COPPER STOP LIMITED Applicant And: PARKLAND FUEL cORPORATION Respondent, 2020 NLSC 114

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Copper Stop Limited v. Parkland Fuel Corporation , 2020 NLSC 114 Date : August 20, 2020 Docket : 202003g0061 Between: COPPER STOP LIMITED Applicant And: PARKLAND FUEL cORPORATION Respondent Before: Justice Kendra J. Goulding Reasons for Judgment Given Orally Place of Hearing: Grand Falls-Windsor, Newfoundland and Labrador Dates of Hearing: June 1, 2020; July 21, 2020; July 28, 2020 Appearances: Joseph S. Twyne Appearing on behalf of the Applicant Neil L. Jacobs, QC Matthew Y. Jacobs Appearing on behalf of the Respondent

Authorities Cited: CASES CONSIDERED: Red Lake (Township) v. Drawson (1963), (ON SC), [1964] 1 O.R. 324, 1963 CarswellOnt144 (H. Ct. J.), aff’d (BC SC), [1964] 2 O.R. 248, 1964 CarswellOnt 617 (C.A.); Resolute FP Canada Inc. v. Ontario(Attorney General), 2019 SCC 60; Scanlon v. Castlepoint Development Corp. (1992), (ON CA), 11 O.R. (3d) 744, 37A.C.W.S. (3d) 563 (Ont. C.A.); Antaios Comopania Naviera S.A. v. Salen Rederierna A.B. (the Antaios) (1984), [1985] A.C. 191 (U.K.H.L.); Atos IT Solutions v.

Sapient Canada Inc., 2018 ONCA 374; Unique Broadband Systems Inc., Re, 2014 ONCA 538; RamonaMorrison Hospitality Services Ltd. v. Stonebridge Hotel Ltd., 2008 ABCA 222; Oak Harbour I Management Ltd. v. Villanova (2000), 96A.C.W.S. (3d) 861, [2000] O.J. No. 1476 (Sup. Ct. J.); Gerstl v. Sobey Leased Properties Ltd., 1998 NSCA 194; Gateway Realty Ltd. v.Arton Holdings Ltd. (1991), (NS SC), 288 A.P.R. 180, 29 A.C.W.S. (3d) 262 (N.S. T.D.); Imperial Oil Ltd. v. C & GHoldings Ltd. (1986), 39 A.C.W.S. (2d) 48, 58 Nfld. & P.E.I.R. 326 (Nfld. (T.D.)); Donovan Homes Ltd. v. Modern Paving Ltd., 2011NLCA 39; Mifflin v.

North Atlantic Refining Limited, 2017 NLTD(G) 140 REASONS FOR JUDGMENT Goulding, J.: INTRODUCTION [1] This proceeding concerns the operation of an Ultramar service station at Baie Verte in the Province of Newfoundland andLabrador.

The Applicant, (hereinafter referred to as “Copper”) filed an Originating Application on May 20, 2020 seeking a declarationthat it is entitled to accept an offer by Irving Oil effectively terminating the existing Lease with the Respondent, (hereinafter referred toas “Parkland”.) Copper relies on clause 8 of the Lease, being the Right of First Refusal, which Copper interprets as requiring Parkland tomatch the offer of Irving Oil within 60 business days.

Otherwise, the Lease with Parkland expires at the end of the initial term, renderingParkland’s right to renew under clause 9 null and void. [2] Parkland seeks a declaration that the Lease be renewed for a five-year term and that the parties negotiate in good faith toestablish the financial terms and gasoline/diesel volumes for this period. Further, Parkland claims bad faith damages and costs of theproceeding on a full indemnity basis.

Parkland interprets the Right of First Refusal as a clause for its benefit after the expiration of theLease and not as means for Copper to disregard the renewal right and terminate the Lease early. [3] Both parties agree to maintain the status quo until a decision by this Court is rendered. Therefore, the claim for injunctiverelief sought by Parkland did not proceed. BACKGROUND Agreed Statement of Facts [4] The parties agree on the following facts and timeline of events. − February 7, 2013: Lease Agreement at issue is signed.

