D.L.G. & Associates Ltd. v. Minto Properties Inc., (2015) 341 O.A.C. 50 (CA)

• Judge: Doherty, Lauwers and Huscroft, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 29, 2015
• Jurisdiction: Ontario
• Citations: (2015), 341 O.A.C. 50 (CA);2015 ONCA 705

DLG & Assoc. v. Minto Prop. Inc. (2015), 341 O.A.C. 50 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. OC.026

D.L.G. & Associates Ltd. (plaintiff/appellant) v. Minto Properties Inc. (defendant/respondent)

(C59891; 2015 ONCA 705)

Indexed As: D.L.G. & Associates Ltd. v. Minto Properties Inc.

Ontario Court of Appeal

Doherty, Lauwers and Huscroft, JJ.A.

October 22, 2015.

Summary:

The parties were commercial entities. A second sewer backup occurred in the leased premises. The plaintiff/tenant claimed damages for fraudulent and negligent misrepresentation, breach of the terms of the lease and negligence. The defendant/landlord denied liability and counterclaimed for back rent. The landlord moved to strike the claims as failing to disclose a reasonable cause of action.

The Ontario Superior Court, in a decision with neutral citation 2014 ONSC 7287, held that the fraudulent misrepresentation claim should proceed, but that it was plain and obvious that the covenant to insure in the lease barred the claims for breach of contract, negligence and negligent misrepresentation, and that the landlord had not waived the covenant to insure. The tenant appealed.

The Ontario Court of Appeal allowed the appeal in part. The Court allowed the negligent misrepresentation claim to stand, as well as the tenant's assertion that the landlord was estopped from relying on the covenant to insure.

Contracts - Topic 1604

Formation of contract - Mistake, misunderstanding or misrepresentation - Misrepresentation - What constitutes - [See third Landlord and Tenant - Topic 1634 ].

Contracts - Topic 2116

Terms - Express terms - "Entire agreement" or "four corners" clause - This appeal involved a landlord's motion to strike claims based on the pleadings - The Ontario Court of Appeal held that it was not plain and obvious that the "entire agreement" clause in the lease should immunize the landlord from liability for post-contract negligent misrepresentations - "The reach of the 'entire agreement' clause is a matter of interpretation and the wording of the clause is of primary importance. It is arguable that absent very clear language, the 'entire agreement' clause does not apply prospectively to representations made after the contract was entered into by the parties" - The language in the "entire agreement" clause required that any "modification" to the lease be in writing - A determination of whether the misrepresentations stood apart from the terms of the lease and were therefore not a "modification" of the terms of the lease, could not be decided within the narrow confines of a pleadings motion - The lease amending agreement provided that "all provisions of the lease continue in full force and effect" - Those words, however, did not assist in interpreting the provisions of the lease and specifically did not assist in determining whether "the entire agreement" clause applied prospectively to misrepresentations made after the lease was entered into - See paragraphs 32 to 35.

Contracts - Topic 2116

Terms - Express terms - "Entire agreement" or "four corners" clause - The parties were commercial entities - The defendant landlord ("Minto") moved to strike claims based on negligent misrepresentations made before the lease was entered into by the parties - It relied on the "entire agreement" clause - The Ontario Court of Appeal held that the motion judge erred in striking the negligent misrepresentation claim - "The evidentiary detail necessary to decide whether an 'entire agreement' clause precludes reliance on pre-contractual negligent misrepresentations is not available on a motion to strike based on the pleadings. It may be that Minto can convince a trial judge or a judge on a summary judgment motion that just as in Taurus [Intrawest Corp. v. No. 2002 Taurus Ventures Ltd. et al. (2007 B.C.C.A.)] ... it would not 'accord with commercial reality to give no effect to the entire agreement clause' in deciding whether a tort claim for negligent misrepresentation based on pre-contractual representations should succeed. The argument is premature at this stage." - See paragraphs 36 to 39.

Contracts - Topic 2120

Terms - Express terms - Exclusionary clauses - [See second Landlord and Tenant - Topic 1634 ].

