In reasons released November 18, 2010, the Superior Court of Justice in Fairweather Ltd. v. Riocan Yec Holdings Inc., 2010 ONSC 6445 on an application to interpret a commercial lease for a retail store, in particular,  a Lease Amending and Extending Agreement, which included a redevelopment termination clause, which was at the center of the dispute, held that the landlord was entitled  issue the notice of termination and it validly did so.

The reasons of Justice Stinson contained an analysis of the principles applicable to the interpretation of commercial contracts, including the summary of those principles by the Ontario Court of Appeal in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust 2007 ONCA 205 (CanLII), (2007), 85 O.R. (3d) 254 (C.A.), as follows:

“Broadly stated … a commercial contract is to be interpreted,

(a)   as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(b)   by determining the intention of the parties in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended what they have said;

(c)     with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract),

(d)     in a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity. “

In the circumstances, the court held that it was not necessary for the landlord to demonstrate to some level of certainty that it requires the Fairweather premises at a specified time, for a specified purpose, by reason of a specified legal or practical obligation or need.

David Alderson, LL.B, LL.M

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