Booster Juice Inc v West Edmonton Mall Property Inc, 2017 ABQB 790

Court of Queen’s Bench of Alberta Citation: Booster Juice Inc v West Edmonton Mall Property Inc, 2017 ABQB 790 Date: 20171221 Docket: 1403 11164 Registry: Edmonton Between: Booster Juice Inc Plaintiff - and - West Edmonton Mall Property Inc Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice G.R. Fraser _______________________________________________________ Background [ 1 ] Both the Plaintiff and the Defendant in this matter are well-established, successful large corporations located in Edmonton Alberta.

Booster Juice Inc. (Booster Juice) is a franchise operation with over 300 locations worldwide. The corporate set up of Booster Juice involves a franchising company, AW Holdings. AW Holdings receives all the franchise payments from Booster Juice franchisees. It also operates some locations. Its parent company, Booster Juice, negotiates and holds the leases for all the locations. Booster Juice then sub-leases the locations to its franchisees. Booster Juice profits from any concessions obtained in the lease negotiations.

[2] The Phase III West Edmonton Mall Booster Juice location had been open since 2000. In 2003, the location was subleased toWestPhase D and D Enterprises Inc. The same franchisee continued to operate that location through 2014 and is still there today. [3] West Edmonton Mall Properties Inc. (West Edmonton Mall) is the company that handles leasing for West Edmonton Mall.It is part of the 555 Corporation. The mall opened in 1981, and at one point was the largest shopping mall in the world. The mall itselfhas over 500 tenants of various sizes, ranging from small kiosks to large anchor tenants.

All mall leases are conducted by WestEdmonton Mall Properties. There is a standard-form lease used on all leases. Attached to the standard-form lease is a lease outlinedrawing (LOD) which contains the specific location of the premises in the mall. There may also be a letter outlining special terms thatare incorporated into the lease. [4] In this matter, despite there being two sophisticated parties involved in what should have been a fairly straightforward lease,things went terribly wrong. The parties are now before the Court seeking a determination of multiple issues.

They are: Is the Phase I lease a binding contract? If it is a binding contract, what are the terms of the lease? Did either party breach the Phase I lease? Was the Phase I lease properly terminated by West Edmonton Mall? Was the Phase III lease properly terminated? Is there a valid cross-default clause applicable to the Phase III lease? If so, what is the effect of a cross-default clause? If the terminations referenced above were valid, what damages arise? In the alternative, if the terminations referenced above were not valid, what damages arise?

Issue One - Was the Phase I lease valid? [5] This would seem like a fairly straightforward question to answer. The lease document signed by Mr. Wishewan is four pageslong and contains 17 paragraphs. That document also incorporates West Edmonton Mall’s standard-form lease. That document is 17pages long and contains 19 different articles. Each

article covers a different aspect of the lease. For the most part, both documents arewritten in fairly plain English and are quite clear. Any experienced business person should have a clear understanding of each party’sobligations under the lease. [6] In this case, there was much negotiating between the parties regarding the terms of the lease. The first proposal from WestEdmonton Mall to Booster Juice is dated March 5, 2013. The final agreement was signed by Mr. Wishewan on July 16, 2013. On July22, 2013 West Edmonton Mall Properties agreed to the lease as amended by Mr.

Wishewan. [7] Each time West Edmonton Mall sent a proposed lease to Booster Juice, the lease was returned with many handwrittenchanges. Various terms would be changed, sometimes words were added; other times words were crossed out. Occasionally entireparagraphs would be deleted. These changes would be initialed by Mr. Wishewan and the document would be signed in the appropriateplace. [8] Of significance in this action is what is attached to the lease documents, a map of West Edmonton Mall outlining thelocation of the leased premises. This was referred to as a lease outline drawing or LOD.

