Decisions of the Court of Appeal

COURT OF APPEAL FOR ONTARIO

CITATION: 402 Mulock Investments Inc. v. Wheelhouse Coatings Inc., 2022 ONCA 718

DATE: 20221021

DOCKET: C70136

Feldman, Hoy and Lauwers JJ.A.

In the matter of 402 Mulock Investments Inc. Landlord, against Wheelhouse Coatings Inc. Tenant

BETWEEN

402 Mulock Investments Inc.

Applicant (Appellant/

Respondent by way of cross-appeal)

and

Wheelhouse Coatings Inc.

Respondent (Respondent/

Appellant by way of cross-appeal)

Ronald B. Moldaver Q.C., for the appellant/respondent by way of cross-appeal

Philip V. Hiebert, for the respondent/appellant by way of cross-appeal

Heard: September 12, 2022 by video conference

On appeal from the judgment of Justice Jill C. Cameron of the Superior Court of Justice, dated December 9, 2021, with reasons reported at 2021 ONSC 8084.

Hoy J.A.:

 

[1]          This appeal and cross-appeal arise out of the application by 402 Mulock Investments Inc. (the “Landlord”) for a writ of possession with respect to the unit occupied by Wheelhouse Coatings Inc. (the “Tenant”) in the building at 402 Mulock Drive in Newmarket, Ontario.

An earlier proceeding

[2]          The Landlord and the Tenant share an unhappy history. On December 9, 2020, a bailiff posted a lockout notice advising that the Landlord had terminated the lease for the unit occupied by the Tenant at 402 Mulock Drive (the “Lease”). On December 24, 2020, the Landlord entered the unit and removed all of the Tenant’s property. The Landlord leased the premises to a third party, which, in turn subleased a portion of the premises. On January 6, 2021, the Tenant issued a Notice of Action, alleging that the Landlord had illegally terminated the Lease and distrained the Tenant’s property. The Tenant also served a Notice of Motion on January 8, 2021, seeking various interlocutory relief, including an injunction and the return of the Second Security Deposit (the “Deposit”) in the amount of $65,000 held by the Landlord under s. 1.9 of the Lease.

[3]          Justice Bird found that, in re-entering the leased premises at the time that it did, the Landlord violated s. 82 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7 (the “CTA”), as amended by the Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020, S.O. 2020, c. 36, which received Royal Assent on December 8, 2020. That section provides that no landlord shall exercise a right of re-entry in respect of a tenancy referred to in ss. 80(1) or 80(2) during the applicable non-enforcement period. Justice Bird found that the non-enforcement period was in effect from December 8, 2020 to January 31, 2021. She noted that during the period from October 31, 2020 to December 8, 2021 there was nothing prohibiting landlords from re-entering the premises. She ordered the Landlord to give vacant possession of the portion of the leased premises not subject to subleases to the Tenant no later than April 15, 2021 and to deliver the Tenant’s property in its possession to the Tenant. She made no order in relation to the Deposit: see Wheelhouse Coatings Inc. v. 402 Mulock Investments Inc. et al, 2021 ONSC 2354.

The balance of the background

[4]          The balance of the relevant background can be briefly stated.

[5]          After Bird J. released her reasons, the Landlord invoiced the Tenant for a share of the cost to the Landlord of replacing the roof membrane, amortized over two years. The Landlord deducted the invoiced amount from the Deposit when the invoice was not paid. The Landlord asserted that s. 1.9 of the Lease required the Tenant to then “top up” the Deposit to $65,000 and relied on the Tenant’s failure to do so as a further default warranting an order granting it a writ of possession.

[6]          In response to the Landlord’s application, the Tenant argued that: under the Lease, it was not required to pay the invoiced amount; s. 1.9 of the Lease required the Landlord to have returned the Deposit on September 30, 2020 or, in the alternative, on August 14, 2020; and, even if it were required to pay the invoice, since the Landlord should have returned the Deposit on September 30, 2020, or, in the alternative, on August 14, 2020, it was not required to “top up” the Deposit.

[7]          The application judge held that the invoice was in conformity with ss. 2.6 and 1.6 of the Lease and was payable by the Tenant; however, s. 1.9 of the Lease required the Landlord to have returned the Deposit in August 2020. As such, the Landlord should not have deducted the invoiced amount from the Deposit and no “top up” of the Deposit was required. The application judge ordered the Tenant to pay the invoice, amortized over two years, and declared that the Landlord should have returned the Deposit on August 15, 2017. She offset the amount of the invoice against the Deposit to determine, and order, the net amount to be paid by the Landlord to the Tenant. The application judge declined to issue a writ of possession.

