



COURT OF APPEAL FOR ONTARIO

CITATION: Harvey Kalles Realty Inc. v. BSAR
    (Eglinton) LP, 2021 ONCA 426

DATE: 20210616

DOCKET: C67776

Rouleau, Hoy and van Rensburg
    JJ.A.

BETWEEN

Harvey
    Kalles Realty Inc.

Plaintiff (Respondent)

and

BSAR (Eglinton) LP

Defendant (Appellant)

James M. Wortzman and Spencer
    Malthouse, for the appellant

Ian Cantor, for the respondent

Heard: June 2, 2021 by video conference

On
    appeal from the judgment of Justice Mary Anne Sanderson of the Superior Court
    of Justice, dated November 8, 2019, with reasons reported at 2019 ONSC 4434.

REASONS FOR DECISION

[1]

The appellant appeals from the trial judges
    decision awarding the respondent real estate brokerage the sum of $245,878.96
    together with interest and costs pursuant to its claim as assignee of the
    commission payable under an October 7, 2012 Commission Agreement. The appellant
    submits that no commission is owing because one of the two conditions set out
    in the Commission Agreement was not met.

[2]

The parties generally agree on the two
    conditions contained in the Commission Agreement. The first condition required
    that an offer to lease be  entered into between the appellant and a Tenant,
    defined as  Loblaw Companies Limited or any associated, affiliated, related
    company or individual, nominees or any principals, partnerships, joint
    ventures, corporations, affiliates or associates for whom it is a nominee or to
    whom it is directly or indirectly related within 24 months of the Commission
    Agreement. The second condition required that the Tenant subsequently enter
    into a final form of lease with all conditions of the offer met or waived.

[3]

The appellant concedes, as it did at trial, that
    the first condition was met when the appellant and Loblaw Properties Limited
    signed a formal offer to lease on July 10, 2013. However, the appellant argues
    that the trial judge erred in finding that the second condition was met. According
    to the appellant, the second condition in the Commission Agreement required
    that
t
he appellant sign a lease with Loblaws Companies
    Limited or a company that was associated, affiliated or related to it as of the
    date of the Commission Agreement. The eventual tenant, Shoppers Drug Mart, only
    became a Loblaws entity after the offer to lease was signed.

[4]

In the appellants submission, the trial judge
    made a series of palpable and overriding errors in reaching her decision. In
    addition, the appellant maintains that the trial judge also erred in law in at
    least two respects. First, she erred in failing to find that the offer to lease
    had been automatically terminated. Second, she erred in law when she found that
    Shoppers met the definition of Tenant in the offer to lease and in the
    Commission Agreement.

[5]

There is no dispute as to the relevant
    principles. As explained in
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633
, the
    primary goal of contractual interpretation is to give effect to the objective
    intention of the parties at the time of contract formation. Courts must
    determine the intent of the parties and the scope of their understanding by
    reading 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 meaning of words is
    determined by contextual factors, including the purpose of the agreement and
    the nature of the relationship created by the agreement:
Sattva
,
at paras. 47-48.

[6]

It is also well settled that courts should avoid
    commercially absurd interpretations of contracts. Commercial reasonableness
    must be interpreted from the perspective of both contracting parties:
Resolute
    FP Canada Inc. v. Ontario (Attorney General)
, 2019 SCC 60, at para. 148.

[7]

We see no error in the trial judges findings or
    conclusions. This was a straightforward case involving the interpretation of
    two agreements. The trial judge did not, as the appellant suggests, confuse the
    objective intent of the parties to the Commission Agreement with the objective
    intent of the parties to the offer to lease. In her reasons setting out how she
    made her findings and reached her decision, the trial judge carefully and
    correctly applied the approach for interpreting commercial contracts set out in
    the leading case of
Sattva
. She considered the genesis and factual
    matrix of the Commission Agreement and determined that it was clearly the
    objective intention of the parties that the leasing commission would be paid if
    the appellant concluded a lease for the commercial component of the subject
    property with any Loblaws entity.

