Lions Gate Animal Medical Clinic Inc. Plaintiff v. J.C.F. Development Corporation, 2003 BCSC 446

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Lions Gate Animal Medical Clinic Inc. v. J.C.F. Development Corp., 2003 BCSC 446 Date: 20030326 Docket: S75676 Registry: New Westminster Between: Lions Gate Animal Medical Clinic Inc. Plaintiff And J.C.F. Development Corporation Defendant Before: The Honourable Madam Justice MacKenzie Reasons for Judgment Counsel for the plaintiff: P. McMurchy Counsel for the defendant: G. Baldwin Dates and Place of Trial: March 3, 4, & 5, 2003 New Westminster, B.C. [ 1 ] The main issue in this action by Lions Gate Animal Medical Clinic Inc. ("Lions Gate") against J.C.F.

Development Corporation ("J.C.F.") with respect to a lease is whether J.C.F. actually received notice that Lions Gate was exercising its option to extend the term of the lease. Lions Gate did not use the prescribed term in the lease for giving notice of the exercise of this option, so only if J.C.F. actually received such notice would it be effective: Re Ross v. T. Eaton Co. Ltd. (1992), 1992 CanLII 7470 (ON CA) , 96 D.L.R. (4 th ) 631 (Ont.

C.A.). [ 2 ] The alternate issue is whether Lions Gate was reasonably led to believe that J.C.F. was not relying on the strict notice terms of the lease and that it would be extended. BACKGROUND [ 3 ] Lions Gate is owned by Dr. and Mr. Brian Wilkie. They purchased it around January 31, 2001. Lions Gate runs an animal/veterinarian clinic in the Dunderave area of West Vancouver. Dr. Wilkie is the veterinarian. The business affairs of Lions Gate are managed by Brian Wilkie. [ 4 ] The president of J.C.F. is Joan Forrester. Mr. Wilkie and Ms.

Forrester each testified at trial on behalf of the respective parties. [ 5 ] Lions Gate and the previous owner of the premises at 2459A Bellevue Avenue, West Vancouver, were involved in a lease agreement. Ms. Forrester, on behalf of J.C.F., purchased the property in 1994 and J.C.F. assumed the position of landlord under the lease. Dr. and Mr. Wilkie became involved when their company, Lions Gate, continued the tenancy it began in 1992. [ 6 ] The lease was for a term of ten years, commencing August 1, 1992.

It provided the tenant, Lions Gate, an option to exceed the term of the lease for two further periods of five years, commencing August 1, 2002.

[ 7 ] The lease provided that notice of exercise of the option to extend the lease, "shall be deemed sufficiently given, if mailed by registered mail in the City of Vancouver, Province of British Columbia, postage pre-paid ...." If given to the landlord, the notice was to be addressed to the landlord, "at the address set out above".

The address set out above is the address of the previous owner of the premises but it is clear that Brian Wilkie knew the correct address of J.C.F., the current landlord, as he had visited that address and sent mail there. [ 8 ] To exercise the option to extend the term of the lease, the tenant was required to notify the landlord of such exercise at least five months before the end of the original term.

The parties agree that date was February 28, 2002, which is five months prior to July 31, 2002, the last day of the lease. [ 9 ] Lions Gate says it complied with the five months notice requirement for exercising the option to extend the term of the lease. However, J.C.F. says it did not receive the required five months notice. [ 10 ] Brian Wilkie testified that he enclosed a letter dated January 30, 2002, in the envelope which contained Lions Gate rent cheque for February 2002. He mailed the envelope containing both documents to Joan Forrester, president of J.C.F. at 2690 Finch Hill, West Vancouver.

The address, including postal code was current. Ms. Forrester has both her business and home at that address. The letter stated: January 30, 2002 Joan C. Forrester President J.C.F. Development Corporation 2690 Finch Hill West Vancouver, BC V7S 3H3 Dear Joan; Please be informed that we will be renewing the lease for 2459A Bellevue when it comes do [sic] in August. If you have any questions pleas [sic] call me. Sincerely yours, "Brian Wilkie" [ 11 ] There are obvious spelling and grammatical errors in the letter. Mr.

Wilkie explained them by testifying he composed the letter in a hurry to keep it with the rental cheque to make the mail on January 30, 2002. He said he intended the cashing of the rental cheque to inform him that the notice was received. I observe that January 30, 2002, was six months prior to the expiration of the lease on July 31, 2002. He was early to exercise the option, and there was no need to rush. The wording of the letter is informal. It does not use the words of the lease with respect to exercising the option. In addition, Mr. Wilkie received no confirmation or response from Ms.