[8]          The Landlord appeals the application judge’s order declaring that it should have returned the Deposit. Counsel for the Landlord advises that because the Lease expires shortly, the Landlord no longer strenuously seeks a writ of possession.[1]

[9]          The Tenant cross-appeals, arguing that the application judge erred in concluding that the invoice was in accordance with ss. 2.6 and 1.6 of the Lease and permitting the Landlord to deduct the amount of the invoice from the Deposit before returning the balance of the Deposit to the Tenant.

[10]      For the following reasons, I would allow both the appeal and the cross-appeal.

The appeal

[11]      The Landlord argues that the application judge committed reviewable errors (1) by failing to conclude that the issue of the return of the Deposit had been judicially considered by Bird J. and was barred by res judicata or as an abuse of process; (2) by declaring that it should have returned the Deposit in the absence of a motion or counter-application for return of the Deposit; and (3) even if the issue of the return of the Deposit could properly be determined by her, by interpreting s. 1.9 of the Lease as requiring the return of the Deposit in the absence of evidence that the Tenant was not in default on August 14, 2020.

[12]      I disagree that the application judge was barred from considering the issue of the return of the Deposit by res judicata or as an abuse of process.

[13]      Nor do I agree that the application judge erred by declaring that the Landlord should have returned the Deposit in the absence of a counter-application for declaratory relief.

[14]      However, I agree that the application judge’s declaration that the Landlord should have returned the Deposit rests on an interpretation of s. 1.9 of the Lease that cannot stand.

Res judicata and abuse of process not made out

[15]      But for citing Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460 and Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, the Landlord advanced no specific argument on its submission that the issue of whether the Deposit should be returned was barred by res judicata or as an abuse of process.

[16]      Res judicata prevents the re-litigation of previously adjudicated and finally decided matters. There are two branches of res judicata: cause of action estoppel and issue estoppel: Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company), 2021 ONCA 141, 457 D.L.R. (4^th) 530, at para. 31.

[17]      Cause of action estoppel precludes the parties from litigating claims that have been determined in a prior action: Dosen, at para. 31. It applies where the basis of the cause of action was argued or could have been argued in the prior action through the exercise of reasonable diligence. The same parties must be involved in the subsequent litigation and the underlying decision must be final: The Catalyst Capital Group Inc. v. VimpelCom Ltd., 2019 ONCA 354, 145 O.R. (3d) 759, at paras. 50-51. 

[18]      Issue estoppel precludes the re-litigation of issues that have been previously decided in another proceeding: Dosen, at para. 32. Three preconditions are required. First, the same issue must have been decided. Second, the judicial decision giving rise to the estoppel must be final. Third, the parties to the judicial decision must be the same persons as those in the proceeding in which the estoppel is raised, or their privies: Toronto (City), at para. 23. If the criteria are met, the court must determine whether, as a matter of discretion, issue estoppel ought to be applied: Danyluk, at para. 33.

[19]      Abuse of process engages the inherent and residual discretion of the court to prevent the misuse of its procedure: Toronto (City), at para. 35. The doctrine of abuse of process is characterized by its flexibility as it is unencumbered by specific requirements: Behn v. Moulton Contracting Ltd., 2013 SCC 26, [2013] 2 S.C.R. 227, at para. 40. As a result, it may be relied on to prevent re-litigation in circumstances that violate judicial economy, consistency, finality, and the integrity of the administration of justice. The primary focus of the doctrine is the integrity of the courts’ adjudicative functions, but it arises in an array of contexts: Toronto (City), at paras. 36-37, 43. 

[20]      The preconditions to cause of action estoppel and issue estoppel are not made out. Moreover, I see no error in the application judge’s tacit rejection of the Landlord’s abuse of process argument.

[21]      As counsel for the Tenant submits, and as counsel for the Landlord acknowledged in his submissions before the application judge, although the Tenant sought the return of the Deposit in its Notice of Motion, Bird J. indicated she would only deal with the issue of the applicability of Part IV of the CTA and what remedy was appropriate if the re-entry was unlawful. In considering whether injunctive relief should be granted to the Tenant, she addressed the Landlord’s argument that, given the Tenant’s history of being in arrears of rent, it would be negatively impacted if the Tenant were reinstalled in the premises. Bird J. wrote at para. 35 of Wheelhouse Coatings Inc. that,

However, the landlord still has the $65,000 security deposit along with last month’s rent. There is no evidence that [the Tenant] was a problematic tenant in any way other than being behind in the payment of rent from time to time. Further, the landlord will be entitled to take any action legally available to it in the future if [the Tenant] falls into arrears again.

