



COURT OF APPEAL FOR ONTARIO

CITATION: Urmila Holding, Inc. v. Anand
    Holdings Inc., 2021 ONCA 886

DATE: 20211214

DOCKET: C69458

Gillese, Trotter and Nordheimer
    JJ.A.

BETWEEN

Urmila Holding, Inc.

Applicant (Respondent)

and

Anand Holdings Inc., Harpaul J.
    Anand Dentistry Professional Corporation and Harpaul Jimmy Anand

Respondents (Appellants)

Mark H. Arnold, for the appellants

Allan Sternberg and Emily Hives, for
    the respondent

Heard: November 17, 2021

On appeal from the judgment of Justice
    Edward P. Belobaba of the Superior Court of Justice, dated April 19, 2021, with
    reasons reported at 2021 ONSC 2707.

Trotter J.A.:

A.

Introduction

[1]

Urmila Holding, Inc. (Urmila) purchased a unit
    in a commercial condominium plaza. It paid a premium for a unit that was
    designated for its exclusive use as a dental clinic; no other unit in the plaza
    could be used for this purpose.

[2]

When the plaza was marketed by the developer,
    Dr. Anand,
[1]
a dentist, attempted to purchase a unit designated for exclusive use as a
    dental clinic. But he was too late  Dr. Anand was advised that Urmila had
    already secured such a unit. Dr. Anand then approached Urmila and arranged to
    lease its unit for a period of ten years, with an option to renew for five
    years. As the term neared its end, Dr. Anand sought a ten-year extension of the
    lease. Urmila was only prepared to extend the lease for five years.

[3]

Unbeknownst to Urmila, Dr. Anand purchased the unit
    next door. He moved his dental practice into that unit and purported to assign
    the exclusive use benefit purchased by Urmila to himself.

[4]

Urmila applied under s. 134 of the
Condominium
    Act, 1998
, S.O. 1998, c. 19 (the Act) for a determination of its
    rights under the exclusive use provisions of the condominiums Declaration. The
    application judge held that Dr. Anand, as tenant, could convey the exclusive
    use benefit to himself, but only for the duration of the unexpired term of the
    extended lease. Dr. Anand appeals this ruling.

[5]

The following reasons explain why I would uphold
    the application judges conclusion.

B.

the facts

(1)

The Purchase and the Lease

[6]

It is difficult to improve on the application
    judges rendition of the factual context of this case. I borrow heavily from his
    reasons.

[7]

The plaza is located in the City of Brampton. When
    the plaza was being marketed, a representative on behalf of Urmila reserved an
    exclusive use unit for a dental clinic, by Reservation Form dated December 28,
    2005. It entered into an Agreement of Purchase and Sale (APS) on October 23,
    2006 and paid a premium for this type of unit. It did so with the expectation
    that the unit would appreciate in value and would attract higher rent. The APS
    provided that, if the unit was not used in accordance with its exclusive use
    within 12 months of the occupancy date, Urmila would forfeit such exclusivity
    of Use.

[8]

Urmila leased its unit, Unit 20, to Dr. Anand on
    August 8, 2007 for a period of ten years, ending on July 31, 2017. During the
    negotiation of the lease, Dr. Anand wanted confirmation that his would be
    the only dental clinic in the plaza. Urmila showed him the Reservation Form.
    Moreover, the lease incorporated the Declaration (even though it was not
    registered on title until April 11, 2008) and contained a covenant whereby
    Urmila warranted that, should its sole principal (or her husband) purchase
    another unit in the plaza, it shall not be leased to any person to operate therein
    a dental practice.