Forrester that she had received the alleged letter of notice. Rather, Ms. Forrester testified she did not receive the letter of notice at all. I accept Ms. Forrester's evidence. She was a forthright witness who impressed me as being honest and reliable. [ 12 ] I do not know why Ms. Forrester, on behalf of J.C.F., did not receive the alleged letter of notice dated January 30, 2002, if Mr. Wilkie did place it in the envelope with the February rent cheque which was cashed. There are several possibilities. Mr.

Wilkie is mistaken about having enclosed the notice letter in the same envelope as the rent cheque, or he was untruthful about it, or Michelle Cross, Ms. Forrester's assistant, received the notice and did not give it to Ms. Forrester. It does not matter, however, because on application of the principles in Re. Ross v. T. Eaton , the method of ordinary post chosen by Mr. Wilkie is less advantageous to J.C.F. than the registered mail permissively, (not exclusively) provided for in the lease for giving notice, and the notice was not communicated to Ms.

Forrester. [ 13 ] The next event was the letter dated May 6, 2002 (received by Mr. Wilkie May 10, 2002) from Mr. Baldwin, J.C.F.'s lawyer, enquiring whether Mr. Wilkie was interested in leasing after August 1, 2002. Mr. Baldwin said that if he were, Mr. Baldwin would prepare a lease for execution by the parties. In the letter, Mr. Baldwin said the landlord proposed a five year lease with a base rent of $26 per square foot for two years and $30 per square foot for the remaining three years. The monthly rent was calculated upon 2,150 square feet. Mr. Baldwin asked Mr.

Wilkie to advise as to his position concerning a new lease.

[ 14 ] Mr. Wilkie did not respond to the May 6, 2002 letter so Mr. Baldwin sent a follow-up letter dated May 27, 2002. [ 15 ] On May 28, 2002, Mr. Baldwin telephoned Brian Wilkie requesting a response to the May 6 and May 27, 2002 letters. Mr. Wilkie testified that he told Mr. Baldwin that he had already sent a letter dated January 30, 2002, to Ms. Forrester exercising the option to extend the current lease term. Mr. Wilkie testified he read it over the phone to Mr. Baldwin and faxed it to him that day, May 28, 2002.

The fax of the January 30, 2002 letter is before the court. [ 16 ] In a letter dated May 30, 2002, Mr. Baldwin wrote Mr. Wilkie, referring to the January 30, 2002 letter. He stated Ms. Forrester did not receive such notice and she did not believe it was sent to her. Mr. Baldwin said Ms. Forrester had conducted a thorough search of her file but found no such letter. Mr. Baldwin repeated the proposal for the rate of rent put forward in the May 6, 2002 letter and asked for Mr. Wilkie's reply. [ 17 ] On June 6, 2002, there was a meeting taken up by Ms. Forrester at Mr. Wilkie's office. [ 18 ] On June 13, 2002, Mr.

Wilkie wrote to Ms. Forrester offering rent of $21.50 per square foot. [ 19 ] On June 18, 2002, Mr. Baldwin wrote to Mr. Wilkie stating there was no response to the May 30, 2002 letter, and confirming the existing lease would expire on July 31, 2002. Mr. Baldwin repeated the question whether Mr. Wilkie was interested in leasing the premises after August 1, 2002, as per the terms expressed in the May 30, 2002 letter of Mr. Baldwin. [ 20 ] On June 19, 2002, Mr. Baldwin wrote to Mr. Wilkie in reply to Mr.

Wilkie's letter of June 13, 2002, stating the proposal of $21.50 per square foot was not acceptable and repeating there was no extension of lease available, only a new lease with the landlord's terms for rent as indicated in the previous correspondence. [ 21 ] The lease expired on July 31, 2002. On August 6, 2002, Mr. Baldwin notified Mr. Wilkie the lease had expired and the landlord would not permit any overholding. Mr.

Baldwin demanded immediate possession of the premises, requiring the tenants to vacate immediately. [ 22 ] Lions Gate has continued to occupy the premises paying its rate under the expired lease of $18.50 per square foot rather than the rate stipulated in the May 30, 2002 letter of $26 per square foot. DISCUSSION [ 23 ] In Re. Ross v. T. Eaton Co. Ltd., the issue was whether the T. Eaton Co. Ltd., the tenant under a 30-year lease with David A.

Ross, the landlord, effectively exercised an option to renew the lease for ten years. [ 24 ] David Ross brought an application for a declaration that Eaton had not properly renewed the lease and it was accordingly at an end. The court of first instance held in favour of Eaton and dismissed the application. Ross appealed. [ 25 ] The majority of the court allowed the appeal and made an order directing trial of the issue of whether the notice of renewal was actually received by Ross within the time provided for in the lease.

The court said that if it were found that the notice was received, the application by Ross for a declaration that Eaton had not properly renewed the lease should be dismissed.