[22]      She accurately reflected the state of events: the Landlord still had the Deposit because she had not dealt with the issue. She contemplated that the Landlord might take future action, and it did. Among other reasons, the issue of whether the Landlord was entitled to retain the Deposit was not res judicata because Bird J. did not decide whether the Landlord was entitled to retain the Deposit.

[23]      I reject the Landlord’s argument that, even if not determined by Bird J., the issue of the Deposit is barred by cause of action estoppel because the Tenant could have argued the issue before Bird J. The Landlord says that the Tenant could have brought the issue of the Landlord’s right to retain the Deposit back before Bird J. or appealed the order of Bird J. on the basis that she erred by not addressing all the relief sought by the Tenant in its Notice of Motion.

[24]      The Tenant sought to have the issue of the Deposit determined by Bird J. The issue was not determined because Bird J. decided not to determine it. I note that the Landlord brought its application for a writ of possession on May 13, 2021, only about six weeks after Bird J. released her reasons. Bird J. stipulated that the Tenant would resume its tenancy no later than April 15, 2021, as long as the Tenant paid the arrears owing from November 2020 and the rent payable from December 1, 2020 to December 8, 2020, and that between April 15, 2021 and April 30, 2021 no rent would be payable in recognition of the fact that the Tenant would require time to move into the premises and set up its operations. The application put in issue whether the Landlord was entitled to have retained the Deposit. It was relevant to whether the Landlord was entitled to the writ of possession it sought. In my view, in these circumstances, it cannot be said that the issue of the Deposit could have been argued before Bird J. through the exercise of reasonable diligence.

[25]      In all the circumstances, raising the issue of the Landlord’s entitlement to the Deposit before the application judge, in response to the Landlord’s application for a writ of possession, was not a misuse of the court’s procedure and not an abuse of process. It was likely the most efficient manner of determining the issue.

No error in granting declaratory relief

[26]      The application judge had to consider whether the facts underlying the Landlord’s application for the writ of possession were made out, including whether the Landlord was entitled to deduct the amount of the invoice from the Deposit and require the Tenant to “top up” the Deposit, or whether, as the Tenant argued, the Landlord should have returned the Deposit. Having made those determinations, she appropriately declared in her judgment that the Landlord should have returned the Deposit. Doing so provided clarity that the issue was judicially determined.

The interpretation of s. 1.9 of the Lease

[27]      The Lease was made effective July 11, 2017 and was amended to insert s. 1.9 by an Amendment to Agreement to Lease made September 21, 2017. Section 1.9 provides as follows:

Tenant shall pay directly to the Landlord a Second Security Deposit of Sixty-Five Thousand Dollars ($65,000.00), upon execution of this Amendment.… The Landlord may, at its option, apply all or any portion of the Second Security Deposit to any Tenant default. In the event that all or any portion of the Second Security Deposit is applied by the Landlord on account of any Tenant default, the Tenant shall pay to the Landlord an amount sufficient to restore the Second Security Deposit to the original amount set out hereunder. The Second Security Deposit shall be held for a period of Three (3) Years from the Commencement Date, August 15, 2017. At the end of the Three (3) Year period, on August 14, 2020, and provided that the tenant is not then in default at that time, the Second Security Deposit shall be returned to the Tenant, and provided there has been no deduction from the amount of the Second Security Deposit by the Landlord as a result of default by the Tenant, without any setoff or deduction. If the amount of the Second Security Deposit has been reduced as a result of the Tenants default, then the remaining amount of the Second Security Deposit shall be returned to the Tenant. [Emphasis added.]

[28]      The application judge concluded as follows at para. 18 of Wheelhouse Coatings Inc.:

It does appear from a plain reading of clause 1.9 of the agreement that regardless of whether or not the tenant is in default, the [Deposit] is supposed to be returned to the tenant in whole or in part with the landlord being entitled to deduct the amount in default from the portion that is to be returned to the tenant. Regardless of whether or not I accept that [the Tenant] was in default in August 2020, no deduction from the [Deposit] was made by the landlord at that time. I agree with counsel for [the Tenant] that this [Deposit] should have been returned in August 2020 per clause 1.9 of the lease.

