1183882 Alberta Ltd. operating as Sok ’ s Contracting Plaintiff - v. -, 2011 ABQB 440

Court of Queen ’ s Bench of Alberta Citation: 1183882 Alberta Ltd. (Sok ’ s Contracting) v. Valin Industrial Mill Installations Ltd., 2011 ABQB 440 Date: 20110707 Docket: BK24 115444, 1103 07673 Registry: Edmonton In the Matter of the Bankruptcy and Insolvency Act And In The Matter of 1183882 Alberta Ltd., operating as Sok's Contracting Between: 1183882 Alberta Ltd. operating as Sok ’ s Contracting Plaintiff - and - Valin Industrial Mill Installations Ltd. Defendant _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.E. Topolniski _______________________________________________________

I. Introduction [ 1 ] Two cross applications arise from a tenant ’ s purported exercise of an option to purchase lands [Option] granted in a commercial lease. The lease, made February 4, 2008 between 1183882 Alberta Ltd. as tenant [Sok ’ s] and Valin Industrial Mill Installations Ltd. [Valin] as landlord [Lease]. The term was for one year commencing November 1, 2008 and expiring October 31, 2009. [ 2 ] The Lease was extended pursuant to an oral agreement to April 30, 2009. Later, the parties extended it again by written agreement made April 8, 2010 [Extension Agreement].

The Extension Agreement extended the term of the Lease from May 1, 2010 until April 30, 2011. The same rents were payable under the Extension Agreement as during the original term of the Lease. [ 3 ] The applications mirror one another. Sok ’ s seeks a declaration that it validly exercised the Option and asks for relief against forfeiture should that be necessary. In turn, Valin seeks a declaration that exercise of the Option by Sok ’ s was invalid and an order discharging the caveat filed by Sok ’ s on March 8, 2011 against title to the leased premises. II.

Preliminary Issues [ 4 ] Valin requires leave to proceed with its originating notice and this application since all proceedings against Sok ’ s have been stayed as a consequence of it making a proposal to its creditors under Division I of the Bankruptcy and Insolvency Act , 1985 RSC 1985, c B-3 [ BIA ]. Sok ’ s consents to that application. [ 5 ] Sok ’ s sued Valin in the Judicial District of Edmonton for damages alleged to have been incurred as a result of Valin ’ s refusal to honour the Option. Valin ’ s originating notice was filed in the Judicial District of Peace River.

It asks that its action be transferred to the Judicial District of Edmonton. Sok ’ s also consents to that application. [ 6 ] In light of the consent by Sok ’ s to both applications and the fact that no other creditor is affected, the applications are granted. III. Background A.

The Lease and the Option [ 7 ] Clause 7 of the Lease describes the events of default, including failure of the lessee to pay the rent or “ any other sum required to be paid to the Lessor by any provision ” of the Lease, and such default continuing for 15 days “ after notice thereof given by the Lessor to the Lessee ” (clause 7.1.1(a)). [ 8 ] Clause 7.1.1(

c) provides that the lessee is in default if it seeks relief under any insolvency legislation, in which case the current and next month ’ s rent are due and payable (Insolvency Cause). [ 9 ] The Option, contained in clause 9 of the Lease, was continued under the Extension Agreement. The Extension Agreement did not state a date by which it had to be exercised.

[ 10 ] Clause 9 of the Lease reads, in part: If the Lessee is not in default of the terms of this Lease, the Lessee shall be granted an option to purchase the demised premises on September 1, 2009 at a price equal to the fair market value of the Demised Premises. [ 11 ] Clause 9 also specifies that: 1. The lessee is credited 40 percent of the basic rents paid under the Lease towards the purchase price. 2. The Option is open for acceptance for 30 days after September 1, 2009 by the lessee delivering written notice to the lessor ’ s solicitor together with a $10,000 deposit. 3.

Within 15 days of the lessee ’ s delivery of written notice and the deposit, the lessor is to deliver transfer documents under trust conditions. 4. Closing of the transaction is 30 days after delivery of the lessee ’ s written notice and the deposit. B. Sok ’ s BIA Proceedings [ 12 ] Sok ’ s filed a notice of intention to make a proposal to its creditors on October 15, 2010 [NOI]. It delivered its proposal to its creditors on March 7, 2011. The creditors ’ meeting was adjourned twice, but on April 26, 2011 the creditors voted in favour of the proposal.

