Reasons for Decision

COURT FILE NO.: CV-24-84610
DATE: April 30, 2025
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Denny’s Lube Centre (2016) Inc., Applicant
- and -
1121209 Ontario Inc., Respondent
BEFORE: Jennifer MacNeil
COUNSEL: Andrei Dobrogeanu – Lawyer for the Applicant
Terry Corsianos – Lawyer for the Respondent
HEARD: January 20, 2025

Introduction

[1] The Applicant makes this application for an order that the Respondent comply with its obligation under a commercial lease, made April 9, 2020 (“the Lease”), to provide audited statements; and that the Respondent is estopped from claiming any rent that may have been payable prior to January 1, 2021.

[2] The Respondent seeks a dismissal of the application on the basis that it has effectively complied with the contractual terms between the parties and their intention at the time of contract formation; and that it is not estopped from now claiming rent owing from 2020.

[3] The parties submitted affidavits in support of their respective positions. The affiants were cross-examined, and transcripts of those cross-examinations were filed. Both parties also presented opinions given by professional accountants as to the nature and value of audited statements.

Background

[4] The Applicant is a tenant at a shopping centre owned by the Respondent at premises located on Rymal Road East (“the Property”). The Applicant operates a rapid lube facility, providing oil changes and other minor mechanical work.

[5] At the time the parties entered into the Lease, the Applicant was not represented by a lawyer. The Respondent presented a draft lease to the director of the Applicant, who read and executed it as it was, on behalf of the Applicant.

[6] The premises leased by the Applicant consists of 2,469 square feet (“the Leased Premises”). Section 1.2 of the Lease describes the Leased Premises as follows:

1.2 Demise

The Landlord hereby leases to the Tenant and the Tenant leases from the Landlord to have and to hold, for the term and upon the covenants and conditions contained in this Lease, the demised premises (the “Premises”) located in a building shown outlined with thin black lining forming part of the Shopping Centre on the Lands and comprising the whole of the ground floor therein and having approximately Two Thousand Four Hundred (2400) square feet of gross leaseable area (the “Leaseable Area of the Premises”). The location of the Premises is shown outlined in red on the Site Plan. The Tenant shall be permitted to use an exterior garbage enclosure/system as more particularly set out in Schedule “B” attached hereto (collectively the “Enclosures”).

[7] While section 1.2 makes reference to a Site Plan, such a document was not appended to the Lease.

[8] Section 1.4 of the Lease provides for the use of the common areas by the Applicant. It reads:

1.4 Common Areas

The Tenant and its employees and invitees shall be entitled to use in common with others entitled thereto the external portions of the Shopping Centre which serve or are for the benefit of the Premises and other premises in the Shopping Centre (the “Common Areas”) including, without limitation, the parking areas (unless specifically reserved for another tenant of the Shopping Centre), driveways, accessways, entrances, exits, pedestrian sidewalks and landscaped and planted areas, and any interior or enclosed common areas. The Landlord covenants and agrees that the Site Plan will not be amended or varied in any way upon the execution of this Lease, except that the exact size of the Premises may be varied by the Tenant at any time prior to the Landlord’s approved [sic] of the Building Plans pursuant to Appendix I and thereafter, in accordance with this Lease.

[9] There are other tenants at the Property. It has a total leasable area of approximately 24,051 square feet.

[10] Section 1.5(a) of the Lease provides for its term. It reads:

1.5 Term

(a) The initial term (the “Term”) of this Lease shall be ten (10) Lease Years (defined in Section 2.2(d)) commencing on the day (the “Commencement Date”) next following the expiry of the Fixturing Period (defined in Appendix I).

[11] Section 2.2 of the Lease provides for the payment of Minimum Rent by the Applicant as tenant. It reads, in part:

2.2 Minimum Rent

(a) The Tenant covenants and agrees to pay to the Landlord from and after the Commencement Date a minimum rent (the “Minimum Rent”) for the Premises payable in lawful money of Canada in equal consecutive monthly instalments in advance on the first day of each month, without prior demand therefor:

(i) Lease Year 1 (month 1 through to and including month 6): five thousand dollars ($5,000.00) per month;

(ii) Lease Year 1 (month 7 through to and including month 12): eight thousand dollars ($8,000.00) per month;

(iii) Lease Year 2: eight thousand one hundred twenty dollars ($8,120.00) per month;

(iv) Lease Year 3: eight thousand two hundred forty-one dollars and eighty cents ($8,241.80) per month;

(v) Lease Year 4: eight thousand three hundred sixty-five dollars and forty-three cents ($8,365.43) per month;

[12] Section 2.4 of the Lease provides for the payment of Additional Rent by the Applicant. It reads:

2.4 Additional Rent

The Tenant shall be responsible for the following costs as additional rent (“Additional Rent”):

(a) the cost of utilities supplied to or consumed by the Premises pursuant to Section 12.1;

(b) business taxes assessed by the municipality or taxing authority in respect of the business carried on in the Premises;

(c) realty taxes payable by the Tenant pursuant to Section 3.2 which are estimated by the Landlord to be $12.00 per square foot of the Leaseable Area of the Premises for the first Lease Year; and

(d) the Tenant’s Proportionate Share of Common Area Costs pursuant to Section 5.10 which are estimated by the Landlord to be $3.50 per square foot of the Leaseable Area of the Premises for the first Lease Year.