The original term is 7 years commencing on July 1, 2013 and expiring onJune 30, 2020. − Parkland and Copper are the proper parties to the proceeding being the successors to the original parties to the Lease Agreement. − May 16, 2019: Copper, via legal counsel, gives notice to Parkland that it does not intend to renew the Lease and Copper willterminate its relationship with Parkland effective June 30, 2020. − July 3, 2019: Parkland’s legal counsel in Montreal writes back to advise that it wishes to renew the Lease for an additional five-year term in accordance with the renewal provisions of the Lease. − No Negotiations occur between Copper & Parkland between July 3, 2019 and January 13, 2020. − December, 2019: Copper solicits offers from other petroleum suppliers for a new distribution agreement. − January 13, 2020: Parkland’s agent, David Mouland meets with Copper’s Director, Joy Barker to discuss renewal terms.

Copperdiscloses details of the competing offers to Mr. Mouland as part of negotiation. The parties cannot agree on renewal terms at thismeeting. − January 15, 2020: Copper serves notice of Irving Oil’s offer to Lease on Parkland, enclosing a copy of Irving Oil’s Letter of Intent. Irving Oil’s offer contemplates entering into an agreement with Copper effective July 1, 2020, the end of the original term of the Lease.

Copper invokes clause 8 of the Lease to give Parkland sixty business days to match Irving’s offer. − February 5, 2020: Copper’s counsel sends executed copy of Irving Oil’s offer to Parkland. − February 17, 2020: Parkland acknowledges receipt of executed Irving offer and states ready to negotiate renewal in good faith. − March 10-11, 2020: Copper and Parkland correspond about further details of the Irving Oil offer as part of renewal discussions.

− Sixty day business period in clause 8 of the Lease runs out by April 29, 2020 at the latest, (calculated from the February 5th correspondence.) The parties disagree on the relevance of the sixty-day period insofar as it affects the renewal right under clause 9 of the Lease. − May 20, 2020: The Originating Application in this matter is filed. − May 21, 2020: The Originating Application is served on Parkland’s office in Newfoundland and Labrador. − June 4, 2020: Parkland forwards renewal proposal which Copper rejects, stating it is unsatisfactory compared to competing offers. − July 1, 2020: Existing Lease term expires.

Copper and Parkland continue to hold status quo pending determination of this Application. The Lease [ 5 ] Although I have considered the Lease in its entirety, the relevant provisions for my analysis are as follows. The Lessor is Copper and the Lessee is Parkland. Clause 2 TERM TO HAVE AND TO HOLD the said Demised Premises unto the Lessee during the term of seven (7) years from July 1, 2013. However, the term of this Lease shall be automatically extended for such further period of time as is necessary for the Lessor to repay the balance owing on any reimbursable loan by the Lessor to the Lessee.

Clause 8 RIGHT OF FIRST REFUSAL – LEASE If, during the term of this Lease or any extension or renewal thereof (including any period of overholding), and for a period of six (6) months following end of initial term or any renewal period or period of overholding, the Lessor makes a bona fide offer or receives a bona fide offer, which he is willing to accept, to or from any other petroleum supplier for the sale and distribution of the products of that supplier from the Demised Premises for a term to commence after the expiration of this Lease or any extension or renewal thereof (whether by offer to lease or otherwise), the Lessor shall give written notice of the offer to the Lessee by sending it a true copy of the offer and the Lessee shall have the right, during the next sixty (60) business days after receipt of such notice by the Lessee, by written notice to the Lessor, to elect to Lease the Demised Premises for the rent and upon the terms and conditions contained in the offer, the Lessor recognizing that the different conditions but monetarily equivalent constitute conditions identical to those stated in the offer.

If the Lessee does so elect, the notice given by it shall constitute a binding agreement to lease. If the Lessee does not elect, the Lessor shall be free to accept the offer. If the offer is not accepted by the Lessor, the Lessor shall be obliged to submit any further offer to the Lessee in the manner hereinabove provided.

