1323677 Alberta Ltd. v. 334154 Alberta Ltd., 2014 ABQB 486

• Judge: Topolniski, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 16, 2014
• Citations: 2014 ABQB 486;(2014), 595 A.R. 201 (QB)

1323677 Alta. Ltd. v. 334154 Alta. Ltd. (2014), 595 A.R. 201 (QB)

MLB headnote and full text

Temp. Cite: [2014] A.R. TBEd. AU.122

1323677 Alberta Ltd. (applicant) v. 334154 Alberta Ltd. (respondent)

(1303 16510; 2014 ABQB 486)

Indexed As: 1323677 Alberta Ltd. v. 334154 Alberta Ltd.

Alberta Court of Queen's Bench

Judicial District of Edmonton

Topolniski, J.

August 7, 2014.

Summary:

A dispute arose between the parties, triggered by the exercise of an option to renew a commercial lease. The issues were: (1) whether the option to renew was enforceable; (2) if so, whether the tenant was in default of its obligations; (3) if so, whether equitable relief was available to the tenant; (4) if not, whether the landlord was entitled to vacant possession; and (5) whether the landlord was entitled to monetary remedies.

The Alberta Court of Queen's Bench concluded that the tenant was not in default when the lease expired. In the event the tenant was in default, equitable relief was available to the tenant. The landlord was awarded judgment in the undisputed sum of $3,200 for costs and rent. Ongoing rent and occupancy costs were directed to arbitration in accordance with the terms of the lease.

Equity - Topic 1061

Equitable relief - Relief from forfeiture - General - [See first Landlord and Tenant - Topic 6786 ].

Estoppel - Topic 1030

Estoppel in pais (by conduct) - By agreement - Estoppel by convention - [See second Landlord and Tenant - Topic 6786 ].

Estoppel - Topic 1157

Estoppel in pais (by conduct) - Representation - By conduct - Silence or standing by - Detriment - [See second Landlord and Tenant - Topic 6786 ].

Landlord and Tenant - Topic 2382

The lease - Renewals - What constitutes an enforceable renewal - [See Landlord and Tenant - Topic 2398 ].

Landlord and Tenant - Topic 2396

The lease - Renewals - Conditions precedent - A dispute arose triggered by the exercise of an option to renew a commercial lease - Clause 30.01 of the lease provided in part: "30.01 Providing that the Lessee is not in default under the terms and conditions of this lease, the Lessee shall on termination of the Lease have an option to renew the Lease for a further term of ten years." - The Landlord claimed that the Tenant was in default of its obligation to pay occupancy costs (operating expenses) pursuant to the Lease - The Alberta Court of Queen's Bench held that the tenant established an absence of default at the relevant time - "The best evidence before the Court is that it diligently paid rent as required, and occupancy costs in the only amount clearly indicated by the Landlord. In my view, this shifts the evidentiary burden to the Landlord to point to evidence which would establish that the claimed outstanding occupancy costs are a live issue. ... [A]ny potential underpayment of the occupancy costs in this case lies at the feet of the Landlord, and did not constitute a default." - See paragraphs 31 to 64.

Landlord and Tenant - Topic 2398

The lease - Renewals - Certainty of terms - The handwritten option to renew was found in the Renewal Lease Agreement: "8. The lessee has the option to renew the lease for further 10 years." - Clause 30.01 of the Lease provided in part that the rent payable during the option period shall be "such amount of rent as shall be agreed between the parties based on market value and failing agreement shall be decided by arbitration according to the laws of the Province of Alberta" - It also directed the arbitrator to address market conditions in determining the rent - The landlord asserted that the clause was void for uncertainty since it failed to deal with future rents - The Alberta Court of Queen's Bench concluded that the option to renew was enforceable - "Read contextually and as a whole with the Lease and with a view to the practical objectives it was intended to achieve, the option in this case has a formula and the machinery to make it work. ... The fact that the Lease had previously been renewed supports a finding that the mechanism in Clause 30.01 posed no difficulty in the past." - See paragraphs 28 to 30.

Landlord and Tenant - Topic 2805

The lease - Liability of tenant - Operating expenses of building - [See Landlord and Tenant - Topic 2396 ].

Landlord and Tenant - Topic 6786

Termination, forfeiture and reentry - Relief against forfeiture - When available - The Alberta Court of Queen's Bench addressed the issue of its ability to relieve against a condition precedent for a lease to be in good standing at the time of exercise of an option to renew - "Despite the apparent lack of clarity on this issue, Chroniaris [Chroniaris Enterprises Ltd. v. MKRS Pub Inc. (2008) (Alta. C.A.)] is binding authority in this jurisdiction. ... Therefore, assuming that the Court does have the power to relieve against the failure to pay under a lease in relation to a renewal option, such power must extend to a situation such as this one, where the Tenant made diligent efforts to comply with the terms of the lease but those efforts were unavailing through no fault of its own - similar to situations where a tenant has genuinely attempted, but failed, to abide by the notice provisions in a lease" - See paragraphs 68 to 74.

