
Issue
[12] As outlined above, the sole issue to be determined is whether “Rentable Area of the Premises” means either 2,035 square feet or 2,314 square feet.
Parties’ Respective Positions
Tenant’s Position: 2,035 Square Feet
[13] The Tenant’s position is that “Rentable Area of the Premises” is and cannot be anything other than 2,035 square feet based on Space Database’s measurement and certification of the Tenant’s specific unit only. According to the Tenant, its share of the common areas (the determination and calculation of which it does not dispute) is not included in “Rentable Area of the Premises”.
[14] The Tenant submits that the square footage of the “Rentable Area of the Premises” cannot be any larger than that of the “Premises” because, as a matter of grammar, “Rentable Area” must be equivalent to or smaller in size to “Premises”.
[15] The Tenant further submits that the court cannot give effect to clauses 7.08(a) or (b) relating to the adjustment or measurement, respectively, of the applicable square footage by the Landlord. Although the definition of “Rentable Area” provides that it shall include the Tenant’s share of common areas, facilities and improvements “as attributed or allocated by the Landlord”, the Landlord failed to make such attribution or allocation at or before the time that the Lease was executed and thereby waived its right to measure or adjust the applicable square footage.
[16] Finally, the Tenant submits that the inclusion of its share of the common areas in the “Rentable Area” results in an unconscionable increase in the applicable square footage that, as a consequence, renders unenforceable the Landlord’s right to make the applicable measurement and/or adjustment.
Landlord’s Position: 2,314 Square Feet
[17] The Landlord’s position is that the square footage for the “Rentable Area of the Premises” is 2,314 square feet in accordance with Space Database’s measurement and certification of the Tenant’s specific unit and its share of the common areas.
[18] The Landlord submits that the Tenant’s argument is inconsistent with the applicable law respecting contractual interpretation, as it requires the terms “Rentable Area” and “Premises” to be read in insolation from the rest of the Lease. The proper approach is to read the entire Lease as a whole.
[19] Based on that proper reading, says the Landlord, the Lease expressly provides the Landlord with the right, at any time during the term of the Lease, to measure the “Rentable Area of the Premises” including the Tenant’s share of common areas, facilities and improvements. Upon that measurement, the meaning of “Rentable Area of the Premises” is revised accordingly.
Decision
[20] The meaning of “Rentable Area of the Premises” is 2,314 square feet.
Applicable Law
[21] The applicable law respecting contractual interpretation is well settled.
[22] The overriding consideration is giving effect to the parties’ objective intent at the time of contract formation based on a reading of the contract as a whole; giving the words used their ordinary and grammatical meaning consistent with the surrounding circumstances that were objectively known to the parties at the time of contracting (see: Harvey Kalles Realty Inc. v. BSAR (Eglinton) LP, 2021 ONCA 426, at para. 5).
[23] A commercial contract is to be interpreted as a whole document; i.e., “in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective” (see: 2651171 Ontario Inc. v. Brey, 2022 ONCA 148, at para. 16). It should also be interpreted in a manner that is commercially reasonable and avoids commercial absurdity (see: Harvey Kalles, at para. 6).
[24] Contractual waiver occurs when a party “takes steps that amount to foregoing reliance on some known right or defect in the performance of the other party”, but will be found only where the waiving party had: a) full knowledge of the right or deficiency that might be relied upon; and b) an unequivocal and conscious intention to abandon the right to rely thereon (see: Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, at para. 63). The intention to abandon must be communicated, which communication can be formal, informal or inferred from conduct (see: Technicore, at para. 63).
Analysis
[25] On a fair and purposive reading of the Lease as a whole and giving the words used therein their ordinary and grammatical meaning, I find that “Rentable Area of the Premises” means 2,314 square feet.
[26] The above interpretation is commercially reasonable and accords with the parties’ objective intent at the time of execution of the Lease that:
a) the “Rentable Area of the Premises” would be approximated at the time of the Lease’s execution;
b) the Landlord would have the right to measure (including allocating or attributing the Tenant’s share of the common areas, facilities and improvements) the “Rentable Area of the Premises” at any time during the currency of the Lease; and
c) thereafter, the said measurement would be the “Rentable Area of the Premises”.
[27] Clause 7.08(b) expressly provides that the Landlord has the right to measure the “Rentable Area of the Premises” at any time during the currency of the Lease and, thereafter, that measurement constitutes the applicable square footage. The definition of “Rentable Area” mandates that it “shall include the Tenant’s share, as attributed or allocated by the Landlord, of those areas, facilities and improvements which serve or are for the benefit of the Development”.
