Waters et. al. v. NPR, 2017 NUCJ 12

Nunavunmi Maligaliuqtiit NUNAVUT COURT OF JUSTICE Cour de justice du Nunavut Citation: Waters et. al. v. NPR, 2017 NUCJ 12 Date: 20170714 Docket: 08-17-316 Registry: Iqaluit Plaintiffs: Donna Waters and Kim Waters o/a Water’s Edge Seafood & Steakhouse -and- Defendant: NPR Limited Partnership by its general partner NPR GP Inc. ________________________________________________________________________ Before: The Honourable Mr. Justice Paul Bychok Counsel (Plaintiffs): James Morton Counsel (Defendant): Sheila MacPherson and Toby Kruger Location Heard: Iqaluit, Nunavut Date Heard: July 14, 2017 Matters: Statement of Claim under Commercial Tenancies Act Judicature Act REASONS FOR JUDGMENT

(NOTE: This document may have been edited for publication) I. BACKGROUND [ 1 ] The plaintiffs have operated Waters’ Edge Seafood and Steakhouse in a local hotel since 2007. In 2011, the ownership of the hotel changed hands. Since then the plaintiffs have rented space for their business from the defendant landlord pursuant to a written lease dated September 1, 2012. For the purposes of this litigation, there are three key aspects of the lease: 1.

The defendant owns all “equipment, furniture, appliances, (and) other chattels” in the rented premises except for the “cash registers, cookware, music system and small wares” which belong to the plaintiffs. [1] 2. The tenants are responsible for keeping, “at its expense … all equipment, furniture and appliances located therein (the rental space) … in a clean and sanitary condition and in good and substantial repair.” [2] 3.

The lease expires on August 31, 2017. [3] [ 2 ] The plaintiffs wrote the defendants on February 21, 2017 “to express our interest in renewing the lease.” The defendants replied on May 9, 2017 saying no renewal was possible. They confirmed the lease would expire on August 31, 2017. [ 3 ] About that time, the plaintiffs heard rumours the defendant was about to sell the property. On June 2, 2017, the plaintiffs filed a Statement of Claim in court. The plaintiffs claim they have a right to renew the lease for a further five-year term due to an alleged oral agreement made in late 2013.

They seek an injunction, or court order, preventing the defendant from terminating their lease. They claim they have a right to continue their business in the hotel for another five-year term. [ 4 ] On June 20, 2017, the defendant filed a Notice of Motion in court. It says the plaintiffs’ claim should be dismissed summarily. In every day English, they say the plaintiffs do not have a case. They deny that the parties entered into an enforceable oral agreement in late 2013.

They say the plaintiffs’ request for an injunction should be dismissed. [ 5 ] The defendant has indeed agreed to sell the hotel to a third party. It is obliged to give vacant possession of the hotel to the purchaser by July 28, 2017. It is also required to deliver vacant possession of the restaurant space by August 31, 2017. The court agreed to hear both motions at the same time and quickly given the urgency of the matter. [ 6 ] The court heard evidence on June 26, 27, July 4, 6 & 7, 2017. At my insistence, the parties called the two representatives who negotiated the disputed lease extension.

I then received legal arguments from the lawyers. I reserved my decision to consider the evidence. II. LAW

[ 7 ] The applicable law is not in dispute. [ 8 ] A lease is a form of contract between two or more parties concerning property. It may be oral or written. [4] In this case, the lease is a written document which was signed after negotiations between the parties. The document outlines the parties’ respective obligations and rights for the space occupied by the plaintiffs’ business.

A lease dealing with land for a term longer than three years must be written and registered at the Land Titles Office. [5] [ 9 ] A written contract may be amended by a subsequent oral agreement between the parties. [6] But for such an agreement to be enforceable, one of the parties must have acted in reliance upon the verbal agreement. This is called ‘part performance’. [7] Further, those acts must have been directly related to the terms of the later agreement. [8] [ 10 ] The burden of proof in a civil action lies on the plaintiffs.

The plaintiffs’ evidence must meet the standard of proof on a balance of probabilities. III. ISSUE [ 11 ] The issue I must decide is whether, on a balance of probabilities, the plaintiffs have established a right to renew their lease for five years pursuant to the “oral agreement” of late 2013. [ 12 ] For the following reasons, I rule that the plaintiffs do not have that right of lease renewal. The lease expires on August 31, 2017. IV. ANALYSIS [ 13 ] There is no dispute about several key facts. The parties did have negotiations in late 2013. Mr. Tyler Fraser represented the plaintiffs.

