



COURT OF APPEAL FOR ONTARIO

CITATION: Mapleview-Veterans Drive Investments Inc. v. Papa
    Kerollus VI Inc. (Mr. Sub), 2016 ONCA 93

DATE: 20160202

DOCKET: C60604

Blair, Hourigan and Brown JJ.A.

BETWEEN

Mapleview-Veterans Drive Investments Inc.

Applicant

(Appellant)

and

Papa
    Kerollus VI Inc. c.o.b Mr. Sub

c.o.b
    Mr. Submarine-Mapleview
and

Mr.
    Submarine Limited

Respondents

(
Respondents in
    Appeal
)

Milton A. Davis and Ian P. Katchin, for the appellant

Sharon M. Addison for the respondent

Heard: October 26, 2015

On appeal from the order of Justice Gregory M. Mulligan
    of the Superior Court of Justice, dated June 12, 2015, with reasons reported at
    2015 ONSC 3833, 59 R.P.R. (5th) 134.

R.A. Blair J.A.:

Overview

[1]

The issue on this appeal is whether the respondent, Papa Kerollus VI
    Inc., is entitled to exercise a right of renewal contained in a commercial lease
    of premises located in Barrie, Ontario, where it carries on a Mr. Submarine franchise
    business. Mapleview-Veterans Drive Investments Inc., the appellant, is the
    owner of the premises and the successor landlord under the Lease.

[2]

The Lease was effective as of June 1, 2000 for a 15-year term expiring on
    May 31, 2015. It gave Papa Kerollus an option to renew for one further period
    of five years on the same terms and conditions save as to the rental rate
    which shall be the then current rate.

[3]

Papa Kerollus purported to exercise the renewal option in November 2014
     within the time required  but Mapleview disputed its right to do so on the following
    bases:

(a) the renewal option was void for
    uncertainty because, with no guidelines for the calculation of the renewal term
    rent and no arbitration provision to settle it if agreement was not reached,
    the renewal rent could not be ascertained; and in any event,

(b) the renewal option could not be
    exercised for two reasons:

(i) Papa Kerollus was in default of
    a precondition to the exercise of the option because it had not paid the rent
    and all other sums payable under [the] Lease when due at the time it purported
    to exercise the renewal option (the rent-related covenant); and,

(ii) it was also in default of a precondition
    to the exercise of the option because it had not performed all other covenants
    under the Lease at the relevant time (the non- rent covenants).

[4]

Mapleview applied to the court for a declaration that the renewal option
    was void for uncertainty or, in the alternative, for an order and declaration
    that Papa Kerollus was in breach of the terms of the Lease and that the
    purported exercise of the renewal option was invalid and unenforceable, as well
    as for other related relief.

[5]

After a hearing, the application judge made the following orders and/or
    declarations that are the subject of the appeal:

(a) the renewal option was not void
    for uncertainty because the term current rate was capable of judicial
    determination provided the parties called expert evidence on the point;

(b) there was, however, a live issue
    as to the proper calculation of what the tenant owed for additional amounts of arrears
    and a trial was required to make a determination of what was owing by the
    tenant to the landlord;

(c) once there had been a judicial
    determination of the arrears, if any, by trial, the tenant was to have a
    sixty-day period to pay the properly calculated arrears, if any, by way of a
    lump sum payment, at which time the renewal notice would be deemed to have been
    validly constituted, as of June 1, 2015; and

(d) once the tenant had paid the
    arrears, if any, the current rate for the renewal period was to be determined
    judicially on the basis of expert evidence presented by the parties.

[6]

With respect to Mapleviews contention that the renewal option could not
    be exercised because Papa Kerollus was in default of various non-rent covenants
    under the Lease, relating to such things as the failure to maintain the
    premises and the improper subleasing of space to others for advertising, the
    application judge found that these defaults had been substantially cured by
    the time of the application. In oral argument before this Court, counsel for
    Mapleview withdrew any reliance on the non-rent covenant defaults in support of
    its argument that the renewal option could not be exercised. It is therefore
    unnecessary to deal with this issue.

[7]

While I agree with the application judge that the renewal option is not
    void for uncertainty, I would allow the appeal and set aside the remainder of
    his order, for the reasons that follow.