Clause 9 RENEWAL The Lessee shall have the right to renew this Lease for one (1) further term of five (5) years under same conditions except for financial terms and gasoline/diesel volumes which shall be negotiated in good faith by both parties or to be determined by arbitration should the parties fail to reach an agreement. [ 6 ] The Lease also provides for early termination by the Lessee under clauses 5 (second paragraph), 6 and 17. There is no similar right afforded to the Lessor. Copper’s Position [ 7 ] In

summary, Copper relies on its

interpretation of clause 8 of the Lease and states that it has a bona fide offer from Irving Oil received during the initial term of the Lease, which it is willing to accept. Irving Oil’s offer is for the sale and distribution of its products from the Demised Premises. Copper states the offer from Irving Oil will commence after the expiration of the Lease which Copper submits is July 1, 2020. [ 8 ] Copper gave notice of the terms of Irving Oil’s offer to Parkland who failed to match the offer by the end of sixty business days.

Copper asserts it is now free to accept Irving Oil’s offer. [ 9 ] Parkland gave written notice to Copper on July 3, 2019 of its intention to renew the Lease for a further five (5) years. [ 10 ] Copper states that the parties had not reached an agreement on the financial terms and gasoline/diesel volumes by April 29, 2020. Therefore, Parkland has not availed of or has waived the renewal option under clause 9.

[11] Further, Copper submits that as key issues had not been determined by the parties, the Lease is invalid, uncertain andunenforceable. It claims clause 9 is actually an “agreement to agree” and a contract for renewal must settle everything that is necessaryfor the contract to take effect. Parkland’s Position [12] Parkland submits that there is only one commercially reasonable

interpretation of the Lease, that is, that Parkland has anabsolute renewal right and the Right of First Refusal cannot abrogate the renewal right. [13] Parkland argues Copper’s

interpretation would require the Court to nullify the renewal right in favor of the Right of FirstRefusal which flouts common sense in a business sense. Parkland questions why Parkland or any tenant would negotiate renewal rightsthat could be voided at Copper’s unilateral discretion.

The Right of First Refusal is not drafted to be an escape mechanism for Copperor to avoid an obligation to renew or to prematurely terminate the Lease. [14] Parkland argues the Right of First Refusal is written for the opposite purpose, to provide Parkland a matching right shouldCopper attempt to Lease to a third party after the term or renewal thereof has expired.

The Right of First Refusal is written to maintainthe leasing relationship not to circumvent it. [15] Further, Parkland states that the renewal right must be read in conjunction with the Guardian Principle, which is a longstandinginterpretative guide to renewal rights under leases and as stated by the Supreme Court of Canada is “based on the notion that an option torenew gives the Lessee a present interest and, absent express conditions for its exercise, should not be defeated unless there aresubstantial reasons for doing so.” [16] Parkland submits that Copper has in bad faith manufactured this litigation and its

interpretation of the Lease is not commerciallyreasonable, but instead a coy attempt to escape its obligations under the Lease and to lease to Parkland’s competitor. Copper’sinterpretation is not in good faith since it is an attempt to read the terms of the Lease in a manner, which would deprive Parkland of itsrenewal right for Copper’s gain. [17] Parkland asserts that Copper’s breach of its commitment to negotiate in good faith and bad faith practices warrant discipline andseeks damages and full indemnity costs. THE LAW [18] I have reviewed all the authorities submitted by counsel. I reference those decisions that are relevant to the issues and on whichI have relied. Contractual

Interpretation [19] A court should lean against interpreting a contract in a manner prejudicial to vested rights unless the words plainly require thatinterpretation as stated by Ferguson, J at paragraph 13 in Red Lake (Township) v. Drawson (1963), (ON SC), [1964] 1O.R. 324, 1963 CarswellOnt 144 (H. Ct. J.), aff’d (BC SC), [1964] 2 O.R. 248, 1964 CarswellOnt 617 (C.A.). [20] Contractual

interpretation requires a court to consider commercial reasonableness and efficacy. Côté and Brown, J.J.(dissenting in part) and Rowe J. (concurring) stated at paragraph 79 in Resolute FP Canada Inc. v. Ontario (Attorney General), 2019SCC 60. … Contracts ought therefore to be interpreted "in accordance with sound commercial principles and good business sense" (Scanlon v.Castlepoint Development Corp. (1992), (ON CA), 11 O.R. (3d) 744 (Ont. C.A.), at p. 770). As Lord Diplockexplained in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. (the Antaios) (1984), [1985] A.C. 191 (U.K.

