1218807 Alberta Ltd. Plaintiff - v. -, 2023 ABKB 300

Court of King’s Bench of Alberta Citation: 1218807 Alberta Ltd v Muslim Association of Canada Ltd, 2023 ABKB 300 Date: 20230519 Docket: 2003 18579 Registry: Edmonton Between: 1218807 Alberta Ltd. Plaintiff - and - Muslim Association of Canada Ltd. Defendant _______________________________________________________ Memorandum of Decision of the Honourable Justice L.M. Angotti _______________________________________________________ Table of Contents I. Introduction . 3 II. General Facts . 4 III. Analysis of Issues . 5 1. Principles of Contract

Interpretation . 5

2. Were the Conditions Precedent set out in the Lease satisfied so that the Lease remained valid and enforceable and, if not, is the Lease void? . 6 3. If the Lease is void, is the security deposit paid by MAC under the Lease to the Landlord returnable to MAC? . 12 4. If the Lease is valid and enforceable, what is the impact of the COVID-19 Pandemic (the “Pandemic”)? 12 5. Does the force majeure clause in the Lease apply to relieve MAC of its obligations under the Lease? 17 6. Does frustration of the Lease apply to relieve MAC of its obligations under the Lease? . 21 7.

If the Lease is valid and enforceable, has MAC established that the Landlord breached its statutory obligations under the Commercial Tenancies Protection Act , SA 2020, c C-19.5 (the “ CTP Act ”), thereby committing a substantial breach? . 23 8. Is MAC entitled to relief from forfeiture? . 25 9. Has the Landlord committed an anticipatory breach of the Lease? . 28 10. Did the Landlord breach its obligation under the Lease to act in good faith? . 29 11. If the Lease is valid and enforceable and the Landlord committed a substantial breach, is MAC entitled to specific performance of the Lease? . 31 12.

If the Lease is valid and enforceable, has MAC breached the terms of the Lease? . 32 13. Damages arising from MAC’s breach of the Lease . 32 IV. Costs . 37 I. Introduction [ 1 ] The Muslim Association of Canada Ltd. (“MAC”) is a non-profit corporation whose community services include the educational and spiritual development of the community members and the provision of religious and social services.

MAC wanted to establish an Islamic private school in southeast Edmonton. 1218807 Alberta Ltd. (the “Landlord”) owned a building that was previously used as a college and was now vacant (the “Premises”), as well as the lands and surrounding buildings (the “Property”). The parties entered into a commercial lease (the “Lease”) on December 5, 2019, for the purpose of MAC using the Premises for a private school and a religious assembly. [ 2 ] The private school was never established. The Landlord terminated the Lease in September 2020 and brought this action for breach of the Lease by MAC.

The Landlord takes the position that MAC breached the Lease by failing to pay rent when it was due and owing. MAC takes the position that the Lease is null and void due to conditions precedent not being met or, alternatively, that the Landlord breached the Lease or applicable legislative provisions or that the Lease is not enforceable, as a result of the COVID-19 pandemic (the “Pandemic”). [ 3 ] The parties proceeded by consent to

summary trial, with the detailed issues for determination set out in a Court Order granted June 23, 2021. The judge hearing the matter must be satisfied that, 1) the disputed questions of fact can be determined on affidavit, cross-examination on affidavit, and any other proceedings authorized by the Alberta Rules of Court for a

summary trial and 2), that it would be just and fair to the parties to determine the issues in that manner: Imperial Oil v Flatiron Constructors Canada Ltd. , 2017 ABCA 102 at para 24 . [ 4 ] I am satisfied that any factual matters can be determined on the state of the record before me, which consists of both affidavits and cross-examination on affidavits and provides a sufficient evidentiary basis. Neither party raised issues of credibility. There are no disputes about the facts, the record, or the law that would render a

summary trial inappropriate or potentially unfair. While the matter is somewhat complex, that complexity arises mainly from the law rather than the facts. The core of the action is contract

interpretation and the application of the law to events that occurred following the parties entering into the Lease. Thus, I find that it is appropriate to have this matter determined on a

summary trial. II. General Facts [ 5 ] While certain facts will be dealt with under the issues to which they are most relevant, it is useful to set out the basic facts that inform all of the issues. [ 6 ] MAC was seeking to establish an Islamic private school in southeast Edmonton, to serve the Islamic community in that area. At the time and presently, an Islamic school did not exist in that area of the city and community members informed MAC that there was a need for such a school in the underrepresented area.