Background

The Lease

[8]

Clause 2 of the Lease provides for the option to renew:

Provided that the Tenant
has paid the rent and all other
    sums payable under this Lease when due
and, provided the Tenant
has
    performed all other covenants under the Lease as and when the same are required
    to be performed,
the tenant shall have the option to renew for one further
    term of Five (5) years each provided that written notice is given to the Landlord
    at least six (6) months prior to the expiry of the term or any previous renewal
    thereof, on the same terms and conditions as herein contained,
save as to
    the rental rate which shall be the then current rate
. [Emphasis added.]

[9]

As noted above, Mapleview abandoned in oral argument its ground of
    appeal based upon the alleged default of Papa Kerollus under the non-rent covenants
    of the Lease. It submits, however, that Papa Kerollus was  and remains  in
    default of its obligation [to pay] the rent and all other sums payable under [the]
    Lease when due.  A number of provisions in the Lease bear upon this
    submission.

[10]

As
    tenant, Papa Kerollus was obliged to pay both a base rent (as stipulated in
    clause 3.A) and additional rent consisting of (a) goods and services taxes
    (clause 3.B) and (b) the Tenants Percentage of taxes, utilities, insurance,
    common area maintenance and repairs, other operating costs and administrative
    fees (clause 3.C).  Clause 21 makes it clear that it was intended to be a
    carefree net Lease for the Landlord.

[11]

There
    is no dispute that Papa Kerollus has paid its base rent throughout the term of
    the Lease, as required. Amounts owing as additional rent pursuant to the
    Tenants Percentage clause became an issue, however.

[12]

Clause
    3.C outlines this obligation:

The Tenants Percentage hereinafter referred to, is calculated
    by dividing the total square footage of the Demised Premises as referred to in
    clause 1 by the total rentable square footage of the project.

As a method of payment
of the Tenants percentage of
    taxes, utilities, insurance, common area maintenance and repairs, other
    operating costs and administrative fees,
the Landlord may estimate the total
    cost of these charges on an annual basis and request the Tenant to pay monthly
to the Landlord, one-twelfth of the Tenants proportionate cost for those
    charges.

The Landlord will provide the Tenant with
a statement of
    actual expenses on an annual basis. An adjustment of over/under payment will be
    made at that time
. [Emphasis added.]

[13]

Clauses
    10 through 13 contain the tenants specific covenants to pay its share of
    taxes, utilities, insurance costs, and common area maintenance and repairs.
    Each stipulates that the tenants obligation is to pay upon demand. Clause 20
    provides for the payment of interest on all rent or additional rent in arrears
    at the rate of 18% per annum.

The Disputes and Purported
    Exercise of the Option to Renew

[14]

Beginning
    in 2013, as the application judge noted at para. 9, the relationship between
    Mapleview and Papa Kerollus turned sour.  Papa Kerollus says this was because
    Mapleview was upset with it for not accepting a suggestion that it relocate to
    other nearby premises in spring 2013, something that would have freed up the
    leased premises to be used for other purposes by Mapleview. Papa Kerollus
    contends that it was only after this refusal that Mapleview began to make complaints
    about defaults under the Lease.  Mapleview calls this allegation a complete
    fabrication, and denies that the manner in which it dealt with Papa Kerollus
    changed as a result of the tenants disinterest in relocating.  It says that it
    was not attempting to move Papa Kerollus out, but was only responding to
    complaints by Papa Kerolluss principal, Mary Athanasios, about the rent, and
    was trying to suggest another nearby available location where it could continue
    to carry on its business while paying less rent.

[15]

In
    any event, Mapleview delivered a notice of default in June 2013. For the most
    part, the alleged defaults involved non-rent covenant defaults  failures to
    comply with the terms of the Lease concerning garbage bins, third party signs,
    parking lot lights and other maintenance failures. The only rent-related
    complaint was that the rental payments were habitually late.

[16]

There
    followed an exchange of correspondence between the parties and their solicitors
    regarding the merits of these complaints and what had been done, or what was to
    be done, to deal with them.

[17]

Matters
    escalated in 2014. On May 12, Mapleview delivered invoices reconciling its cost
    recovery claims for 2012 ($2,275.67) and 2013 ($11,040.30).  At the same time,
    it delivered a revised monthly summary statement for 2014 calling for a monthly
    payment for base rent plus operating expenses, property taxes, and HST in the
    amount of $7,250.84 commencing June 1, 2014.  This represented an increase of
    $1,017.00 over the $6,233.84 that Papa Kerollus had been paying for some time.