When negotiations started between Booster Juiceand West Edmonton Mall regarding a second location outside of Phase III, the Yogi’s Yogurt site was proposed as a possible location.The LOD for that location shows an east-west orientation for the kiosk. This was in fact the actual orientation of the kiosk. This is whatMr. Wishewan saw when he toured the mall looking for a possible new location. [9] When negotiations started on the Phase I lease, the LOD attached to the proposed lease shows a north-south orientation forthe kiosk. This is clear from the drawing. Mr.

Wishewan went through the lease proposals in great detail. He made at least eight changesto the proposed lease dated May 29, 2013. He then made two changes to the July 11, 2013 letter regarding terms of the lease. [10] The Phase I lease contained a cross-default term. Its wording was “this agreement shall be cross-defaulted with the tenantsother location unit T-101 Phase III of West Edmonton Mall in that any default by tenant hereunder shall be deemed a thereunder and viceversa.” This term is located in paragraph 17 of the four-page lease.

That paragraph is 13 lines long, and the heading for the paragraph issimply “lease”. [11] There was no time pressure on Mr. Wishewan. While it is likely that both parties wanted to complete the lease as quickly aspossible, there was no impending hard deadline. They had been negotiating lease terms for over three months. Throughout thenegotiations there was no change in the kiosk orientation on the LOD, it was north-south.

There was no change to paragraph 17, italways included the cross-default clause. [12] In Sylvan Lake Golf and Tennis Club Limited v Performance Industries Limited, 2002 SCC 19 , [2002] 1 SCR678, Justice Binnie wrote: When reasonably sophisticated business people reduce their oral agreements to written form, which are prepared and reviewed by

lawyers, and changes made, and the documents are then executed, there is usually little scope for rectification (at para 29). [ 13 ] Rectification is predicated on the existence of a prior oral contract whose terms are definite and ascertainable. The plaintiff must establish that the terms agreed to orally were not written down properly. The error may be fraudulent, or it may be innocent. What is essential is that at the time of execution of the written document the defendant knew or ought to have known of the error and the plaintiff did not.

Moreover, the attempt of the defendant to rely on the erroneous written document must amount to "fraud or the equivalent of fraud" (at para 31). [ 14 ] In this case there is no evidence of how the Phase I kiosk orientation was changed. There is no doubt that the lease with the yogurt establishment showed an east-west orientation. There is also no doubt that the lease with Booster Juice shows a north-south orientation. Nothing in Mr. Wishewan’s testimony explained why he did not notice the orientation change. Nowhere in Ms. Cheramy’s testimony was there an explanation of how the change occurred.

There was nothing in her testimony to indicate it was a deliberate attempt to dupe Booster Juice. She seemed to also be unaware of the change in orientation, and indicated that if she had known about the change she would have brought it to the attention of Mr. Wishewan. [ 15 ] The cross-default provision was contained in the same spot in every proposed Phase I lease sent to Booster Juice. It is apparent from the number of changes made by Mr. Wishewan that he must have gone through the lease documents with a fair amount of detail.

He took note of dates, proposed utility costs, proposed drawing review costs, and the proposed rent. He testified that he did not notice the cross-default clause because it was buried in the middle of one of the paragraphs. Although he may not have noticed it, there was no attempt by West Edmonton Mall properties to hide the clause. Booster Juice cannot now benefit from Mr. Wishewan’s oversight. [ 16 ] It was clear from the testimony of Mr.

Wishewan, along with the testimony of Rosemary Cheramy that while there were many verbal discussions regarding the Phase I lease, there was never a complete verbal agreement on the terms of the lease. There is no oral contract with definite, ascertainable terms. There is a clearly worded written, signed lease. There is no evidence that West Edmonton Mall Properties attempted to defraud Booster Juice with a “trick” lease. This makes rectification impossible. Booster Juice is bound by the terms of the Phase 1 lease.

Issue 2 - Did either party breach the Phase I lease? [ 17 ] The terms of the Phase I lease are quite clear. The lease is to start November 1, 2013. Construction is to start on October 1, 2013. Booster Juice will install a pre-fabricated kiosk of its design that complies with West Edmonton Mall kiosk design criteria.