To date, the situation remains the same. [ 7 ] The Premises, located at 830 Saddleback Road, were previously used, at least in part, as a private post-secondary school. When MAC started to look for a location to establish the Islamic school, it became aware, in January 2017, that the Property was listed for sale. MAC explored buying the Property, but ultimately decided not to. When an agreement for sale did not come to fruition, the

parties pursued the potential for MAC to rent the Premises, which efforts culminated in the Lease in December 2019. [ 8 ] The Landlord engaged Colliers International (“Colliers”) to provide property management services to the Landlord, including managing its tenants such as MAC. [ 9 ] The Lease had a 10 year term, with specified rent payable on an a nnual basis and an early termination clause. The Lease also contained a defined fixturing period, with a defined commencement date (the “Fixturing Period”).

The two conditions precedent set out in the Lease were approval of MAC’s development application and approval of the Permitted Use (the “Conditions Precedent”). [ 10 ] Under the Lease, MAC intended to use the Premises to operate a private school and, at a later date, add a religious assembly, which two uses were defined as the “Permitted Use”. In order to proceed with the Permitted Use, MAC sought a Development Permit from the City of Edmonton.

On January 16, 2020, the City of Edmonton issued the Development Permit to MAC. [ 11 ] On January 30, 2020, the parties entered into a lease amendment, which amended the approval date under the condition precedent clause from January 30, 2020, to February 14, 2020 (the “Lease Amendment”). This was the only amendment to the Lease. [ 12 ] MAC paid the Landlord a $101,823.50 security deposit sometime shortly after February 14, 2020, which security deposit was set out in the Lease (the “Security Deposit”).

The Landlord continues to retain the Security Deposit. [ 13 ] In March 2020, the Pandemic started impacting upon Canadian society in a significant manner. The Pandemic led to restrictions on services provided by the City of Edmonton (“City”) and legislation by the Government of Alberta (“GOA”), including legislation with respect to commercial lease arrangements impacted by the Pandemic. [ 14 ] Other than the Security Deposit, MAC has never paid any money to the Landlord, including any rent due and owing pursuant to the Lease.

The failure to pay rent the Landlord believed was due and owing resulted in the Landlord terminating the Lease on September 17, 2020, and commencing this action. III. Analysis of Issues 1. Principles of Contract

Interpretation [ 15 ] The Lease Amendment was completed in accordance with the Lease. Therefore, the entirety of the contract to be interpreted is the Lease and the Lease Amendment. While the parties disagree on the result of the application of contract

interpretation principles to the Lease, they do not disagree on what those principles are. [ 16 ] The generally applicable modern principles of contract

interpretation are set out in Sattva Capital Corp v Creston Moly Corp , 2014 SCC 53 at paras 47-48 , 56-60; Corner Brook (City) v Bailey , 2021 SCC 29 at paras 20 , 23; IFP Technologies (Canada) Inc v EnCana Midstream and Marketing , 2017 ABCA 157 at paras 79-83 . Contract

interpretation involves a practical, common-sense approach not dominated by technical rules of construction. The main objective of contract

interpretation is to give effect to the intentions of the parties to the contract, at the time that they entered into the contract, based upon what a reasonable person would have objectively understood. [ 17 ] This involves interpreting various parts of the contract in the context of the entire agreement and giving effect to all parts of the agreement. Words are to be interpreted in accordance with their plain and ordinary meaning.

However, the context in which the contract was formulated is relevant and important, as the meaning of words, phrases and the contract as a whole are to be interpreted in light of the circumstances surrounding the formation of the contract. However, evidence of the factual matrix must not be allowed to overwhelm the text of the contract.

And, that evidence is to be limited to the background facts known or that reasonably ought to have been within the knowledge of both parties, in other words the common knowledge of the parties, at or before the date of contracting. [ 18 ] The parties agree that in considering the surrounding circumstances, the Court should only consider objective evidence of what the contracting parties knew at the time of the execution of the contract, such as the genesis, aim, or purpose of the contract; the nature of the relationship created by the contract; and the nature or custom of the market or industry in which the contract was created.

That is distinct from evidence of subsequent conduct, which can only be admitted if the contract remains ambiguous after considering its text and the factual matrix in which it was created. 2. Were the Conditions Precedent set out in the Lease satisfied so that the Lease remained valid and enforceable and, if not, is the Lease void? a. Landlord – Conditions Precedent Met and Lease is Valid [ 19 ] The Landlord emphasized that the Lease was negotiated by legal counsel on behalf of both parties.

It submitted that the language in s 2.6 of the Lease makes it clear that the Conditions Precedent focus upon the issues of usage and zoning designations, through a development permit application. There is nothing in s 2.6 that would, either expressly or by implication, establish approvals by an entity other than the City. [ 20 ] Therefore, any approvals required from the GOA for MAC to operate a private school are not part of the Conditions Precedent.