[9]

Near the end of the initial lease term, Dr.
    Anand offered to buy Unit 20 for approximately $1 million, which was well above
    market value. Urmila was not interested in selling. Dr. Anand tried to
    negotiate a ten-year extension of the lease. Urmila was only prepared to extend
    the lease for five years. A Lease Amending and Extending Agreement was entered
    into on March 14, 2017, extending the lease until July 31, 2022. Unbeknownst to
    Urmila, Dr. Anand had other ideas for his dental practice. As the application
    judge explained:

Realizing that his lease would end sooner than
    he would have preferred, Dr. Anand took the following steps to maintain his
    Plaza location. He discreetly purchased the adjacent Unit 21 while still a
    tenant in Unit 20. Sometime in 2020 (about 13 years into his 15-year lease) and
    unbeknownst to Urmila, Dr. Anand moved his dental clinic into Unit 21 and purported
    to transfer Unit 20s exclusive dental clinic use to Unit 21. Although Unit 20
    sat empty, Dr. Anand continued to pay the monthly rent.

Urmila first noticed that that the respondent
    had vacated Unit 20 and was using Unit 21 as a dental clinic in July 2020. Upon
    further investigation and a title search, Urmila discovered that Anand Holdings
    had purchased Unit 21 three years earlier on May 8, 2017  about two months
    before the end of the 10-year lease  for a purchase price of $715,000.



In a letter to the Plazas property manager
    dated July 3, 2020, Dr. Anand outlined what he had done  as the tenant
    operating a dental clinic in Unit 20, he consented in writing to allow himself
    (the owner of Unit 21) to operate a dental clinic in Unit 21.
He then
    asserted a usage exclusivity in Unit 21 that would forever bar Urmila or any
    other unit-owner in the Plaza from leasing their unit to another dentist
.
    [Emphasis added.]

[10]

Upon discovering this state of affairs, and after
    the exchange of lawyers letters, Urmila made its application under s. 134 of
    the Act.

(2)

The Declaration

[11]

The Declaration lists ten prohibited uses (i.e. tattoo
    parlour, pawn shop, etc.), as well as 32 exclusive uses, one of which is a
    dental clinic. The following sections are relevant to the dispute between the
    parties:

4.5     Restrictions of Use

Owners and the tenants, occupants, licensees
    or any other person utilizing such Owners Unit(s) shall not engage, within or
    from such Unit(s) in any of the following business operations (unless two
    contiguous Units are owned by the same Owner and are operated together as one
    of the following business operations), if such business operations are already
    being carried on in another Unit as at the date that such Owner, tenant,
    occupants, licensees or any other person utilizing such Owners Unit intends to
    engage in such existing business operations (the Existing Business):



(iv) dental clinic (includes: general
    dentistry, dental hygiene, endodontics, periodontics, orthodontics, oral
    surgery, denture therapy, paedodontics);



unless any Owner, tenant, occupant or
    licensee already carrying on an Existing Business within or from their Unit,
    consents in writing to allow any other Owner, tenant, occupant or licensee to
    carry on such Existing Business
, which consent may
    be arbitrarily withheld by any such existing Owner, tenant, occupant or
    licensee conducting, operating or carrying on such Existing Business. [Emphasis
    added.]

4.6     Leasing of Units



(d) No Owner shall be entitled to lease a Unit
    to a third party for a proposed use that is then enjoyed by or operated in
    another Unit in the Corporation.

C.

the application judges reasons

[12]

The application judge was called upon to
    interpret the relevant sections of the Declaration, particularly the
    underscored words in section 4.5, reproduced above. He observed that, in
    general, the exclusive use provisions focus on exclusive use for designated
units
.
    He said, And yet, if one reads section 4.5 literally, such exclusive usage can
    be transferred by a tenant without the knowledge or consent of the initial
    unit-owner even where, as here, the initial unit-owner paid a premium for the
    exclusive usage designation. Thus, the question was whether section 4.5 was to
    be read literally, or whether a more purposive approach was required.

[13]

On the application, the parties were in
    agreement that the principles in
Sattva Capital Corp. v. Creston Moly Corp.
,
    2014 SCC 53, [2014] 2 S.C.R. 633 applied to the interpretation of the
    Declaration. As discussed below, the appellants have changed their position on
    appeal and now insist on a literal interpretation, devoid of any context.