[18]

There
    followed another lengthy exchange of correspondence between the parties
    solicitors.  Papa Kerollus demanded backup particulars of the statements
    provided in May and also for all years dating back to 2009.  It did admit,
    however, that it was in arrears in the amount of $251.92 (the admitted
    arrears), comprising a debt of $303.46 for 2013, less a credit it had been
    granted for $51.54 for 2012.

[19]

Although
    Mapleview took the position that its only obligation was to provide a statement
    of actual expenses, it ultimately yielded and provided detailed backup
    information for all of these years by letter dated September 19, 2014.  This
    only led to further demands and disputes. As it turned out, one of the side effects
    of this exercise was that  after Mapleview had completed this more thorough
    review of the cost reconciliations  its claim for backward-looking adjustments
    only increased. In addition to the raised monthly payments of $7,250.84 going
    forward, the effect of the reconciliations reflected in the 2009-2013 annual
    statements was to increase Mapleviews demand for payment for shortfalls said
    to be due to it under the Lease to $33,328.99 (an amount that, with interest,
    had increased to a little over $56,000 by the time of the hearing of the
    application).

[20]

Papa
    Kerollus did not pay any of these amounts, including the admitted arrears.
    Instead, it continued to pay only the $6,233.84 per month that it had been
    paying for the previous several years, and the running dispute continued.

[21]

Papa
    Kerollus objected both to the increased monthly amount and to the lump sum
    demanded. It questioned some of the mathematics. It contested the percentage
    allocation of taxes and operating expenses as between it and the adjacent
    tenant, RBC, based on the proportionate square footage of the two premises,
    something that would affect the 15% management fee Mapleview was charging as
    well.
[1]
Papa Kerollus also contended that Mapleview had changed the method of billing
    subcontractors without advising it and that insurance costs were improperly
    attributed to it instead of being apportioned between it and RBC.

[22]

During
    these exchanges, each party took care to preserve its position on the issue of
    renewal. Mapleview insisted that the renewal option could not be exercised
    because it was void for uncertainty and because Papa Kerollus continued to be
    in default in respect of both the rent-related covenant and the non-rent
    covenants. Papa Kerollus continued to deny any default that would preclude it
    from exercising the renewal option, and advised that it intended to do so.

[23]

By
    letter dated November 6, 2014, but not delivered until November 27, Papa
    Kerollus purported to exercise the option to renew. These proceedings followed.

The Issues

[24]

There
    are two issues to be determined on the appeal:

(1) Did the application judge err in
    holding that the renewal option clause was not void for uncertainty?

(2) Did the application judge err in
    holding that Papa Kerollus was entitled to exercise the renewal option once the
    amount of rental arrears owing by it had been determined by way of a trial of
    that issue?

(1) The Renewal Option is Not Void for Uncertainty

[25]

We
    did not call upon counsel for Papa Kerollus to respond to the argument that the
    renewal option is void for uncertainty. I agree with the application judge that
    it is not.

[26]

The
    renewal option provides that the rental rate for the renewal period is to be
    the then current rate. This is a rate that can be readily ascertained through
    resort to expert evidence as to the rental rates for comparable spaces as at
    the renewal date. If the parties are unable to agree, the rate can be
    determined, as the application judge concluded, through judicial or other
    binding means.

[27]

It
    is trite law that the courts will not enforce an agreement to agree and that
    there must be reasonable certainty as to the length of the term of a lease or of
    a renewal option, as well as to the amount of rent to be paid. See e.g.
Re Fice
    and Department of Public Works of Ontario
(1922), 64 D.L.R. 535 (Ont. S.C.
    (A.D.)), at p. 539;
Gourlay v. Canadian Department Stores Ltd.
, [1933]
    S.C.R. 329, at p.

331; and
Re Calford Properties Ltd. and Kellys
    Billiards Ltd.
(1973), 37 D.L.R. (3d) 300 (Alta. S.C. (T.D.)), at pp.
    303-5.