On May 17, 2011, the same day this application was heard, I granted an order sanctioning the proposal. [ 13 ] Filing of the NOI resulted in a stay of any proceedings against Sok ’ s( BIA , s 69(1)(a)). The stay, which was extended by court order ( BIA , s 69.1), prevented Valin from enforcing the Lease or seeking any remedy against Sok ’ s. [ 14 ] The NOI also triggered the Insolvency Clause. C. Exercise of the Option by Sok ’ s [ 15 ] On February 25, 2011, counsel for Sok ’ s notified Valin ’ s counsel in writing that his client was exercising the Option and enclosed the requisite deposit.

On March 7, 2011, Valin ’ s counsel returned the deposit, advising that the window for exercising the Option had closed on September 30, 2009. Counsel for Sok ’ s volleyed back with a letter the same day challenging Valin ’ s position and once again enclosing the deposit. Also that day, Sok ’ s registered a caveat against the title to the leased premises [Caveat]. [ 16 ] On May 6, 2011, Sok ’ s “ re-tendered ” the April 2011 rent that Valin claimed was outstanding. It asserts that it did so “ out of an abundance of caution. ” IV. The Parties ’ Positions [ 17 ] Sok ’ s submits that:

(

a) a plain reading of the Lease and the Extension Agreement shows that it validly exercised the Option on February 25, 2011; (

b) alternatively, it exercised the Option on March 7, 2011 by once again sending the deposit to Valin’s counsel; (

c) in any event, its “re-tendering” of rents on May 6, 2011 cured any breach caused by (alleged) late payments due under the Lease; (

d) the Insolvency Clause is contrary to public policy as it undermines the general rules of liquidation contemplated by the BIA; and (

e) any breach by it of the Lease was so trivial that relief from forfeiture should be granted. Sok’s points to the value of the Option($112,500) and argues that it would be unjust to allow Valin to enjoy the windfall it would obtain if exercise of the Option by Sok’s isruled invalid. [18] Valin now concedes that the purported exercise by Sok’s of the Option on February 25, 2011 was timely, but maintains it wasinvalid nevertheless given that: (

i) Sok’s was in arrears of rent on both February 25, 2011 and March 7, 2011 and, therefore, was in default under the Lease; and (ii) Sok’s was in default under the Lease as a result of having filed the NOI. [19] Valin contends that relief from forfeiture, as requested by Sok’s, is unavailable in these circumstances, and even if it is,Sok’s should not be granted such relief. V. The Issues [20] The following issues arise on these applications: A. Was Sok’s entitled to exercise the Option? B. If not, can or should Sok’s be granted relief against forfeiture? VI. General Principles A.

The Onus [21] Sok’s bears the onus of establishing that it was not in default when it purported to exercise the Option, although it is notobliged to prove perfect or punctual performance of its obligations under the Lease (Fingold v. Hunter, (ON CA),[1944] 3 DLR 43 at 46 (Ont CA) [Fingold]). B. Interpreting the Lease

[22] The following are well known principles of contract

interpretation: 1. Contracts are governed by the words of the agreement. 2. The goal of contract

interpretation is to give effect to the parties’ true intention; an intention that is to be found in the firstinstance in the operative words of the document, read as a whole, giving meaning to every provision if that is possible. 3. Words are to be given their plain, ordinary meaning, unless to do so would result in absurdity. 4. In cases of doubt, as a last resort, language should always be construed against the grantor or the promisor under the contract. 5. Where an agreement is susceptible of two or more reasonable alternative meanings, evidence of the subsequent conduct of theparties is admissible as an aid to resolving the ambiguity if the conduct is more consistent with one

interpretation than the other. (Scurry-Rainbow Oil v. Kasha (1996), 1996 ABCA 206 , 184 AR 177 at paras 43-44 (CA); Chitty on Contracts, 24th ed(London: Sweet & Maxwell, 1977) at para 713; and Fridman, Law of Contract in Canada, 5th ed (Toronto: Carswell, 2006) at 454-462). VII. Analysis A. Was Sok’s Entitled to Exercise the Option? [23] Valin alleges that Sok’s was in default of its covenants under the Lease and, therefore, was precluded from exercising theOption on February 25, 2011 and March 7, 2011 because: (

i) it failed to make timely rent payments; (ii) it either failed to prepay the last month’s rent due under the Extension Agreement or to pay the April 2010 rent; and (iii) the Insolvency Clause had been triggered. 1. Timely payment of rent [24] Clause 7.1.1(

a) of the Lease states that the lessee is in default if it fails to pay the rent when due “... and such default shallcontinue for Fifteen days after notice thereof by the Lessor to the Lessee.” [25] Sok’s was late in making its monthly rental payment on a number of occasions during the terms of the Lease and theExtension Agreement, but these breaches had been remedied before Sok’s first purported to exercise the Option on February 25, 2011. [26] The doctrine of “spent breach” precludes a landlord from relying on historic remedied breaches as a means of avoiding atenant’s exercise of an option in a lease (Sail Labrador Ltd. v. The Challenge One, (SCC), [1999] 1 SCR 265 at paras