The lease clearly states: The landlord acknowledges that the tenant shall be utilizing a prefabricated kiosk of the tenant’s design for its business operations, all in accordance with plans drawings and specifications submitted by the tenant and approved by the landlord and which must comply with current Mall design criteria for kiosks. [ 18 ] The criteria were submitted as a joint exhibit by the parties. The criteria are clear that kiosks have a maximum height of 7’6”. The witnesses from Booster Juice all testified that they were unaware of the exact height requirement.

In fact, no one from Booster Juice ever bothered to read the design criteria. Booster Juice submitted proposed kiosk designs to West Edmonton Mall starting September 7, 2013. The designs were submitted four more times. Each time the designs were rejected because they showed an overall height of 8’0”. Booster Juice did not contact anybody from West Edmonton Mall, or West Edmonton Mall’s design consultants about the reason for the designs consistently being too high. [ 19 ] There was testimony from the Booster Juice Director of Business Development Tim Hengel, as to why the height was so important.

He explained that the lower height would cause the menus to be obscured by items that were on the counter. His explanation made perfect sense, and West Edmonton Mall may have conceded to the kiosk being over height earlier if his explanation had been provided earlier. [ 20 ] Booster Juice claims that West Edmonton Mall was unreasonable in not approving the proposed kiosk drawings. Consequently, the mall is at fault for any delay. This is not supported by the facts outlined above. The lease is clear that any kiosk must comply with the West Edmonton Mall design criteria.

The drawings submitted by Booster Juice never complied with those criteria. Each set of drawings showed a kiosk with a height of 8’0”, 6 inches over the maximum height criterion. While West Edmonton Mall did eventually agree to the change in height, it was not required to do so. It was not unreasonable for the mall to reject Booster Juice’s proposed kiosk design. The delay from October 1, 2013 to March 19, 2014 is the sole responsibility of Booster Juice. [ 21 ] The terms of the Phase I lease become less clear after March 19, 2014.

That is the date when West Edmonton Mall agrees to approve the Booster Juice drawings. The catch is that the location is being moved south from the original location, meaning the kiosk would be closer to a staircase and farther from the main corridor of the mall. [ 22 ] This is a change of one of the essential elements of the Phase I lease. Booster Juice considered the new location less desirable as it would be less visible. West Edmonton Mall did not consult with Booster Juice prior to making the change. This change in location is a major change to the Phase I lease.

It is of such significance that a new lease should have been prepared regarding this new location. The original lease was no longer valid. [ 23 ] After further negotiations and a meeting on site, the parties eventually agreed to the location and orientation of the kiosk. The next step was to start construction of the kiosk. Booster Juice began to prepare for the construction of the kiosk in Phase I. This was in May 2013. Before anything could get started, West Edmonton Mall demanded payment of rent from November 1, 2013 onward. This demand was formalized in a letter dated June 2, 2013.

The letter demanded $84,000 in rent and $2100 in drawing approval fees. The letter demanded full payment within one week and also demanded that the Phase I location be open within that same time. The letter also raised the cross-default provision regarding the Phase III location.

[24] Not surprisingly, the letter resulted in a meeting on June 13, 2013 between Mr. Wishewan and Ms. Cheramy. After thatmeeting, Booster Juice indicated it could be open in approximately 6 to 8 weeks. Also, Mr. Wishewan indicated that the parties neededto discuss the arrears. These answers appeared to satisfy West Edmonton Mall as there was no action taken in June regarding rent,construction, or cross-default. [25] On July 7, 2013, West Edmonton Mall was again making inquiries as to the progress of construction and when the kioskwould be open. At this point no construction had started at the kiosk site.