H.L.), at p. 201, "ifdetailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts businesscommonsense, it must be made to yield to business commonsense". [21] I further quote in

part Côté, Brown and Rowe, J.J. at paragraphs 142-144 in Resolute: 142 …when interpreting commercial contracts, courts seek to reach a commercially sensible

interpretation, since doing so is morelikely than not to give effect to the intention of the parties 143 Discerning commercial reasonableness entails … an objective analysis. Courts should therefore read commercial contracts in a“positive and purposive manner”, seeking to understand the structure of the agreement reached by the parties, the purpose of thetransaction and the business context in which the contract was intended to operate… 144 Given, then, the choice between an

interpretation that allows the contract to function in furtherance of its commercial purpose andone that does not, it is generally the former

interpretation that should prevail … While a party cannot avoid its contractual obligationssimply because the bargain that they entered into was undesirable or unusual, commercially absurd

interpretations should be avoided… [22] In Atos IT Solutions v. Sapient Canada Inc., 2018 ONCA 374, leave to appeal to S.C.C. refused, 2019 CarswellOnt 4343,Brown J.A. stated at paragraph 60:

The interpretive principle of commercial efficacy – and its corollary, avoiding

interpretations that result in a commercial absurdity – ismerely one of several tools used by courts to give an accurate meaning to the parties’ intentions as stated in a contract: Geoff R. Hall,Canadian contractual

Interpretation Law, 3d ed. (Toronto: LexisNexis Canada, 2016), at pp. 55-56. Commercial reasonableness is not“judged solely from the perspective of one of the contracting parties but rather must be assessed objectively”: Hall, at p. 57. “[I]nassessing commercial reasonableness the court will consider both the language of the contract as a whole (such that individual provisionsare not assessed in isolation for commercial reasonableness) and the factual matrix (as the surrounding circumstances are essential tounderstanding whether a particular

interpretation makes good business sense)”: Hall, at p. 58. [23] In Unique Broadband Systems Inc., Re, 2014 ONCA 538, Hourigan, J.A. stated at paragraphs 88-89: 88 A commercial contract will be interpreted in a manner that is consistent with commercial principles and that avoids a commercialabsurdity.” In Consolidated-Bathurst Export Ltd. V. Mutual Boiler & Machinery Insurance Co. (1979), (SCC), [1980] 1S.C.R. 888 (S.C.C.), at p. 901, Estey J. stated: [w]here words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as theinterpretation which would promote the intention of the parties. Similarly, an

interpretation which defeats the intentions of the partiesand their objective in entering into the commercial transaction in the first place should be discarded in favour of an

interpretation of thepolicy which promotes a sensible commercial result. Is the renewal right an agreement to agree? [24] In that regard, I refer to two decisions. In Ramona Morrison Hospitality Services Ltd. v. Stonebridge Hotel Ltd., 2008 ABCA222, the court considered the wording of the arbitration clause which stated that the rental rate “shall be settled by arbitration”.

TheCourt held in Ramona, it was reasonable to conclude that the parties to the lease envisaged reasonable rent and the implication of such aterm fit within the business efficacy basis for implying a contractual term in the lease. [25] In Oak Harbour I Management Ltd. v. Villanova (2000), 96 A.C.W.S. (3d) 861, [2000] O.J. No. 1476 (Sup. Ct. J.), Lack, J.stated partly at paragraph 24: … The option was to renew the lease on its present terms except for the rental to be charged.