However, if that finding was not made, then the Ross was entitled to the relief claimed in the application. [ 26 ] According to the term of the lease, if Eaton wished to renew the lease, it had to deliver to Ross notice of its election to exercise this right at least twelve months before the expiration of the 30-year term. [ 27 ] Eaton did send a letter by courier before the expiration of the 30-year term in which Eaton advised it exercised its option to renew the lease.

The courier was unable to find Ross at the address on the letter because Ross had moved many years earlier. (He had written at the time of the move to so advise Eaton). Eaton then elected to send the renewal letter to Ross' bank, confident that the bank would redirect the letter to Ross. [ 28 ] The court determined that whether Ross received the renewal letter from Eaton through Ross' bank was an issue of fact that could not be determined on affidavits and transcripts.

The case was remitted for trial. [ 29 ] Morden (then A.C.J.O.) said at p. 638: ... if an offeree wishes to depart from the method of acceptance prescribed by the offeror (which is not insisted on as the sole method of acceptance), he or she can only do so effectively if the communication is by a method which is not less advantageous to the offeror and the acceptance is actually communicated to the offeror.

And, again at p. 639: If an offeree wishes to depart from the prescribed terms for communicating the acceptance, he or she should only be able to do so effectively where the offeror has actually received the acceptance.

[ 30 ] It can be seen from Mr. Baldwin's letter to Mr. Wilkie that J.C.F. consistently refers to a "new" lease and a change in the rent. There is no suggestion of renewal of the existing lease. If Mr. Wilkie interpreted the letters as being negotiation on a new rent under the existing lease, he did so at his peril. Nothing in the letter or the conduct of J.C.F. could have reasonably led him to that conclusion. [ 31 ] In addition, nothing in the discussions with Ms. Forrester in February and March 2001, shortly after he and Dr. Wilkie bought Lions Gate, could have reasonably led him to believe Ms.

Forrester, on behalf of J.C.F., was not relying on the strict terms of the lease with respect to notice. In any event, I find this argument inconsistent with Lions Gate's position that it had, through Mr. Wilkie, complied with the term of the lease with respect to giving notice before February 28, 2002. [ 32 ] Lions Gate argues the discussions in February and March, 2001 between Mr. Wilkie and Ms. Forrester amounted to oral notice from Lions Gate to J.C.F. of the exercise of the option to extend the term of the lease by Lions Gate. [ 33 ] However, the lack of specificity in Mr.

Wilkie's evidence about what could be interpreted as an exercise of an option to extend the term of the existing lease persuades me that no oral notice was given in those discussions. Clearly, Ms. Forrester did not interpret any conversation as containing such notice. [ 34 ] Whatever social or business discussions occurred at the beginning of this landlord/tenant relationship in February and March 2001, cannot amount to conduct by Ms. Forrester which could have reasonably led Mr. Wilkie to believe J.C.F. would not rely on the strict terms of the lease. As I stated, the letters sent by Mr.

Baldwin from May, 2002 to July, 2002, consistently refer to a "new lease" and never mention an extension of the existing lease. [ 35 ] On the totality of the evidence, I find the lease expired on July 31, 2002, without notice received by J.C.F. of any exercise by Lions Gate of the option to extend the term of the lease. [ 36 ] As I stated, whether Mr. Wilkie actually sent the January 30, 2002 letter of notice cannot be determined from the evidence. Even if he did, Ms. Forrester for J.C.F. did not receive such notice. Therefore, the principle in Re. Ross v. T.

Eaton applies in this case. [ 37 ] There will be an order that the plaintiff give up possession and vacate the premises. [ 38 ] There is sufficient evidence before me on the issue of damages to find it reasonable that the defendant's position is correct. That is, at the end of July 31, 2002 when the lease expired, but for the actions of the plaintiff, J.C.F. would have received approximately $26 per square foot for the premises, rather than the $18.50 per square foot the plaintiff has paid to date.

J.C.F.'s damages are reasonably calculated as the difference between $26 and $18.50 per square foot from August 1, 2002 until the plaintiff vacates the premises. [ 39 ] Having regard to counsel's submissions that there should be a generous period for Lions Gate to vacate this veterinarian clinic, it will be by May 30, 2003 at 5:00 p.m. I do not discern significant prejudice to the defendant by setting this date.

It merely constitutes a delay in sorting out the business arrangement but J.C.F. will receive damages up until the plaintiff vacates. [ 40 ] There will be court ordered interest at the Registry's prevailing rates on the difference between what the tenant has paid since August 1, 2002 to the date it vacates. [ 41 ] The lease expired July 31, 2002. There is a declaration that it is terminated. [ 42 ] The defendant will have its costs at Scale 3. “A.W. MacKenzie, J.” The Honourable Madam Justice A.W. MacKenzie