Court File and Parties

COURT FILE NO.: CV-22-1587-0000 DATE: 2023-04-03

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

S.A.M.S. SERVICE CENTRE LTD. Applicant

Evan Moore, for the Applicant

• and -

YAMI YUMMY INC. Respondent

Danny Bellin, for the Respondent

HEARD: February 27, 2023

REASONS FOR JUDGMENT

C. Chang J.

[1] The applicant landlord, S.A.M.S. Service Centre Ltd., (the “Landlord”) brings this application for declaratory and other relief respecting a commercial lease agreement (the “Lease”) between it and the respondent tenant, Yami Yummy Inc., (the “Tenant”).

[2] In its factum, the Tenant requests the dismissal of the application and various other relief, for which other relief it has failed to bring its own application.

Facts

[3] The facts are undisputed:

a) the parties entered into the Lease on August 1, 2017 respecting the commercial property located at 452 Charleston Side Road [1], Caledon, Ontario (the “Property”);

b) the Lease is for five years with an option to renew for a further five years;

c) the renewal provision provides as follows:

Renewal of Lease

Upon giving written notice no later than 30 days before the expiration of the term of this Lease, the Tenant may renew this Lease for an additional one term of Five years (5 years) sole and absolute discretion. All terms of the renewed lease will be reviewed and discussed.

d) the Landlord sold the Property in October 2018 and purported to terminate the Lease at that time by way of a “termination letter” to the Tenant;

e) the Tenant refused to vacate the Property and the Landlord brought an application against the Tenant in 2019 seeking an order for vacant possession;

f) the Landlord’s 2019 application was heard on July 2, 2019 and dismissed and the 2018 sale of the Property was not completed;

g) the Landlord again attempted to sell the Property in December 2021, but was unsuccessful in doing so;

h) the Tenant gave the Landlord a “Lease Renewal Notice” on June 1, 2022;

i) neither the timeliness nor the wording of the “Lease Renewal Notice” is disputed and the Landlord does not challenge the Tenant’s delivery of the said notice in accordance with the Lease;

j) on June 30, 2022, the Landlord provided the Tenant with a draft lease agreement that contained terms different from those set out in the Lease;

k) the parties were unable to come to an agreement on the draft lease agreement proffered by the Landlord;

l) the Tenant attempted to pay rent under the Lease for August 2022 and September 2022, but the Landlord refused to accept those payments; and

m) given the Landlord’s refusal to accept any rent payments under the Lease after July 2022, the Tenant has been paying same, in trust, to its legal counsel.

Issue

[4] The sole issue to be determined on this application is whether the Tenant validly exercised the option to renew the Lease.

Parties’ Respective Positions

Landlord’s Position

[5] The Landlord submits that, although the Tenant did exercise the renewal option in the Lease, the Tenant’s refusal to execute a new lease agreement for the renewal period caused the exercise of the renewal option to become void. As a result, the Lease expired on July 31, 2022.

[6] The Landlord further submits that, given that expiry, it is entitled to vacant possession of the Property and to payment from the Tenant of double the applicable rent amount pursuant to s. 58 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7.

Tenant’s Position

[7] The Tenant submits that it validly exercised its option to renew the Lease and, contrary to the Landlord’s argument, it was not required to execute a new lease for the renewal period in order for that exercise to be valid.

[8] The Tenant further submits that a proper reading of the Lease provides that the Tenant has an option to renew the entire Lease, not just the temporal term, and there is no obligation on the Tenant to execute a new lease agreement for the renewal period.

Applicable Law

[9] The applicable law respecting contractual interpretation is well settled.

[10] 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).

[11] 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).

Decision

[12] The Tenant validly exercised its option to renew the Lease.

Analysis

[13] On a fair and purposive reading of the Lease and of the Tenant’s Lease Renewal Notice, each as a whole and giving the words used therein their ordinary and grammatical meaning, I find that the Tenant exercised its option to renew in accordance with the Lease.

[14] In support of their respective positions, the parties advanced extensive and convoluted arguments respecting the meaning of, among other words, “this”, “renewal”, “extension”, “reviewed”, “discussed” and “agree”. Those arguments propose the extensive parsing of the renewal term in the Lease and of counsel’s pre-litigation correspondence. The parties cite cases from across Canada, across North America and across the pond, which cases go as far back in time as 1843.

[15] In my view, the comminuted lexical examinations and grammatical gymnastics proposed by the parties are unnecessary and the parties’ focus thereon has caused them to, in no small measure, lose the plot.

[16] The Lease’s renewal provision, which is clear and unambiguous, expressly provides that, “[u]pon giving written notice no later than 30 days before the expiration of the term of this Lease, the Tenant may renew this Lease for an additional one term of Five years”.