I conclude this because the provisionrelating to the renewal option in the offer to lease provides “rent renewal shall be agreed upon between landlord and tenant failing whichan arbitrator shall impose on both parties.” I do not find the terms of the option vague or unenforceable, as the Applicant contends. Anoption for renewal that contained no time limit and no condition on the manner of exercise was considered by the Supreme Court ofCanada in Guardian Realty Co. of Canada v. John Stark & Co. (1922), (SCC), 64 S.C.R. 207 (S.C.C.).

Under thecircumstances, in that case, the option was found to be enforceable at any time up until either the tenant vacated or the landlord put thetenant to his option. Nor is the option simply an agreement to agree and as such unenforceable, because, in the absence of agreement,the rental terms – presumably fair market value – are capable of being made definite through imposition by an arbitrator. Guardian Principle [26] Cromwell, J.A.’s comprehensive explanation of the Guardian Principle in Gerstl v.

Sobey Leased Properties Ltd., 1998 NSCA194 at paragraphs 38-40 has been considered by the Court: 38 The crux of this part of the appeal is how the principle enunciated by the Supreme Court of Canada in Guardian Realty Co. ofCanada, supra, applies in this case. This principle applies where a tenant has an option to renew and there is no specific term governingthe time or method of exercising it. In these circumstances, the tenant may exercise its rights to renew as long as the tenant has notindicated that there will be no renewal.

This indication may be express or implied as, for example, from the tenant going out ofpossession at the end of the term. The lessor may require the tenant to say whether or not it exercises the right to renew. Absent anexpress or implied election not to renew or a failure to respond once put to the election by the landlord, the option to renew subsists andmay be exercised.

This principle has been applied on many occasions since it was enunciated by the Supreme Court in Guardian RealtyCo. of Canada in 1922… 39 Stated more broadly, the Guardian Realty Co. of Canada principle is based on the notion that an option to renew gives the lessee apresent interest and, absent express conditions for its exercise, should not be defeated unless there are substantial reasons for doing so... … 40 It follows from this principle that the key considerations are whether the landlord has put the tenant to its option and, if not,whether the tenant has implicitly elected not to renew.

While retaining possession may be strong evidence of an election to renew, it issimply that. The important question is whether the tenant has done anything to preclude the exercise of the right to renew -- whether ithas lost the right to renew by virtue of its conduct of which retaining or going out of possession may be an important aspect… [27] Cromwell, J.A. stressed a common-sense approach that looks at the substance of what transpired (at paragraphs 42, 45-46):

42 ... The Guardian Realty Co. of Canada principle, however, demands that the substance of the situation and not simply its formmust be examined.

This follows from the judicial attitude towards options to renew set out in Guardian Realty Co. of Canada: the rightrests on a "substantial foundation", not a "mere verbal formula". … 45 … [W]here the right would otherwise subsist, it should not be extinguished unless giving effect to it has become impossible or forsome other substantial reason. 46 … Once again, the Court's attention is on the substance of the matter and whether the tenant is able to perform the substance ofthe obligation required by the option to renew.

What conduct constitutes bad faith [28] I am referring to Nova Scotia Supreme Court in Gateway Realty Ltd. v. Arton Holdings Ltd. (1991), (NSSC), 288 A.P.R. 180, 29 A.C.W.S. (3d) 262 (N.S. T.D.) and a decision of Kelly, J. in which he discussed a contractual obligation ofgood faith and stated at paragraphs 39 and 41: 39 The law requires that parties to a contract exercise their rights under that agreement honestly, fairly and in good faith.

Thisstandard is breached when a party acts in a bad faith manner in the performance of its rights and obligations under the contract. “Goodfaith” conduct is the guide to the manner in which the parties should pursue their mutual contractual objectives. Such conduct isbreached when a party acts in “bad faith” – a conduct that is contrary to community standards of honesty, reasonableness or fairness.

The insistence on a good faith requirement in discretionary conduct in contractual formation, performance, and enforcement is only thefulfillment of the obligation of the courts to do justice in the resolution of disputes between contending parties. … 41 The concept that one party to a contract should not act in such a way as to deprive the other party of the anticipated benefits of thecontract is not a new one.