The Landlord, acting reasonably, may make annual estimates of those items of Additional Rent payable to the Landlord. The Tenant, at the same time and along with the payment of Minimum Rent, agrees to pay such Additional Rent by way of equal monthly instalments based upon the Landlord’s reasonable estimate for the relevant annual period. Within ninety [sic] (90) days after the end of each such annual period, the Landlord shall provide to the Tenant an audited statement of such Additional Rent for such period and the parties shall make all appropriate Additional Rent adjustments within thirty (30) days thereafter. Notwithstanding anything to the contrary, the Tenant’s obligation to pay any increase in the estimated monthly instalment of Additional Rent for any subsequent annual period during the Term shall be suspended if and for so long as the Landlord has not provided the audited statement of Additional Rent for any preceding annual period. The Tenant shall have the right to request back up information substantiating any item of Additional Rent and, where any question of discrepancy remains after receipt of such back-up information, to inspect the Landlord’s books and records relating to Additional Rent upon fifteen (15) days written notice at its sole cost and expense. [Emphasis added.]

[13] Section 3.2 provides for the payment of property taxes by the Applicant. It reads:

3.2 Realty Taxes Payable by Tenant

Tenant shall pay all realty taxes levied solely against the Premises, based on a separate tax bill or separate assessment of the Premises, together with the Tenant’s Proportionate Share of realty taxes, if any, levied by the municipality or taxing authority in respect of the Common Areas, based on a separate assessment for the Common Areas or, if no separate assessments are available, then Tenant shall pay its Tenant’s Proportionate Share (as defined in Section 5.9) of the realty taxes levied against the Shopping Centre. The Landlord shall be responsible, any [sic] not the Tenant, to remit all payments on account of realty taxes levied.

[14] Section 3.5 also relates to property taxes and provides:

3.5 Taxes During the Term

Any realty tax relating to a fiscal period of the taxing authority a part of which is within the Term and a part of which is prior to the Commencement Date or subsequent to the expiration or earlier termination of the Term, shall, whether or not such realty taxes shall be assessed, levied, imposed or become a lien upon the Shopping Centre or any part thereof or shall become payable during the Term, be apportioned and adjusted between the Landlord and the Tenant as of the Commencement Date or expiration or earlier termination of the Term, as the case may be.

[15] Section 5.9 of the Lease defines the phrase “Tenant’s Proportionate Share”. It reads:

5.9 Proportionate Share

For the purposes of this Lease, the “Tenant’s Proportionate Share” means a fraction the numerator of which is the Leaseable Area of the Premises and the denominator of which is the entire Leaseable Area of all premises in the Shopping Centre, whether or not leased, including the Premises. The Landlord shall not convert existing leaseable area in the Shopping Centre to non-leaseable area.

[16] Section 5.10 sets out the Applicant’s payment of the “Tenant’s Proportionate Share”, stating:

5.10 Payment of Tenant’s Proportionate Share of Common Area Costs

Tenant shall pay to the Landlord from and after the Commencement Date the Tenant’s Proportionate Share of the Common Area Costs in accordance with and subject to all applicable provisions in this Lease.

[17] Section 12.1 addresses utility charges and reads as follows:

12.1 Utility Charges

During the Fixturing Period (defined in Appendix I) and the Term, the Tenant shall be solely responsible for and promptly pay all charges for heat, water, gas, electricity or any other utility used or consumed in the Premises based on separate meter readings. If during the Fixturing Period there are no separate meters, the Landlord acting reasonably may invoice the Tenant for its equitable share of the cost of such utilities. The supply and installation of the meters will be at the Landlord’s expense.

[18] The “Fixturing Period” provided for in the Lease was to begin after the Respondent completed certain work at the Leased Premises, which was defined as the “Landlord’s Work”. The Fixturing Period would last for 60 days during which the Applicant would be responsible for the payment of Additional Rent, but not Minimum Rent. In this regard, the Lease’s “Appendix I – Construction Provisions” reads, in part:

5. Fixturing Period: The Tenant shall receive 60 days vacant possession of the Premises to complete fixturing of the Premises (the “Fixturing Period”). The Fixturing Period will commence on:

(i) the date that the Landlord completes its Landlord’s Work outlined in Schedule “B” attached hereto.

7. No Minimum Rent: During the Fixturing Period, the Tenant shall not be responsible for payment of Minimum Rent but shall be responsible for Additional Rent and the cost of all utilities consumed in respect of the Premises.

[19] Section 22.1 of the Lease provides that a party’s failure to require compliance with a term of the Lease shall not be considered a waiver of such. It reads:

22.1 Waiver

Failure by the Landlord or the Tenant to require performance of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or of any subsequent breach of the same or of any other term, covenant or condition herein contained. The subsequent acceptance of Minimum Rent hereunder by the Landlord shall not be deemed to be a waiver of any preceding breach by the Tenant of any term, covenant or condition of this Lease, other than the failure of the Tenant to pay the particular Minimum Rent so accepted, regardless of the Landlord’s knowledge of such preceding breach at the time of acceptance of such Minimum Rent. No covenant, term or condition of this Lease shall be deemed to have been waived by the Landlord or the Tenant, unless such waiver be in writing by the Landlord or the Tenant.

[20] Section 22.3(a) of the Lease is an entire agreement clause. It reads:

22.3 Entire Agreement and Restrictions

(a) This Lease, together with Appendix 1 and the Schedules attached hereto (all of which are deemed to form part of this Lease), constitutes the entire agreement between the parties hereto and there are no conditions, representations, promises, agreements, terms, warranties or undertakings between the parties other than as are herein set forth. No amendment to this Lease shall have any force unless it is in writing and signed by both parties.

