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COMMERCIAL TENANCIES - Lease - Renewal - Shopping centre

Tuesday, August 18, 2020 @ 6:00 AM  


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Appeal by the tenant from a decision interpreting a provision of the lease. Cross-appeal by the landlord from the judge’s finding that the lease was renewed. The appellant leased commercial space in the respondent’s shopping mall. In response to the respondent having distrained against the appellants’ goods for unpaid rent, the appellant applied for a declaration that it overpaid the rent due, claiming that Article 11 of the lease capped all amounts payable as rent at nine per cent of its revenue from the premises. The respondent argued the appellant’s unpaid rent exceeded $500,000, claiming Article 11 capped only the additional rent payable which included only utilities. The application judge rejected both parties’ interpretations of Article 11. He concluded it operated to limit all amounts payable by the tenant as rent except minimum rent. The appellant argued the judge erred in determining that the cap under Article 11 did not apply to its minimum rent obligation under the lease. Specifically, the application judge failed to consider evidence of the appellant’s post-contractual conduct in issuing Debit Notes to the landlord reflecting an interpretation of Article 11 that capped its rent at nine per cent, the respondent’s admission in an e-mail of the appellant’s interpretation of Article 11, and Article 11.1(d) which permitted the appellant to deduct the excess paid from future rent. Relying on the fact the application judge found that the appellant was in default at the time it notified the respondent of its intention to renew, the respondent argued the judge was required to conclude the appellant forfeited the right to renew, notwithstanding the absence of any such condition precedent to the exercise of the right.

HELD: Appeal and cross-appeal dismissed. The judge’s finding in relation to subsequent conduct did not give rise to a reversible error in the interpretation of Article 11. Even if the judge erred in his assessment of the evidence of subsequent conduct, it is not an error that had an impact on the disposition as he found no ambiguity in the clause. The application judge did not err in deciding the respondent should not be considered as having admitted that it owed the appellant excess rent and, by inference, that it agreed with its interpretation of Article 11, based on the respondent’s e-mail sent during negotiations for the sale of the shopping centre. Even if treated as an admission, given the inability to identify the source of the amount mentioned, there was no way to connect it to a particular interpretation of the lease. The application judge did not fail to consider the significance of clause 11.1(d). There was no basis for interpreting the concluding statement that the appellant would be entitled to deduct the overpayment from the next sum or sums to become due, as permitting it to deduct the full amount of the overpayment from future rent. The lease was renewed. The provision clearly indicated that, despite being titled “Option to Renew,” the appellant would, presumably for the benefit of the respondent, be deemed to have exercised this option to renew if it did not give notice to the contrary. Despite being somewhat unique, there was no reason to accept the suggestion that the provision, as it currently existed, did not reflect the priorities and intention of the parties at the time the lease was executed.

Hart Stores Inc. v. 3409 Rue Principale Inc., [2020] N.B.J. No. 167, New Brunswick Court of Appeal, K.A. Quigg, R.T. French and L.A. LaVigne JJ.A., July 16, 2020. Digest No. TLD-August172020004