Professor Belobaba, in his thorough review of the doctrine of good faith, in Good Faith In Canadian ContractLaw Special Lectures of the Law Society of Upper Canada (Don Mills Ontario: De Boo 1985), points out at p. 80 that a doctrine of goodfaith has been a part of Anglo-Canadian contract law for 300 years; …sometimes explicit, most often implicit, … A careful study of the three major stages of the contracting process – negotiation andformation, contractual performance, and contractual enforcement – shows a consistent and confident judicial vigilance against bad faithbehaviour.

Analysis [29] Although not contained in the Agreed Facts, it is obvious from the documents filed by the parties that Copper was discontentwith the business relationship with Parkland. On May 16, 2019, Copper’s counsel forwarded a written notice to Parkland that Copper didnot intend to renew the lease and that its relationship with Parkland would terminate on June 30, 2020. Copper has provided no legalbasis nor authority for this action and I find Copper had no right under the Lease to unilaterally terminate it.

This was the positioncommunicated by Parkland’s counsel to Copper in correspondence dated July 3, 2019, which also gave notice to Copper of Parkland’sintention to renew the Lease for an additional term of five (5) years. Parkland concluded the correspondence by stating that it was readyto negotiate financial and gasoline/diesel volumes in good faith and its manager would soon contact Copper to begin negotiations. [30] The Lease does not provide a date by which Parkland was required to give notice of its intention to renew under clause 9.

However, I find Parkland did provide such notice on a timely basis being almost one year before the expiry of the initial term. Nor didthe Lease set out any timeframes for negotiations or if necessary, arbitration but the parties agree a meeting to discuss renewal termstook place on January 13, 2020 which is 5 ½ months prior to the end of the initial term. [31] Subsequent negotiations occurred which did not lead to a successful resolution. Copper argues that Parkland’s delay incommencing negotiations and providing offers amounted to a waiver of the option to renew.

I find this argument to be without merit forthe following reasons. [32] Firstly, the Agreed Facts do not support a finding that: a. The negotiations were unduly delayed or;

b. That any delay was caused solely or mainly by the actions of Parkland. [ 33 ] The parties’ representatives, Joy Barker and David Mouland present opposing and conflicting views in their affidavits regarding the intent of Mouland’s visits to the service station on June 19 and November 27, 2019 and whether Barker was notified of the visits in advance. Further, the representatives are not in agreement as to what transpired during the meeting on January 13, 2020. The parties had the option to cross-examine affiants and/or adduce further evidence. However, they chose to present an Agreed Statement of Facts.

Therefore, the Court cannot resolve any issue of credibility and it would be improper for me to delve into matters not addressed in the Agreed Facts. [ 34 ] Therefore, I cannot find on the Agreed Facts that Parkland “slept on its rights” following the notice to renew in July, 2019. Similarly, I cannot find that Copper avoided meetings and was not interested in negotiating.

The evidence is simply insufficient to satisfactorily make such findings of fact. [ 35 ] However, it should be noted that even if Parkland was solely responsible for any delay, it would not result in the renewal right being rendered null and void. The Lease does not set out a time line for negotiations and arbitration. [ 36 ] Further, Copper provided no legal authority for its proposition that delay would amount to a waiver of the renewal option. To make such a finding, the Court would have to add terms to the Lease which would be inappropriate in the circumstances of this case.

Gerstl is authority for the foregoing. [ 37 ] Copper solicited offers from other petroleum suppliers in December, 2019 being 5 months after Parkland had given notice of its intention to renew the Lease.

Parkland considered this bad faith negotiations as Parkland believed strongly that offers from its competitors, if not matched, could only come into effect after the renewal period, being on or about July 1, 2025. [ 38 ] I am satisfied that the renewal right in the Lease is strong as it contains a requirement for good faith negotiations and a dispute resolution mechanism (that is arbitration) if the financial terms and gasoline/diesel volumes cannot be resolved by the parties. [ 39 ] The agreement of Copper and Parkland to engage in good faith negotiations and then arbitration distinguishes this case from the decisions cited by Copper being Imperial Oil Ltd. v.

