



COURT OF APPEAL FOR ONTARIO

CITATION: Meridian C C Intl Inc. v. 2745206
    Ontario Inc., 2022 ONCA 12

DATE: 20220112

DOCKET: C69533

Rouleau, van Rensburg and Roberts
    JJ.A.

BETWEEN

Meridian C C Intl Inc. and
    Guiyan Xin

Plaintiffs/Defendants by Counterclaim
(Appellants)

and

2745206 Ontario Inc.

Defendant/Plaintiff by
    Counterclaim
(Respondent)

Robert S. Choi and Gina P. Rhodes, for
    the appellants

Michael A. Katzman, for the respondent

Heard: January 4, 2022 by
    video conference

On appeal
    from the judgment of Justice Frederick L. Myers of the Superior Court of Justice
    dated May 3, 2021, with reasons reported at 2021 ONSC 3270.

REASONS FOR DECISION

[1]

This appeal concerns a termination provision in
    a commercial lease. Paragraph 11(1) of the lease permits the landlord to terminate
    the tenancy upon giving 180 clear days written notice where the landlord
    desires to remodel or demolish any part of the rented premises to an extent
    that renders continued possession by the tenant impracticable. It is the
    interpretation and application of the quoted words that are in issue in this
    case.

[2]

The respondent landlord gave the appellant
    tenant the requisite 180 days written notice to terminate under para. 11(1) of
    the lease so that it could remodel the premises. The remodeling plan proposed
    the demolition of the garage, the remodelling of the main floor into two
    separate units, the replacement of windows, wiring and plumbing throughout the
    premises, and the use of part of the basement for building services and
    utilities. The appellants (the tenant and its principal) resisted the termination.
    They asserted, among other things, that the termination was in bad faith
    because the respondent had sought to terminate the lease, which had been in
    existence since 2013, shortly after purchasing the building in which the leased
    premises were located. They also claimed that the proposed remodelling would
    not interfere with the operation of the tenants business. The retail portion occupied
    only one half of the main floor of the building, such that the remodelling
    would not render the tenants continued possession impracticable.

[3]

In the litigation that followed, the respondent
    moved for summary judgment seeking to enforce the termination. The motion judge
    found that the planned renovations were
bona fide
and that the
    premises as described under the lease would cease to exist because of the
    planned renovations. As a result, he concluded that continued possession by the
    tenant was impracticable. He rejected as irrelevant the issues surrounding the
    evolution of the landlords plans and whether the tenant could possibly remain
    in part of the premises during renovations because, as he explained, the
    proposed remodeling and demolition deprive the tenant of substantial portions
    of the Premises defined under the lease. He determined that the respondent
    properly gave notice to terminate the lease in accordance with the parties
    bargain. He dismissed the appellants action and allowed the respondents counterclaim
    to terminate the lease, with costs to the respondent in the amount of $75,000.

[4]

The appellants raise several grounds of appeal.
    To dispose of the appeal, it is necessary to resolve only the issue of whether
    the motion judge erred in construing para. 11(1) of the lease too narrowly and
    in isolation from the other provisions of the lease.

[5]

For the reasons that follow, we agree that the
    motion judge made reversible errors of law in his interpretation of the lease, and
    we allow the appeal.

[6]

It is helpful to begin our analysis with the
    standard of review. The motion judges interpretation of the parties lease
    agreement, including its factual matrix, would ordinarily attract a deferential
    standard of appellate review:
Sattva Capital Corp. v. Creston Moly Corp.
,
    2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-52. Absent an extricable question
    of law, which courts should be cautious in identifying, or palpable and
    overriding error, appellate intervention is not warranted:
Sattva
, at
    paras. 53-54.