While the GOA approval process may have required fire and building inspections, and such inspections would be done by the City, the inspections were not part of the City’s Development Permit application process. Thus, the Conditions Precedent only required approval from the City of Edmonton on usage and zoning, through the provision of a Development Permit related to the Permitted Use.

[ 21 ] The Development Permit that was obtained by MAC was valid and enforceable as of February 14, 2020, when the notification period expired and no appeals had been filed. The other conditions within the Development Permit were of a continuing nature, as they required proper maintenance throughout the life of the Development Permit. The validity of the Development Permit is not dependent upon completion of conditions of a continuing nature. Therefore, the Conditions Precedent were met on February 14, 2020, and the Lease was valid and enforceable. [ 22 ] This

interpretation, according to the Landlord, is supported by the conduct of MAC at the time. The Lease Amendment was done after the Development Permit was obtained and amended the Lease to change the condition removal date to February 14, 2020, after expiry of the notification period for the Development Permit.

The Lease Amendment thus reflects both that the parties would consider the Development Permit as valid on February 14, if the notification period passed without any filed objections or appeals, and the parties’ understanding at the time that the Premises were now correctly zoned and a private school and religious assembly were permissible uses. Had there been any other impediments to a valid Development Permit or meeting the Conditions Precedent, the parties would have addressed these in the Lease Amendment.

Also, MAC paid the Security Deposit, as recognition that the Conditions Precedent were met. [ 23 ] The Landlord also argued that the conditions in s 2.6 are not true conditions precedent, as the completion of the conditions required due diligence of MAC and is not wholly dependent upon the actions of a third party. b.

MAC – Conditions Precedent were not Satisfied and the Lease is Void and Unenforceable [ 24 ] MAC submits that the Conditions Precedent set out in s 2.6 are true conditions precedent, which were not satisfied, and therefore, the Lease is void and unenforceable by its own terms. [ 25 ] The purpose of s 2.6 was to ensure that MAC could operate the Premises for the intended purpose of a school and religious assembly. As the Premises were already zoned for use as a school from the past use, MAC required both development approval and approval of the permitted use, being the Conditions Precedent.

The protection set up in s 2.6 was necessary, as the Landlord was not aware of the approvals or other particular requirements needed to operate a school. [ 26 ] After the Lease was executed, MAC took immediate steps to get the necessary approvals from the City and the GOA. On December 16, 2019, they contacted the GOA about the application for a private school, which application was submitted on January 19, 2020. On December 17, 2019, they applied for a development permit from the City.

MAC submits that this evidence supports that the parties always contemplated that the Conditions Precedent required full approval from both the City and GOA. [ 27 ] MAC submits that the Development Permit granted on January 16, 2020 was subject to three conditions, being the expiry of the notice period and two conditions with respect to lighting on the premises. The Landlord’s agent recognized, on February 20, 2020, that approval with respect to the lighting conditions remained outstanding and there is no evidence that they were met. As a result, it remained throughout a conditional development permit.

Even if the other two conditions could be characterized as of a continuing nature, the Development Permit still required MAC to establish that they were met in the first instance. Thus, the Condition Precedent for approval of the development application approval was not met. [ 28 ] MAC also distinguishes between the Development Permit and the Permitted Use approval, as two distinct matters that could not be met simply through the Development Permit. The Development Permit only satisfied the first condition. The Permitted Use is defined in the Lease and is central to the purpose of the Lease.

Section 2.6 was drafted to set out two separate conditions. Interpreting them as two distinct conditions allows for harmony and avoids redundancy, as required by the Supreme Court of Canada’s jurisprudence. [ 29 ] The second condition required actual approval or accreditation from GOA to operate the school. MAC recognizes that s 2.6 does not mention GOA approvals specifically, but argues that GOA approval for the school would require both a building safety inspection and a fire inspection by the City.

Such fire and building standards inspections by the City were required so MAC would then be informed as to whether further steps were needed to bring the Premises into compliance for its permitted use. These inspections never occurred, as the City refused to complete them until June 2020 at the earliest due to the Pandemic. Without these inspections, the Permitted Use approval condition was not satisfied.

To interpret the Lease such that Permitted Use was resolved by the issuance of the Development Permit would result in a commercial absurdity and effectively amend the Lease, by merging the two Conditions Precedent. [ 30 ] MAC also notes that the timing of payment of the Security Deposit is irrelevant, as s 2.6 contemplated that the Security Deposit could be paid prior to removal of the Conditions Precedent and failure to remove them would simply result in a return of the Security Deposit. c.