He is an experienced Toronto-based restaurant management consultant. He testified he was authorised to negotiate with the defendant. He wanted to secure for the plaintiffs a right to renew the lease for another five-year term. But he was clear in his testimony that he did not have authority to bind the plaintiffs. He had to take the results of the negotiations to the plaintiffs for their acceptance. [ 14 ] Mr. Fraser was not asked by either lawyer if he communicated his limited authority to the defendant’s representative.

However, I infer from the nature of their dealings that this fact would have been clear to Mr. Kelly Hayden, who represented the defendant in the negotiations about a possible lease renewal. [ 15 ] Mr. Hayden was the Yellowknife-based Vice-President of the corporate defendant and responsible for its property portfolio in Nunavut. The defendant had acquired the hotel (and restaurant lease) when it purchased the property in 2011. In 2013, the defendant was about to make a major $600,000 capital investment in the hotel.

But it was concerned by the rundown appearance of the restaurant and by numerous complaints against it (the restaurant) made by guests. Mr. Hayden had a mandate to negotiate a right of renewal in exchange for an infusion of capital by the plaintiffs into the restaurant. [ 16 ] Late in 2013, Mr. Fraser and Mr. Hayden came to what the plaintiffs’ lawyer called an “agreement in principle”. Some of the terms of this agreement were then written into a draft “Lease Amendment Agreement” dated September 1, 2012 to coincide with the lease. The document was drafted by legal counsel for the defendant and sent by Mr.

Hayden to Mr. Fraser. The key parts of the amended lease document which concern this dispute follow: 1. The effective date is said to be the same as the existing September 1, 2012 lease.

2. The defendant transfers ownership of the restaurant appliances and equipment to the plaintiffs for $1. 3. The tenants “shall have the right to renew this Lease” for a further five years provided “it is not in default of any of its obligations” under the lease. 4. The tenants become obligated to notify the defendant of their “intention to renew the Lease” at least six months before its expiration. 5. The original lease continues in full force and effect except as amended by this document. [9] [ 17 ] I accept Mr.

Hayden’s evidence that he agreed to the proposed right of renewal as an essential quid pro quo to the plaintiffs making a substantial capital investment into the restaurant. There was no need to refer to the capital infusion by the plaintiffs in the “Lease Amending Agreement”. The plaintiffs were already legally obligated under the lease to keep the rental space in good and proper repair. The “Lease Amending Agreement” specifically incorporated those obligations under the original lease. I am satisfied that Mr. Fraser understood this situation as well.

Here we come to the heart of the dispute. [ 18 ] The plaintiffs say they accepted the amended lease and acted in reliance upon it. Attached to Ms. Donna Waters’ affidavit is a “2013 Year End Report” authored by Mr. Fraser. In it Mr. Fraser claims he and Mr. Hayden “were able to sign a lease extension that secures the Waters Edge restaurant until at least the year 2023.” Mr. Fraser testified he never signed any such agreement. Given his testimony that he had no right to bind the plaintiffs, I find his report to the plaintiffs to be careless and self-serving hyperbole.

The legal onus was on the plaintiffs to accept or reject the negotiated proposal and to communicate that fact to the defendant. The plaintiffs did neither. [ 19 ] Ms. Donna Waters testified. She said she and her sister invested about $100,000 in the restaurant, believing Mr. Fraser that they had secured a right to renew. She provided no documentary evidence of any investment to support her claim. Her testimony concerning what investments they made was vague and imprecise. The facts demonstrate that the plaintiffs did make some investment, but not until 2015.

I will return to this aspect of the case in a moment. [ 20 ] Ms. Kim Waters testified. She said she and her sister signed the draft “Lease Amendment Agreement” in June 2014 and that they sent it by facsimile to Mr. Fraser. [10] She was not able to provide any fax confirmation sheet showing the document was sent. She said their facsimile machine only reported failed transmissions and none were issued. Mr. Fraser denied ever receiving the signed document from them. I have no difficulty finding as a fact that Mr. Fraser never received that signed document. Mr. Fraser was a member of a professional firm.