On July 18, 2013 Ms. Cheramy tried to reach Mr. Wishewan toobtain a firm start date. After speaking with him, she made it clear that if there was not a firm start date by the end of the day, the cross-default provision would be triggered. After further correspondence between the parties, the cross-default provision was eventuallyapplied on July 29, 2013. [26] The conduct of both parties resulted in each breaching the Phase I lease. Booster Juice did so by not paying rent fromNovember 1, 2013 forward. The terms of the lease were clear. It started November 1, 2013, and rent was due monthly.

Booster Juiceclaims that it was contemplated by the parties that there would be no rent charges while approval of the construction plans and drawingsremained pending, or before the parties agreed and finalized the new location of the Phase I Booster Juice. [27] There is no merit in this claim. Mr. Wishewan went through the proposed leases in detail. There is nothing in any of theproposed leases indicating an abatement of rent until the drawings were approved.

Despite most of the dealings between Booster Juiceand West Edmonton Mall being documented through emails or letters, there is nothing indicating rent would not start November 1, 2013.The only evidence of this agreement was the testimony of Mr. Wishewan. On this point, I find his evidence to be unreliable. Althoughthere may have been a discussion about a suspension of rent until the start of construction, there was never a binding agreement betweenthe parties. [28] The terms of the lease are clear. Rent started to become due November 1, 2013.

In fact, Booster Juice should have been awarethat West Edmonton Mall expected its rent to be paid because of the December 1, 2013 invoice. There is also no legal basis to alter thewritten lease by means of a later verbal agreement. [29] Booster Juice also claims that West Edmonton Mall was unreasonable in not approving the kiosk designs. Consequently, itdoes not owe rent because it was unable to open the kiosk due to West Edmonton Mall’s purposeful and unreasonable denial of planapproval.

Again, this claim is without merit. [30] The lease was clear that any kiosk had to comply with the West Edmonton Mall’s design criteria. Every plan submitted byBooster Juice did not comply with the criteria. It chose not to discuss the reasons for it’s over height kiosk with West Edmonton Mall’sdesign consultants or with its leasing agent. It simply resubmitted designs that did not comply with the design criteria. West EdmontonMall cannot be found at fault for following the terms of the lease.

Its actions were not done in an unreasonable manner or with bad faith. [31] Booster Juice breached the Phase I lease. [32] West Edmonton Mall, however, is not blameless regarding the Phase I lease. It breached the Phase I lease by unilaterallymoving the location of the kiosk. It should have been abundantly clear to everyone involved that location and orientation of the kioskwere very important to Booster Juice. There were multiple meetings between the parties as well as emails back and forth. Booster Juicewanted an east-west orientation, which is not contained in the lease.

It also wanted the location as it existed in the lease. It did not wantthe location nearer to the staircase. When West Edmonton Mall decided unilaterally to move the location, it was making a fundamentalchange to the lease. As late as June 16, 2014, Booster Juice was indicating there was a problem with the location change. As statedearlier, the location change should have resulted in a new lease be negotiated with the new location made clear to everyone.

AlthoughWest Edmonton Mall did eventually agree to the initial location, when it changed the lease location things should have restarted fromsquare one. [33] West Edmonton Mall breached the Phase I lease. Issue 3 Was the Phase I lease properly terminated [34] The terms of the lease are clear. Rent started to accrue November 1, 2013. No rent was paid. Booster Juice should have paidrent up until March 19, 2014. This is the date when West Edmonton Mall unilaterally changed the location of the kiosk. This meansBooster Juice owed six months’ rent, a total of $49,800.

Paragraph 17.1 of the standard form lease which forms a part of the Phase I leasestates that a failure to pay rent shall be deemed

an act of default. Booster Juice defaulted according to the terms of the lease. [35] Paragraph 17.2 of the standard form lease entitled the landlord to terminate the lease if there is a default. Booster Juicedefaulted, consequently it is at the discretion of West Edmonton Mall to terminate the lease. West Edmonton Mall properly terminatedthe Phase I lease. Was the Phase III lease properly terminated? [36] West Edmonton Mall relies on the cross-default provision contained in the Phase I lease to terminate the Phase III lease. Thecross-default clause is only contained in the Phase I lease.