[29]      Contractual interpretation involves issues of mixed fact and law and is subject to appellate deference, unless there is an extricable question of law: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 52-53. The exception is standard form contracts, which is not relevant here: Corner Brook (City) v. Bailey, 2021 SCC 29, 460 D.L.R. (4th) 169, at para. 44.

[30]      Respectfully, the application judge’s interpretation gives no effect to the clear provision that the Deposit shall be returned in August 2020, “provided that the tenant is not then in default at that time” (emphasis added) and is clearly wrong. In this instance, deference is displaced. The only interpretation of the Lease that gives effect to that clear proviso – and therefore the only reasonable interpretation of the Lease – is that if the tenant was in default on August 14, 2020, the Landlord was entitled to continue to hold the Deposit for the remainder of the term of the Lease and, on the expiry of the Lease, is required to return the then remaining amount of the Deposit (if any) to the Tenant. The Tenant was entitled to have the Deposit returned to it on August 14, 2020 only if not in default at that time.

[31]      In addition to being the only interpretation available on the clear wording of the Lease, this interpretation makes commercial sense. If the Tenant were in default three years into the Lease, the parties would reasonably expect that the Landlord would retain the Deposit as a cushion against further defaults. 

[32]      The next question is whether the Tenant was in default under the Lease on August 14, 2020. Regrettably, the application judge concluded that it was unnecessary to address this issue.

[33]      The record filed on this appeal, and, I understand, on the application, includes material that was before Bird J. and both parties relied on it in their submissions. Both the Landlord’s and the Tenant’s summaries of rent paid that were in the record before Bird J. show that rent for August 2020 was not paid when due on August 1. Indeed, the Tenant concedes that, if amounts subsequently paid by the government under the Canada Emergency Commercial Rent Assistance Program relative to the month of August 2020 are not treated as, in fact, having been paid as of August 1, 2020 (or at least by August 14, 2020), the Tenant was in default under the Lease on August 14, 2020.[2] The Lease requires rent to be paid monthly in advance and the Tenant does not point to any agreement or legislative provision to the effect that government rent subsidies shall be deemed to have been paid by tenants or received by landlords or that rent should be deemed to be forgiven or reduced when the rent was due. Accordingly, based on the record, I find that the Tenant was in default on August 14, 2020. Therefore, the Landlord was not required to return the Deposit. To give effect to this, I would strike paragraph 2 of the judgment of the application judge.

[34]      The Tenant renews the argument that it made to the application judge that the August 14, 2020 date is a clear mistake because the Lease, which was made effective as of July 11, 2017, provides in s. 1.2 that the term of the Lease shall commence on October 1, 2017, defines October 1, 2017 (and not August 15, 2017) as the “Commencement Date”, and provides that the Lease shall end on the 5^th anniversary of the Commencement Date. Thus, the Tenant argues, the version of s. 1.9 at issue, contained in the Amendment to Agreement to Lease, which was not accepted until September 21, 2017, should have referred to October 1, 2017 as the Commencement Date; therefore the relevant question is whether the Tenant was in default on September 30, 2020. Moreover, the Tenant submits, the Landlord’s own summary of rent payments shows that the Tenant was not in default on September 30, 2020.

[35]      The Landlord disagrees that the applicable date is September 30, 2020.

[36]      The application judge did not address this argument.

[37]      The Tenant effectively asked the application judge (and asks this court) to grant the equitable remedy of rectification, without reference to the legal principles as to when such a remedy is available, and in the absence of an application for such a remedy. This is different from countering an application for a writ of possession by arguing that the Tenant is not in default of the Lease, properly interpreted. In my view, the application judge correctly did not consider this argument.  

The cross-appeal

[38]      The application judge agreed with the Landlord that, by operation of sections 2.6 and 1.6 of the Lease, the cost of replacing the roof membrane was to be amortized as Additional Rent. She accepted that the Tenant’s share of the cost was based on the total rentable area of the building. She concluded that the Tenant was responsible for paying the invoice, which amortized the cost over two years.

[39]      Sections 2.6 and 1.6 of the Lease provide, in relevant part, as follows:

2.6  Landlord’s Maintenance

The Landlord shall be responsible, at its own cost, for any major repairs to, or replacement of, structural components of the building, unless caused by the Tenant’s activities or negligence.

