



COURT OF APPEAL FOR ONTARIO

CITATION: 1289012 Ontario Ltd. v. 2251420 Ontario Inc. 2015
    ONCA 524

DATE: 20150713

DOCKET: C59186

Strathy C.J.O., Epstein and Huscroft JJ.A.

BETWEEN

1289012 Ontario Ltd. and Ossom International
    Developments Inc.

Plaintiffs (Respondents)

and

2251420 Ontario Inc.

Defendant (Appellant)

AND BETWEEN

2251420 Ontario Inc., Aliasghar Hariri and Tayebe
    Vahidtary

Plaintiffs by Counterclaim
    (Appellants)

and

1289012 Ontario Ltd., Ossom International Developments
    Inc.,

Oleg Bourlatski and Aleksandr
    Bourlatski

Defendants to the Counterclaim (
Respondents
)

Pauline Bosman, for the appellants

Leo Klug, for the respondents

Heard: July 7, 2015

On appeal from the judgment of Justice Anne Mullins of
    the Superior Court of Justice, dated July 8, 2014.

ENDORSEMENT

[1]

The appellant 2251420 Ontario Inc. (225) asserts the trial judge erred
    in finding that the Associates Lease, dated Sept. 21, 2010, between it and the respondent
    1289012 Ontario Ltd. (128) was a valid and  enforceable lease and in awarding
    damages for rent due under the lease. It claims that the Associates Lease was
    void
ab initio
because 128 had previously leased the service station to
    Imperial Oil and was collecting rent from Imperial. In a counterclaim, it
    sought the return of the rent it paid to 128 and damages for wrongful taking of
    possession.

[2]

After reviewing the 10-year history of the premises, involving a
    succession of operators of the service station, the trial judge found that
    before entering into the Associates Lease, 128 regained, if it had ever truly
    parted with, a bona fide right to grant possession of the premises and receive
    rent from 225.

[3]

Throughout the material time, 128 was the head tenant of the premises,
    which were owned by a third party. In 2001, concurrent with its Dealer Sales
    Agreement with Imperial, 128 leased [the trial judges quotation marks] the
    premises to Imperial (the Imperial Lease) in return for a payment of 1.5 cents
    per litre for all fuel sold on the premises. Imperial then sub-leased or
    cross-leased the premises to 128 for $1.00 per year (the Sublease).

[4]

There was evidence that the purpose of the lease and leaseback was to
    secure Imperials right to supply gasoline to the service station and to
    control the dealers use of the premises, that the 1.5 cent per litre rent
    paid by Imperial to 128 was simply a volume rebate, and that such arrangements
    were common in the industry.

[5]

As the service centre business was transferred to successive companies
    over the years, the Sublease, Dealer Sales Agreement and related agreements
    were assigned to the new dealer. 128 remained the head lessor to Imperial under
    the Imperial Lease.

[6]

These contractual arrangements changed somewhat when the business was
    transferred to an unrelated company in 2009. At that time, the respondents entered
    into a separate sublease, referred to as an Associates Lease, with the new
    operator as well as a form of franchise agreement, referred to as an Associates
    Agreement. The new operator assumed the other arrangements with Imperial,
    including the Sublease. The same contractual framework was used when 225 purchased
    the business from that operator in 2010. The upshot was that there were two
    leases of the premises: the Sublease and the Associates Lease.

[7]

The essence of 225s position is that the form and plain language of the
    Imperial Lease, should determine its legal effect and that 128 had no right to
    lease the premises because it had previously leased them to Imperial. 225 says
    the trial judge erred in failing to interpret the Imperial Lease and the
    Sublease according to their terms and without reference to extrinsic evidence.

[8]

In the circumstances of this case, we disagree.

[9]

The court is, of course, required to have regard to the nature of the
    documents and the words used by the parties to determine their contractual
    intent. But as the Supreme Court of Canada noted in
Sattva Capital Corp v.
    Creston Moly Corp.
,

2014 SCC 53, [2014] 2 S.C.R. 633, at para.
    48, the meaning of words is determined from a number of contextual factors,
    including the nature of the relationship and the purpose of the agreement.

[10]

The
    trial judge was therefore required to have regard to the factual matrix in the
    interpretation of the agreements:
Sattva
,

at para. 46. In
Sattva
the Supreme Court also noted, at para. 47, the importance of the history of the
    transaction, the background, context and the market in which the parties were
    operating.

[11]

Another
    interpretative principle is also pertinent. As this court observed in
Salah
    v. Timothys Coffees of the World Inc
., 2010 ONCA 673, 268 O.A.C. 279, at
    para. 16, Where a transaction involves the execution of several documents that
    form parts of a larger composite whole  like a complex commercial transaction
     and each agreement is entered into on the faith of the others being executed,
    then assistance in the interpretation of one agreement may be drawn from the
    related agreements.

[12]

In
    this case, the factual matrix included not only the Imperial Lease, the
    Sublease, and the Dealer Sales Agreement entered into between 128 and Imperial,
    but also the suite of contracts entered into by 225 when it acquired the gas
    station business. This set of interrelated agreements included the Associates
    Lease, the Associates Agreement and other agreements between the 225 and the previous
    operator of the gas station business, whereby 225 purchased the assets of the
    business and assumed various agreements with Imperial (and its successor
    Parkland), including the Sublease.

[13]

The
    trial judge was entitled to find, as she did, that the expectations of 128 and
    225 were reflected in the Associates Lease. She was also entitled to find, as
    she did, that the effect of the various agreements was that 128 had the right
    to lease the premises. Her conclusions were grounded in the evidence, including
    the evidence of a representative of Parkland, Imperials successor, which had
    no issue with 225s tenancy and was not claiming a right to possession.

[14]

In
    sum, the trial judge was entitled to give effect to substance over form.
    Although the Sublease resembles a lease in form, in substance and in context,
    its purpose was to give Imperial control over the use of the premises.  The
    Sublease did not prevent 128 from leasing the premises to others, so long as the
    new tenant remained bound to operate the service centre and to buy fuel from
    Imperial or its designate.

[15]

There
    is, moreover, no evidence that 225s possession of the property was disturbed. In
    fact it occupied the property and paid rent to 128 for 17 months before running
    into business difficulties and defaulting. It did not raise the alleged
    invalidity of the Associates Lease until after it realized the business was
    unprofitable and shortly before this litigation was commenced.

[16]

The
    appellants have identified no extricable error of law in the trial judges
    interpretation of the bundle of inter-related agreements made by the parties.
    Nor have they identified any palpable or overriding error in her assessment of
    the evidence or the interpretation of the agreements.

[17]

For
    these reasons, the appeal is dismissed, with costs to the respondent fixed at
    $18,000, inclusive of disbursements and all applicable taxes.

G.R. Strathy C.J.O.

Gloria
    Epstein J.A.

Grant
    Huscroft J.A.