[28]

However,
    contrary to Mapleviews submission, this case does not involve an agreement to
    agree on the renewal rate. In the cases relied upon by Mapleview, there was
    neither a formula or other objective standard for establishing the rate, nor
    any mechanism for its determination in the event of a failure to agree: see
Sheppard
    v. Czechoslovak (Toronto) Credit Union Ltd.
(1989), 1 R.P.R. (2d) 290
    (Ont. D.C.), at p. 293;
Young v. Van Beneen
, [1953] 3 D.L.R. 702
    (B.C.C.A.), at pp. 704-5;
Great Atlantic & Pacific Co. of Canada v.
    Topostar (Aurora) Inc.
, 2006 CanLII 7279 (Ont. S.C.), at paras. 51-52; and
Delphi Management Corp. v. Dawson Properties
, 2014 ONSC 354, at paras.
    10-11.

[29]

Here,
    however, there is a formula or other objective standard for establishing the
    rate  namely, what is the then current rate at the time of renewal. Courts
    should not strive to set aside a commercial bargain that was intended to have
    legal effect where a clause in an agreement  even if not precisely expressed 
    has an ascertainable meaning:
Hillas & Co. Ltd. v. Arcos Ltd
.
    (1932), 147 L.T. 503 (Eng. H.L.), at p. 514; and
Griffin v. Martens
(1988),
    27 B.C.L.R. (2d) 152 (C.A.), at p. 153. Adopting this approach in
Empress
    Towers Ltd. v. Bank of Nova Scotia
(1991), 73 D.L.R. (4th) 400, at p. 403,
    leave to appeal refused, [1990] S.C.C.A. No. 472, the British Columbia Court of
    Appeal concluded that the courts will try, wherever possible, to give the
    proper legal effect to any clause that the parties understood and intended was
    to have legal effect.  I agree.

[30]

Here,
    I am satisfied that the parties intended to make a binding agreement as to the
    renewal rate; they simply declined to specify that rate in a dollar amount
    because neither wished to assume the risk of error (too high or too low,
    depending on their interest) 15 years later. This makes commercial sense. 
    Expressing the renewal rate as the then current rate is the functional
    equivalent of saying the then market value or the then prevailing market
    rate  expressions that have been found to be sufficient to overcome a
    void-for-uncertainty argument. See e.g.
Mustard Seed (Calgary) Street
    Ministry Society v. Century Services Inc
., 2009 ABQB 171, 79 R.P.R. (4th)
    252, at paras. 31-39, 46 (the then prevailing market rate);
Brown v.
    Gould
, [1972] 1 Ch. 53, at pp. 60-62 (the market value of the premises at
    the time);
Great Atlantic & Pacific Co.,
at para. 51 (an objective
    standard such as market rent); and
Empress Towers
, at p. 404

(the
    expression market rent prevailing at the commencement of [the] renewal term
    would itself have sufficed, but the addition of the words as mutually agreed
    between the Landlord and the Tenant rendered the clause void for uncertainty
    in the circumstances).

[31]

I
    agree with the application judges conclusion, at para. 22 of his reasons:

[T]he use of the words current rates in the lease is a clear
    intention that the parties anticipated a renewal, and that the renewal rate
    would have legal effect.  Although there was no provision for arbitration,
    there was nothing preventing the parties from making proposal[s] and
    counter-proposals. If the issue was not resolved, the parties could have
    resorted to a decision by arbitration or the courts as to the current rate to
    be applied to the subject premises.

[32]

I
    would not give effect to this ground of appeal.

(2) Rent-Related Default

[33]

Respectfully,
    however, the application judge erred in concluding that Papa Kerollus:

(a) was not in rent-related default at
    the time of its purported exercise of the option to renew; and,

(b) was entitled to a judicial
    determination of what amounts were owing under the Lease and, following that, to
    a further 60 days during which to pay the properly calculated arrears, if any,
    at which time the renewal notice would be deemed to have been validly
    constituted (except for the renewal term, which was ordered to mature on May
    31, 2020, in any event).

[34]

The
    appeal must be allowed on this basis.

Default


[35]

In
    my view, Papa Kerollus has not satisfied its onus to show that it complied with
    its obligation to 
[have] paid
the rent and
all other sums payable
under [the] Lease
when due
 as a precondition for the exercise of the renewal
    option (emphasis added). The application judge erred in law in overlooking the
    onus Papa Kerollus was required to meet, and made palpable and overriding
    errors of mixed fact and law in failing to hold, on this record, that Papa
    Kerollus had not complied with its obligation to pay all additional rent when
    due and that it therefore was not in a position to exercise the right to
    renewal of the Lease.