Analysis - The Conditions Precedent in the Lease were satisfied so that the Lease remained valid and enforceable [ 31 ] Although the purpose of the Lease was to operate a private school, MAC’s position that the Conditions Precedent were tied to approvals required by the GOA for the operation of the school is not supported upon review of the wording of the Lease and the context surrounding the agreement between the parties. [ 32 ] The purpose is clearly set out in the Lease and is consistent with the evidence of both parties.

MAC was seeking to establish an Islamic private school, as well as the potential for future expansion to include a religious assembly, as services to its community.

The purpose of the Lease was for the Landlord to rent the Premises to MAC for the defined “Permitted Use” of “Private school and religious assembly” (s 1.1(h)). [ 33 ] As the school had not yet been established by MAC, the development of a school and the development, zoning, and building use requirements of the City of Edmonton are part of the context within which the Lease was entered. [ 34 ] MAC took two significant steps after entering into the Lease on December 5. It made an application to the City for a

Development Permit and started communicating with GOA about the requirements, including an application, to obtain approval for the school. It is not disputed at trial that MAC required approvals from both the City and GOA in order to operate the school in the Premises. [ 35 ] However, the factual matrix of the background facts known or that reasonably ought to have been known by both parties, being their common knowledge, is considered in the time frame at or before the Lease was executed.

While it would be expected that the Landlord had knowledge of the impact of land use and development issues upon a lease, there was no evidence that the necessary requirements to operate a school would ordinarily be in the knowledge of the Landlord. MAC submitted that, at the time of lease negotiations, MAC understood that the Landlord was not aware of any particular requirements or required approvals to operate a school. [ 36 ] As a result of this state of knowledge, MAC sought the inclusion of the Conditions Precedent in the Lease, to protect itself in case proper approvals were not granted.

However, despite this disparity in the parties’ knowledge and MAC’s reasoning to include the Conditions Precedent, the Lease only included language specifically regarding approvals by the City. [ 37 ]

Section 2.6 of the Lease states: Change of Use Development Application Notwithstanding anything in this Lease to the contrary, the Landlord and Tenant acknowledge and agree that the Tenant’s Permitted Use of the Premises is not authorized under the current usage and zoning designations approved by the City of Edmonton, and as such, the Tenant shall be required to submit a development permit application (the “Development Application”) to the City of Edmonton to change the permitted use(

s) of the Premises prior to taking possession of the Premises. The Tenant covenants and agrees to prepare and submit the Development Application to the City of Edmonton and use its best commercial efforts to prosecute same to completion. The Landlord shall cooperate with the Tenant in submitting the Development Application and shall execute and deliver all such further documents and instruments and do all acts and things as the Tenant may reasonably require in order to fulfil the Development Application requirements.

Notwithstanding the foregoing, or anything in this Lease to the contrary, the Landlord and Tenant expressly acknowledge and agree that this Lease is conditional upon the Tenant receiving the City of Edmonton’s approval of: (

i) the Development Application; and (ii) the Tenant’s Permitted Use, on or before January 30, 2020 (the “Approval Date”), failing which this Lease shall be null and void and of no force and effect, and the Security Deposit shall be returned to the Tenant. If approval of the Development Application and the Tenant’s Permitted Use are received by the Tenant on or before the Approval Date, the Tenant shall notify the Landlord of same, and the Landlord shall provide notice in writing to the Tenant specifying the commencement date of the Fixturing Period. [ 38 ] The wording of s 2.6 is not reasonably capable of an

interpretation that approval by GOA for the permitted use of a school is part of the Conditions Precedent. GOA is not mentioned. I am not aware of any law that would imply into the Lease a condition precedent of approval from GOA when a school is the subject matter of a lease, where the parties have not dealt with such approval directly in the agreement: Swan Group Inc v Bishop , 2013 ABCA 29 at para 19 . [ 39 ] The Conditions Precedent in the Lease are encompassed by the language “…receiving the City of Edmonton’s approval of: (

i) the Development Application; and (ii) the Tenant’s Permitted Use…”. This is consistent with the first part of s 2.6, which confirms agreement by the parties “…that the Tenant’s Permitted Use of the Premises is not authorized under the current usage and zoning designations approved by the City of Edmonton,...” and that this issue would be dealt with by a development permit application. Development permits are the purview of the City, as recognized in s 2.6, not the domain of GOA.

Section 2.6 does not mention building, fire, or other inspections by the City nor City building permits, which MAC submitted was the connection that brought GOA approval into the second Condition Precedent; s 2.6 exclusively speaks to development matters. There is no ambiguity in the provision that would suggest an intention or implication of GOA approval requirements. [ 40 ] This

interpretation of s 2.6 is supported by the Lease as a whole. GOA is not referenced anywhere in the Lease. Further, s 2.7 also reflects the singling out of the City’s approval for both the Development Application and the Permitted Use.