Contracts - Topic 3735

Performance or breach - Fundamental breach - Effect of exclusionary clause - [See second Landlord and Tenant - Topic 1634 ].

Contracts - Topic 9901

Promissory estoppel - General - The Ontario Court of Appeal stated that "[a] party relying on promissory estoppel to escape an obligation that the party would otherwise have must show three things: A pre-existing legal relationship between the parties; A promise or assurance, express or implied, by one party to the other that it would not hold the other party to the performance of an obligation imposed under the pre-existing legal relationship; and Reliance on the promise or assurance by the other party who acts in some way to change its position because of the promise or assurance" - See paragraph 46.

Estoppel - Topic 1327

Estoppel in pais (by conduct) - Acquiescence - Standing by without objection - [See fourth Landlord and Tenant - Topic 1634 ].

Estoppel - Topic 1381

Estoppel in pais (by conduct) - Circumstances where doctrine not applicable - General - [See fourth Landlord and Tenant - Topic 1634 ].

Fraud and Misrepresentation - Topic 2516

Misrepresentation - General principles - Contracts - [See third Landlord and Tenant - Topic 1634 ].

Fraud and Misrepresentation - Topic 2568

Misrepresentation - Representations - Particular statements - Water supply, septic system, etc. - [See third Landlord and Tenant - Topic 1634 ].

Landlord and Tenant - Topic 1634

The premises - Insurance - Agreement by tenant to insure - The parties were commercial entities - The plaintiff/tenant, after a sewer backup, covenanted to obtain "all risks" insurance which specifically included insurance for "sewer back-up" - A second sewer backup occurred - The tenant claimed damages based on the landlord's breach of its "quiet enjoyment" and "good repair" obligations under the lease - A motion judge found that it was plain and obvious that the covenant to insure barred the claim - The Ontario Court of Appeal agreed that the claim was properly struck - "A covenant to insure is one of several provisions within a lease which allocates risk as between the parties to the lease. The allocation of risk is presumably reflected in the rent to be paid. A covenant to insure would hardly serve the purpose of risk allocation if it were read as allocating the risk to the tenant if the landlord was negligent, but to the landlord if the same act amounted to a breach of a provision in the lease, e.g. the obligation to maintain and repair. As almost any act of negligence would also be a breach of the obligation to maintain and repair, the interpretation urged by the [tenant] would effectively put the risk on [the landlord] despite [the tenant's] obligation to obtain 'all risks' insurance." - See paragraphs 16 to 19.

Landlord and Tenant - Topic 1634

The premises - Insurance - Agreement by tenant to insure - The parties were commercial entities - The plaintiff/tenant after a sewer backup, covenanted to obtain "all risks" insurance which specifically included insurance for "sewer back-up" - A second sewer backup occurred - The tenant claimed damages based on the landlord's breach of its "quiet enjoyment" and "good repair" obligations under the lease - The Ontario Court of Appeal held that the covenant to insure could not be read as a clause excluding the landlord from liability it would otherwise carry but for the clause - "Instead, the covenant to insure assigns risk for certain losses by requiring that the tenant ... obtain insurance coverage for those losses" - The Court, in obiter, addressed the enforceability of the clause, and observed that "in the context of a negotiated lease between arms-length commercial entities I see little room for an argument that a covenant to insure, whether directed at the landlord or the tenant, could be viewed as unconscionable." - See paragraphs 20 to 22.

Landlord and Tenant - Topic 1634

The premises - Insurance - Agreement by tenant to insure - The parties were commercial entities - The plaintiff tenant alleged misrepresentations that induced it to enter into the lease and it alleged different misrepresentations that induced it to continue to operate under the lease and attempt to restart its restaurant business - The misrepresentation claims, both fraudulent and negligent, were founded in tort - The landlord moved to strike the misrepresentation claims based on the pleadings - The Ontario Court of Appeal held that the judge erred in striking the negligent misrepresentation claim - It was arguable that the defendant's liability for negligent misrepresentation, like its liability for fraudulent misrepresentation, was not precluded by the covenant to insure - The covenant to insure was intended to assign risk within the operation of the contractual relationship between the parties - The alleged tortious conduct occurred outside of that relationship - It was not plain and obvious that the terms of the contract demonstrated that the parties intended to exclude the defendant's potential liability for any negligent misrepresentations that induced the tenant to enter into and/or continue the tenancy - See paragraphs 23 to 31.