[36]

The
    application judge properly recognized that the option to renew was available
    only provided that the tenant had complied with its obligation to pay rent and
    all other sums payable when due. He also correctly observed that a tenant must
    take a covenant to renew as the tenant finds it and must comply with any
    conditions precedent that apply to its exercise: see
Finch v. Underwood
(1876),
    2 Ch. 310 (Eng. C.A.), at p. 315; and
Clark Auto Body Ltd. v. Integra
    Custom Collision Ltd
., 2007 BCCA 24, 277 D.L.R. (4th) 201, at para. 30.

[37]

However,
    the application judge became overly engrossed in the dispute about the proper
    amount of the arrears owing by Papa Kerollus to Mapleview, and focussed on how
    that issue could be resolved before the renewal option was to be exercised. Respectfully,
    that was not the issue he was required to determine.

[38]

The
    issue for the application judge to have determined was whether Papa Kerollus
    [had] paid the rent and all other sums payable under [the] Lease when due, which
    was a precondition to its right to exercise the renewal option.  On this
    question, the onus was on Papa Kerollus:
1383421 Ontario Inc. v. Ole Miss
    Place Inc.
(2004), 67 O.R. (3d) 161 (C.A.), at paras. 53-55.

[39]

Had
    the application judge turned his mind to the onus question, he would have
    realized that Papa Kerollus could not meet its onus on this record.

[40]

Undeniably,
    there is a dispute as to the amount of additional rent Papa Kerollus is
    required to pay. It may be that [a] trial is required to make a determination
    of what is owing by the tenant to the landlord: para. 41. But there is no real
    dispute that it is required to pay
something
. Indeed, as noted,
Papa Kerollus acknowledges the admitted arrears of
    $251.92.

[41]

More
    significantly, perhaps, Papa Kerollus was in breach of its covenant to pay
    additional rent on a monthly basis in accordance with the terms of the Lease,
    at least as of June 1, 2014 and thereafter.  Recall that clause 3.C of the
    Lease permits the landlord as a method of payment  [to] estimate the total
    cost of [the Tenants Percentage] on an annual basis and request the Tenant to
    pay monthly one-twelfth of that estimated amount. Under that same clause, the
    landlord is required to provide a statement of actual expenses annually, at
    which time [a]n adjustment of over/under payment will be made. In addition,
    clauses 10 through 13 provide that the various payments constituting the
    Tenants Percentage are to be payable upon demand.

[42]

An
    obligation to pay upon demand signals that the payment is due once that demand
    is made. According to
Blacks Law Dictionary
, the term

payable
    on demand means [p]ayable when presented or upon request for payment; payable
    at once at any time: Bryan A. Garner, ed., 10th ed. (St. Paul, Minn.: Thomson
    Reuters, 2014). Courts have held  albeit in the promissory note context  that
    payable on demand indicates that the debt is payable at once and due as
    soon as it is delivered:
Edwards v. Walters
, [1896] 2 Ch. 157 (Eng. C.A.),
    at p. 166;
and
Royal BK. v.
    Hogg
, [1930] 2 D.L.R. 488 (Ont. S.C. (A.D.)),
    at p. 489
. See also
Boulton v. Langmuir
(1897), 24 O.A.R.
    618 (C.A.), at p. 622.  I see no reason for diverging from that approach here.

[43]

Papa
    Kerollus was notified on May 12, 2014 that its revised monthly payment for
    rent, operating expenses, property taxes and HST would be increased to $7,250.84
    from the previous $6,233.84, effective June 1, 2014, to account for increases
    in operations and property taxes. This was a reference to the Tenants
    Percentage under clause 3.C of the Lease. Papa Kerollus admits that it has not
    been paying this increased amount (a difference of $1,017.00 per month). Its
    explanation is that, in the view of Ms. Athanasios, [Mapleview] asked me for
    too much increase for no reason. Ms. Athanasios acknowledged on her
    cross-examination that at least starting as of August 1, 2014, the rent that
    [Papa Kerollus]
had to then pay
was $7,250.84 (emphasis added).

[44]

By
    its own admission, then, Papa Kerollus was not in compliance with the method
    for payment set out in clauses 3.C and 10 through 13, which required the
    Tenants Percentage payments to be made monthly and upon demand after receipt
    of the landlords estimate, and later re-adjusted after receipt of the annual
    statement of actual expenses.