[14]

The application judge relied on the following
    passages from
Sattva
, in which Rothstein J. said, at paras. 47 and 58:

Regarding the first development, the
    interpretation of contracts has evolved towards a practical, common-sense
    approach not dominated by technical rules of construction. The overriding
    concern is to determine "the intent of the parties and the scope of their
    understanding" (
Jesuit Fathers of Upper Canada v. Guardian Insurance
    Co. of Canada
, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27
per
LeBel
    J.; see also
Tercon Contractors Ltd. v. British Columbia (Transportation and
    Highways)
, 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65,
per
Cromwell
    J.). To do so, a decision-maker must read the contract as a whole, giving the
    words used their ordinary and grammatical meaning, consistent with the
    surrounding circumstances known to the parties at the time of formation of the
    contract.



The nature of the evidence that can be relied
    upon under the rubric of "surrounding circumstances" will necessarily
    vary from case to case. It does, however, have its limits. It should consist
    only of objective evidence of the background facts at the time of the execution
    of the contract, that is, knowledge that was or reasonably ought to have been
    within the knowledge of both parties at or before the date of contracting.
    [Citation omitted.]

[15]

The application judge also relied on the
    principle that a commercial contract should be interpreted, in a fashion that
    accords with sound commercial principles and good business sense and that
    avoids a commercial absurdity:
All-Terrain Track Sales and Services
    Limited v. 798839 Ontario Limited
, 2020 ONCA 129, at para. 27, applying
Richcraft
    Homes Ltd. v. Urbandale Corporation
, 2016 ONCA 622, 406 D.L.R. (4th) 507,
    at para. 58.

[16]

Applying these principles, the application judge
    considered the Declaration as a whole, and ascribed meaning to its words
    consistent with the surrounding circumstances known to the parties when they
    entered into the lease. He searched for factors that were known, or ought
    reasonably to have been known, to the parties at or before the date on which they
    entered the initial ten-year lease and subsequent renewal.

[17]

He found that: (a) Dr. Anand knew that Unit 20
    had been assigned the exclusivity for use as a dental clinic; and (b) Dr. Anand
    knew or should have known that an exclusive usage designation carried a premium
    over non-exclusive usages. As noted above, the application judge considered the
    fact that Dr. Anand attempted to buy a unit in the plaza with exclusive use as
    a dental clinic, but that Urmila had already secured that right. He also took
    note of the fact that, in 2017, before negotiating the extension of the lease
    with Urmila, Dr. Anand offered to purchase Unit 20 at a price above market
    value.

[18]

Bringing these principles to bear on the facts as
    he found them, the application judge reached the following conclusions:

In my view, Mr. Sternberg, counsel for Urmila,
    provided the court with the most reasonable interpretation of the provisions in
    question. Dr. Anand, as tenant, can only consent to what he has and what he has
    is the time remaining on his lease. In other words, tracking the well-known
nemo
    dat
principle, Dr. Anand can consent to Unit 21 carrying on a dental
    clinic but this consent expires on July 31, 2022 when his five-year renewal on
    Unit 20 comes to an end.

In the present case, the operator carrying on the
    exclusive business in the existing unit is a tenant. As such the tenant has the
    contractual right to carry on the exclusive business within the existing unit
    for the term of the lease. If such tenant gives its consent to another operator
    to carry on the exclusive business in a new unit, such consent cannot be for a
    period of time longer than the balance of the lease term  because one cannot
    convey what one does not have.

In my view, this is a reasonable
    interpretation of the provisions in question because it protects Urmilas
    capital investment (its tenant will continue to pay the elevated rent on Unit
    20 to lease-end) and gives a commercially reasonable meaning to the concluding
    paragraph in section 4.5 of the Declaration.

