



COURT
OF APPEAL FOR BRITISH COLUMBIA




Citation:



Edgewater Casino Inc. (Re),









2010 BCCA 17




Date: 20100118

Docket: CA035924

In the Matter of the
Companies Creditors Arrangement Act
,
R.S.C. 1985, c. C-36, as amended

In the Matter of the
Business Corporations Act
,
S.B.C. 2002, c. 57, as amended

In the Matter
of Edgewater Casino Inc. and
Edgewater Management Inc.

Between:

Canadian Metropolitan Properties Corp.

Appellant

(
Applicant
)

And

Libin Holdings Ltd., Gary Jackson Holdings Ltd.
and Phoebe Holdings Inc.

Respondents

(
Respondents
)




Before:



The Honourable Mr. Justice Mackenzie





The Honourable Mr. Justice Lowry





The Honourable Madam Justice Neilson




On appeal from: Supreme
Court of British Columbia, December 18, 2007, (
Edgewater Casino Inc. (Re):
Utilities Issue
, 2007 BCSC 1829, Docket S062842)




Counsel for the Appellant:



J.J.L. Hunter, Q.C.
  and J.A. Henshall





Counsel for the Respondents:



M. Buttery and A.
  Folino





Place and Date of Hearing:



Vancouver, British
  Columbia





December
  8 and 9, 2009





Written Submissions Received:



December
  15, 2009





Place and Date of Judgment:



Vancouver, British
  Columbia





January 18, 2010









Written Reasons by
:





The Honourable Mr. Justice Lowry





Concurred in by:





The Honourable Mr. Justice Mackenzie

The Honourable Madam Justice Neilson






Reasons for Judgment of the
Honourable Mr. Justice Lowry:

[1]

The question is whether, under the terms of a commercial lease, the costs
of utilities incurred over several months during the fixturing of the premises
were to be borne by the tenant, and, if not, whether the terms are to be
rectified so that the tenant would bear those costs.

[2]

The landlord, Canadian Metropolitan Properties Corp., is the owner of
the Plaza of Nations. The tenant, Edgewater Casino Inc., leased one of the
buildings on the site, Building C, to open and operate a casino. It also leased
office space in another building, Building B. The named respondents were at the
material times the owners of Edgewater. The question arises in the context of
the tenant seeking a set-off of the utility costs in issue, which it has in
fact paid, against claims made by the landlord in proceedings under the
Companies
Creditors Arrangement Act
, R.S.C. 1985, c. C-36 (
CCAA
) taken for
the benefit of the tenant. The proceedings involved other creditors in addition
to the landlord. The set-off is sought on the basis the utility costs were paid
to the landlord by mistake. The landlord maintains the parties agreed the
tenant would pay those costs.

[3]

The claims of all of the other creditors have been satisfied and an
amount sufficient to meet the landlords claims has been placed in trust. The
judge who had conduct of the proceedings concluded a mistake had been made. The
landlord contends the judge erred and now appeals.

[4]

Before us, the landlord initially took the position it was not open to
the judge to grant a judgment against it as a claimant in the
CCAA
proceedings. The suggestion was that any amount the tenant was entitled to set off
would be less than a complete reimbursement for the utility costs at issue. But
the position has been abandoned such that the appeal can be considered as a
claim made by the tenant for the return of costs paid to the landlord which are
said to have been paid by mistake.

The
Lease


[5]

The circumstances and the provisions of the lease that are material to
the appeal can be briefly stated.

[6]

Discussions between the parties appear to have begun in the summer of
2003. They led to the tenant preparing a proposal for the lease of the premises
which it gave to the landlord in the form of a Term Sheet in September and
amended in October. The tenant set out the principal provisions for a formal
lease having a three-year term commencing on the opening of the casino
(expected to be in 2004) with the annual rent being approximately $2.2 million,
increased in October to $2.5 million. There was apparently no express
acceptance of the terms proposed but the landlord authorized the tenant to
apply in the landlords name for rezoning necessary to the operation of a
casino. The tenant engaged architects to design improvements to the buildings,
apply for the rezoning, and obtain development permits. The tenant then
renovated the office space to be leased in Building B at a cost of $500,000. It
moved into that space and took possession of Building C in May 2004. It then
undertook extensive demolition and renovation work to construct the casino. A
draft lease was prepared by solicitors for consideration in May, but the lease
was not executed until November. By that time, the tenant had spent in the
order of $10 million on Building C. The casino opened in February 2005.