It provides that should such approvals not be received, the Landlord was no longer required to deal exclusively with MAC and could seek a lease of the Premises with another party. [ 41 ] Further, three other facts from the context surrounding the Lease undermine the argument of MAC. [ 42 ] First, as noted already, the Landlord itself was not experienced with or aware of the approvals and requirements MAC needed to operate the planned private school, as noted by MAC.

MAC argued that there is a distinction between the ability to use the lands for the desired purpose and the ability to operate for the desired purpose. While this is a valid distinction, it also must be considered that the City only had the ability to approve the use of the land and the GOA only had the ability to approve the operation of a school. I do not find that the Landlord would know that GOA required certain inspections to be completed for its approval process.

In that context, it is not logical that the Landlord would have an intention or understanding that approval of the Permitted Use would also require GOA approval. [ 43 ] Second, knowing that the Landlord was not sophisticated in this area, MAC negotiated for the inclusion of s 2.6 in the Lease. Therefore, MAC demonstrated and acted upon an ability to protect its interests. MAC provided evidence that GOA approval was critical to MAC’s opening of a school in the premises.

Yet, while the reasons are unknown, MAC agreed to the Lease without the specific inclusion of GOA approval in the Conditions Precedent. [ 44 ] Third, MAC agreed that the Lease Amendment only altered the Approval Date for removal of the Conditions Precedent. This amendment resulted in the Approval Date coinciding with the end of the appeal period of the Development Permit, a date known at the time of the Lease Amendment. By that time, MAC had already submitted its application to GOA and knew that such approval was still outstanding.

If the GOA approval was part of the Conditions Precedent, it would be logical for the parties to have amended the Approval Date to accommodate the GOA approval process. They did not. Therefore, the context and the evidence, in particular the Lease and Lease Amendment, all support that the Condition Precedent related only to specific approvals by the City.

[45] The Landlord argued that the City’s approval of both the Development Application and the Tenant’s Permitted Use wassatisfied by the Development Permit. MAC argued that this

interpretation of the Lease would lead to a redundancy, as there are twodistinct Conditions Precedent. However, while I find that there were two distinct Conditions Precedent, that does not preclude a findingthat the Development Permit could satisfy both if the Permit encompassed both.

Rather than suggesting that more than a developmentpermit was required, such as the completion of fire or building standards inspections, s 2.6 specifically connects the approval of thePermitted Use with the Development Application: ...the Tenant’s Permitted Use of the Premises is not authorized under the current usage and zoning designations approved by the City ofEdmonton, and as such, the Tenant shall be required to submit a development permit application (the “Development Application”) to theCity of Edmonton to change the permitted use(

s) of the Premises... [46] In interpreting a contract, the Court is to strive to harmonize its terms to give meaning to every term and to avoid redundancy.Simply because the Development Permit could satisfy both Conditions Precedent does not create a redundancy in the

interpretation ofthe contract. To find otherwise would fail to recognize and give meaning to the words in s 2.6 that explicitly recognize the outcomearising from a development permit. [47] The Supreme Court of Canada defined a condition precedent in Turney v Zhilka, (SCC), [1959] SCR 578 at583-584: ....one party to a contract may forego a promised advantage or may dispense with part of the promised performance of the other partywhich is simply and solely for the benefit of the first party and is severable from the rest of the contract. But here there is no right to be waived.

The obligations under the contract, on both sides, depend upon a future uncertain event, thehappening of which depends entirely on the will of a third party—the Village council. This is a true condition precedent—an externalcondition upon which the existence of the obligation depends. Until the event occurs there is no right to performance on either side. Theparties have not promised that it will occur. In the absence of such a promise there can be no breach of contract until the event doesoccur... [48]

Section 2.6 is a true condition precedent, as it made the Lease conditional upon an event that depended entirely on the will ofa third party – the City of Edmonton. While MAC was required to make a development application, the outcome of the applicationinvolved an uncontrolled third party whose decision could frustrate the ability of MAC to complete the agreement: Swan Group, supraat paras 15-18.

The clause also provides that a failure to obtain that approval would render the lease “null and void and of no force andeffect”. [49] While conduct by the parties subsequent to February 14, 2020 (the Approval Date) appeared inconsistent with their position attrial, such as MAC’s active steps under the Lease and seeking approval from GOA or the Landlord’s email that there were outstandingconditions in the Development Permit, they are irrelevant to the determination of whether the Conditions Precedent were satisfied.Absent an express reservation of a power to waive in the agreement (which does not exist in this Lease), neither party can waive, by theirconduct or otherwise, a true condition precedent: Swan Group, supra at para 26. [50] Finally, it must be determined whether the Development Permit, which was issued on January 30, 2020, was valid.