[21] As of October 1, 2020, the Landlord’s Work was completed and the Applicant was given vacant possession of the Leased Premises. (The evidence shows that the Applicant did have some access to the Leased Premises as early as August or September 2020.)

[22] The evidence is that, at the time the Applicant was given vacant possession, there was road construction surrounding the Property and stay-at-home orders were in place related to the COVID-19 pandemic. The Applicant alleges that, due to the impact of those limitations on the operation of its business, the Respondent represented that no Minimum Rent or Additional Rent payments would be charged until January 1, 2021, and that the parties agreed that Additional Rent would be paid at $12.50 per square foot per year, rather than the $15.50 per square foot ($12.00 plus $3.50) set out in the Lease.

[23] Commencing January 1, 2021, the Applicant paid the Minimum Rent of $5,000 each month for the period January 1 to June 30, 2021, and then paid $8,000 each month for the period July 1 to December 31, 2021. The Respondent accepted those rent payments.

[24] Commencing January 1, 2021, the Applicant also paid to the Respondent the Additional Rent at the rate of $12.50 per square foot by way of monthly cheques for the 2021 calendar year.

[25] On December 17 and 20, 2021, the Applicant wrote to the Respondent asking for “copies of the Taxes, Maintenance and Insurance documents” (“the TMI Information”) upon which the Additional Rent payment was to be based and calculated. On December 20, 2021, the Respondent replied by email: “[T]his is typically done within 30-60 days after year end, once the accountant has had a chance to complete it we would be glad to share it with you.” About 15 minutes later, the Respondent sent a further email to the Applicant stating that it needs the “Rent and TMI cheques for Jan 1 on”.

[26] On or about January 1, 2022, the Applicant provided the Respondent with post-dated cheques for the Minimum Rent and Additional Rent payments for 2022; the Additional Rent was paid at the same rate as for 2021, being $12.50 per square foot.

[27] The Applicant did not receive the TMI Information it had requested in December 2021. It is the Applicant’s evidence that it subsequently made a number of verbal requests to the Respondent as well for the information supporting the calculation of the Additional Rent, and received either no response or was told it would be provided soon.

[28] On December 9, 2022, the Applicant wrote again to the Respondent requesting the TMI Information and commented that it had been asking for the information for a long time. No audited statement or verifying documents were provided to the Applicant in response at that time.

[29] On February 21, 2023, the Applicant sent a registered letter to the Respondent outlining the various requests it had made for the TMI Information. Enclosed with the letter were two cheques for Additional Rent for the months of January and February 2023 at a reduced rate in the amount of $1,500 each, inclusive of HST, based on the Applicant’s estimate of its proportionate share of the TMI costs. Those cheques were subsequently returned by the Respondent because they were not for the correct sum. Since the TMI Information was not provided, the Applicant did not forward further Additional Rent cheques at this time because “the amounts could not yet be discerned”, but it made its Minimum Rent payments for 2023 by way of post-dated cheques.

[30] Between March and July 2023, the Applicant made a number of additional requests to the Respondent for the TMI Information. It received no response.

[31] On September 13, 2023, the Respondent emailed the Applicant requesting a meeting to “settle up all outstanding TMI”. In its responding email, dated September 13, 2023, the Applicant requested yet again the TMI documents to review and settle the issue of payment.

[32] On September 15, 2023, a meeting of the parties was held to discuss the issues between them. At the meeting, the Respondent provided the Applicant a one-page document titled “Statement of Operating Expenses for Year End January 31, 2022”. That document referred to the “first lease year” as commencing on January 1, 2021. It also indicated that the Additional Rent for February 1 to December 31, 2021 was to be $6.58 per square foot, almost half the $12.50 amount the Applicant paid. No source documentation regarding the TMI Information was provided by the Respondent.

[33] At the September 15th meeting, despite the “Statement of Operating Expenses for Year End January 31, 2022” showing the Additional Rent rate to be $6.58 per square foot, the Respondent required that the Applicant pay the $12.50 rate. The Applicant then advised that it would not pay the Additional Rent until an audited statement was provided along with the supporting documents. The Respondent responded that if the Additional Rent for January to September 2023 was not paid by 4:00 p.m. that day, the Applicant’s locks would be changed.

[34] On September 20, 2023, the Applicant’s (then) lawyer sent a letter to the Respondent stating:

I am advised by my client that you are changing the locks to the commercial property. We demand that you refrain from doing so. Subject to section 2.4 of the commercial lease, you are obligated to provide my client with audited figures within 90 days after the end of the annual period. To date my client has not received said audited figures, and the estimates have not been substantiated.

In the efforts [sic] to avoid the necessity of litigation, we request that you provide audited figures by September 27th, 2023.

[35] On September 21, 2023, the Applicant also separately emailed the Respondent requesting “the audited figures of all items listed” on the “Statement of Operating Expenses for Year End January 31, 2022” that had been provided.

[36] Subsequent exchanges between the lawyers for the parties followed.

[37] Among them, by letter dated October 11, 2023, counsel for the Respondent made the first formal written demand for Minimum and Additional Rent allegedly outstanding for “a portion of November 2020 and December 2020”.

[38] On October 19, 2023, the Applicant paid $9,711.60 towards the Additional Rent for 2023 and made two payments of $1,850.68 for Additional Rent for each of November and December 2023. The cheques were delivered along with correspondence from the Applicant’s lawyer that, among other things, noted audited statements had not been delivered within the 90-day deadline provided for in the Lease, and advised of an intention to commence litigation.