[19]

The application judge held that, if his approach
    to interpreting the Declaration was wrong, and a literal interpretation of
    section 4.5 were required, he would still find in Urmilas favour. He concluded
    that section 4.5 did not permit Dr. Anand to consent/transfer the exclusive
    usage right to himself; the section only permits transfer to any
other
owner [or] tenant (emphasis in original).

D.

the positions of the parties

[20]

Dr. Anand submits that the application judge was
    correct to find that, as a tenant, he was permitted to assign the exclusive usage
    to himself. However, he erred in holding that the assignment was time-limited
    and would expire at the end of the extended lease. He submits that the error
    arose from the application judges erroneous interpretation of the Declaration.
    Being akin to a constitutional document,
Sattva

principles had
    no application; a literal interpretation of the Declaration authorized what Dr.
    Anand purported to do in this case.

[21]

Urmilas position on appeal is more complicated.
    It submits that the application judge was correct in applying
Sattva
and the
nemo dat
principle. However, he erred in finding that Dr.
    Anand could assign the exclusive usage benefit at all  whether to himself or
    another, time-limited or otherwise. Only Urmila, as owner, could do that. The
    complication arises because Urmila has not cross-appealed on these issues. At
    the hearing of the appeal, we were advised that Urmila is content to live
    with the outcome of the application for two reasons: (1) Dr. Anand continues
    to pay rent on Unit 20; and (2) it would not be sensible for Dr. Anand to move
    his dental practice back to Unit 20, only to move out again by July 31, 2022.

E.

analysis

[22]

The equities of this case unequivocally favour
    Urmila. Dr. Anand tried to appropriate a valuable benefit acquired by Urmila
    when it purchased Unit 20. This was done behind Urmilas back. Dr. Anand knew Urmila
    paid a premium for the unit because he attempted to purchase what Urmila had
    already bought  a unit with an exclusive usage designation as a dental clinic.
    Dr. Anand was also aware of the increased rent associated with exclusive use
    units given that he paid a premium rent to Urmila during the course of his
    tenancy.

[23]

It is nothing short of remarkable that, after
    buying Unit 21 and purporting to transfer the exclusive use benefit to himself
    (through Anand Holdings Inc.), Dr. Anand wrote to the property manager to
    declare that, the Tenant does not consent to any other unit, including any
    owner, tenant, occupier, or licensee of the Existing Unit [i.e., Urmilas unit],
    conducting, operating or owning a dental clinic.

[24]

And just like that, Dr. Anand, a tenant,
    believed he had divested Urmila of its exclusive usage right in Unit 20 in
    perpetuity. In my view, an interpretation of the Declaration, insofar as it
    impacts on the contractual arrangements between these parties, that allowed
    this result to stand would amount to a commercial absurdity.

[25]

I am troubled by Dr. Anands change of position
    on appeal, repudiating the acknowledgment of his counsel on the application
    (not Mr. Arnold) that
Sattva
principles governed the interpretation of
    the Declaration in the context of this case. Nonetheless, I agree with the
    submission made by counsel for Urmila that the application judge did not err in
    allowing the contractual interpretation principles in
Sattva
to guide
    his approach to interpreting the Declaration; after all, the Declaration was
    incorporated into and formed part of a contract  the lease.

[26]

Dr. Anand relies on
Metropolitan Toronto
    Condominium Corporation No. 590 v. The Registered Owners and Mortgagees of Metropolitan
    Condominium Corp. No. 590
, 2020 ONCA 471, 21 R.P.R. (6th) 189, as
    authority for the proposition that the principles of contractual interpretation
    mandated in
Sattva
do not apply to condominium declarations. He relies
    on a passage in which Nordheimer J.A. acknowledged the caution in
Sattva
against courts too readily finding extricable questions of law when engaged in
    contractual interpretation. As he said, at para. 15:

Here, though, while a declaration under the
Condominium
    Act
could be characterized as a contract, [it] is not the type of contract
    negotiated between two parties, to which the comments in
Sattva
were
    directed. A declaration is a special form of contract, the structure of which
    is prescribed by statute. It must adhere to certain statutory requirements.
    Indeed, the
Condominium Act
provides, in s. 7(5), that, if there is
    any conflict between the statute and the declaration, the statute prevails.