C & G Holdings Ltd. (1986), 39 A.C.W.S. (2d) 48, 58 Nfld. & P.E.I.R. 326 (Nfld. (T.D.)), Donovan Homes Ltd. v. Modern Paving Ltd. , 2011 NLCA 39 , Mifflin v. North Atlantic Refining Limited , 2017 NLTD(G) 140. [ 40 ] Parkland argued that Irving Oil’s offer placed Parkland in a difficult and unfair position during the negotiations. I do not know what happened during their negotiations and there are no details in the Agreed Facts. The notice of the Irving Oil offer was based on Copper’s

interpretation of clause 8 and it would have been prudent for Copper to seek a determination from this Court in February, 2020, because it is clear that the Irving Oil offer was taking precedence and was an obstacle to positive and fruitful negotiations between the parties. [ 41 ] The information from Irving Oil could have been used to inform both parties. However, if it was being used as a sword, which I cannot say on the Agreed Facts, then Copper must also take responsibility for no agreement being reached.

Copper would have been entitled to make inquiries regarding competitor’s offers so that it could bargain effectively with Parkland and to possibly present such information to an arbitrator. To enter into negotiations with Parkland without being properly informed would have been foolhardy on the part of Copper. [ 42 ] Parkland did not respond to Irving Oil’s letter of intent within 60 business days and I am satisfied Parkland was not required to do so. [ 43 ] I accept Parkland’s argument that the only commercially reasonable

interpretation of the Lease is that Parkland has an absolute renewal right that cannot be nullified or abrogated by the Right of First Refusal. If Parkland gives notice of its intention to renew, then it has an opportunity to match the third party offer received or obtained by the Lessor during the renewal term and during six (6) months thereafter. If not matched, the third party offer would commence at the end of the renewal term.

The Right of First Refusal explicitly accounts for the exercise of the renewal as it references “renewal” on three occasions. [ 44 ] The lease term was extended by Parkland’s exercise of the renewal right for a further term of five (5) years. The Right of First Refusal is for Parkland’s benefit only, it is not intended to provide a “means” to Copper to unilaterally terminate the lease. [ 45 ] Parkland’s

interpretation of clause 8 is in harmony with clause 9 and also the intent of the parties at the time of entering into the Lease. Copper’s

interpretation would substantially alter the objectives of the Lease, cause harm to Parkland and would be contrary to the expectations of the parties. It would lead to an absurd result not in accordance with sound business principles. [ 46 ] By way of illustration, Copper’s

interpretation would allow Copper to present an offer to Parkland from a competitor very early in the initial term of the lease or after Parkland had given notice of its intention to renew, which if not matched by Parkland within 60 business days, would result in Parkland losing its right to renew. [ 47 ] Further, the

interpretation would permit Copper to present a competitor’s offer to Parkland during the initial term, but after Parkland had given notice of its intention to renew and after the parties had successfully negotiated or had proceeded to arbitration, which if not matched within 60 business days, would result in Parkland losing its right to renew. Copper interprets their Right of First Refusal as being paramount to the renewal right which is not commercially reasonable. This

interpretation by Copper clearly disregards the strong renewal right and takes away a vested right of Parkland which has been contractually agreed to by the parties. Copper’s position does not result in the two clauses (8 and 9) being read harmoniously whereas Parkland’s position does. [ 48 ] There is no substantial nor obvious reason for this Court to abrogate the renewal right. I agree with Parkland that such an

interpretation would not be in accordance with the Guardian Principle . [ 49 ] In the case before me, the option to renew is clearly enforceable as the terms of the option are not vague and are capable of

being made definite through imposition by the arbitrator. This is supported by the decisions in Oak Harbour and Ramona Morrison . [ 50 ] Parkland asserts that Copper by its action to terminate the Lease in May, 2019, which it had no right to do, exercised bad faith. Parker also submits that Copper’s conduct in presenting Irving Oil’s offer which Copper believed defeated the renewal right is also bad faith.