The Landlord shall be responsible for maintaining, repairing, and/or replacing the roof membrane, flashings etc., exterior windows and doors serving the Leased Premises and amortizing this cost in the Additional Rent;

…

1.6  Additional Rent

It is intended that Lease shall be a net lease and to the Landlord except for the obligations set out herein as being the responsibility of the Landlord. Without limiting the foregoing, the Tenant shall pay as Additional Rent in equal monthly payments in advance based on the Landlord’s reasonable estimates, the Tenant’s proportionate share (based upon the total rentable area of the Building) of all taxes and other actual costs and expenses incurred by the Landlord in maintaining, operating, repairing, replacing, and managing the Lands and the Building. The Landlord estimates that the Additional Rent is Two Dollars and Forty Cents ($2.40) per sq. ft. per annum in the first year of the lease….

Notwithstanding the foregoing, (i) the landlord shall, at its own expense, be responsible for all structural repairs or replacements and all work done specifically for other tenants, (ii) any other capital repairs or replacements shall be amortized over the useful life of the repair or replacement determined in accordance with generally accepted accounting [principles], consistently applied, and (iii) the Landlord’s management and administration fees shall not exceed fifteen percent (15%) of the Additional Rent excluding taxes and insurance. [Bold in original; underlining added.]

[40]      In its cross-appeal, the Tenant argues that the application judge’s interpretation of these sections is tainted by four palpable and overriding errors or extricable questions of law. I address them in turn. I reject the first three arguments but accept the fourth.

[41]      First, the Tenant argues that the application judge’s rejection of its interpretation of ss. 2.6 and 1.6 amounts to a palpable and overriding error. The Tenant submits that its responsibility for costs relating to roof repairs is limited to the cost of repairing the portion of the roof covering its specific unit and that the repairs for which it was invoiced relate to other units. The Tenant argues that, contrary to the application judge’s conclusion, the words “serving the Leased Premises” in s. 2.6 make clear that its responsibility for costs is limited to the roof covering its unit.

[42]      I disagree. Section 2.6 describes the Landlord’s obligation to the Tenant to, among other things, maintain, repair, and/or replace the roof membrane serving the Leased Premises. Section 2.6 is not about who is to pay the Landlord’s costs of fulfilling that obligation. I agree with the application judge that s. 1.6 addresses the extent to which such costs are to be paid by the Tenant as Additional Rent. In any event, the evidence before the application judge was that the roof membrane of the roof for the entire building was being replaced. 

[43]      Second, the Tenant argues that the application judge’s interpretation of s. 1.6 was tainted by palpable and overriding error or by an extricable error of law because she failed to consider whether the replacement of the roof membrane is a structural repair or replacement, within the meaning of s. 1.6 or made a clear error in concluding that it was not. Counsel for the Tenant cites several cases which consider whether work on a roof constituted structural repairs within the meaning of that term in a lease.

[44]      The application judge adverted to the Tenant’s argument that the work done to the roof constituted structural repairs and that under the Lease the tenant was not required to pay for structural repairs and implicitly rejected it. There is no extricable error of law, and I am not persuaded that this amounts to a palpable and overriding error.

[45]      The cases cited by the Tenant are ultimately of little assistance. Whether the replacement of the roof membrane constitutes “structural repairs” within the meaning of that term in s. 1.6 must be determined with regard to the facts and the terms of the lease in this case. 

[46]      The evidence of Matthew Gabriele, an officer of the Landlord, was that the repairs in question were the replacement of the roof membrane for the entire building. The meaning of “structural repairs” in s. 1.6 was properly interpreted with regard to the provisions of the Lease – in particular, s. 2.6, which makes clear that “maintaining, repairing, and/or replacing the roof membrane” is not included in any “major repairs to, or replacements of, structural components of the building”. This is because the second paragraph of s. 2.6, which addresses the cost of replacing the roof membrane is not specified as applying “notwithstanding the preceding paragraph”. This signals that what is described in the second paragraph (replacing the roof membrane) is different from what is described in the first paragraph (major repairs to, or replacements of, structural components of the building). Section 2.6 specifically indicates that – unlike the costs of structural repairs – the cost of replacing the roof membrane is to be amortized in the Additional Rent.

[47]      Third, the Tenant argues that the replacement of the roof membrane did not relate to the “Leased Premises” and therefore could only relate to the premises of a different or other tenant. Thus, it submits, the roof repairs were “done specifically for other tenants” within the meaning of that phrase in s. 1.6. I reject this argument. While explored in the cross-examination of Matthew Gabriele, this argument was not developed in the Tenant’s closing submissions to the application judge. Moreover, the evidence of Matthew Gabriele was that the contract in relation to the roof was for the whole roof and the Tenant acknowledges in its factum that his evidence was that roof repairs related in part to the Leased Premises. The record supports that the roof repairs were not “done specifically for other tenants”.