68 and 69 ; Bass Holdings Ltd. v. Morton Music Ltd . , [1987] 2 All ER 1001 ; 1290079 Ontario Inc. v. Beltsos , 2010 ONSC 4967 , 97 RPR (4th) 238 ; appeal dismissed 2011 ONCA 334 at para 29 ; Fingold ). [ 27 ] Accordingly, these particular breaches do not invalidate exercise of the Option by Sok ’ s. 2. Prepayment of the last month ’ s rent due under the Extension Agreement and payment of the April 2010 rent [ 28 ] Clause 3.1 of the Lease indicates that the last month ’ s rent (October 2009) is to be prepaid in November 2008.

The Extension Agreement continues all terms of the Lease which it does not expressly address.

Accordingly, prepayment of the last month ’ s rent for the term provided by the Extension Agreement (expiring April 2011) was required in May 2010, the first month of the term under the Extension Agreement. [ 29 ] Sok ’ s prepaid the last month ’ s rent due under the Lease, but there is some dispute about the status of the last month ’ s rent due under the Extension Agreement. [ 30 ] Evidence proffered by Valin establishes that Sok ’ s prepaid the April 2011 rent, but this payment later was applied by Valin to satisfy arrears for April 2010 pursuant to an oral agreement between the parties.

Valin subsequently wrote to Sok ’ s on October 13, 2010 demanding immediate delivery of a certified cheque for the April 2011 rent “ to get back on track ” with the Lease [Demand Letter]. [ 31 ] Sok ’ s did not send a substitute payment for the April 2011 rent until May 6, 2011, which was after its purported exercise of the Option. I find that it was in breach of its obligation under the Lease in that regard.

Even if I had found that the covenant regarding prepayment of the last month ’ s rent had been fulfilled by the initial payment by Sok ’ s, I would have found that Sok ’ s was in breach of its obligations under the Lease for having failed to remedy its previous default in rent payment. [ 32 ] The existence of rental arrears (one way or the other) does not end the inquiry since the Lease provides that the failure to make a payment when due will only be considered

an act of default if it continues for 15 days after Valin has given notice to Sok ’ s. In my view, the Demand Letter constituted proper notice of the default. It was close to seven months after the notice was given that Sok ’ s sent payment for the April 2011 rent, obviously well past the 15 day deadline. Accordingly, I find that it was in breach of the Lease when it purported to exercise the Option on February 25, 2011 and again on March 7, 2011. 3.

The Insolvency Clause [ 33 ] The Insolvency Clause of the Lease (clause 7.1.1(c)) provides that a default occurs if the lessee makes application for relief under the provisions of any statute concerning bankrupt or insolvent debtors.

In such event, the current month ’ s rent together with the next month ’ s rent are due and payable immediately. [ 34 ] Sok ’ s maintains that the Insolvency Clause is void as against public policy as it ignores the application of the BIA by purporting to give Valin a remedy despite the NOI, citing in support of its argument Ex Parte MacKay (1872-73), 8 LR Ch App 643; Ex Parte Jay (1880), 14 Ch D 19 ; British Eagle v.

Air France , [1975] 1 WLR 758 [ British Eagle ] ; and Re Westerman , 1998 ABQB 946 , 234 AR 37 , Registrar, overturned on other grounds 1999 ABQB 708 , 275 AR 114 (QB) . [ 35 ] The principle espoused in Ex Parte MacKay at p 648 and adopted in Ex Parte Jay and British Eagle is that a person cannot … “ make it part of his contract that, in the event of bankruptcy, he is then to get some additional advantage which prevents the property from being distributed under the bankruptcy law. ” [ 36 ] The issue in Ex Parte MacKay was whether an unsecured liability could be converted to a secured one by an event of bankruptcy.

The court concluded that it could not.

[37] Ex Parte Jay concerned a builder who entered into a ninety-nine year lease with the owner and agreed to forfeit allimprovements, materials, and effects on the leased land in the event of bankruptcy.

