1043545 Ontario Inc. v. 2748355 Canada Inc. et al., (1998) 70 O.T.C. 267 (GD)

• Judge: John A.B. Macdonald, J.
• Court: Ontario Court of Justice General Division (Canada)
• Case Date: June 30, 1998
• Jurisdiction: Ontario
• Citations: (1998), 70 O.T.C. 267 (GD)

1043545 Ont. Inc. v. 2748355 Can. Inc. (1998), 70 O.T.C. 267 (GD)

MLB headnote and full text

Temp. Cite: [1998] O.T.C. TBEd. JL.002

1043545 Ontario Inc. (plaintiff/defendant by counterclaim) v. 2748355 Canada Inc. and 547495 Ontario Limited O/A Beutel Goodman Real Estate Group (defendants/plaintiffs by counterclaim)

(File No. 96-CU-98860CM)

Indexed As: 1043545 Ontario Inc. v. 2748355 Canada Inc. et al.

Ontario Court of Justice

General Division

John A.B. Macdonald, J.

June 30, 1998.

Summary:

In 1993 Sadowski, on the plaintiff tenant's behalf, negotiated leasing arrangements of premises that were part of the Madison Centre owned by Madison Developments Ltd. (the prior owner). The plaintiff's Agreement to Lease incorporated by reference all the terms and conditions of the Madison Centre Retail Lease. A subsequent Amendment to Lease (the Amendment) provided the plaintiff with, inter alia, an option to renew. The Amendment's renewal option clause (clause 1) was intended to refer to the plaintiff's lease, however, the plaintiff's option to renew was made contingent upon its performing covenants in a lease between the prior owner and a previous tenant of the same premises (the Restco lease). In 1995 the defendant 2748355 Canada Inc. (the present owner) took possession of the Madison Centre. The present owner claimed to have no knowledge of the plaintiff's renewal option and took title free and clear of it pursuant to the Land Titles Act. The plaintiff argued that the present owner was estopped from asserting the Land Titles Act against its interests and sought to enforce the Amendment's renewal option as rectified by having the reference to the Restco lease deleted and referring it to its lease. The defendants counterclaimed for a declaration that the plaintiff was not entitled to renew, arguing that the plaintiff breached the conditions precedent to exercising that option by failing to comply with terms of the Restco lease, i.e., not paying rent in advance on the first day of each month and not keeping insurance in effect.

The Ontario Court (General Division), dismissed the plaintiff's action. The court considered the facts necessary to grant rectification (see paragraphs 30 to 37) and found that Sadowski had intended to commit the plaintiff to the terms and conditions of the documents he signed and therefore the plaintiff was not entitled to rectification of the option to renew clause. The court found that the Restco lease had been proven in evidence (whereas the Madison Centre Retail Lease had not) and clauses 3 and 1 of the Amendment had the effect of incorporating by reference into the plaintiff's lease all of the terms and conditions of the Restco lease. Therefore, because of the plaintiff's breach of its obligations which were condition precedent to its exercising its option the court held that plaintiff was not entitled to exercise its renewal option.

Contracts - Topic 2164

Terms - Incorporation by reference - Incorporation of terms of other agreements - See paragraphs 22, 23, 38 and 39.

Contracts - Topic 3563

Performance or breach - Performance of conditions precedent - Failure to perform - Effect of - See paragraphs 40 to 45.

Contracts - Topic 3944

Performance or breach - Relief from forfeiture - When available - See paragraph 43.

Contracts - Topic 7426

Interpretation - Ambiguity - What constitutes ambiguity - See paragraphs 38 and 39.

Contracts - Topic 7433

Interpretation - Ambiguity - Contra proferentem rule - See paragraph 26.

Deeds and Documents - Topic 5051

Rectification - When available - General - See paragraphs 33 to 37.

Evidence - Topic 6204

Parol evidence rule - General principles - Evidence offered to contradict or explain written agreement - See paragraphs 27, 28 and 34.

Landlord and Tenant - Topic 2396

The lease - Renewals - Conditions precedent - See paragraphs 38 to 45.

Real Property - Topic 8085

Title - Registration of instruments - Notice by registration - Constructive notice - Where applicable - See paragraphs 50 and 51.