[48]      Regrettably, the application judge did not advert to or address the Tenant’s fourth and final argument, squarely raised below, that, if not a structural repair, the replacement of the roof membrane was a capital replacement within the meaning of s. 1.6 and therefore was to be amortized over its useful life, determined in accordance with generally accepted accounting principles, consistently applied.

[49]      The total cost of the roof replacement exceeded $500,000. Below, counsel for the Landlord argued that this cost is a maintenance expense, and not a capital expense, and that as the Landlord’s costs were spread over two years, the charges to the Tenant as additional rent were properly spread over two years. 

[50]      Before the application judge, counsel for the Landlord also argued that it was in any event unnecessary for the application judge to consider s. 1.6 of the Lease. In his submission, it could have no application because the replacement of the roof membrane was specifically covered by the Lease. I assume he refers to the fact that the replacement of the roof membrane is specifically referred to in s. 2.6. That section says that the cost of the replacement of the roof membrane is to be amortized as Additional Rent, but it does not specify how the Additional Rent is to be calculated or the applicable amortization period. Section 1.6 addresses how Additional Rent is to be calculated, and how the costs are to be amortized in the case of capital repairs or replacements. The Landlord relies on the first paragraph of s. 1.6 to say that the Tenant’s proportionate share is to be calculated based on the total rentable area of the building. It is inconsistent for the Landlord to assert that the second paragraph of s. 1.6 – which is prefaced by language indicating that it applies “notwithstanding the foregoing” – does not apply. Counsel for the Landlord’s argument is illogical and untenable. If the application judge accepted it, she was clearly wrong in doing so.

[51]      Counsel for the Tenant pointed to the invoices from the roofing company indicating that there is a 20-year non-pro-rated warranty for workmanship and materials, and, based on that warranty, argued that the useful life of the replacement roof membrane is at least 20 years.

[52]      Neither party adduced expert accounting evidence about the useful life of the replacement roof membrane, determined in accordance with generally accepted accounting principles. In his affidavit dated June 24, 2021, the Tenant’s affiant, Vincent Ursini, asserted that the costs were a capital expense. In his email to the Tenant submitting the invoice, Michael Gabriele described it as an “invoice for [a] maintenance fee shortfall” for 2020 and in an affidavit he denied that it is a capital expense. However, in cross-examination he acknowledged that it is a capital repair or replacement. When asked, with reference to s. 1.6, if the roof work was done for a different tenant and accordingly was not billable to the Tenant, he replied:

Well, this is a greater contract for the replacement of the whole roof, and section [(ii)] of the same paragraph says: “Any capital repairs or replacements shall be amortized over the useful life of the repair or replacement.” And our TMI has a line item for the amortization of the roof, which is what makes up part of the TMI.

[53]      Based on Mr. Gabriele’s evidence, I accept that the replacement of the roof membrane for the entire building was a capital repair or replacement. Accordingly, the question is whether the useful life of the new roof membrane, determined in accordance with generally accepted accounting principles, consistently applied, was two years, the twenty years the Tenant asserts, or some other period. But, as noted above, there is no expert accounting evidence on this issue.

[54]      The Landlord’s application was solely for a writ of possession. It did not seek declaratory relief as to the amount of Additional Rent it is entitled to charge the Tenant as a result of replacing the roof membrane. And the Tenant did not bring a cross-application, seeking a determination of the amount it was required to pay the Landlord. In the circumstances, I would strike paragraph 1 of the application judge’s judgment, declaring that the Tenant is responsible for the payment of the invoice, and paragraph 3 of the judgment, which gives effect to that calculation, without prejudice to either party seeking a determination of the applicable amortization period and, as a consequence, the amount of Additional Rent payable by the Tenant as a result of the replacement of the roof membrane.

Disposition

[55]      I would allow the appeal and the cross-appeal and strike paragraphs 1 through 3 of the judgment of the application judge. Given the mixed success, I would order that there shall be no costs of the appeal or the cross-appeal.

Released: October 21, 2022 “K.F.”

 

 

“Alexandra Hoy J.A.”

“I agree. K. Feldman J.A.”

“I agree. P. Lauwers J.A.”