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June 14, 2010 • Law Times
Courts using equitable remedies in leasing disputes OBA real estate session discusses case law developments, litigation trends
BY DARYL-LYNN CARLSON For Law Times
taining to real estate law that practitioners, especially those who practise in the area part time, should be aware of. Many of the cases pertain to
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commercial real estate matters that are no less applicable for lawyers facilitating commercial property purchases and leases for clients in smaller towns and cities than in major centres. At the Ontario Bar Asso-
here have been some important develop- ments in the courts per-
ciation's most recent real estate program on commercial leasing matters, Jane Chung, an associ- ate with Miller Thomson LLP's commercial real estate group, presented a session on 10 key cases in that area. She essentially discussed matters decided in ei- ther 2009 or 2010 with a view to highlighting some of the more notable decisions that should be considered when drafting leases or advising clients. "One general trend that was
identified was that courts are not afraid to use equitable remedies when deciding on a particu- lar matter, especially when an
interpretation of the provisions of a contract leads to a com- mercially unreasonable result or where it would lead to an unfair result," said Chung. She noted leases are now con-
siderably complex documents that can be upwards of 60 pages as lawyers in the field have been trying to capture any and every circumstance that may arise be- tween landlords and tenants. De- spite the efforts to address those issues, if an interpretation of the lease leads to a commercially un- reasonable or unfair result, the courts will try to intervene by using equitable remedies. "A con- tract is always open to various in- terpretations," Chung said. "But the courts are willing to intervene using equitable remedies." Chung's presentation out-
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lined 10 cases in which the courts rendered decisions in six different areas: • A landlord's consent to en- able a tenant to transfer a
a leaseholder moving into a commercial site still under construction.
• The alleged fundamental breach of a lease agreement by a landlord.
• The validity of estoppel cer- tificates.
• Renewal provisions within a contractual lease.
• The allocation of risk and insurance obligations. When discussing recent de-
'A contract is always open to various interpretations. But the courts are willing to intervene using equitable remedies,' says Jane Chung.
lease or sublet to another business.
• Equitable principles and remedies dealing with the terms of rent payment by
cisions relating to fundamental breach and limitation of li- ability and exclusion clauses, Chung noted the recent Su- preme Court of Canada deci- sion in Tercon Contractors Ltd. v. British Columbia (Transpor- tation and Highways), which purported to reject the doc- trine of fundamental breach. Chung encouraged lawyers to consider the implications of this decision in commercial leasing matters where one par- ty has committed what would be viewed as a "fundamental" breach. She emphasized that careful consideration of the de- cision should always be taken when reviewing fundamental breach cases and drafting limi- tation of liability or exclusion of liability clauses in leases. The cases Chung cited are
national in scope, although she notes they all serve as sig- nificant precedents relating to recent commercial leasing dis- putes in the courts. The cases she referenced include: • Spectrum Physiotherapy Brampton Ltd. v. Cardillo Capital Corp.
• Tradedge Inc. (Shoeless Joe's) v. Tri-Novo Group Inc.
• ClubLink Corp. v. Pro-Hedge Funds Inc.
• 550 Capital Corp. v. David S. Cheetham Architect Ltd.
• Calloway Reit (Westgate) Inc. v. Michaels of Canada ULC
• Diamond Robinson Building Ltd. v. Conn
• 997484 Ontario Inc. v. Ex- treme Properties Inc.
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• Vancouver City Savings Cred- it Union v. New Town Invest- ments Inc.
• Nasheim v. White Buffalo Wholesale Ltd.
• 1044589 Ontario Inc. (Nan- tucket Business Centre) v. AB Autorama Ltd. In discussing the issues, Chung
noted that any contract or lease is only as good as its wording and, therefore, it's critical for lawyers advising clients and perhaps draft- ing leases to keep up on case law developments and the nuances the courts have recently been tak- ing into consideration. Ultimately, she suggested
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that those lawyers who find themselves doing the occasional commercial lease file can review the relevant case law to ascer- tain just how the courts have responded, particularly when representing a property owner or landlord providing the lease. The OBA session was well-
attended with about 100 lawyers participating via webcast.
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