[39] On or about November 7, 2023, the Respondent’s lawyer provided to the Applicant documentation that purported to support some of the Additional Rent expenses charged between December 2020 and January 31, 2023, including:

(i) A document entitled “SOE Breakdown – Denny’s Lube Shop – February 1, 2021 to January 31, 2022”. It sets out line items for different expense categories and includes the square foot cost and a “prorated portion” amount for each, with supporting charts showing line items described simply as “Cheque” or “Bill” with corresponding dates, service providers and amounts. The Applicant’s square footage is shown as being 2,469. In the SOE Breakdown, the Applicant’s TMI rate was calculated to be $4.88/sq. ft. and its property tax rate to be $3.08/sq. ft. Purported supporting invoices/statements were also provided; and,

(ii) A document entitled “SOE Breakdown – Denny’s Lube Shop – February 1, 2022 to January 31, 2023”. It sets out similar line items as found in the 2021-2022 SOE Breakdown and indicates the Applicant’s square footage as being 2,469. It also includes a new line item called “Management fee (15% of CAE expenses)”. In this SOE Breakdown, the Applicant’s TMI rate was calculated to be $3.87/sq. ft., its 15% Management fee rate to be $0.58/sq. ft. and its property tax rate to be $5.24/sq. ft. Purported supporting invoices/statements were also provided.

[40] On December 8, 2023, the Applicant provided post-dated cheques for the Minimum Rent and Additional Rent amounts for the period January to December 2024. The monthly amount of $1,850.46 (inclusive of HST) was paid, on a without prejudice basis, for the Additional Rent.

[41] As of February 1, 2024, the Respondent added an additional 7 square feet, related to “common area electrical”, to the Applicant’s leased square footage for the purposes of calculating the Additional Rent using a new total of 2,476 square feet. However, it is unclear where the Respondent’s authority to charge this additional 7 square feet comes from since it is not specifically provided for in the Lease. On cross-examination, the evidence of the Respondent’s representative was that the accountants added the additional 7 square feet “when they wrote down everything … it’s common area space.”

[42] It is also unclear where the Respondent’s authority to charge a “Management fee” of 15% of CAE expenses comes from. There is no term in the Lease that specifically provides for the charging of such a fee.

[43] Section 5.8 of the Lease deals with Common Area Costs, which is defined to mean “without duplication, all direct costs and expenses incurred by the Landlord in operating and maintaining the developed portions of the Common Areas”. Section 5.8(b) does make reference to “management and/or administration fees”, stating:

(b) Notwithstanding anything herein to the contrary, in no event shall the Tenant’s Proportionate Share of Common Area Costs inclusive of any management and/or administration fees, be greater than $3.50 per square foot of the Leaseable Area of the Premises in the first Lease Year. [Emphasis added.]

However, there are only two sections in the Lease that then provide for the requirement to pay administration fees in particular circumstances, but not a management fee:

(i) Section 11.6 – Landlord Repairs, which states in part: “… If the Tenant fails to comply with any of its obligations under this Section, the Landlord is entitled (but not required) to perform or complete such obligation on the Tenant’s behalf and to add to Rent the cost thereof plus an administration fee equal to fifteen percent (15%)).” And,

(ii) Section 16.6(b) – The Landlord or the Tenant May Perform Covenants, which states in part: “All expenses incurred and expenditures made by or on behalf of the Landlord or the Tenant under this Section together with an administration fee (the “Admin Fee”) in the amount of 15% of such expense, plus interest thereon at the Interest Rate from the due date until paid, shall be forthwith paid by the Tenant or the Landlord as the case may be. …”

[44] A management fee line item of 15% of the CAE is also claimed by the Respondent on the “Statement of Operating Expenses for the Year End January 31, 2024” it prepared and has provided to the Applicant.

[45] The Applicant commenced the within application on February 27, 2024.

Issues

[46] The issues to be decided on the application are:

(a) Is the Respondent required to provide audited statements of Additional Rent?

(b) Is the Applicant required to make rent payments for the period prior to January 1, 2021?

Analysis

(a) Is the Respondent required to provide audited statements of Additional Rent?

Position of the Applicant

[47] It is the Applicant’s position that the Lease is clear that the Respondent is required to provide “audited statements of Additional Rent” at the end of each annual period. There is no ambiguity in the meaning of the phrase “audited statement” other than that imputed by the Respondent in an attempt to avoid its obligations under the Lease to properly account for the Additional Rent. The provision of audited statements respecting Additional Rent was specifically bargained for in the Lease.

[48] In the event the court finds any ambiguity in the term “audited statement”, the rule of contra proferentem should apply and that ambiguity should be resolved in favour of the Applicant since the Lease was drafted by the Respondent.

Position of the Respondent

[49] The Respondent submits that the Applicant’s case is an abuse of the court’s process and has been brought as a pretext to avoid and/or delay paying rent that is due and owing to the Landlord. The first time the Applicant raised the need for “audited statements” was in its lawyer’s letter of September 20, 2023, some three years into the parties’ contractual relationship, to forestall the Respondent’s then-threatened enforcement proceedings.

[50] The term “audited statement” is not defined in the Lease. At the time of contract formation, it was the Respondent’s understanding that an “audited statement” would consist of a statement from the Respondent, as the landlord: (i) certifying what the TMI expenses were for the relevant term; (ii) stipulating what the Applicant’s proportionate share of the TMI expenses were; and (iii) providing corroborating evidence of those expenses through underlying invoices. The Respondent never discussed or agreed with the Applicant that there would be any formal audit done by an accountant to corroborate the Additional Rent.