[7]

In May 2004, when the tenant took possession, the parties negotiated the
rent to be paid from then until the casino opened: the fixturing period. The
tenant proposed what it described as a concept plan and a revised concept
plan in two letters it sent to the landlord early in the month for the
landlords consideration. The tenant proposed to pay $145,833.33 in what became
termed Occupation Rent each month. Payments for May and June were to be made
on June 30 with all further payments being deferred until after the casino
opened.

[8]

The lease provides:

3.01     Rent

The Tenant will pay to the Landlord rent, monthly in advance,
in lawful money of Canada, commencing on the Commencement Date and continuing
on the first day of each and every month thereafter during the Term, calculated
as follows ...

Except as set expressly forth in
Articles 3.03, 3.04 and 3.05, the rent payable under this Article 3.01 includes
all amounts that might otherwise be payable in respect to utilities, taxes,
common area operating expenses and insurance and no additional rent is payable
by the Tenant to the Landlord.

3.02     Utilities for Building B

The Landlord will supply and pay
for all utilities reasonably required by the Tenant for its business operations
in Building B including, without limitation, heating, ventilation and
air-conditioning, power and water, provided that the Tenant will be responsible
for its own telephone and cable service.

3.03     Utilities for Building C

... The Tenant will pay the
Landlord for the steam heat and electricity consumed on the Premises as
determined by check meters where installed, and will pay all charges
attributable to Building C for the supply of ventilation and air-conditioning,
and for steam heat where such supply to Building C is not subject to check
meters....

3.07     Additional rent

All monies other than rent and
goods and services tax which from time to time may be owing by the Tenant to
the Landlord pursuant to this lease are hereby deemed to be additional rent. The
Tenant will pay any such money to the Landlord upon demand by the Landlord
unless other terms for payment are expressly stipulated in this lease....

4.01     Possession of Premises and occupation rent

The Tenant will obtain vacant possession of the Premises on
May 4, 2004 for the purpose of constructing its improvements pursuant to
Article 7.03....

Except as specifically set forth
herein, no rent or additional rent will be payable by the Tenant prior to the
Commencement Date, but the Tenant will otherwise be bound by the Tenants obligations
under this lease. The Tenant will owe to the Landlord occupation rent (the
Occupation Rent) for the period commencing on May 1, 2004 ... and continuing
to and including the day prior to the Commencement Date, in the sum of
$145,833.33 per month, ... The payment of such Occupation Rent ... will be
deferred and paid by the Tenant to the Landlord as follows ...

16.13   Entire agreement

Except as expressly set out
herein, there are no representations, warranties, conditions or collateral
agreements between the Landlord and the Tenant.

[9]

The Commencement Date is defined as the date that the Tenant opens
Building C for business to the public.

[10]

At the end of December 2004, the landlord invoiced the tenant for the
utility costs from May to November. Thereafter, the landlord continued to
invoice the tenant for such costs, and all of the invoices were paid. The
invoices were initialled for payment by the tenants principal who had
negotiated the lease, and the cheques were signed by him and by another of the
tenants principals. The utility costs for the fixturing period that were paid
were about $180,000.

The Judgment


[11]

Before the judge, the landlord argued the parties had entered into a
general oral agreement, predicated on the Term Sheet, under which the tenant
would pay the utility costs for Building C during the fixturing period prior to
the Commencement Date. It then argued clause 4.01 of the lease was to be
interpreted as deferring the tenants payment of the subject utility costs
under clauses 3.03 and 3.07. Finally, the landlord argued that, if necessary,
the lease was to be rectified to provide that the tenant was to pay the utility
costs during the fixturing period.