The question then becomes can the cross-default provision be inserted into thePhase III lease? [37] This issue was addressed in the case of Greenwin Construction Company Limited v Stone and Webster (ON SC), [2001] O.J. No. 290. The facts of the case are very similar to the case at bar in that only one of the leases contained a cross-default clause. There was a default of the lease that contained the cross-default clause. There was no default of the other lease, and thattenant had been a good tenant for years. The court found that the cross-default clause could not be applied to the lease that did not

contain the clause. [ 38 ] In its reasoning, the Court discussed the purpose and enforcement of a cross-default clause as follows: Judging from the concept of a cross - default clause, it is reasonably intended to allow a landlord to rid itself of a tenant who, by reason of the default under one lease is less likely, generally, to meet the landlord's reasonable requirements of: 1.) financial stability; 2.) conduct and character compatible with the present and prospective tenants of the building; and 3.) minimum cost and effort in administering the premises and the leases. (at para 30). [ 39 ] In this case, there is no evidence that the Phase III location had any issues with financial stability.

It had been paying its rent for over 10 years. There is no evidence that anything in the conduct of the Phase III location was detrimental to the functioning of the mall or caused difficulties in mall administration. None of the reasons for enforcing a cross-default clause were present in this case. [ 40 ] Still, a landlord has the right to enforce the clauses of its lease, subject to some limitations. The Phase III lease, however, does not contain a cross-default provision. To insert such a clause into the lease without notice to the affected party is unreasonable.

Although Booster Juice is the lease holder of both leases, it should not be held to have agreed to a cross default clause in the Phase III lease. It did agree to the cross-default clause in the Phase I lease. By signing the lease, Booster Juice agreed that if the Phase III location was found in default the Phase I location would also be in default. [ 41 ] The Phase III location had been operating successfully for over a decade. There was little likelihood that it would default on its lease. That prospect was not so certain with the Phase I lease. It would be a new location with no proven record of success.

This placed the Phase III lease holder at a greater risk. The cross-default clause was a significant change to the Phase III lease. There should have been specific notice to the Phase III lease holder of the cross-default clause. A simple letter indicating that the cross-default clause was being applied the Phase III lease would have sufficed. [ 42 ] If the cross-default clause does apply to both locations, there are reasons why it should not be enforced regarding the Phase III lease. The only reason to not enforce the clause would be the court’s inherent authority under equity.

In considering whether relief forfeiture should be granted the court must examine the conduct of the applicant and the gravity of the breaches, whether the right of forfeiture is being exercised essentially to secure the payment of money, and the disproportionality between the value of the property forfeited and the damage caused by the breach. [ 43 ] This is a situation involving a dispute between the parties over money. The Phase III location had done nothing to cause the forfeiture.

There had been prior issues between Booster Juice and West Edmonton Mall regarding renovations of the Phase III location, but those had been settled by the time the Phase III location was shut down. [ 44 ] Booster Juice is a large corporation that had a presence in the mall for over a decade. Although there was certainly a dispute between Booster Juice and West Edmonton Mall over what money, if any, was owed this is not a situation where the party was likely to vacate the premises and disappear into the night leaving the landlord to suffer a significant loss.

As was eventually decided in an interlocutory hearing, payment of money into trust would provide the landlord adequate security while waiting for the matter to be decided. [ 45 ] If the cross-default clause is enforced against the Phase III location there would be substantial loss to Booster Juice. That location was profitable, making somewhere between $10,000 and $20,000 per month. Forcing it out of the location would result in that loss of income to the franchisee, and subsequently a loss to AW holdings and Booster Juice.