[51] Given that the term “audited statement” is not defined in the Lease, there is some ambiguity with respect to what it actually means. However, the context of this case supports a finding that the term simply refers to the underlying supporting documentation which substantiates the Respondent’s claim for Additional Rent. Since the Respondent has provided the invoices and supporting documentation relating to the operating expenses for which the Additional Rent pertains, it has, in effect, satisfied the requirement to provide “audited statements” to the Applicant and it submits that the Applicant has effectively conceded that.

The Law

[52] In Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, para 65, the Ontario Court of Appeal summarized the general principles of interpreting a commercial contract as follows:

(a) Determine the intention of the parties in accordance with the language they have used in the written document, based upon the “cardinal presumption” that they have intended what they have said.

(b) Read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, 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.

(c) Read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties.

(d) Read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.

See also Bryfam Enterprises Inc. v. Harbour Carrick Holdings Inc., 2018 ONSC 6623, paras 22-23.

[53] Where the contractual terms are ambiguous, then the rule of contra proferentem applies: Bryfam Enterprises Inc., at para 25; 2249778 Ontario Inc. v. Smith, 2014 ONCA 788, para 22.

[54] Expert evidence may be admitted to explain the meaning of words used within a particular business or profession: R. v. Manuel, para 17.

Discussion

[55] Having considered the use of the phrase “audited statement” in section 2.4 of the Lease, in light of the whole of the contract and the surrounding circumstances, I have determined that the contractual intent of the parties was that a statement verified or confirmed by an accountant would be provided to the Applicant by the Respondent concerning the appropriate Additional Rent to be paid. The Lease was entered into in April 2020, before the Landlord’s Work had been completed. The shopping centre was not fully tenanted or occupied at that time, and the amount of Additional Rent items to be charged was not known. By virtue of section 2.4, the Applicant agreed to pay Additional Rent based on the Respondent’s reasonable estimates of the items for the relevant annual period. Given this, it makes commercial sense that the parties would agree to audited statements of Additional Rent subsequently being provided by the Respondent in order to ensure a proper reconciliation of what was actually owed by the Applicant, once it could be determined.

[56] I find that the use of the phrase “audited statement” in section 2.4 of the Lease was deliberate. It is found twice in that section. While the Respondent argues that the Lease was the product of negotiations between the parties, there is no evidence that the Applicant was engaged in the actual drafting of the language used in any of the contract’s terms or, in particular, section 2.4. Based on the record before me, I find that the Respondent drafted the Lease and presented it to the Applicant for signing.

[57] The Lease does not define the phrase “audited statement”. I infer from this that the parties intended the phrase would be interpreted in its ordinary sense and have its usual meaning. I accept the Applicant’s submission that it is commonly understood that an “audited statement” is one that is prepared by an accountant in accordance with their professional standards. On cross-examination, the Respondent’s representative stated that his understanding of the meaning of the word “audit” was that it meant “verified … [by] … accountants”.

[58] That interpretation corresponds generally with ss. 2(1) and 3(1) of the Public Accounting Act, 2004, which, when read together, provide that, when an audit will be relied on by a third party, it is to be prepared “on a basis that is independent of the person for whom the services are being provided” and by a public accountant who is duly licensed in accordance with the Act. That interpretation also accords with the general opinions of the public accountants presented by both parties that an auditor’s objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; that audited statements provide the highest reasonable level of assurance regarding the accuracy and completeness of amounts included in a financial statement; and that audited statements do not guarantee assurance on 100% of the items listed in a financial statement.

[59] I find that the phrase “audited statement” as found in section 2.4 is not ambiguous. The Respondent does not actually proffer a different interpretation of the meaning “audited statement”. Rather, it seeks that the court simply ignore the term “audited” altogether and find that the parties intended to be content with the Respondent merely providing to the Applicant a statement setting out the TMI expenses, along with supporting documentation. To accept the Respondent’s argument in this regard would lead to an absurd result since it would mean that the word “audited” would be given no meaning whatsoever.

[60] In the event that I am wrong that there is no ambiguity in the meaning of “audited statement”, since I have found that the Lease was drafted by the Respondent, I find that the rule of contra proferentem should apply and that ambiguity should be resolved in favour of the Applicant: Bryfam Enterprises Inc., at para 25.

[61] The provision of audited statements respecting Additional Rent was specifically bargained for in the Lease. In my view, if the Respondent had intended on simply providing an internally prepared statement accompanied by a copy of the TMI expenses invoiced and paid, there was no need for the modifying word “audited” to have been used in section 2.4 of the Lease. The Respondent’s interpretation would also make the condition that the Applicant, as tenant, has “the right to request back up information substantiating any item of Additional Rent” redundant since, by the Respondent’s account, such supporting information would have already been provided in the ordinary course. However, giving the Applicant a right to request supporting documentation makes sense in the context of the provision of “audited statements” since such “back up information” does not typically form part of same.