[12]

The judge gave no credence to the notion of an oral agreement and he
rejected the interpretation of clause 4.01 for which the landlord contended. He
said (2007 BCSC 1829):

[21]  The Lease is clear on its face. For the period leading
up to the Commencement Date, no rent or additional rent will be payable by
Edgewater except for the sum of $145,833.33 per month. Regarding the term
sheets relied upon by CMPC, it is clear that all of the references relating to
utility costs refer to what clauses would be included in the Lease and not to
the occupation rent  for the period commencing on May 1, 2004  and
continuing to and including the date prior to the Commencement Date ..

[22]  Clause 4.01 could not be any clearer. The parties to
the Lease determined that only rent of $145,833.33 per month would be paid
prior to the Commencement Date and there would be no other provision for any
other rent or any additional rent as that term is defined in the Lease.

* * *

[31]  I also reject the submission that the only effect of
Clause 4.01 was to defer the payment of rent and not to preclude the cost of
utilities being collected from Edgewater. First, Clause 4.01 is clear. Second,
the provisions of Clause 3.01 cannot override the clear provisions of Clause
4.01 which deals with the period prior to the Commencement Date. Third, the
rent actually invoiced and paid for May and June, 2004 amounts to $291,666.66
or $145,833.33 per month as was agreed to between the parties. There is nothing
in evidence which would allow me to conclude that the cost of utilities was
ever sought by CMPC for May and June, 2004. I find this as further evidence
that it was never intended that the cost of utilities would be payable over and
above $145,833.33 per month.

[32]  I am also satisfied that
the provisions of Clause 16.13 of the Lease result in Clause 4.01 being
conclusive as to what rent, if any, would be paid prior to the Commencement
Date. Clause 16.13 precludes the argument raised by CMPC that there were
collateral agreements between Edgewater and CMPC regarding the alleged
requirement of Edgewater to pay the cost of utilities prior to the Commencement
Date.

[13]

With respect to the landlords contention the lease was to be rectified,
the judge considered that, as a matter of law, it could not be accepted,
principally because it had not been established any agreement concerning the
utility costs for the fixturing period existed before the lease was executed.

[14]

The judge then concluded:

[44]  I am satisfied that the payments made on account of
utilities up to and including the Commencement Date were made as a result of a
mistake. The arrangement in place prior to the Commencement Date and the Lease
did not require the payment of those utility charges. Expenditures made by
mistake may be recovered in circumstances where restitution is sought and there
are no mitigating factors such as a change of position or estoppel: ...

[45]  As I can find no agreement
that Edgewater would pay for the cost of the utilities prior to the
Commencement Date, as I can find that CMPC in no way changed its position as a
result of the payments made and as I cannot find that Edgewater should be
estopped from claiming that the payments made should be reimbursed to it, I
find that Edgewater should be reimbursed for all utility payments made by it to
CMPC for the period up to and including the Commencement Date.

[15]

Judgment with pre-judgment interest was granted as follows:

[66]  [The tenant] will be
entitled to a Judgment against CMPC for all utility charges paid by Edgewater
relating to the period prior to the Commencement Date as defined under the
Lease plus prejudgment interest on the sums paid to and including the
Commencement Date from the date of payment to the date of the Judgment.

Discussion


[16]

Faced with the entire agreement clause in the lease, the landlord puts
its case now on the interpretation of clause 4.01, maintaining the utility
costs payable by the tenant under clause 3.03 for Building C were to be
deferred in the same way as the payment of Occupation Rent was deferred. The
landlord says any ambiguity there may be in that regard is to be resolved with
reference to the negotiations between the parties reflected in the Term Sheet.