[27]

I agree with counsel for Urmila that this
    decision did not purport to oust the application of
Sattva
principles
    in this context; the passage reproduced is concerned with the standard of
    review on appeal. See
Seto v. Peel Condominium Corporation No. 492
,
    2016 ONCA 548, at para. 10, in which this court applied
Sattva
to the
    interpretation of a Declaration. Here, in contrast, we are dealing with the
    proper interpretation of the contractual arrangements between these two
    parties.

[28]

The application judge properly identified the
    background factors that were known or ought to have been known by the parties
    when they entered into the lease agreement and the subsequent extension.
    Importantly, the Declaration was incorporated into the lease between Dr. Anand
    and Urmila.

[29]

Another factor to consider is that Urmila, as
    owner of the exclusive use unit, was not obliged to carry on the exclusive use business
    itself. It only covenanted to ensure that the unit would be used for the
    designated purpose; otherwise, it would lose its exclusive use designation. In
    order to preserve this exclusive use benefit, Urmila leased the unit to Dr.
    Anand. It would make no commercial sense if, in fulfilling this contractual obligation
    in the way that it did, Urmila risked losing a valuable property right to its
    tenant.

[30]

Consequently, the parties could not have
    reasonably intended that Dr. Anand, as tenant, could arrogate to himself
    the exclusivity benefit in Unit 20, forever divesting Urmila of something it
    had purchased.

[31]

Moreover, as the application judge observed, the
    bulk of the language in the exclusive use provisions of the Declaration signal
    that the use attaches to the unit itself. This is also reflected in the language
    of the Reservation Form (which Dr. Anand inspected) and in the APS.
    Moreover, Urmila covenanted in the lease that, if its sole principal (or her
    husband) acquired another unit in the plaza, they would not permit the
    operation of a dental clinic therein, further supporting the interpretation
    that the exclusive usage right attached to the unit. It belonged to the owner/landlord,
    Urmila, not Dr. Anand.

[32]

The application judge bolstered his conclusion
    through his reliance on the
nemo dat

principle
.
In
Green
    v. Green
, 2015 ONCA 541, 387 D.L.R. (4th) 512, in the family law context,
    this court said, at para. 53: at common law, an assignor may not assign more
    than it has, or put differently,
nemo dat quod non habet
, no one gives
    who does not possess.

Applying this principle, the application judge
    held that, although the exclusive usage right belonged to Urmila as the owner
    of Unit 20, as a tenant, Dr. Anand had a limited right to assign the exclusive
    usage for as long as he was entitled to the benefit of the exclusive use under
    the lease.

[33]

As noted above, because Urmila is content with
    the current arrangements, it did not seek to improve its position by cross-appealing
    this aspect of the application judges order. Similarly, Urmila did not attempt
    to achieve the same result by urging upon us the application judges
    alternative mode of analysis (i.e., that Dr. Anand could not assign or convey
    exclusive usage to himself). In the circumstances, it is neither appropriate
    nor necessary to resolve these issues. However, nothing in these reasons should
    be taken as endorsing these aspects of the application judges decision. The
    resolution of both issues is best left for another day when they are squarely
    before us.


F.

conclusion

[34]

I would dismiss the appeal. I award costs to Urmila
    in the amount of $30,000, inclusive of HST and disbursements.

Released: December 14, 2021 E.E.G.

Gary Trotter
    J.A.

I agree.
E.E. Gillese J.A.

I agree. I.V.B.
    Nordheimer J.A.





[1]
Dr.
    Anand operated his dental practice through Harpul J. Anand Dentistry
    Professional Corporation. His holding company, Anand Holdings Inc., later
    became involved in what happened. For simplicitys sake, it is convenient to
    keep Dr. Anand at the forefront of the narrative, unless otherwise specified.