It is possible the facsimile transmission was lost at his end. However, I think it very unlikely given what else Ms. Waters had to say. [ 21 ] Ms. Kim Waters also testified to a conversation she claims to have had with Mr. Fraser around the same time. She said Mr. Fraser told her that after he and Mr. Hayden agreed on the renewal terms, they shook hands on it. Mr. Fraser then flipped a coin to Mr. Hayden to seal the deal. Mr. Fraser denied ever flipping a coin to Mr. Hayden. Mr. Hayden said this never happened. Mr. Fraser also denied that he ever said that to Ms. Waters. Mr. Fraser then said he and Mr.

Hayden always shook hands at the end of their meetings. I accept Mr. Fraser’s version of events. I am troubled by Ms. Waters’ testimony concerning this conversation. Ms. Waters’ testimony calls her credibility and reliability into sharp focus. Consequently, I cannot say I am satisfied that Ms. Waters did, in fact, ever send the signed agreement to Mr. Fraser. [ 22 ] Mr. Hayden testified that the defendant never received a copy of the “Lease Amending Agreement” signed by the plaintiffs. He also testified that he and Mr. Fraser had no further discussions concerning the proposed amended lease.

Most importantly, he said the plaintiffs never carried through with capital investment to improve the restaurant. Based on all these circumstances, he said he concluded the proposed amended lease and renewal term were “off the table”. In my respectful view, he had every right to come to that conclusion. [ 23 ] On October 24, 2014, the defendant served notice on the plaintiffs that the lease would be terminated effective November 30, 2014. I understand the reason for this action was an alleged failure by the plaintiffs to maintain the restaurant satisfactorily.

The plaintiffs quickly applied to the Court for an injunction to preserve their position. A hearing was held before Mahar J. on December 11, 2014. He gave his decision on May 11, 2015. [ 24 ] The May 11, 2015 decision of the Court is central to the present dispute. It is key because Mahar J. found that the plaintiffs had not lived up to their responsibilities under the lease. This fact completely undercuts the plaintiffs’ claim that they had acted in reliance on the so-called “amended lease”.

Specifically, the court ordered that the plaintiffs “must maintain and repair all equipment in the premises in accordance with paragraph 4.02 of the Lease and in compliance with paragraph 5.03 of the Lease”. The Court ordered the plaintiffs to replace the carpets in, and to paint the walls of, the restaurant no later than September 1, 2015. The Court also ordered the plaintiffs to prepare “a plan for ongoing maintenance and operations of the premises in a fashion consistent with the quality of the hotel operations … within 30 days of this order”. [11]

[ 25 ] The situation had not improved even as late as September 2015. On September 8, 2015, the defendant’s lawyer wrote to the plaintiffs. In that letter, the defendant asserted numerous breaches of the May 11, 2015 court order. These breaches included the failure to re-carpet and re-paint the restaurant. The letter also referenced the plaintiffs’ several convictions that month under the Liquor Act . Significantly, the letter also referenced the maintenance plan provided to the defendant pursuant to the May 11 Order.

It read: The Plan provided ensures minimal maintenance until 2017, when the current lease expires, and proposes significant capital investment in the premises only for 2018 onwards. It is clearly predicated upon the expectation of a renewal of the lease which will not occur ”. [12] [ 26 ] The defendant’s September 8, 2015 correspondence was unequivocal notice to the plaintiffs; the lease would expire on August 31, 2017. Nothing in the evidence before me indicates that situation ever changed. [ 27 ] In this context, the wording of the plaintiffs’ February 21, 2017 letter to the defendants bears scrutiny.

It reads as follows: As our lease is coming to an end, August 31, 2017, we would like to take this opportunity to express our interest in renewing the lease for the operation of the Kickin’ Caribou Pub and Waters’ Edge Seafood and Steakhouse, under the management of our current incumbent, Edward Walker. [13] [ 28 ] I can draw only one rational inference from this letter: the plaintiffs did not believe they had an enforceable right to renew the lease. They explicitly acknowledged their lease was about to expire. They did not assert an enforceable right to renew it.

They expressed their interest to negotiate a lease renewal, in other words, a new lease. It is disingenuous for the plaintiffs now to assert an enforceable right to renew. V. DECISION [ 29 ] The plaintiffs have not met their evidential burden. I find the September 1, 2012 lease expires on August 31, 2017. [ 30 ] I grant the defendants request for

summary judgment. I dismiss the plaintiffs’ application for an injunction. [ 31 ] I will accept written submissions respecting costs. Any submissions must be submitted within ten business days.

Dated at the City of Iqaluit this 14th day of July, 2017 ___________________ Justice P. Bychok Nunavut Court of Justice