[45]

Papa
    Kerollus has submitted that Mapleview was itself in default with respect to the
    exercise of the method of payment provided for in clause 3.C by improperly
    allocating expenses and by not delivering statements of actual expenses for
    certain of the years prior to 2014. However, even if this submission is
    correct, it is not an answer to the above. Mapleview could not have been in
    default of its obligation to provide a statement of actual expenses for the
    year 2014 at the time of the exercise of the option in November 2014. No such
    statement was called for at that time.

[46]

On
    any view of the record, Papa Kerollus was therefore in default in the payment
    of additional rent under the Lease and could not satisfy its onus of
    establishing that it had complied with all the preconditions for its exercise
    of the renewal option.

[47]

The
    application judge concluded that [a] tenant is entitled to know with some
    degree of accuracy what arrears exist, so that it can put itself in a position
    where it is not in default when exercising its right to renewal: para. 40.  I
    do not accept this as a general proposition, at least in the absence of bad
    faith conduct, which was not established here. As I have noted, the question for
    these purposes is not
what
arrears exist, if any, but whether Papa
    Kerollus complied with the covenants under the Lease that were necessary
    preconditions for the exercise of the option.

[48]

On
    the wording of this Lease at least, if the tenant cannot show that it 
has paid
the rent and
all other sums payable
under [the] Lease
when due
,
    it is not entitled to exercise the renewal option. The Lease does not permit
    renewal where the tenant has paid some or most of the sums payable, or
    almost but not all of the sums payable, or merely the undisputed sums
    payable. The application judges interpretation would require the Lease to be
    read as amended in that fashion.

[49]

I
    do not think that is a permissible interpretation.

[50]

A
    tenant must comply with the terms of a renewal option as a condition of
    exercising that option. Gillese J.A. summarized the law with respect to this
    principle and the onus issue in
Ole Miss Place Inc
.  At

para.
    54, she stated:

Where  performance of the lease covenants is a precondition to
    renewal, the onus rests on the tenant to show due performance.  That is, the
    Tenant has the burden of proof to show that it was not in default.  See
Fingold
    v. Hunter
, [1944] 3 D.L.R. 43, [1944] O.W.N. 287 (Ont. C.A.), at p. 46
    D.L.R., in which this court held that where [d]ue performance of the lessees
    covenants is a condition precedent  The burden is upon the lessee in such a
    case to show that he had performed the terms upon which his right depends.

[51]

Here,
    in order to be entitled to exercise the renewal option, Papa Kerollus must show
    that it 
has paid
 the rent and all other sums payable (e.g., additional
    rent) 
when due
. This means that the covenant must have been complied
    with
before
the option is exercised. Otherwise, the words has paid
    would have no meaning, nor would the words when due.

Equitable Considerations

[52]

Nor
    does equity assist Papa Kerollus in these circumstances.

[53]

There
    appear to be conflicting authorities on whether a court can grant equitable
    relief from the failure to comply with a covenant that is a condition precedent
    to the renewal of a lease. In
Re Pacella and Giuliana
(1977), 16 O.R.
    (2d) 6, at p. 8, this Court concluded that the court has power to relieve
    against forfeiture, but no power to excuse performance of conditions precedent. 
    While
Re Pacella
was a mortgage renewal case, the Court adopted the
    following statement from
Sparkhall v. Watson
, [1954] 2 D.L.R. 22 (Ont.
    H.C.), at pp. 25-26  a lease renewal case  in support of its conclusion:

Counsel for the lessee also submitted that the order relieving
    against forfeiture wiped the slate clean and made it impossible to look at the
    prior default in the payment of rent in order to determine whether the right to
    renew was lost.  The proposition is correct so far as the original term is
    concerned, but the order does not operate so as to excuse performance of
    conditions precedent to the right of renewal.  The distinction is clearly made
    in
Finch v. Underwood
, 2 Ch. D. 310.  The Court has power to relieve
    against forfeiture, but no power to excuse performance of conditions precedent.
    [Citation omitted.]

[54]

More
    recently, the British Columbia Court of Appeal adopted a similar view in
Clark
    Auto Body
.  At para. 30, Kirkpatrick J.A. said:

In my opinion, it is essential to distinguish between the
    courts equitable jurisdiction to grant relief from forfeiture for the
    non-observance of covenants in an existing lease and from the failure to comply
    with conditions precedent to the exercise of an option to renew a lease.  In
    the former, equity recognizes that a tenant may be permitted to cure its
    default and be relieved from forfeiture to allow it to retain the balance of
    the term of the lease. In the latter, there is no compulsion on the tenant to
    exercise the renewal option, but if it does so, the tenant must comply with the
    conditions precedent.  If the tenant fails to comply, it does not suffer a
    penalty or forfeiture of an existing tenancy. Equity will not intervene.