[17]

The landlord contends clause 3.03 obligates the tenant to pay the
utility costs for Building C and that under clause 3.07 they are payable as
additional rent on demand. It says the provision that additional rent will not
be payable by the tenant until the Commencement Date has to do with nothing
more than the timing of the payments. The words but the Tenant will otherwise
be bound by the Tenants obligations under this lease in clause 4.01 affirm
that the deferral does not affect the obligation to pay.

[18]

I am unable to read clause 4.01 as deferring the payment of utility
costs. In my view, the clause serves to provide that, except for Occupation
Rent which does not include utility costs, the tenant was required to pay no
rent or additional rent until the Commencement Date when the tenant opened
Building C for business to the public. Clause 3.01 makes provision for the
payment of rent to begin on the Commencement Date. There is no provision for
the commencement of the payment of utility costs, which are additional rent,
other than clause 4.01 which provides neither rent nor additional rent will be
payable until the Commencement Date. Like the judge, I consider it perfectly
clear that, on the terms of the lease as executed, the tenant had no obligation
to pay utility costs for Building C until the casino opened in February 2005.

[19]

The real question is whether clause 4.01 should be rectified to provide
utility costs were to be paid by the tenant from the date it took possession in
May 2004. While I question the judges analysis, I do not consider the landlord
has made out a case for rectification.

[20]

I do not consider what was once seen as a requirement that a prior
agreement be established has continued to be essential to obtain rectification
in the case of a mutual mistake. As discussed in
Fraser v. Houston
, 2006
BCCA 66, 51 B.C.L.R. (4th) 82 at paras. 26-30, what the party seeking
rectification must prove, on evidence which is compelling, is that, up to the
time the agreement sought to be rectified was executed, there existed a
continuing common intention on the point in issue, outwardly expressed, that is
at odds with the executed terms such that what was written was not what the
parties intended.

[21]

The landlord contends the mutual mistake was the inclusion of the words
or additional rent employed in the second paragraph of clause 4.01. It says
their deletion would result in the lease properly reflecting the parties
common intention in November 2004, when the lease was executed, to obligate the
tenant to pay the utility costs for Building C from the time it took possession
in May. It says the evidence in support is to be found in the provisions of the
Term Sheet, statements made to the tenants principals, and in the conduct of
the parties after the lease was executed, when the landlord invoiced the tenant
for the utility costs during the fixturing period and the tenant paid the
invoices.

[22]

Assuming the deletion of the words or additional rent would serve to
render the tenant liable for utility costs for Building C from the date of
possession, I do not consider it can be said the evidence on which the landlord
relies is at all compelling.

[23]

I find no support in the Term Sheet for the contention there was a
continuing common intention the tenant would pay utility costs before the
Commencement Date. The Term Sheet did provide for the tenant to pay utility
costs, but it was a proposal for a lease of the premises for a three-year term
beginning when the casino opened. It contained no provision for any payment by
the tenant before then. I see nothing in the Term Sheet amounting to a proposal
by the tenant that the tenant would pay utility costs before what became the
Commencement Date.

[24]

Similarly, there appears to be little in what was said to the tenant
that is indicative of a common intention the tenant would pay utility costs for
Building C during the fixturing period. There is no evidence the tenants
principals ever said the tenant would pay utility costs before the casino
opened. The most the landlord can say is that its general manager, who
negotiated the lease, had occasion to speak to the tenants principals about
leaving the doors to Building C open when they started the demolition work
there. He testified on discovery he told them it was money out the window and
they were paying for it. Why that would be a concern during the spring and
summer months from May to at least August is not clear to me. The judge
expressed doubt about the evidence, particularly as there was no written follow-up
confirming the landlords expectation that the tenant would be paying the
wasted utility costs. But even taken at face value, the evidence is
indicative of no more than what the landlords general manager had in mind. It
does not equate to a common intention with respect to utility costs during the
fixturing period.

[25]

The only other evidence offered as to the general managers assertion
the tenant would be responsible for the utility costs is a comment he made on
the first draft of the lease in August 2004 that it had been agreed the tenant
would be responsible for any utilities used and a remark one of the tenants
principals noted the following month that the general manager said the tenant
should pay all charges attributable to Building C. There is nothing of a common
intention concerning the subject utility costs in this evidence.

