



COURT OF APPEAL FOR ONTARIO

CITATION: Wittington Properties Limited v. Goodlife Fitness
    Centres Inc.,

2018 ONCA 52

DATE: 20180123

DOCKET: C63842

Simmons, Roberts and Nordheimer JJ.A.

BETWEEN

Wittington Properties Limited

Applicant
(Respondent on the appeal)

and

Goodlife Fitness Centres Inc.

Respondent
(Appellant)

John K. Downing and Brian Whitwham, for the appellant

Wolfgang Kaufmann and Daniel Waldman, for the respondent

Heard:  January 16, 2018

On appeal from the judgment of Justice Andra Pollak of
    the Superior Court of Justice sitting without a jury, dated May 2, 2017.

REASONS FOR DECISION

[1]

The appellant appeals from the
    judgment declaring that it does not have the right to extend its commercial
    lease with the respondent, and has lost its entitlement to exercise the option
    to extend the lease for an additional five years
.

[2]

At the hearing, we dismissed the appeal with reasons to follow. These
    are those reasons.

[3]

For many years, the appellant
    has leased premises from the respondent for the operation of a fitness club
    called the St. Clair Club. Under the provisions of the lease as set out in a
    lease amending and extension agreement, the appellant was entitled to extend
    the lease for an additional five years, provided the appellant was not in
    default of the Lease and has not regularly been in default during the Extended
    Term beyond any applicable cure periods.

[4]

The application judge
    determined that the appellant had breached the lease as follows:


i.

the appellants
    operation of its club at Park Road breached the geographic restrictions of the
    non-compete clause of the lease; and


ii.

the appellant had not
    calculated and reported its gross revenue to the respondent, which formed the
    basis for the calculation of its percentage rental payments under the lease, in
    accordance with the lease provisions.

[5]

The application judge also
    found that the appellant had been given ample notice to cure its defaults under
    the lease, but had not done so. Specifically, the respondent had advised the
    appellant of the defaults in issue by letter dated December 29, 2014, but the
    appellant did not change its calculation or manner of reporting gross revenue
    to the respondent and maintained the Park Road Club within the prohibited
    radius.

[6]

The appellant submits that the
    application judge made overriding and palpable errors in her interpretation of
    the meaning of the non-compete provisions of the lease. In particular, the
    appellant argues that the application judge erred in failing to find that the
    geographic restrictions did not apply to the Park Road Club because, first, it
    was a regular and not a premier club; and, second, it fronted onto Bloor
    Street and therefore met the exemption provided for in the non-compete clause.

[7]

We reject these submissions. The
    application judges conclusions about the breach caused by the operation of the
    Park Road Club were open to her based on her interpretation of the lease and the
    other evidence before her. The appellants submissions that all of its clubs
    are regular clubs run contrary to the requirement under the lease that the
    St. Clair Club be operated as a premier club and to its concession that the Park
    Road Club is comparable to the St. Clair Club. Further, the application judges
    determination that the Park Road Club did not front onto Bloor Street was
    reasonable and founded on the uncontested evidence that there was no signage or
    other evidence of the appellants presence on Bloor Street and that the only
    sign for the Park Road Club is above the direct entrance to the club, on Park
    Road that is also the clubs municipal address.  There is no basis to interfere
    with these conclusions.

[8]

The appellant submits that the
    application judge erred in determining that the admitted failure to accurately report
    gross revenue in accordance with the calculation required in the lease
    constituted a breach of the lease. Again, there is no basis to interfere with
    the application judges determination that is firmly rooted in the evidence.

[9]

This evidence included the report
    of the accountant retained by the respondent under the audit provisions of the
    lease and the admissions made by the appellants Vice President of Accounting. Specifically,
    the appellant had used an internal accounting method of designating gross
    revenue to its members home clubs, and in certain instances, the appellant had
    submitted net as opposed to gross figures as required under the lease. While
    this calculation of the appellants gross revenue followed generally accepted
    accounting principles, its manner of reporting was not in accordance with the
    lease provisions, which required the reporting of all gross income originating
    from the St. Clair Club.  These conclusions were open to the application judge
    and, absent palpable and overriding error, should not be interfered with. We
    see no error here.

[10]

The appellant submits that the application
    judge erred in failing to find that the doctrine of promissory estoppel and
    waiver applied in this case. Specifically, the appellant argues that
    respondents failure to make any objection during the appellants long history
    of submitting its reports of gross revenue and payment of rent, and its open
    and notorious operation of the Park Road Club, precludes the respondent from
    relying on the breaches in issue.

[11]

We do not accept these submissions.

[12]

In this case, the applicability of the
    doctrines of promissory estoppel and waiver depended on proof by the appellant
    of a course of conduct over an extended period that showed an intention by the
    respondent not to rely on the strict terms of the lease with respect to the reporting
    requirements and geographic non-compete prohibition:
Med-Chem Health
    Care Inc.
,
Re
, 2000 CarswellOnt 3820, at para. 10. As
    the application judge correctly concluded, there was no evidence to support the
    appellants waiver argument. In particular, there is no evidence that the
    respondent knew about the problems with the appellants manner of calculating
    and reporting its gross revenue before receipt of its accountants report, nor
    that it was aware that the appellant was operating a club in contravention of
    the geographic non-compete provisions of the lease. The same considerations
    apply to the promissory estoppel argument.

[13]

Finally, the appellant argues that the
    application judge erred in failing to grant it relief from forfeiture of its
    option to extend the lease because any breaches were technical in nature. We
    disagree.

[14]

Relief from forfeiture is a highly discretionary,
    fact-specific remedy. We see no error in the application judges application of
    the relevant legal test to the evidence before her. Specifically, the evidence
    did not satisfy a necessary condition for relief from forfeiture, namely,
    evidence that the tenant has made diligent efforts to comply with the terms of
    the lease which are unavailing through no default of his or her own: see
1383421
    Ontario Inc. v. Ole Miss Place Inc
. (2003), 67 O.R. (3d) 161 (C.A.), at para. 80.

[15]

The appellants continuing failure to cure
    its defaults in the more than two years following notice of them was
    intentional. Most notably, first, the appellant purported to cure its reporting
    default by proffering a cheque to the respondent at the hearing of the
    application; however, the amount proffered was not calculated in accordance
    with the lease. Further, there was no offer or undertaking to close the Park
    Road Club. As the application judge noted, the onus was on the appellant to
    prove that its ongoing breaches of fundamental terms of the lease were technical
    and immaterial. It failed to do so.

[16]

There is no basis to interfere with the
    application judges discretionary decision not to grant the appellant relief
    from forfeiture.

[17]

Accordingly, the appeal is dismissed.

[18]

As agreed, the respondent is entitled to
    its partial indemnity costs in the amount of $29,500, inclusive of
    disbursements and applicable taxes.

Janet Simons J.A

L.B. Roberts J.A.



I.V.B. Nordheimer J.A.