[55]

On
    the other hand, this Court has also concluded that the court does have
    jurisdiction to grant equitable relief in circumstances where there has been a
    failure to comply with a precondition to the renewal of a lease. But the
    jurisdiction to do so is a narrow or a limited one: see
Ross v. T.
    Eaton Co.
(1993), 11 O.R. (3d) 115 (C.A.), at pp. 124-25;
120

Adelaide
    Leaseholds Inc. v. Oxford Properties Canada Ltd.
, [1993] O.J. No. 2801
    (Ont. C.A.), at para. 9; and
Ole Miss Place Inc.
, at para. 80.

[56]

It
    is not necessary to resolve the differences between these two lines of
    authority here because, in the circumstances of this appeal, Papa Kerollus is
    not entitled to the benefit of equitable intervention on either approach, in my
    view.  The
T. Eaton Co., 120 Adelaide Leaseholds
, and
Ole Miss
    Place Inc.
line of authorities makes clear that one of the prerequisites
    for the exercise of any such equitable jurisdiction is 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:
T. Eaton Co.
, at p.
    125, cited in
Ole Miss Place Inc.
, at para 80.

[57]

That
    cannot be said in favour of Papa Kerollus here, for the reasons outlined above.
    It acknowledges that it was in default in payment of the admitted arrears of
    $251.92. This is a small amount, and had Papa Kerollus wished to preserve its
    position with respect to the renewal option, it could easily have paid it. Similarly,
    it could have paid the additional $1,017.00 monthly amounts for the period June
    1, 2014 onwards  as the payment method in clause 3.C of the Lease required 
    and then sought a re-adjustment after receipt of the statement of actual
    expenses for the year 2014. But it did neither. Instead, it held tenaciously to
    its stance that it would pay nothing further until the dispute over the total
    amount of arrears owing was resolved. In my view, it was not entitled to do so under
    the terms of the Lease if it wished to preserve its option to renew.

Disposition

[58]

It
    may or may not be that Mapleview is entitled to all of the amounts that it
    claims are owing for rent and additional rent under the Lease. However, Papa
    Kerollus has not met its onus of establishing that it was not in default of its
    covenant [to pay] the rent and all other sums payablewhen due as a precondition
    to its right to exercise the option to renew under clause 2 of the Lease.

[59]

For
    all of the foregoing reasons, although I agree with the application judge that
    the renewal option was not void for uncertainty, I would allow the appeal, set
    aside the order below and in its place substitute an order:

(a) that Papa Kerollus VI Inc. was in
    breach of its obligation under the Lease to have paid the rent and all other
    sums payable under the Lease when due at the time it purported to exercise the
    renewal option under the Lease;

(b) that, accordingly, the purported
    exercise by Papa Kerollus VI Inc. of the renewal option under the Lease is
    invalid and unenforceable;

(c) that the time for exercising the
    renewal option under the Lease has expired and the term of the Lease ended on
    May 31, 2015;

(d) that Papa Kerollus VI Inc. shall
    have 30 days from the date of this order to vacate the premises, subject to the
    continued application of the terms of the Lease during that period, and
    thereafter shall have no right to hold, occupy, remain in possession or control
    the Demised Premises or in any way access the Demised Premises for any reason;
    and,

(e) that if the parties cannot come to
    an agreement, there shall be a trial on the issue of the amounts owing to
    Mapleview by Papa Kerollus VI Inc. under the Lease.

[60]

Mapleview
    is entitled to its costs of the appeal, fixed in the amount of $20,000 inclusive
    of disbursements and all applicable taxes.

Released: February 2, 2016

R.A. Blair J.A.

I agree C.W. Hourigan J.A.

I agree David Brown J.A.





[1]
Mapleview applied a 35%/65% ratio, whereas Papa Kerollus submits that its
    square footage represents only 24% of the subject property and that it should
    therefore only be responsible for 24% of the expenses.  In this regard,
    Mapleview says that it was simply continuing the practice established by the
    original landlord.