[62] I do not accept the Respondent’s submission that there is no better indicator of what the parties’ reasonable expectations were, at the time of contract formation, respecting the requirement to provide an “audited statement” than the Applicant’s first request for the TMI Information in December 2021 which did not make mention of the need for an “audited statement”. The Applicant requested, on numerous occasions, the TMI Information to support the Additional Rent it was to pay. While the Applicant did not initially use the specific phrase “audited statement”, it was clearly exercising its rights under s. 2.4 of the Lease. I prefer instead the evidence of Mr. Leger, the Applicant’s representative, who stated that the original estimated rate of $12.50 per square foot was “non-negotiable and was disputed at the time it was provided” in or about October 2020. On cross-examination, Mr. Leger’s evidence was that prior to October 2020 he had had a discussion with A. Longo, R. Longo, M. Longo and their father. He had been friends with the father for about 15 years by then. Their conversation took place at the Dry N Shine facility, during which he disputed the $12 per square foot rate because it was too high. It was Mr. Leger’s evidence that, during that discussion, it was “mutually agreed” that the Respondent was going to waive the rent for October, November and December 2020 because of the impact of the then road construction and COVID-19 stay-at-home orders, and that he was advised by A. Longo that any overpayments of the Additional Rent, based on the estimated $12.50 per square foot, would be reimbursed under the terms of the Lease. In this context, the audited statement was to provide some assurance to the Applicant that the statement of Additional Rent was free from material error or misstatement.

[63] I also do not accept the Respondent’s argument that, since the underlying supporting documentation has been provided to the Applicant, there is no benefit to be obtained from requiring a formal audit. First, it is unclear from the record before me that, as of the date of the hearing, the Respondent has, in fact, provided all of the corroborating documentation regarding the claimed property taxes, insurance and common area maintenance. Second, the charts provided by the Respondent are vague and do not contain details such as invoice dates, invoice numbers, or actual payments made. The lack of invoice numbers means that the information contained in the chart cannot be properly correlated to the purported supporting documentation that was provided. In my view, the state of the documentation provided to the Applicant by the Respondent respecting the Additional Rent claimed to be owing goes to show why an “audited statement of Additional Rent” is important. Otherwise, the Applicant will be unable to properly inform itself of the expenses being claimed by the Respondent and determine if they are appropriate or not according to the Lease’s terms (e.g., the purported management fee), and whether it needs to demand further particulars and/or challenge an item. I conclude that the Respondent’s contractual duty under section 2.4 to provide an “audited statement of Additional Rent” has not been effectively fulfilled by the charts and documentation it has provided to the Applicant to date.

[64] While it is open to the parties to reach consensus amongst themselves, if they so wish, on the appropriate Additional Rent amounts owing based on documentation other than a formal audited statement, it is not the place of this court to revise the terms of their original agreement under the guise of a contractual interpretation analysis.

[65] I conclude that the language used in section 2.4 of the Lease is clear and unambiguous. The Respondent is required to provide audited statements of Additional Rent to the Applicant.

(b) Is the Applicant required to make rent payments for the period prior to January 1, 2021?

Position of the Applicant

[66] With respect to whether the Applicant is obligated to pay rent prior to January 1, 2021, the Applicant’s position is that, at the time vacant possession was granted, there was road work construction on the roads surrounding the Property and COVID-19 lockdowns. Due to these circumstances, the parties discussed the start date of the rent payments and the Respondent agreed not to charge the Applicant Minimum Rent or Additional Rent until January 1, 2021. The Applicant relied on this representation and made the payments under the Lease commencing on January 1, 2021. The Respondent accepted the rent as paid by the Applicant. The Applicant argues that it is entitled to rely upon the waiver of rent previously instituted by the Respondent, and that the Respondent is now estopped from claiming the deficit of any rent for the period in question.

Position of the Respondent

[67] The Respondent argues that the Applicant owes rent pre-dating January 1, 2021. The Respondent granted vacant possession of the Premises to the Applicant on October 1, 2020. Under the Lease, the Applicant was granted a 60-day Fixturing Period during which it was required to pay Additional Rent but was relieved of its duty to pay Minimum Rent. As of December 1, 2020, therefore, the Applicant was obligated to pay both Minimum Rent and Additional Rent on a going-forward basis. The accounting period for Minimum Rent starts at the lease commencement date of December 1, 2020 and ends on January 31, 2024, which is the fiscal year-end for the Respondent. Based on that accounting period, the Applicant is currently in default of its payment obligations for Minimum Rent in the sum of $9,452.94 (inclusive of HST).

[68] As it relates to Additional Rent, the Respondent asserts that, for the period covering October 11, 2020 (when it first started accruing) to January 31, 2024, a balance of $5,398.91 is owing to the Applicant by the Respondent. The Respondent submits that the Applicant has been underpaying its proportionate share of TMI to the extent of $462.70 (plus HST) per month since February 2024. Further, the Applicant has benefited by paying only $12.50 per square foot for Additional Rent which is less than the estimated rate of $15.50 per square foot that was set out in the Lease for the first year alone.

[69] The Respondent denies that there was any agreement reached between the parties that the Applicant would not have to pay the rents required by the Lease for the months of October, November and December 2020. Even if the Respondent had promised the Applicant that it would not seek to enforce on the outstanding rent for the 2020 period, promissory estoppel is not permanent. Rather, it only obligates the Respondent to provide reasonable notice to the Applicant of its intention to revert back to its contractual rights: Lalani Properties International Inc. v. Intact Insurance Company, 2024 ONCA 583, paras 98-99. The best the Applicant can hope for is to preclude the Respondent from seeking a forfeiture of the Lease on the basis of the Applicant’s failure to pay the 2020 rent. It cannot, however, permanently bar the Respondent from seeking to collect on the outstanding rent.

[70] The Respondent argues that, by virtue of section 22.3(a) of the Lease, the Applicant is precluded from relying on any alleged verbal agreement changing the terms of the Lease. Further, the Respondent contends that section 22.1 of the Lease precludes the Applicant from relying on the fact that the Respondent did not insist on payment of the rent for the months of October to December 2020 until much later.