Parkland agreed there was sufficient evidentiary basis for me to decide this matter. [ 51 ] On the basis of the Agreed Facts, I am not satisfied on the balance of probabilities that Copper engaged in bad faith although I find Parkland’s claim has merit. [ 52 ] Copper tried to terminate the Lease in May, 2019. Copper either misunderstood the Lease or simply decided to take a leap maybe anticipating Parkland was also disinterested in continuing the business relationship. The facts before me do not allow a solid determination of Copper’s belief, intent or motivation.

Either way, Copper abandoned the notice to terminate the Lease upon receiving Parkland’s reply some six (6) weeks later. [ 53 ] The subsequent action of Copper in presenting Irving Oil’s offer appears to have been based on a genuine but faulty misinterpretation of clause 8. It may have been encouraged by the failure of the parties to negotiate from July, 2019 until January 13, 2020.

Parkland had indicated in its July, 2019 correspondence that they would be in contact with Copper soon, however, it was January, 2020 before the negotiations commenced. [ 54 ] It may have been prudent from a business point of view for Parkland to promptly commence negotiations as the letter from Copper attempting to end the Lease was a clear indication of a breakdown in the relationship of the parties. I raise this only because Parkland asserts a coy attempt on the part of Copper to escape its obligations.

However, I am considering the limited evidence regarding both parties’ actions and conduct, not simply Copper’s in a vacuum. There is evidence in the Agreed Facts and documents that supports a finding that both parties could have handled this matter in a more productive and business like fashion. For example, the March 10-11, 2020 documents indicate that Mouland would get back to Barker the following week; there is no indication he did so. [ 55 ] Clearly, both parties were acting in their own best interests as one would expect.

However, considering the whole of the circumstances and the conduct of both parties, on the limited Agreed Facts, I am not satisfied that the actions of Copper amounted to bad faith for which damages should be awarded. The parties blame each other and have differing views of what occurred and opposite

interpretations of the Lease; but there is no evidence that Copper acted dishonestly or deceitfully. The evidence is simply not sufficient to meet the civil burden of a finding of bad faith on the part of Copper. [ 56 ] On the bad faith claim, I am not ordering costs to Copper as its initial action in attempting to terminate the lease was without legal justification, and in that regard, the claim of Parkland has some merit. Therefore, Parkland should not be penalized in costs.

While Parkland believes Copper attempted to rob Parkland of its bargained for renewal right, I find Copper’s conduct falls short of bad faith but it is conduct that should be discouraged. [ 57 ] Lastly, Parkland seeks costs on a full indemnity basis which is denied. There is an insufficient basis on which to find scandalous, vexatious or reprehensible behavior on the part of Copper. An offer was not forthcoming from Parkland after March 11, 2020 and the parties continued to have a difference of

interpretation regarding the Lease. [ 58 ] The April 29, 2020 deadline for matching Irving Oil’s offer had passed and while Copper believed it was now in a position to accept Irving Oil’s offer, it did not take any actions other than to file an Application with this Court in May 2020, seeking an

interpretation of the Lease but not seeking any costs from Parkland. It agreed to maintain the status quo until determination of this matter. In the context of all that has occurred since May, 2019, solicitor and own client costs or full indemnity costs are not justified nor warranted. However, Parkland is entitled to its costs on a party and party basis, column 3 for the proceeding, less 25% which accounts for the approximate time incurred on the bad faith claim. conclusion i. Copper’s application for a declaration that it is entitled to accept Irving Oil’s offer is dismissed. ii.

Parkland’s application for a finding of bad faith actions by Copper is dismissed. iii. Parkland’s application for a declaration that the Lease be renewed for a five (5) year term or such longer period as the parties may mutually agree and for an order that the parties negotiate in good faith and if necessary proceed to arbitration to establish the financial terms and gasoline/diesel volumes is granted. iv. Costs are awarded to Parkland on a party and party basis column 3, less 25% accounting for the time incurred on the bad faith claim. _____________________________ Kendra J. Goulding Justice