[28] It is undisputed that the Landlord, through Space Database, conducted the applicable measurement, which resulted in a certified measurement of 2,314 square feet, being 2,035 for the Tenant’s unit and 279 square feet for its share of the common areas. The Tenant does not dispute either the determination or calculation of these amounts.
[29] I do not accept the Tenant’s argument that “Rentable Area of the Premises” must be 2,035 square feet because the use of the preposition “of” in that phrase mandates that “Rentable Area” must be equal to or lesser in size than the “Premises”. No such comminuted grammatical examination is required.
[30] Clause 7.08(b) expressly provides that the Landlord can undertake the relevant measurement of the “Rentable Area of the Premises” and, thereupon, the resultant square footage thereafter constitutes the “Rentable Area of the Premises”. The definition of “Rentable Area” mandates that the tenant’s share of common areas, facilities and improvements be included therein.
[31] There is nothing in the evidence that lends itself to the Tenant’s proposed interpretation that the parties intended the meaning of “Rentable Area of the Premises” to be immutable as at the date of execution of the Lease. To the contrary, the evidence, including the express wording of the Lease, is that the parties agreed to an approximate square footage for “Rentable Area of the Premises” that would be subject to adjustment, including, without limitation, to include the tenant’s share of common areas, facilities and improvements.
[32] Therefore, whether the term is read “Rentable Area of the Premises” or “Rentable Area” of the “Premises”, the parties agreed for that term to be subject to measurement and adjustment by the Landlord.
[33] Furthermore, the Tenant’s said argument requires that clauses (A) and (E) of the BLT, part of clause 7.08(a) and the definitions of “Rentable Area” and “Premises” be read in isolation from the rest of the Lease and that clause 7.08(b) be given no effect. This would be inconsistent with the applicable law.
[34] It is noteworthy that, during the negotiations, the Tenant did not seek to remove or revise the applicable provisions of the draft Lease relating to the Landlord’s right to measure and adjust the applicable square footage of the “Rentable Area of the Premises”. Instead, those provisions remained in the draft Lease and were part of the parties’ bargain when they executed the Lease.
[35] I also do not accept the Tenant’s argument that the Landlord waived its right to measure the “Rentable Area of the Premises” pursuant to clause 7.08 by failing to attribute or allocate the Tenant’s share of common areas, facilities and improvements before executing the Lease. In my view, this argument would lead to a commercially absurd interpretation of the Lease.
[36] It is well-settled law that waiver can only be found where the party waiving has full knowledge of the subject right and communicates its unequivocal and conscious intention to abandon the right to rely on it (see: Technicore, at para. 63).
[37] In the case at bar, the right to measure the “Rental Area of the Premises” in accordance with clause 7.08 did not accrue to the Landlord until after the Lease had been executed. It would be commercially absurd to interpret the Lease as giving the Landlord that right if and only if the Landlord exercises same before it ever crystalizes.
[38] I also do not accept the Tenant’s argument that “Rentable Area of the Premises” can only mean 2,035 square feet because, otherwise, the applicable square footage would represent an unconscionable, and therefore unenforceable increase.
[39] The issue of unconscionability is not before me. However, even if I were inclined to consider same (I am not), there is no evidence to support such a claim other than the uncorroborated self-serving statements in the Tenant’s affidavits.
[40] The issue of the enforceability of any of the provisions of the Lease is also not before me. However, even if I were inclined to consider same (again, I am not), it is undisputed that the Lease is enforceable in accordance with the terms contained therein.
Summary & Disposition
[41] I have found that, on a fair and purposive reading of the Lease as a whole and giving effect to the parties’ objective intent at the relevant time, the term “Rentable Area of the Premises” means 2,314 square feet.
[42] Judgment to go accordingly.
Costs
[43] The Landlord was successful on this application and is entitled to its costs.
[44] The parties uploaded their respective costs outlines, but advised that there may be operative offers to settle, so I did not hear submissions on costs after the conclusion of oral argument on the application.
[45] I urge the parties to agree on the scale and quantum of costs and, upon such agreement, to forthwith advise me accordingly through the Milton Administration Office.
[46] Failing such agreement, the parties are to make their respective written submissions on costs (limited to two pages, excluding offers to settle) and deliver same through the Milton Administration Office as follows:
a) the Landlord by no later than 4:00 p.m. on December 5, 2022;
b) the Tenant by no later than 4:00 p.m. on December 12, 2022; and
c) there shall be no reply.
C. Chang J.
Released: November 28, 2022
COURT FILE NO.: CV-22-940
DATE: 2022-11-28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Envision Foods (Hyde Park) Ltd.
Applicant
– and –
Purple Knights Development Inc.
Respondent
REASONS FOR JUDGMENT
C. Chang J.
Released: November 28, 2022