TheDevelopment Permit sets out when it is to be considered valid: This Development Permit is NOT valid until the Notification Period expires in accordance to

Section 21.1. The Development Permit shall not be valid unless and until the conditions of approval, save those of a continuing nature, have beenfulfilled; and no notice of appeal from such approval has been served on the Subdivision and Development Appeal Board within the timeperiod specified in subsection 21.1. [51]

Section 21.1 of Edmonton Zoning Bylaw 12800 provides for a 21 day appeal period from the date the Development Permitwas issued, which time period is called the Notification Period. In this case, the Development Permit was issued on January 16, 2020,but specified that the Notification Period commenced on January 23 and expired on February 13, 2020. The parties agree that theNotification Period expired, without a notice of appeal.

Therefore, the first condition was met on February 13, 2020, prior to the date inthe Lease Amendment for removal of the Condition Precedent. [52] There were two conditions set out in the Development Permit relating to exterior lighting. MAC submitted that these twoconditions were not met and, until all conditions in the Development Permit were met, it was not approved and could not satisfy theConditions Precedent.

The Landlord submitted that these two conditions were of a continuing nature and so the Development Permit wasvalid upon the expiry of the Notification Period. [53] What is meant by the phrase in the Development Permit: “those of a continuing nature”? This phrase is also found in s 17.1(1)(

a) of Edmonton Zoning Bylaw 12800, but its language simply mirrors the Development Permit and does not provide any definition. Thephrase is not otherwise used or defined in the current Bylaw. I am unaware of any decisions which define the phrase in relation todevelopment permits. [54] Continuing is defined in Merriam Webster as “1. Continuous, constant 2. needing no renewal; enduring”. When a condition isof a continuing nature, it is the opposite of a discreet condition that can be satisfied at one time.

An example of the latter is expiry of aspecific period of time, a requirement to obtain a document or have a specific assessment completed, or the removal of somethingspecific. Rather, a condition of a continuing nature is a condition that imposes a continuing, constant, or ongoing obligation, whosefulfillment at one point in time does not ensure their fulfillment at any future point in time. [55] The first condition in the Development Permit requires the development of exterior lighting to provide a safe lit environmentin accordance with ss 51 and 58 of the Bylaw.

The second condition requires any outdoor lighting to be located so as not to impact onadjoining properties or interfere with the effectiveness of traffic control devices, also citing s 51 of the Bylaw.

Section 51 requires

lighting to be “arranged, installed, and maintained” in a manner that does not cause a nuisance to neighboring properties or sites.

Section 58 requires consideration of Crime Prevention Through Environmental Design, including lighting elements. [ 56 ] I find that these two conditions are of a continuing nature. Both conditions have a “maintenance” requirement arising from s 51. All such lighting must always comply with these two conditions, so as not to cause a nuisance, not to interfere with traffic control devices, and to provide a safe environment. They are enduring and ongoing obligations.

While the first condition must be met to the “satisfaction of the Development Officer”, it does not provide that such compliance is satisfied upon a one time inspection by the Development Officer. If at any time after a Development Officer approved the lighting in place, the lighting failed to provide a safe lit environment, such as a light bulb no longer working, or became a nuisance for neighboring properties, such as a change in direction of the light, then there would be a violation of the Development Permit.

The Development Permit provides that validity is not dependent upon fulfillment of conditions of a continuing nature. [ 57 ] The Development Permit did expressly address the approval required for each Condition Precedent. The Development Permit, valid as of February 14, 2020, was the approval of the Development Application.

The Permitted Use, defined in the Lease as “Private school and religious assembly”, are dealt with in the Development Permit under “Scope of Permit: To continue to operate a Public Education Service, and develop an Accessory Religious Assembly (Minor).” [ 58 ] Therefore, I find that the Development Permit issued by the City satisfied both Conditions Precedent. As of February 14, 2020, the Conditions Precedent had been met and the Lease remained valid and enforceable. 3.

If the Lease is void, is the security deposit paid by MAC under the Lease to the Landlord returnable to MAC? [ 59 ] As I have found that the Conditions Precedent were met and the Lease is not void, this issue need not be addressed. 4. If the Lease is valid and enforceable, what is the impact of the COVID-19 Pandemic (the “Pandemic”)? [ 60 ] Many of the issues raised in the

summary trial require consideration of the impact, if any, of the COVID-19 Pandemic on MAC’s ability to exercise its rights and comply with its obligations under the Lease. There were two situations under the Lease where Rent was not payable: prior to the delivery of the Premises to MAC by the Landlord (s 2.3) and during the Fixturing Period (s 2.5). [ 61 ] The parties both agree that, by oversight, the commencement date of the Fixturing Period as November 1, 2019 set out in s 2.5 was an error and the Lease Amendment did not amend the Lease to address this error.

