Pre-lease emails and drafts resolve ambiguity
The Ontario Court of Appeal has referred to negotiating emails and drafts of a lease to determine the basement of a building was included in an inconsistent and contradictory lease: 1079268 Ontario Inc. v GoodLife Fitness Centres Inc. [2017] FICR 4.
The lease was inconsistent and contradictory in referring to a lease of the whole premises but also stating the area as less than that of the whole premises and omitting the basement in the description and the plans.
Before the lease was executed, an email had been sent referring to a lease of the whole premises excluding the kitchen in the basement, but that exclusion was removed in negotiations.
Over a number of drafts of the lease, the “proportionate share” provision, which required the lessee to pay only the utilities for the portion of the premises it was leasing, was deleted;. the “above normal utilization” clause, which would have permitted the lessor to charge additional rent for above-normal utility use, was deleted; the measurement clause, which would have permitted the lessor to measure the premises and adjust the rent if the stated measurements in the lease were inaccurate, was deleted; and the definition of premises was shortened to refer simply to “the entire property”
The Court of Appeal said the application judge had overlooked this evidence which was an error of law, entitling the appeal court to intervene. Other examples of errors of law are the application of an incorrect principle, the failure to consider a required element of a legal test.
Huscroft JA giving the judgment of the court applied the test in Sattva Capital Corp. v Creston Moly Corp. 2014 SCC 53 (CanLII); [2014] 2 S.C.R. 633 that the court 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.