The Law

[71] In Grasshopper Solar Corporation v. Independent Electricity System Operator, 2020 ONCA 499, paras 67-68, appl’n for leave to appeal dismissed, the Ontario Court of Appeal discussed the principle of promissory estoppel as follows:

67 Promissory estoppel typically involves a promise by one party not to rely on its strict contractual rights. Where such a promise has been made with an intention that the other party will rely on it, and that party relies on the promise to his or her detriment, the party who made the promise is estopped from acting inconsistently with it. As with a shared assumption, although the promise does not vary the terms of the contract, the party who made the promise may be precluded from resiling from it to the extent necessary to protect the position of the party who has relied on the promise to his or her detriment.

68 The classic case is Central London Property Trust v. High Trees House, [1947] K.B. 130. In that case, in the context of a 99-year lease, a landlord agreed to accept reduced rent from a tenant for an indefinite period of time as a result of reduced demand during WWII. Lord Denning held that the landlord’s dispensation came to an end when full occupancy resumed but could also have been terminated at any time by notice. That is, the landlord could require the terms of the lease to govern future payments but was estopped from recovering past rent he had promised to discount.

[72] The promise can be inferred from the circumstances, however, it must be unambiguous: Engineered Homes Ltd. v. Mason, paras 7-8; High Tower Homes Corporation v. Stevens, 2014 ONCA 911, para 58.

Discussion

[73] I find that the evidence establishes, on a balance of probabilities, that an agreement to waive rent until January 1, 2021 was reached between the parties. The Applicant was clear in his evidence that he reached such an agreement with A. Longo, R. Longo, M. Longo and their father. The evidence of the Respondent’s representative was that he had not reached such an agreement with the Applicant, but he was equivocal on whether any of the other directors/officers of the Respondent may have agreed to same with the Applicant. He often made statements such as “I don’t know...”, including as it relates to who at the Respondent had agreed with the Applicant that it would pay the $12.50 rate per square foot and not the $15.50 rate set out in the Lease. On the whole, I found the evidence of the Respondent’s representative to be less reliable than the evidence of the Applicant’s representative. Accordingly, when there is a variance in their testimony, I prefer and accept the evidence of the Applicant’s representative.

[74] I am also satisfied that a finding that the Respondent had agreed to waive rent until January 1, 2021 is supported by the relevant documents and conduct of the parties, including:

(a) The “Statement of Operating Expenses for the Year End January 31, 2022”, which was prepared by the Respondent’s accountant using information given to them by the Respondent, states: “As the first lease year commenced on January 1, 2021, the total common area expenses and property taxes for February 1, 2021 to December 31, 2021 would be $6.58 per square foot.”

(b) The parties had agreed to another variance of the Lease’s terms, namely, that Additional Rent would be paid at the rate of $12.50 per square foot per year, rather than the $15.50 per square foot set out in the contract.

(c) The Respondent did not claim payments were owing for 2020 Minimum Rent or Additional Rent until October 2023. It is hard to believe that if the Respondent truly believed that the non-payment of rent for October to December 2020 was merely a deferral agreement, and not a waiver, that it would not have raised the discrepancy/arrears in rent payments much earlier.

[75] In the case before me, I find that there was a course of conduct over almost 3 years that showed an intention by the Respondent not to rely on the strict terms of the Lease with respect to the payment of any 2020 rent: Wittington Properties Limited v. Goodlife Fitness Centres Inc., 2018 ONCA 52, para 12. There was reliance by the Applicant on the Respondent’s conduct shown by the Applicant’s schedule of rent payments, the rent amounts it paid, the acceptance of those payments by the Respondent, and the fact that the Applicant continued to operate its business in the Leased Premises. The acceptance of the $5,000 rent payments for January 1 to June 30, 2021 implied that the Respondent would not rely on its rights under the Lease, particularly in the context of no demands being made for any arrears until October 2023. The Respondent did nothing in the ensuing years to notify the Applicant that it was in default. There is no evidence that the Respondent was not aware of the date when the payment of rent began or of the lower rent being paid until July 1, 2021. Both parties conducted themselves as if the correct rents were those actually paid by the Applicant. For all of these factors, I find that the Respondent is estopped from claiming any arrears of rent relating to months prior to January 1, 2021. In my view, it would be unfair, unjust, and inequitable for the Respondent to recover the full amount of any shortfall in the rents given the conduct of the parties and the course of their dealings from October 2020 to October 2023.

[76] The Respondent argued that the Applicant’s reliance on any alleged oral representation is inadmissible hearsay evidence and must be excluded since the Applicant’s representative did not identify the source of his information as required by Rule 39.01(5) of the Rules of Civil Procedure, RRO 1990, Reg 194. Rule 39.01(5) permits an affiant to give evidence in relation to an application on information and belief. An affidavit for use on an application must also comply with Rule 4.06, which specifies what affidavits in a civil proceeding must contain, and the permitted source of the evidence given. Subrule 4.06(2) provides that an affidavit shall be confined to the statement of facts within the personal knowledge of the affiant, or to other evidence the affiant could give if testifying as a witness in court, except where the rules provide otherwise. Here, the evidence of the waiver agreement was in Mr. Leger’s own knowledge because he is the person who had negotiated said waiver with the Respondent. While the evidence is hearsay in the sense that he is referring to an out-of-court statement, it is not based on hearsay, that is, on information he had received and believed only. Mr. Leger was a factual witness who has personal knowledge of facts. He was cross-examined on his affidavit and his attestations about the waiver of rent agreement. In my view, because Mr. Leger has first-hand knowledge of that matter, Rule 39.01(5) does not exclude the impugned affidavit evidence.