As the Lease was not entered into until December 5, 2019, it would be absurd that the Fixturing Period would commence on that date. [ 62 ] There is no effective impact from this error.

Section 2.5 provided that the start of the Fixturing Period was subject to s 2.6.

Section 2.6 provided that, upon removal of the Conditions Precedent on or before February 14, 2020, the Landlord would advise MAC, in writing, of the start date of the Fixturing Period. Therefore, once the Conditions Precedent were satisfied on February 14, 2020, the Fixturing Period could be engaged.

The Fixturing Period would last for two months, pursuant to s 2.5, and the Term would commence once the Fixturing Period ended. [ 63 ] As the Landlord was aware as of February 20, 2020 that the Development Permit was valid, Colliers (agent for the Landlord) advised MAC in writing by email on February 28, 2020 that the Fixturing Period would commence on March 1, 2020.

There is no evidence of verbal discussions between the parties or their agents regarding the start of the Fixturing Period. [ 64 ] MAC argued that the Landlord was not permitted to unilaterally set commencement date of the Fixturing Period, as MAC did not advise the Landlord that all Conditions Precedent were removed, that MAC was in a position to commence fixturing, or that MAC accepted the fixturing date set by the Landlord.

Further, the notice of a date by the Landlord was not sufficient to start the Fixturing Period, as the Landlord was also required to release the Premises, on as-is basis, broom swept and clean, to MAC on the first day of the Fixturing Period, which never occurred. [ 65 ] However, s 2.6 provides the Landlord with the power to set the commencement of the Fixturing Period, so long as the notice is provided in writing. The Lease does not require either the input or agreement of MAC to the date.

Therefore, the Landlord did not breach the Lease by setting the commencement date for the Fixturing Period as March 1, 2020. [ 66 ] MAC never took possession of the Premises.

Section 2.5 provided: “[o]n the first day of the Fixturing Period, the Landlord shall deliver the Premises to the Tenant on an as-is basis, broom swept and clean.” It is not disputed that this delivery did not occur. [ 67 ] In the email of February 28, 2020, Warren Brown from Colliers advised MAC that the release of the keys required the provision of a certificate of insurance, in accordance with the details set out in an email of February 26 (copy of which was not in evidence), and requested such certificates. Mr.

Brown followed up on the request on March 4, 2020, again stating that the keys would be released once a certificate of insurance was provided. Mr. Grinde responded on the same day that MAC was in the process of obtaining insurance. MAC reached out to Mr. Brown for a recommendation of an insurance broker, which was provided on March 12, 2020. Mr. Brown again followed up on May 1, advising MAC that the fixturing period had expired on April 30, the term had commenced on May 1, and that an insurance certificate had not yet been received.

On June 16, 2020, the Landlord’s lawyer advised MAC’s lawyer that there were defaults in payment of rent and failure to provide copies of MAC’s insurance policies. On September 2, 2020, the Landlord’s lawyer issued a formal demand for outstanding rents and all copies of MAC’s insurance policies. [ 68 ] At no time did MAC provide a substantive response to the requests for an insurance certificate, although MAC took some steps to obtain insurance. On February 28, 2020 in an internal email, Bassam Fares stated “I am working on the building permit which

needs the fire alarm and health inspectors to come over, we sent a request to the HO for insurance” (it is unknown what HO refers to). On March 9, 2020 in another internal email, Mr. Fares stated that the tenant insurance would be obtained “soon”. Hanan Omar emailed a representative of Hub International HKMB Limited for an insurance quote on March 16, 2020, which representative responded on March 24, 2020, asking for further information so that the requested quote for insurance could be provided. There is no evidence that MAC took steps to respond.

MAC did not procure any insurance as required by the Lease and a certificate of insurance was never provided to the Landlord. The evidence establishes that MAC was not provided possession of the Premises because MAC did not provide the insurance certificate. [ 69 ] The Landlord argued that the Premises were not delivered, as MAC failed to meet its insurance obligations or provide proof of required insurance, under s 11 of the Lease. While a technical

interpretation of the Lease’s words could be that the insurance obligations of either party did not arise until the Term of the Lease started after the Fixturing Period, it would not make commercial sense to allow MAC to move into the premises and start fixturing when proper insurance was not in place. Therefore, it could not have been the intention of the parties that MAC could obtain possession without first meeting its obligation to obtain insurance and so the Landlord was entitled to request proof of insurance before providing possession.