[8]

The trial judge rejected the appellants
    submission that a provision of the Commission Agreement limited its application
    to leases signed with Loblaws entities in existence at the time the Commission Agreement
    was signed. In our view she did not err in so concluding. We disagree with the
    appellants submission that, because the definition of Tenant in the Commission
    Agreement includes  an entity to whom Loblaws is directly or indirectly
    related, the Commission Agreement contemplated only entities in existence at
    the time it was signed and that the trial judges conclusion to the contrary
    constitutes palpable and overriding error or a failure to give effect to the
    words of the agreement. The trial judges findings constitute, in our view, a
    commercially reasonable interpretation of that provision in the context of the
    entire agreement and the factual matrix and should be accorded due deference in
    this court. The appellant has not demonstrated any palpable or overriding
    errors in any of the trial judges findings.

[9]

We also reject the submission that the trial
    judge erred in law in reaching her conclusion that the offer to lease had not
    been terminated and that Shoppers met the definition of Tenant in the
    relevant agreements. These conclusions flowed from the trial judges considered
    interpretation of the terms of the agreements and her findings of fact.

[10]

The appellant submits that the trial judge failed
    to adequately deal with the submission that the offer to lease terminated
    automatically because certain conditions in the offer to lease were neither
    satisfied nor waived by Loblaws. That submission, however, was not the focus of
    the appellants argument at trial and the trial judge cannot be faulted for her
    failure to deal extensively with it in her reasons. The trial judge explained
    that the parties conducted themselves on the basis that the offer to lease had
    not been terminated and that a final form of lease would be signed. It was only
    in the alternative that she turned to the issue of whether the automatic
    termination provision may have been triggered. The trial judge explained that,
    had it been necessary, she would have found that by continuing to negotiate
    with the respondent, Loblaws, by its conduct, waived the need for compliance
    with these conditions. Significantly, at trial, the appellant produced no
    documents and led no evidence setting out, in any substantive way, the timing,
    terms and conditions under which the transaction continued after the point at
    which the appellant argues the offer to lease automatically terminated. There
    would therefore have been no reasonable basis for the trial judge to have found
    that, notwithstanding the lengthy passage of time, the numerous steps taken in
    furtherance of the transaction and the appellant's own firm assertions
    otherwise, the offer to lease had been automatically terminated.

[11]

The trial judges finding that, in effect, the
    lease was simply a finalization or fulfillment of a single lease transaction
    contemplated in the offer to lease was fully supported by the evidence and her
    interpretation of the agreements. The findings of the trial judge in support of
    this conclusion include:

a.

throughout the period from the offer to lease to
    the signing of the lease both Loblaws and the appellant dealt with each other
    as if they were continuing an existing transaction;

b.

Loblaws reassured the appellant that it intended
    to keep the appellant whole under their initial agreement;

c.

Loblaws brought Shoppers into the transaction
    with instructions that the lease with Shoppers must be on identical financial
    terms as the offer to lease;

d.

the lease did in fact have substantive and
    financial terms identical to the offer to lease;

e.

the appellant never re-listed the property for
    lease;

f.

there was no offer to lease with Shoppers and
    the parties proceeded with the Loblaws standard lease form;

g.

Shoppers regarded the lease as a continuation of
    the Loblaws deal; and

h.

while the lease changed the primary use of the
    space from grocery to pharmacy, it expressly permitted the space to be used as
    a grocery, provided it first opened for a single day as a pharmacy.

[12]

We see no basis to interfere with the trial
    judges finding that the offer to lease had not been terminated and that
    Shoppers met the definition of Tenant in the Commission Agreement.

[13]

Finally, in its factum, the appellant submits that the trial judge approached
    this case by first deciding what she considered to be the equitable result and
    then proceeding to find the facts that justified this conclusion. We reject
    this submission. The trial judge heard the evidence and made the factual
    findings that naturally flowed from the record before her. Nothing suggests
    that she somehow sought to tailor those findings to achieve a predetermined
    result.

[14]

The appellant has not identified any error of
    law or error of fact, let alone a palpable and overriding error.

[15]

The appeal is dismissed. Costs to the respondent
    fixed in the amount of $40,000 inclusive of disbursements and applicable taxes.

Paul
    Rouleau J.A.

Alexandra
    Hoy J.A.

K.
    van Rensburg J.A.