A secured creditor (mortgagor) successfullycontested the agreement after the builder’s bankruptcy. [38] British Eagle is cited by Sok’s for the proposition that the principle in Ex Parte MacKay applies to a voluntary winding upproceeding even if the parties did not address their minds to the effect of an impugned provision when they made their contract. [39] In Coopérants, Mutual Life Insurance Society (Liquidator of) v.

Dubois, (SCC), [1996] 1 SCR 900, theSupreme Court of Canada considered a clause in an agreement which provided that the undivided share of certain real property belongingto a company being wound up must be sold to the other undivided co-owner for 75 percent of its market value.

After reviewing thepurpose of the Winding Up Act (at para 37), Gonthier J, who delivered the English version of the judgment, commented (at para 41) thatin exercising their discretion in such cases, courts should respect pre-liquidation contracts that were made in good faith unless theobligations are prejudicial to other creditors and give rise to an unjust preference, in which case equitable relief will be available. [40] Registrar Quinn in Re Westerman found that a covenant in a partnership agreement to surrender 50 percent of the lawyer’scapital account to his partners in the event of that lawyer’s bankruptcy prejudiced other creditors.

At para. 23, he stated: The liability of the bankrupt to the partnership did not arise until the bankruptcy occurred, whereas the bankrupt was indebted to hiscreditors before that, may be even long before that. To allow the partnership to take 50% of what is probably the bankrupt's largestavailable asset would be to grant an unjust preference to the Partnership.

Moreover, the claims of the other Creditors are in specificascertained amounts, whereas any monetary loss incurred by the Partnership by the expulsion of bankrupt partner is a purely speculativeamount in the nature of a damage claim. [41] On appeal, Agrios J agreed that the provision in the partnership agreement that the non-insolvent partner could purchase theinterest of the insolvent partner at a price below market value was void as being contrary to the public policy.

However, he concludedthat the Registrar was in error in holding that the secured creditor had no authority to settle the value of the capital account and to give adischarge of the security. [42] In Canadian Imperial Bank of Commerce v. Bramalea Inc. (1995), (ON SC), 33 OR (3d) 692 (Ont Ct(Gen Div)) [CIBC], Blair J (as he then was) noted that provisions such as those discussed above are sometimes referred to as “fraud uponthe bankruptcy law.” He explained (at para 8) that this does not necessarily mean "fraud" in the sense of dishonesty or impropriety, butrather fraud in effect.

He referred (at para 8) to the following passage from Borland’s Trustee v.

Steel Brothers & Co., [1901] Ch 279 at291, 70 LJ Ch 51, which concerned a share purchase agreement: If I came to the conclusion that there was any provision in these articles compelling persons to sell their shares in the event of bankruptcyat something less than the price that they would otherwise obtain, such a provision would be repugnant to the bankruptcy law…[Emphasis added in CIBC.] [43] The common thread in all of these cases is that giving effect to the impugned provision deprives the insolvent party’screditors of something of value to which they otherwise would be entitled.

The public policy concern is in ensuring an equitable and fairdistribution among unsecured creditors in insolvency situations (CIBC). [44] In my view, it is inappropriate to paint all insolvency proceedings with the same broad brush without regard to the nature ofthe proceeding, the effects of the impugned covenant, and all other relevant circumstances. [45] The effect of the Insolvency Clause here is to deprive Sok’s of the benefit of the Option.

If this were a bankruptcy or otherliquidation proceeding, it is possible that might be sufficient to establish that Sok’s creditors were being deprived of something of value,depending on all of the other circumstances. However, the present case concerns a BIA restructuring where the creditors voted in favourof the debtor’s proposal and the proposal has been sanctioned by the court. The proposal is premised on Sok’s continuing as a goingconcern.

[46] There is no evidence that the restructuring hinged on Sok’s being able to exercise the Option successfully or took into accountthe purchase price and value of the commercial premises. By the time of the creditors’ vote on the proposal, Sok’s knew that Valin wascontesting its purported exercise of the Option. [47] In my view, the only persons affected by the Insolvency Clause are Sok’s and Valin.

The creditors have not been prejudiced.Consequently, the higher principle of safeguarding the integrity of the insolvency system in these circumstances does not override theparties’ freedom of contract. [48] Filing of the NOI by Sok’s stayed Valin from taking enforcement proceedings or terminating the Lease (BIA s. 69.1).However, it did not eradicate the default (Alberta Health Services v. Networc Health Inc., 2010 ABQB 373, 28 Alta LR (5th) 118 atpara 48). B.