Forcing it out of the Phase III location would also result in lower income to West Edmonton Mall, at least until it was able to secure another tenant. [ 46 ] Considering all the factors regarding the granting of relief from forfeiture, it is clear that in this case there are grounds to grant relief. The termination of the Phase III lease is not upheld. Damages [ 47 ] Having made the above rulings, what are the damages to the parties? [ 48 ] If the Phase I lease is valid, and I have found it to be valid, then Booster Juice owes rent. The question becomes how much?

There was certainty regarding the lease between November 1, 2013 and April 30, 2014. That is six months. The rent was to be $8300 per month. That means there is $49,800 in rent owed. [ 49 ] The next question is whether or not Booster Juice should be held liable for the rent for the remainder of the Phase I lease.

Although the lease does contain a provision stating that the leasee will be responsible for the entire rent if there is a default, West Edmonton Mall also has a duty to mitigate its damages. [ 50 ] Although West Edmonton Mall may have found it frustrating, the easiest way to have mitigated its damages would have been to negotiate with Booster Juice. Booster Juice was still interested in opening the Phase I location when the lease was terminated. It had a long history with the mall, and despite sometimes contentious lease negotiations, generally it had been a good tenant.

Additionally, West Edmonton Mall was not completely blameless regarding the breach of the Phase I lease. It moved the location of the kiosk, breaching the terms of the lease. It cannot benefit from its breach of the Phase I lease. [ 51 ] At the June 13, 2014 meeting between Mr. Wishewan and Ms. Cheramy, Mr. Wishewan indicated he was willing to negotiate regarding the rent owing. While this may not have been ideal from the perspective of West Edmonton Mall, it was likely the most

reasonable option. They had a tenant with the financial ability to pay rent that was willing to open in that location. There had been some difficulty leasing that location. It would have been much better to go with the tenant who wanted to be in the location than to hopefully find another tenant that wanted the space. [ 52 ] I find that Booster Juice is only liable for rent from November 1, 2013 to April 30, 2014. That same would apply for the $175 per month media fund charge and the $1522 per month occupancy cost. It is also responsible for the design fees incurred by West Edmonton Mall totaling $2100.

The total amount of damages going to West Edmonton Mall, including GST, is $64,572. [ 53 ] As stated earlier, the Phase III location was profitable for WestPhase D and D Enterprises Inc. In addition, the sudden closure of the location resulted in the loss of many saleable products. All of this loss was initially borne by WestPhase. The franchisee was then made whole by AW holdings. It reimbursed WestPhase for its loss of product as well as its loss of income and loss of staff. AW Holdings was reimbursed by Booster Juice.

Although there is little proof of the reimbursement by Booster Juice, a loss suffered by AW Holdings would also result in a loss to Booster Juice since it is the sole shareholder of AW Holdings. [ 54 ] The Phase III lease holder, Marilyn Westbrook, was taken completely by surprise when West Edmonton Mall personnel came to location and shut it down. It was current on its rent and was a profitable business. Ms. Westbrook described August as being one of the location’s busier months due to back to school shopping. In the previous year, the location had a monthly profit in August of approximately $16,000.

I find that if it had been open in August 2014, its profit would have been $16,000. [ 55 ] When West Edmonton Mall forced the closure of the location, much of its product became unusable. In addition, to avoid having to lay off all of its staff and then rehire upon reopening, the location continued to pay its staff while it was closed. The cost of the loss of product along with the wages paid to keep the staff totaled $14,738.

This makes the total loss for the improper closure of the Phase III location $30,738. [ 56 ] I find that damages to Booster Juice for the improper closure of the Phase III location are $30,738. Costs [ 57 ] Each party has been partially successful in this application. Consequently, each party will bear its own costs. Heard on the 5 th day of September, 2017 to the 14 th day of September, 2017. Dated at the City of Edmonton, Alberta this 21 th day of December, 2017. G.R. Fraser J.C.Q.B.A. Appearances: Stuart R Mackay for the Plaintiffs Sandeep K Dhir, Lindsey E Miller & Brenna Meade-Clift for the Defendant