Court File and Parties
COURT FILE NO.: CV-22-00683252-0000 DATE: 20231027
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: REXALL PHARMACIES LTD. Plaintiff – and – 1178860 ONTARIO LIMITED Defendant
Counsel: Krista Chaytor and Dylan Dilks, Lawyers for the Plaintiff Varoujan Arman, Lawyers for the Defendant
HEARD: August 31, 2023
G. DOW, J.
Reasons for Decision
[1] The defendant, landlord, 1178860 Ontario Limited (“landlord”) sought summary judgment dismissing the claim of the plaintiff, its tenant, Rexall Pharmacies Ltd. (“tenant”). In addition, it sought judgment on its counterclaim being payment of rent withheld from 2017 to date with regard to the interpretation of the original lease, Clause 4.1(b). That lease was signed October 8, 1999.
[2] The amount withheld to December, 2022 has been calculated to be $129,473.57 (Tab 19, Landlord’s Compendium). While the tenant formally only sought dismissal of the landlord’s motion, it did refer, given the legal argument below, to the prayer for relief contained in its Statement of Claim (issued June 27, 2022). Paragraph 1(a) of the Statement of Claim sought a declaration requiring the landlord to calculate the portion of rent owed for realty taxes based on “the Tenant’s Proportionate Share of Taxes levied against the Shopping Plaza”. The Statement of Defence and Counterclaim is dated July 18, 2022.
[3] The tenant, for reasons referred to below, maintained this was distinct relief from that sought under paragraph 1(b) in the Statement of Claim which was for “an accounting with respect to the amount by which the landlord has overcharged the plaintiff for realty taxes”.
Background
[4] The lease entered into in 1999 involved 9,000 square feet in what is called University Downs, a 68,000 square foot strip mall at University Avenue East and Bridge Street West in Waterloo Ontario. There is reference in the evidence to the mall also having restaurants, a grocery store and a doctors office. The ratio of this tenant’s space to the entire mall is 13.24 percent which is relevant given the tenants responsibility to pay, as part of rent, as set out in Clause 4.1(b) of the lease “all taxes” with some exceptions “assessed specifically against the Premises in accordance with the provisions of the Assessment Act, as amended or replaced, plus GST at the same time and in the same manner as Rent”. This phrase was after the following phrase which was struck out of the lease by the parties “against the Shopping Center and being proportionate in relation to the square footage leased by the Tenant”. However, the lease goes on to state, and for clarity, was left in the lease, “If a separate assessment is not available for the Premises, then the Tenant will pay the Tenant’s Proportionate Share of Taxes levied against the Shopping Plaza”.
[5] From 1999 to 2017, the landlord charged and the tenant paid taxes as rent as calculated by the landlord in a manner that was not strictly in accordance with this term. The Municipal Property Assessment Corporation (“MPAC”) issued material to landowners which the landlord used to calculate and bill the tenant over the years 1999 through to 2017. While not specifically related to this issue, the tenant’s satisfaction with what it was being asked to pay is demonstrated by its signature on an estoppel certificate in January 2011. That is, the tenant advising it had no claims against the landlord as of that date.
[6] The tenant retained an expert for this motion and served a report as part of its evidence that the landlord’s method of calculating this portion of the rent failed to follow the MPAC mandatory phasing in of once every four year assessments. This appears to have resulted in the tenant paying somewhat more than what it would have been charged if the “Proportionate Share of Taxes against the Shopping Plaza” had been followed, that is, 13.24% of the total realty taxes levied.
[7] It is clear from the evidence that the tenant preferred, if not required in the early stages, that the landlord seek out and maintain space rented by doctors. This appears to be a logical method for the tenant to increase its revenue. For example, there is a letter dated July 29, 1999 from the landlord to the (then Pharma Plus) representative of the tenant confirming a discussion that the landlord would pay the tenant $70,000 if a group of not less than three doctors and a grocery store had not rented space within one year of the pharmacy opening, or $35,000 if only one of the two had rented space.
[8] Further, the correspondence during the group of doctors renegotiating their lease to a lower rate confirmed discussions about Rexall paying an additional $1 per square foot which was not acted upon.
[9] This position appears to have diminished by 2021 when an April 26, 2021 letter from the tenant declined to contribute to leasehold improvements of the doctors premises noting “While it is our preference to have the doctor clinic remain, the proposal put forth is not something that Rexall can support”.
[10] Clause 1.6 of the lease is entitled “Entire Agreement” and stipulates that there are no other agreements or conditions “affecting or supported by this lease”.
Analysis
[11] Both parties included in their Factums references to Hryniak v. Mauldin, 2014 SCC 7 with regard to how and to what extent summary judgment is available. Specifically, the tenant submitted and relied on the need for a genuine issue for trial to exist and that a fair and just determination can be made only where the process “a) allows the judge to make the necessary findings of fact, b) allows the judge to apply the law to the facts, and c) it is a proportionate, more expeditious and less expensive means to achieve a just result” (Tenant’s Factum at paragraph 42).
[12] I have concluded that the breadth and scope of the evidence tendered by the parties permits this action to be so determined. It can be determined without a trial. There is little in dispute as to what has occurred and findings of credibility were not a significant part to determining the outcome.
[13] Dealing first with the tenant requesting a declaration requiring the landlord to calculate the portion of rent based on what was stated in the lease for reality taxes, it is clear the landlord has been calculating and requesting payment in a manner other than that set out in the lease. This has occurred since its inception and began to be disputed in 2017.