Can or Should Sok’s be Granted Relief from Forfeiture Available to Sok’s? [49] Clause 9 of the Lease reads in part: “[i]f the Lessee is not in default of the terms of this Lease, the Lessee shall be granted anoption to purchase the demised premises…” [50] The language of the Option in the present case is clear. The grant of the Option is conditional on the Lease being in goodstanding. Sok’s was in default at the time it purported to exercise the Option.

It now seeks relief from forfeiture of the Option. [51] Relief from forfeiture is a discretionary equitable remedy that this court can order under authority of the Judicature Act, RSA2000, c J-2. [52] The language of the Lease is important since relief from forfeiture, traditionally, was not available to excuse performance of acondition precedent (Finch v. Underwood (1875), 2 Ch D 310; Finn v. Finn (1983) (AB KB), 42 AR 255 at para 53(QB) [Finn]; Pierce v. Empey, (SCC), [1939] SCR 247; 1383421 Ontario Inc. v. Ole Miss Place Inc. (2003), (ON CA), 67 OR (3d) 161 at para 80 (CA) [1383421 Ontario], citing Ross v.

The T. Eaton Co. Ltd. (1992), (ON CA), 11 OR (3d) 115 at 125 (CA) and 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., [1993] OJ No 2801at para 9 (CA) (QL)). Stated otherwise, defaults caused by the tenant’s own want of diligence (as compared to the landlord havingcaused the default) preclude relief from forfeiture (1383421 Ontario). [53] As in the present case, Finn concerned the validity of a tenant’s exercise of an option to purchase under a lease.

The relevantportion of the option read: “[i]f the Tenant duly and regularly pays the said rent and performs all and every of the covenants, provisionsand agreements herein on the part of the Tenant to be paid and performed, the Tenant, during the term of this Lease, shall have theoption…” [54] Stratton J (as he then was) characterized the requirement of no default under the lease as a condition precedent to the right toexercise the option, stating at para 53: There is a very real distinction for certain purposes between the failure to perform a condition precedent on the one hand and the failureto perform normal tenant's covenants on the other.

Judson, J., in Sparkhall v. Watson, (ON SC), [1954] 2 D.L.R. 22, atp. 26 refers to that distinction in the following words: The distinction is clearly made out in Finch v. Underwood, 2 Ch. D. 310. Thecourt has power to relieve against forfeiture, but no power to excuse performance of conditions precedent. [55] Similarly, Lederer J in 1290079 Ontario Inc. v. Beltsos, 2010 ONSC 4967 [1290079 Ontario] ruled that default under a leaseprecluded relief from forfeiture where the tenant’s right to renew the lease was conditional on the lease being in good standing.

At para51, Lederer J quoted the following discussion in Union Eagle Limited v. Golden Achievement Ltd., [1997] 2 All ER 215 [Union Eagle]at para 9 concerning the rationale for limiting the availability of relief from forfeiture:

The principle that equity will restrain the enforcement of legal rights when it would be unconscionable to insist upon them has anattractive breadth. But the reasons why the courts have rejected such generalizations are founded not merely upon authority (see LordRadcliffe in Campbell Discount Co. Ltd. v. Bridge, [1962] A.C. 600,626) but also upon practical considerations of business. These are,in

summary, that in many forms of transaction it is of great importance that if something happens for which the contract has madeexpress provision, the parties will know with certainty that the terms of the contract will be enforced. The existence of an undefineddiscretion to refuse to enforce the contract on the ground that this would be ‘unconscionable’ is sufficient to create uncertainty. Even if itis most unlikely that a discretion to grant relief will be exercised, its mere existence enables litigation to be employed as a negotiatingtactic… [56] Lederer J also referred to Clark Auto Body Ltd. v.

Integra Custom Collision Ltd., 2007 BCCA 24 at para 30, 277 DLR (4th)201, in which Kirkpatrick JA for the British Columbia Court of Appeal explained that equity recognizes that a tenant may be permitted tocure non-observance of covenants in an existing lease and be relieved from forfeiture, thereby allowing the tenant to retain the balance ofthe term of the lease.

However, where there has been a failure to comply with conditions precedent to the exercise of an option, equitywill not intervene since the tenant does not suffer a penalty or forfeiture of the existing tenancy and there is no compulsion on the tenantto exercise the option in the first place. [57] In obiter, Lederer J in 1290079 Ontario said that even if the law were otherwise, he would refuse to exercise his discretion torelieve against forfeiture.