Landlord and Tenant - Topic 6786

Termination, forfeiture and reentry - Relief against forfeiture - When available - The Alberta Court of Queen's Bench found that the tenant was not in default of its obligation to pay occupancy costs when it exercised the option to renew - If wrong in so finding, equitable relief would be available to the tenant, founded on a communicated, shared assumption (estoppel by convention) - The tenant relied on the information provided by the Landlord, setting the occupancy costs at $371 and accepting payment at that rate - "Arguably the alleged shared assumption in the present case is based upon mere silence. In such a case, there must also be a duty on the silent party to tell the mistaken party that he did not assent to the proposition ... . I have found that the Landlord had a duty under the Lease to provide the adjusted amount of occupancy costs, given that it had sole control over the necessary information. The Tenant's reliance on the $371 set by the Landlord resulted in a detriment in the sense that it was unknowingly in a default position at the time of the renewal." - See paragraphs 77 to 79.

Cases Noticed:

Scurry-Rainbow Oil Ltd. v. Kasha (1996), 184 A.R. 177; 122 W.A.C. 177 (C.A.), refd to. [para. 21].

ATCO Electric Ltd. v. Energy and Utilities Board (Alta.) (2004), 361 A.R. 1; 339 W.A.C. 1; 2004 ABCA 215, refd to. [para. 22].

Jumbo King Ltd. v. Faithful Properties Ltd., [1999] H.K.C.F.A.R. 279, refd to. [para. 22].

Grosvenor Canada Ltd. v. Mailly et al. (2001), 297 A.R. 179; 2001 ABQB 775, refd to. [para. 23].

Mustard Seed (Calgary) Street Ministry Society v. Century Services Inc., [2009] A.R. Uned. 307; 79 R.P.R.(4th) 252; 2009 ABQB 171, refd to. [para. 26].

Calford Properties Ltd. v. Kelly's Billiards Ltd., [1973] 4 W.W.R. 532 (Alta. T.D.), refd to. [para. 26].

Allarco Developments Ltd. v. Novelty Pipe Shoppe Ltd. and Alberta (Provincial Treasurer) (1982), 47 A.R. 161 (Q.B. Master), refd to. [para. 27].

Brown v. Gould, [1971] 2 All E.R. 1505, refd to. [para. 27].

Morrison (Ramona) Hospitality Services Ltd. v. Stonebridge Hotel Ltd., [2008] A.R. Uned. 88; 294 D.L.R.(4th) 574; 2008 ABCA 222, refd to. [para. 28].

Doria v. 66 Degrees Inc., [2000] O.T.C. Uned. 630; 30 R.P.R.(3d) 287 (Sup. Ct.), refd to. [para. 32].

1383421 Ontario Inc. v. Ole Miss Place Inc. (2003), 177 O.A.C. 40 (C.A.), refd to. [para. 17].

Fingold v. Hunter, [1944] 3 D.L.R. 43 (Ont. C.A.), refd to. [para. 38].

Gordstone Enterprises Ltd. v. 622559 Saskatchewan Ltd. (2006), 288 Sask.R. 79; 2006 SKQB 480, refd to. [para. 63].

K.M. v. H.M., [1992] 3 S.C.R. 6; 142 N.R. 321; 57 O.A.C. 321; 96 D.L.R.(4th) 289, refd to. [para. 67].

Clark Auto Body Ltd. v. Integra Custom Collision Ltd. (2007), 234 B.C.A.C. 309; 387 W.A.C. 309; 2007 BCCA 24, refd to. [para. 68].

Finn v. Finn and Cowdy (Carole) Investments Ltd. (1983), 42 A.R. 255 (Q.B.), refd to. [para. 70].

Chroniaris Enterprises Ltd. v. MKRS Pub Inc. (2005), 402 A.R. 70; 2005 ABQB 867, affd. (2008), 432 A.R. 286; 424 W.A.C. 286; 2008 ABCA 172, folld. [para. 71].

Alwell Mechanical v. Royal Bank of Canada (1985), 41 Alta. L.R.(2d) 8 (C.A.), refd to. [para. 71].

1183882 Alberta Ltd. v. Valin Industrial Mill Installations Ltd. (2011), 521 A.R. 281; 2011 ABQB 440, affd. (2012), 522 A.R. 285; 544 W.A.C. 285; 2012 ABCA 62, refd to. [para. 73].

Deerfoot Mall (Calgary) Ltd. v. Dalmont Enterprises (1987), 77 A.R. 204 (C.A.), refd to. [para. 75].

Deerfoot Mall (Calgary) Ltd. v. Burt - see Deerfoot Mall (Calgary) Ltd. v. Dalmont Enterprises.

410675 Alberta Ltd. v. Trail South Developments Inc. (2012), 539 A.R. 157; 561 W.A.C. 157; 2012 ABCA 351, refd to. [para. 75].

B & R Development Corp. v. Trail South Developments Inc. - see 410675 Alberta Ltd. v. Trail South Developments Inc.

Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50; 125 N.R. 294; 47 O.A.C. 333, refd to. [para. 75].

Ryan v. Moore et al., [2005] 2 S.C.R. 53; 334 N.R. 355; 247 Nfld. & P.E.I.R. 286; 735 A.P.R. 286; 2005 SCC 38, refd to. [para. 78].

Authors and Works Noticed:

Bower, S., Estoppel by Representation (4th Ed. 2004), p. 185 [para. 79].

Chitty on Contracts (24th Ed. 1977), para. 713 [para. 21].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (5th Ed. 2006), pp. 454 to 462 [para. 21].

Counsel:

Andrew R. Fraser (Snyder & Associates LLP), for the applicant;

Michael W. Mudie, for the respondent.

This application and cross-application were heard on May 23 and July 16, 2014, before Topolniski, J., of the Alberta Court of Queen's Bench, who delivered the following judgment and reasons, dated at Edmonton, Alberta, on August 7, 2014.