[14] The landlord attempted to defeat the request for a declaration the landlord abide by the terms of the lease based on the tenant’s prior behaviour and the tenant acquiescing to and payment of rent based on the alternative method it used. Further, the landlord submitted that the second part of the tenant’s claim, an accounting with respect to what it may have been overcharged, was consequential relief which resulted in the landlord’s claim being within the exception stipulated under Section 16(1)(a) of the Limitations Act, 2002, S.O. c. 24.
[15] I agree with the tenant’s reliance on the statement of the law in Kyle v. Atwill, 2020 ONCA 476 at paragraphs 47 to 52. That is, a “different limitation period may govern different claims in the same action”. I also agree that declaratory relief should be narrowly construed to ensure Section 16(1)(a) of the Limitations Act, supra is not used to circumvent applicable limitation periods (see Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202 (at paragraph 28)).
[16] Here, the landlord has been calculating and requesting payment of reality taxes of in a manner that does not accord with the terms of the lease between the parties. The tenant seeks a declaration from the court that the landlord do so. The lease contains an entire agreement clause. To that extent, the landlord should be ordered to calculate the portion of the rent owed in accordance with the terms of the lease as negotiated between the parties.
[17] However, in order to avoid any consequential relief being allowed to accompany the tenant’s request for the declaratory relief sought, the issue of the amount of rent to be paid (or repaid) must be determined separately.
[18] As submitted by the parties, that request is subject to a limitation period. It appears there are alternatives to consider. The shortest period of time would be the two years expressed in Section 5 of the Limitations Act, supra and would limit the tenant’s claim for any accounting to June 27, 2020 (being two years before the Statement of Claim was issued). There is clear evidence the tenant “first knew” of its potential claim well before June 27, 2020 given it began withholding portions of the rent the landlord claimed was due, that is, by October 2017.
[19] The alternative approach which provides a longer period of time is found under the Real Property Limitations Act, R.S.O. 1990, c. L.15 at Section 17 which permits recovery going back six years.
[20] I prefer the reasoning and conclusion reached in Pickering Square Inc., v. Trillium College Inc., 2014 ONSC 2629 which analyzed where and how Section 17 of the Real Property Limitations Act, supra, should be applied. That is, the Section 17 applies to rent as periodic sums of money due under a lease between a tenant and the landlord is compensation for the use of land or premises (at paragraph 36).
[21] Applied to the facts at hand, payment of the realty taxes which is the subject of the dispute is clearly part of the “rent” payable under the lease. It is not a claim for damages as occurred in Pickering Square Inc. v. Trillium College Inc., supra where the dispute was regarding the lease requiring the defendant-tenant to continuously operate its business at all times (see paragraphs 3 and 45). Accordingly, I find Section 17 of the Real Property Limitations Act, supra applicable and the claims for determination of the realty taxes of its rent due under the term of the lease can be claimed back to June 27, 2016.
[22] The landlord relied on rent concessions it made to the group of doctors renting space in the mall. However, despite evidence of encouragement by the plaintiff-tenant and potential financial incentives, such did not occur and culminated in Rexall’s position in 2021 that it would not support providing any assistance (which I interpret to mean agreement to any financial arrangements).
[23] The landlord relied on the doctrine of laches, estoppel by convention and the concept of shared assumption with regard to the course of conduct between the parties, particularly between 1999 when the lease began until 2017 when the tenant began its disagreement as to what realty taxes were properly owed. I would agree with that to the extent it does not require the landlord to go back beyond the six years from what I have found to be the limitation period for the proper calculation of realty taxes under the lease.
[24] Finally, the landlord raised its detrimental reliance on this tenant’s ongoing willingness between 1999 and 2017 to pay the realty taxes as calculated by it. I understand the parties have entered into an agreement which provided the tenant not only with the right to extend the lease for a third time, to February 28, 2025 but a fourth and fifth extension of five years, each which fixed the base rent to 2035. Further, that lease or that lease extension and amending agreement was June 8, 2018 or before the tenant began disputing its obligation to pay the realty taxes as calculated and began withholding a portion of the rent claim as due in September, 2018.
[25] This is undermined by the very nature of this “triple net lease” involved. That is, the tenant pays all of its share of operating costs plus space rent. Further, it is noted in the material and was submitted by the landlord that the tenant has failed to pay rent due (Affidavit of Faye Patterson sworn December 13, 2022, Exhibit BB). However, the landlord has remedies for such conduct as contained in Article 7 of the lease.
Conclusion
[26] The defendant-landlord’s motion for summary judgment is dismissed, in part. Its claim for judgment in the amount for $129,473.57 on its counterclaim is dismissed. However, it is entitled to calculate and pursue collection of any unpaid rent for property taxes, calculated in accordance with the terms of the lease, Clause 4.1(b), from June 27, 2016 (being six years before the Statement of Claim was issued). To that extent, at paragraph 1(a) of the Statement of Claim is granted. The balance of the Statement of Claim is dismissed.
Costs
[27] The plaintiff-tenant’s Costs Outline sought $43,659 for partial indemnity fees plus HST of $5,675.67 and disbursements totalling $8,865.30 (of which $7,712.25 was for its expert report) for a total of $58,199.97. Higher amounts were set out for substantial indemnity and actual rates.
[28] This compared to the defendant-landlord’s Bill of Costs which sought $24,782.30 for partial indemnity fees plus HST of $3,221.70 and disbursements of $1,439.60 for a total of $29,443.60. Counsel for the defendant-landlord it made a Rule 49 Offer to Settle which the plaintiff-tenant disputed was within the required criteria of Rule 49.
[29] I urge the parties to agree on costs in this matter noting there has been divided success. If they are unable to do so, each party may serve and forward to me, on or before November 29, 2023 not more than five typed written double space pages in a readable font setting out their position on costs excluding copies of any Offer to Settle being relied upon.
Mr. Justice G. Dow