Cases Noticed:

Scanlon v. Castlepoint Development Corp. et al. (1992), 59 O.A.C. 191; 11 O.R.(3d) 744 (C.A.), refd to. [para. 25].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, refd to. [para. 25].

McClelland and Stewart Ltd. v. Mutual Life Assurance Co. of Canada, [1981] 2 S.C.R. 6; 37 N.R. 190, refd to. [para. 25].

Métropolitaine (La), compagnie d'assurance-vie v. Frenette, Hôpital Jean-Talon et un autre, [1992] 1 S.C.R. 647; 134 N.R. 169; 46 Q.A.C. 161, refd to. [para. 25].

Frenette v. Metropolitan Life Insurance Co. - see Métropolitaine (La), compagnie d'assurance-vie v. Frenette, Hôpital Jean-Talon et un autre.

Hillis Oil and Sales Ltd. v. Wynn's Canada Ltd., [1986] 1 S.C.R. 57; 65 N.R. 23; 71 N.S.R.(2d) 353; 171 A.P.R. 353, refd to. [para. 25].

National Trust Co. v. Mead, [1990] 2 S.C.R. 410; 112 N.R. 1; 87 Sask.R. 161, refd to. [para. 25].

Reliance Petroleum Ltd. v. Stevenson, [1956] S.C.R. 936, refd to. [para. 26].

Transcanada Pipelines Ltd. v. Northern and Central Gas Corp. (1983), 41 O.R.(2d) 447 (C.A.), refd to. [para. 27].

Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072; 20 N.R. 500; 9 A.R. 308, refd to. [para. 28].

Canadian Pacific Ltd., Re (1979), 95 D.L.R.(3d) 242 (B.C.C.A.), affd. (1979), 30 N.R. 541; 105 D.L.R.(3d) 170 (S.C.C.), refd to. [para. 29].

Canadian National Railways v. Canadian Pacific Ltd. - see Canadian Pacific Ltd., Re.

Montreal Trust Co. of Canada v. Birmingham Lodge Ltd. et al. (1995), 82 O.A.C. 25; 24 O.R.(3d) 97 (C.A.), refd to. [para. 29].

Clarke (H.F.) Ltd. v. Thermidaire Corp., [1973] 2 O.R. 57 (C.A.), refd to. [para. 30].

Peter Pan Drive-In Ltd. v. Flambro Realty Ltd. (1978), 22 O.R.(2d) 291 (H.C.), affd. (1980), 26 O.R.(2d) 746 (C.A.), leave to appeal dismissed (1980), 32 N.R. 538 (S.C.C.), refd to. [para. 31].

Austin (John) & Sons Ltd. v. Smith (1982), 35 O.R.(2d) 272 (C.A.), refd to. [para. 31].

Joscelyne v. Nissen et al., [1970] 2 Q.B. 86 (C.A.), refd to. [para. 31].

Pierce v. Empey, [1939] S.C.R. 247, refd to. [para. 41].

Fingold v. Hunter, [1944] O.W.N. 287 (C.A.), refd to. [para. 41].

Sparkhall v. Watson, [1954] 2 D.L.R. 22 (Ont. H.C.), refd to. [para. 41].

Pacella et al. v. Giuliana et al. (1977), 1 R.P.R. 301 (Ont. C.A.), refd to. [para. 43].

Ross v. Eaton (T.) Co. (1992), 58 O.A.C. 366; 11 O.R.(3d) 115 (C.A.), refd to. [para. 43].

Russo v. Field, [1973] S.C.R. 466, refd to. [para. 52].

Pitcher v. Shoebottom et al., [1971] 1 O.R. 106 (H.C.), refd to. [para. 52].

Authors and Works Noticed:

Megarry, R.E., and Thompson, H.W.R., A Manual of the Law of Real Property (7th Ed. 1993), p. 60 [para. 50].

Counsel:

Jeffrey P. Shankman and Jorden Colman, for the plaintiff/defendant by counterclaim;

Peter J. Cavanagh, for the defendants/plaintiffs by counterclaim.

This action was heard before John A.B. Macdonald, J., of the Ontario Court (General Division), who delivered the following judgment which was released on June 30, 1998.