On appeal, MacPherson JA for the Ontario Court of Appeal indicated that the court would not interfere withthe trial judge's exercise of discretion in refusing to grant equitable relief (2011 ONCA 334 at para 32). [58] The need for conditions precedent to have been performed before relief from forfeiture is available was well settled law inAlberta until some recent confusion that I attribute to a few peculiar decisions, including Chroniaris Enterprises Ltd. v. MKRS Pub Inc.(cob Honest Mur's Barr & Grill), 2005 ABQB 867, aff’d 2008 ABCA 172 [Chroniaris].

At issue in that case was the exercise of anoption to renew where the landlord claimed that the tenant was in breach of the lease for having failed to operate a “family restaurant” (ithad added a bar to the restaurant) and for altering the property without the landlord’s consent. [59] The trial judge found that the lease did not require operation of a “family restaurant” and ruled that the landlord was estoppedfrom relying on the tenant’s alteration of the premises since it assisted with the renovations and accepted rent after the breach. CitingAlwell Mechanical Ltd. v.

Royal Bank of Canada (1985), 1985 ABCA 193 , 41 Alta LR (2d) 8 (CA) [Alwell], he also ruled inobiter that relief from forfeiture was available since the breach was trivial and the landlord would otherwise receive a windfall as a resultof the tenant’s improvements to the property.

While Finn was cited by the court, there is no comment as to why the ratio in that casewas inapplicable. [60] In a very brief memorandum of judgment delivered from the bench, the Alberta Court of Appeal in Chroniaris allowed theappeal in part, stating at para. 1: In our view, the Chambers judge correctly dismissed the application for a writ of possession on the basis of an appropriate use of relieffrom forfeiture on the authority of s 10 of the Judicature Act, RSA 2000, c J-2 (as amended) and on the authority of the Alberta Court ofAppeal decision of Allwell Mechanical Ltd. v.

Royal Bank of Canada, (1985) 1985 ABCA 193 , 41 Alta. L.R. (2d) 8. [61] Neither the trial judge nor the Alberta Court of Appeal in Chroniaris addressed the facts of Alwell. The tenant in that caseinvested some $400,000 into improvements to the leased premises, but chose to withhold $90,000 in rents after a dispute arose with thelandlord. The landlord sought to terminate the lease. The tenant requested relief from forfeiture.

Describing the tenant’s actions as“misguided” and citing an inappropriate windfall to the landlord as a reason for its decision, the Court of Appeal granted relief fromforfeiture on stringent conditions for retiring the arrears and payment of solicitor-client costs to the landlord. [62] The decision in Alwell dealt with relief from forfeiture of an existing lease by reason of the tenant's failure to pay rent. Theavailability of relief in that circumstance is supported by the ruling in Clark Auto Body Ltd.

Alwell did not involve forfeiture of an optionto renew or to purchase. [63] I am not satisfied that the longstanding principles and policy reason supporting them as reiterated by Stratton J in Finn and

Lederer J in Beltsos have been relaxed or overturned by other authorities. To the extent that they may have, however, I would exercise my discretion to refuse to grant the equitable relief requested. Sok ’ s was in default of the Lease when it purported to exercise the Option. There is no evidence that Valin will reap an inappropriate windfall if the exercise of the Option by Sok ’ s is ruled invalid. The parties were free to contract as they saw fit and the court should not interfere without a solid foundation for doing so.

Here, there is no such foundation for intervention. [ 64 ] Relief from forfeiture is not granted. The Caveat is to be discharged. VIII. Conclusion [ 65 ] At the time it purported to exercise the Option, Sok ’ s was in default of its obligation to prepay the last month ’ s rent and that default continued for more than 15 days after it received notice of the default from Valin. [ 66 ] Sok ’ s also was in default of its obligations under the Lease as a result of the NOI. [ 67 ] Relief from forfeiture is not available to Sok ’ s in these circumstances. However, to the extent that it is, relief is denied.

The purported exercise of the Option by Sok ’ s was invalid. [ 68 ] In the result: 1. The application by Sok ’ s is dismissed. 2. Valin ’ s cross application is allowed. 3. The Caveat is to be discharged within 30 days. 4. The parties may speak to me within 30 days if they cannot agree on costs. Heard on the 17 th and 18 th day of May, 2011. Dated at the City of Edmonton, Alberta this 7 th day of July, 2011. J.E. Topolniski J.C.Q.B.A.

Appearances: Michael McCabe, Q.C. for the Plaintiff David Shynkar, Q.C. for the Defendant