[7]

An extricable question of law includes a legal
    error made in the course of contractual interpretation such as the application
    of an incorrect principle, the failure to consider a required element of a
    legal test, or the failure to consider a relevant factor:
Sattva
, at
    para. 53. Moreover, a failure to consider the contract as a whole, by focussing
    on one provision without giving proper consideration to other relevant
    provisions, can also be an error of law:
Fuller v. Aphria Inc.
, 2020
    ONCA 403, 4 B.L.R. (6th) 161, at para. 50;
Resolute FP Canada Inc. v. Ontario
    (Attorney General)
, 2019 SCC 60, 444 D.L.R. (4th) 77, at paras. 26-27, 30
    and 32-34. Finally, in
Ventas, Inc. v. Sunrise Senior Living Real Estate
    Investment Trust
, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24, this court
    emphasized that a commercial contract should be interpreted as a whole, in a
    manner that gives meaning to all of its terms and avoids an interpretation that
    would render one or more of its terms ineffective. In our view, the motion
    judge made these errors of law in his analysis of the lease.

[8]

The motion judge was required to consider whether
    it was impracticable in this case for the landlord to carry out the proposed
    remodelling while the tenant continued in possession. This was a fact-specific
    exercise for the motion judge to undertake based on his interpretation of the
    particular lease and the evidence in the record before him:
Kinglip
    Holdings Inc. v. Novak Graphics Inc.
, [2000] O.J. No. 3723 (S.C.), at
    para. 12.

[9]

However, the motion judge erred by focussing too
    narrowly on the definition of the leased premises and the results of the proposed
    renovations. This was a flawed approach.  Instead of giving effect to para. 11(1)
    in its entirety, the motion judges approach would give rise to the unintended
    and commercially unreasonable result that any change which reduces the area of
    the leased premises would allow the landlord to terminate the lease. The motion
    judges approach further caused him to interpret para. 11(1) of the lease in a
    manner that was inconsistent with the whole of the parties agreement. Most
    notably, the motion judges narrow interpretation would untenably permit the
    landlord to terminate the lease in order to make alterations, such as partitioning
    the main floor, and lease parts of the leased premises to other tenants when,
    with the approval of the landlord, the tenant is permitted to carry out the
    same kinds of alterations and sublet parts of the premises under paras. 4 and 7
    of the lease.

[10]

As a result of these errors, the motion judge
    failed to determine the principal question that he had to decide, namely, the
    question of whether the proposed renovations rendered continued possession by
    the tenant impracticable. Accordingly, whether the tenant could remain in possession
    and continue its operation in part of the premises during the renovations were
    relevant questions, among others, that the motion judge should have determined.

[11]

It is not appropriate for this court, on the
    available record, to make the factual findings to determine these issues. Accordingly,
    we set aside the dismissal of the action and the judgment in the counterclaim, such
    that the action will continue in the Superior Court.

[12]

While not strictly necessary to dispose of this
    appeal, it will be of assistance to the parties going forward for us to address
    the appellants argument concerning the motion judges treatment of the opinion
    offered by the appellants construction witness, Tim Clarke. We see no error in
    the motion judge declining to accept Mr. Clarkes opinion evidence. As the motion
    judge rightly noted, the appellants did not seek to qualify him as an expert. Mr.
    Clarke was not a fact witness but was proffered solely for the purpose of giving
    opinion evidence. If the appellants wish to adduce Mr. Clarkes opinion
    evidence in this action, they will have to comply with the requirements respecting
    experts under the common law and the
Rules of Civil Procedure
, R.R.O.
    1990, Reg. 194.

Disposition

[13]

Accordingly, we allow the appeal. The judgment
    and the costs order are set aside.

[14]

The appellants are entitled to their partial
    indemnity costs of the appeal in the amount of $15,000, inclusive of disbursements
    and applicable taxes.

[15]

As this matter is not finally determined, it is
    appropriate to reserve the disposition of the summary judgment motion costs to
    the judge who finally disposes of this action.

Paul
    Rouleau J.A.

K.
    van Rensburg J.A.

L.B.
    Roberts J.A.