Landlord and Tenant - Topic 1634

The premises - Insurance - Agreement by tenant to insure - The parties were commercial entities - The plaintiff/tenant, after a sewer backup, covenanted to obtain "all risks" insurance which specifically included insurance for "sewer back-up" - A second sewer backup occurred - The tenant pleaded "acquiescence, waiver and equitable or promissory estoppel"; specifically, that as a consequence of the landlord's conduct after the first sewer backup, the landlord could not rely on the covenant to insure in the lease in respect of damages flowing from the second sewer backup - The landlord moved to strike the pleadings - The motion judge concluded that neither waiver nor estoppel could assist the tenant - The Ontario Court of Appeal held that those pleadings could not be struck at this stage - The facts as pleaded provided a basis for the factual determinations necessary to support a promissory estoppel claim - Although the waiver clause "presents a formidable obstacle" to the waiver/estoppel claim, it was not plain and obvious that an estoppel argument based on the landlord's conduct after the first sewer backup could not succeed - "Waiver under the terms of the lease cannot necessarily be equated with the broader equitable doctrine of promissory estoppel. ... [P]romissory estoppel is a 'more expansive version of the waiver doctrine' ... " - See paragraphs 40 to 47.

Landlord and Tenant - Topic 2743

The lease - Liability of landlord - Breach of lease - [See first Landlord and Tenant - Topic 1634 ].

Landlord and Tenant - Topic 2749

The lease - Liability of landlord - Exclusionary clause - [See second Landlord and Tenant - Topic 1634 ].

Cases Noticed:

Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways), [2010] 1 S.C.R. 69; 397 N.R. 331; 281 B.C.A.C. 245; 457 W.A.C. 245; 2010 SCC 4, refd to. [para. 15].

Madison Developments Ltd. et al. v. Plan Electric Co. et al. (1997), 104 O.A.C. 194; 36 O.R.(3d) 80 (C.A.), appld. [para. 18].

Smith et al. v. Eaton (T.) Co. et al., [1978] 2 S.C.R. 749; 15 N.R. 315 (S.C.C.), refd to. [para. 20].

St. Lawrence Cement Inc. v. Wakeham & Sons Ltd. (1995), 86 O.A.C. 182; 26 O.R.(3d) 321 (C.A.), refd to. [para. 20].

Shelanu Inc. v. Print Three Franchising Corp. (2003), 172 O.A.C. 78 (C.A.), refd to. [para. 33].

Intrawest Corp. v. No. 2002 Taurus Ventures Ltd. et al. (2007), 240 B.C.A.C. 112; 398 W.A.C. 112; 2007 BCCA 228, refd to. [para. 36].

McNeely v. Herbal Magic Inc. et al., [2011] O.T.C. Uned. 4237; 89 B.L.R.(4th) 226; 2011 ONSC 4237, refd to. [para. 36].

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. 46].

Marble Trend Ltd. et al. v. Sir Wynne-Highlands Inc. et al., [2004] O.T.C. Uned. 719 (S.C.), affd. [2005] O.A.C. Uned. 580, refd to. [para. 47].

Counsel:

Shawn Laubman and Christine Muir, for the plaintiff/appellant;

Adam Grant and Alyssa Caverson, for the defendant/respondent.

This appeal was heard on June 29, 2015, before Doherty, Lauwers and Huscroft, JJ.A., of the Ontario Court of Appeal. In reasons written by Doherty, J.A., the Court delivered the following judgment, released on October 22, 2015.