[77] The Respondent relies on Lalani Properties International Inc. v. Intact Insurance Company, 2024 ONCA 583, to argue that, even if it had promised the Applicant that it would not seek to enforce on the outstanding rent for the 2020 period, promissory estoppel is not permanent. Rather, it only obligates the Respondent to provide “reasonable notice” to the Applicant of its intention to revert back to its contractual rights. In Lalani, Intact had insured a hotel building that had a wall collapse and subsequent fire. The trial judge found that Intact was not liable under the policy to pay for losses arising from the wall collapse but that it was liable to pay for the losses caused by the fire. The plaintiff appealed the wall collapse judgment and Intact appealed the fire judgment. As part of the fire judgment, the trial judge concluded that Intact was estopped from relying on a term in the June 2010 renewal policy that excluded losses if the building was vacant for more than 30 days because Intact knew, when it issued the renewal policy and accepted Lalani’s payment of the annual premium, that the building had already been vacant since the time of the wall collapse more than 30 days earlier and that it would remain vacant for the foreseeable future until either torn down or rebuilt. When the building burned down, it had been continuously vacant for more than eight months.

[78] Lalani dealt with Intact’s promise not to enforce a vacancy exclusion clause. The court held that it would not have made sense to treat Intact’s promise as permanent since the renewal policy expressly permitted Intact to terminate the policy before the end of the full one-year term as long as it gave proper notice. Lalani did not argue that Intact was estopped from invoking the termination clause. The trial judge’s decision that Intact was estopped from relying on the vacancy exclusion up to the point that its notice of early termination of the policy took effect was upheld on appeal.

[79] The case before me is distinguishable from the case in Lalani. The term at issue there related to something that could occur in the future. Intact had agreed to continue insuring the plaintiff’s vacant building but then gave notice that it would be terminating coverage and changing the terms of its coverage in the meantime. The court held that Intact could still exercise its contractual right to terminate the contract ahead of term on proper notice. The consequence of it doing so was the same as if it had rescinded its promise to insure the vacant building by giving Lalani reasonable notice of its change of position, as it could do under the doctrine of promissory estoppel. Here, the Respondent is seeking to rescind its promise and go back in time and demand rent payment for months that I have found it waived the requirement of rent. Given my ruling, it cannot now claim payment of those amounts, and those amounts do not relate to anything that the Respondent can say it is not going to provide in the future, like Intact could in Lalani. In my view, the case before me is similar to that in Central London Property Trust v. High Trees House, [1947] K.B. 130, cited in Grasshopper Solar Corporation, where Lord Denning held that the landlord was estopped from recovering past rent he had promised to discount.

[80] The Respondent argues that section 22.1 of the Lease means that no waiver can be effective unless it is in fact expressly in writing. While the waiver of rent agreement was not put in writing, I find that it meets the test of promissory estoppel: it was a representation made by the Respondent to the Applicant; the representation was intended to affect the legal relationship between the parties by altering the Applicant’s obligations under the Lease; the Applicant reasonably relied on the representation; and the parties’ conduct supports that such a representation was made.

[81] Waiver and estoppel can both arise out of the conduct of a party. Here, I am satisfied that the Respondent has either waived its right to collect rent for any period prior to January 1, 2021 or that it is estopped from collecting such rent. I conclude that the Applicant is not required to make rent payments for the period prior to January 1, 2021.

Disposition

[82] Based on the foregoing, it is ordered that:

(a) Within 90 days of this Order, the Respondent shall provide to the Applicant the audited statements of Additional Rent for each completed annual period of the Lease.

(b) The Respondent shall provide audited statements of Additional Rent going forward in accordance with the terms of the Lease.

(c) The Respondent shall reimburse the Applicant for the overpayment, if any, of Additional Rent within 30 days after the audited statements of Additional Rent are delivered, together with interest as per section 2.5 of the Lease payable from the date that such reimbursement ought to have been made.

(d) The Applicant shall adjust the Additional Rent payable in 2025 to account for the underpayment, if any, of Additional Rent after the audited statements of Additional Rent are delivered. Any adjustment required can be repaid by periodic payments as part of the Additional Rent payments made until January 31, 2026.

(e) The Respondent is estopped from claiming any Minimum Rent and/or Additional Rent that may have been payable under the Lease for any period prior to January 1, 2021.

(f) The Applicant is relieved from making rent payments that were or may have been due and owing for the period prior to January 1, 2021 under the Lease.

Costs

[83] I would urge the parties to agree on costs. If they are unable to do so, then costs submissions may be made as follows and submitted to the Judicial Assistants to my attention:

(a) By May 21, 2025, the Applicant shall serve and file its written costs submissions, not to exceed three pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers; and

(b) The Respondent shall serve and file its responding costs submissions of no more than three pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers, by June 4, 2025; and

(c) The Applicant’s reply submissions, if any, are to be served and filed by June 11, 2025 and are not to exceed two pages.

(d) If no submissions are received by June 11, 2025, the parties will be deemed to have resolved the issue of the costs and costs will not be determined by me.

[84] If the parties are able to settle the issue of costs or if a party does not intend to deliver submissions, counsel are requested to advise the court accordingly.

Released: April 30, 2025

Jennifer MacNeil