[26]

Finally, I do not consider the parties conduct after the lease was
executed constitutes any support for the rectification sought. While invoicing
the tenant for the utility costs for Building C from May 2004 to January 2005
may well reflect the landlords expectation, the judge found the tenant paid
the invoices by mistake and there is the evidence of the tenants principals
that supports that finding.

[27]

Thus, it is my view that no case  certainly no compelling case  for
rectification was made out. Clause 4.01 stands as executed and means the tenant
was not required to bear any of the utility costs for Building C prior to the
Completion Date in February 2005.

Ancillary Questions


[28]

The landlord contends the judge erred in his finding the landlord in no
way changed its position as a result of the invoices for the subject utility
costs being paid when he concluded the tenant was entitled to restitution for
its mistake (para. 45 quoted above). The landlord says that there was a
change of position that constitutes a mitigating factor which precludes the
restitution to which the judge concluded the tenant was entitled. The landlord
says that, as part of the sale of the tenant in conjunction with the
CCAA
proceedings, an amendment to the term of the lease was required. The landlord
agreed to the amendment before the tenant claimed the invoices were paid by
mistake. Based on a statement made by its general manager in an affidavit, the
landlord maintains it would not have changed its position by agreeing to the
amendment if it had known the tenant intended to take the position it does and
claim a set-off.

[29]

The landlord accuses the tenant of having waited to disclose its claim
to a set-off until it had successfully manoeuvred through the
CCAA
proceedings, all to the landlords disadvantage. The landlord did not, however,
advance this position before the judge. It appears to have waited and raises it
now, on this appeal, for the first time. I do not consider the contention
should be entertained.

[30]

The point requires a factual determination. The statement of the general
manager relied on by the landlord is not that there would have been no
agreement to the extension of the lease had the tenant disclosed its claim to a
set-off, but rather, had the landlord known of various claims the tenant
eventually raised, including the claim for a set-off concerning the subject
utility costs, the extension to the lease would not have been agreed until
such claims were resolved. That is not the same as saying the landlord would
not have agreed to an extension of the lease and may raise a question as to
whether the landlords position was actually altered as a con­sequence of the
timing of the set-off claimed in respect of the subject utility costs.

[31]

In any event, the contention rests on accepting what the general manager
says to have been the case and, as indicated, the judge did express doubt about
at least one other aspect of his evidence. I do not consider the point can be
said to be sufficiently factually sound to permit this Court to conclude the
tenant is not entitled to the reimbursement for which the judge gave judgment
because of a mitigating circumstance the landlord did not see fit to raise
before the judge.

[32]

The landlord says the judge erred in awarding pre-judgment interest from
the date the payments for the subject utility costs were paid. It maintains
interest ought to have been awarded only from the time the tenant effectively
made demand for repayment, relying on
Stewart v. Fraser River Bridge
Holdings Ltd.
, 2007 BCSC 1002 at para. 14. But the reasoning for the award
made in that case is not expansive. The tenant cites
Service Packing Co. v.
Fraser Valley Mushroom Growers Co-operative Assn.
, [1985] 3 W.W.R. 474 at
476, 479-80, 60 B.C.L.R. 336 (S.C.) in support of the judges award. The
two decisions of the trial court are at odds on the point.

[33]

Section 1(1) of the
Court Order Interest Act,
R.S.B.C. 1996,
c. 79, provides that a court must add to a pecuniary judgment an amount of
interest calculated from the date on which the cause of action arose. Here, no
demand for repayment was required for the cause of action to arise. It arose when
the mistake was made and the invoices for the subject utility costs were paid. In
my view, the judge made no error in his award of pre-judgment interest.

Disposition


[34]

I would dismiss the appeal.

The Honourable Mr. Justice Lowry

I
agree:

The
Honourable Mr. Justice Mackenzie

I
agree:

The Honourable Madam Justice Neilson