[17] The only condition to the exercise of the renewal option is the giving of written notice at least thirty days prior to the expiry of the Lease, which exercise is complete upon the giving of that notice.

[18] The Tenant’s June 1, 2022 Lease Renewal Notice (the timing and wording of which are not disputed) expressly provides that “the Tenant, pursuant to the Lease, hereby exercises its first right of renewal”. That notice clearly, unequivocally and unconditionally set out that the Tenant was exercising its renewal option, and nothing therein suggests otherwise. The renewal option, therefore, was exercised (see: Anderson Learning Inc. (Bond International College) v. Birchmount Howden Property Holdings Inc., 2022 ONCA 469, at paras. 5-7).

[19] There is nothing in the evidence that lends itself to the Landlord’s argument that the proper exercise of the renewal option was conditional upon agreement on new terms or upon the execution of a new lease agreement. Were I to accept the Landlord’s said argument and adopt the applicable interpretation, that would mean that the issue of the valid exercise of the renewal option could be re-opened at some unspecified time after the option had been exercised. In my view, such an interpretation is neither consistent with the language of the Lease nor commercially reasonable.

[20] If the parties intended to leave the exercise of the renewal option open in the manner suggested by the Landlord, then, in my view, they would have said so. To the contrary, the parties expressly agreed that they would review and discuss “the terms of the renewed lease” [emphasis added]. Therefore, the applicable review and discussion follows the successful renewal of the Lease; not the other way around.

[21] Unlike in Jagtoo & Jagtoo, Professional Corporation v. Grandfield Homes Holdings Limited, 2023 ONCA 214, there is no “failure clause” in the case-at-bar such that the Lease would terminate upon the parties’ failure to agree on the terms of the renewed lease.

[22] I also do not accept the Landlord’s argument that the reference to negotiations in the Tenant’s counsel’s letter dated June 23, 2022 somehow invalidates the exercise of the renewal option. As set out in the renewal provision of the Lease, the parties specifically and expressly anticipated that the “terms of the renewed lease will be reviewed and discussed”. In addition, that letter was sent more than three weeks after the Tenant exercised the renewal option. Further and in any event, in absence of a “failure clause”, reference to the negotiation of terms as part of the exercise of a renewal option does not make that exercise conditional, unclear or equivocal (see: Anderson Learning, at para. 8).

[23] On a fair and purposive reading of the Lease and of the Tenant’s Lease Renewal Notice, the Tenant validly exercised its option to renew the Lease.

Summary & Disposition

[24] For the above reasons, I find that the Tenant validly renewed the Lease in accordance with its terms. Therefore, the claim at paragraph 1(a) of the Landlord’s amended notice of application must, and does, fail. In addition, the Landlord’s remaining claims are moot and also must, and do, fail.

[25] Accordingly, I make orders as follows:

a) it is declared and adjudged that the Tenant validly renewed the Lease on June 1, 2022;

b) the Landlord’s application is dismissed; and

c) the Tenant shall pay rent from August 1, 2022 onward in accordance with the Lease, including from the rents paid to its legal counsel in trust.

[26] Judgment to go accordingly.

[27] Given the Tenant’s failure to bring its own application, I have no jurisdiction to consider the relief sought at para. 60 of its factum and decline to do so. The Tenant’s request for that relief is refused.

[28] In addition, as outlined above, the Lease expressly requires that the “terms of the renewed lease will be reviewed and discussed”; however, based on the evidence, the parties have not engaged in that process to any significant degree. As the determination of the terms of the renewed lease is not before me, I have no jurisdiction to make that determination and decline to do so. That said, if the parties are unable to successfully negotiate those terms and a further legal proceeding is necessary, they may request a case conference before me to canvas the issues for that legal proceeding.

Costs

[29] At the conclusion of the hearing, the Tenant’s counsel advised that there are operative offers to settle, so I was unable to receive oral submissions on costs at that time. However, the parties did upload their respective bills of costs, which set out the following claims:

a) by the Landlord, the all-inclusive amount of $14,630.57 on a partial indemnity basis; and

b) by the Tenant, the all-inclusive amounts of $55,271.61 on a partial indemnity basis or $81,063.86 on a substantial indemnity basis.

[30] 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. The parties would be well-advised to carefully consider these reasons for judgment in the context of their discussions respecting costs.

[31] 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 Tenant by no later than 4:00 p.m. on April 10, 2023;

b) the Landlord by no later than 4:00 p.m. on April 17, 2023; and

c) there shall be no reply.

C. Chang J.

Released: April 4, 2023

[1] The address for the Property is incorrectly referred to in the Lease as 436 Charleston Side Road, but there is no dispute as to the correct address or the enforceability of the Lease.