Section 4.2 required MAC to take possession of the Premises on the first day of the Fixturing Period, but MAC failed to do so as a result of its breach of its insurance obligations. Given the Landlord’s attempts to deliver the premises by addressing the issue of insurance with repeated requests, MAC could not sit on its hands with respect to the insurance obligation and then rely upon s 2.3 that rent was not payable, because the Landlord had not delivered the premises.

The Landlord submits that MAC is precluded from taking the benefit of provisions of the contract, when its own breach caused the state of affairs in which the benefit could arise. [ 70 ] MAC argued that its insurance obligation did not arise until the Term of the Lease commenced after the Fixturing Period, as s 11.1 required MAC to maintain the insurance throughout the Term. Therefore, the Landlord did not have the ability to require the provision of the insurance until the Term started and was breaching the Lease by refusing to provide possession of the premises in the absence of insurance.

Because possession of the Premises had not been delivered, MAC submitted that it was not required to pay rent pursuant to either s 2.3 or s. 2.5.

The Landlord’s explanation that it did not deliver possession due to a lack of tenant insurance is not reasonable, as the Landlord’s remedy in the Lease was for the Landlord to provide such insurance at MAC’s cost. [ 71 ] I agree with the Landlord that it would not make commercial sense for a landlord to provide possession of the premises for the purposes of fixturing without appropriate insurance in place, given the presence of people to perform fixturing work and the nature of fixturing work, including the potential hazards it presents.

It also would not make commercial sense for MAC to begin work in the Premises without appropriate insurance. A reasonable commercial landlord and reasonable commercial tenant would want to have appropriate insurance in place before having third parties on the property and commencing any inspection or construction work on the property. This is part of the context in interpreting the provisions of the Lease. [ 72 ] I also must consider the Lease as a whole.

Section 11.1 sets out some of MAC’s insurance obligations, which it is required to “...obtain and keep in force throughout the Term”.

Section 11.2 of the Lease states, “The Tenant will furnish to the Landlord copies of all policies, or insurance certificates in lieu thereof...”. However, there are other provisions which also address MAC’s insurance obligations. Further, s 2.5 also provides that, “[d]uring the Fixturing Period the Tenant shall be subject to all of the Tenant’s covenants, obligations, and agreements pursuant to this Lease...”, other than the payment of rent. Similarly, s 4.2 allows the Tenant to take possession before the Term starts, which possession is governed by the provisions of the Lease.

Therefore, this engages the Tenant’s obligations to obtain and hold insurance pursuant to s 11.1. In addition, s 7.5 addresses alterations to the Premises by the Tenant. This would include any alterations required during the Fixturing Period. Under s 7.6, such construction and alteration can only be done with the approval of the Landlord and, in particular, subject to “...those conditions which the Landlord may reasonable [ sic ] impose (including contractor’s public liability insurance in reasonable amounts)”.

Thus, by the terms of the Lease, it was reasonable for the Landlord to require proof of insurance from MAC prior to delivering possession of the Premises for the purposes of fixturing. [ 73 ] A party is precluded from taking advantage of and benefitting from a state of affairs produced by its own wrong or being relieved of a contractual obligation on the basis of its own breach or default: Barclays Bank PLC v Devonshire Trust , 2013 ONCA 494 at para 149 ; Southcott Estates Inc v Toronto Catholic District School Board , 2010 ONCA 310 at para 13 . [ 74 ] In the event MAC failed to obtain insurance, there were remedies available to the Landlord, to either obtain insurance for MAC (albeit at MAC’s cost) or terminate the lease.

Both of these remedies were discretionary; the Landlord was not obligated to exercise them and the Landlord did not exercise them. MAC cannot rely upon this decision of the Landlord to benefit from a failure to obtain possession, when that state of affairs arose because MAC did not obtain insurance as required by the Lease. [ 75 ] For many of the issues on the

summary trial, MAC argued that MAC was unable to get the required building permits and inspections completed as a result of the Pandemic and thus through no fault of its own. [ 76 ] On December 17, 2019, GOA provided a private school application package to MAC, which checklist included the necessary fire and building inspection and health and safety inspection (or a timeline in lieu). On January 20, 2020, MAC provided a completed application form to Alberta Learning, but the actual application is not in evidence and it is unknown what MAC put in for timelines on the required inspections.

By February 14, 2020, MAC knew that they had development approval, and that they could begin the building permit process. The Lease also provided that MAC would be permitted, at its own expense, to inspect the property prior to possession and the Fixturing Period. There is no evidence that MAC took steps after receiving the Development Permit to deal with the lighting conditions or to arrange for the necessary inspections until “...around the last week of March”.

The City did not begin to limit its operations as a result of the Pandemic until March 13, 2020 and did not declare a state of emergency until March 20. [ 77 ] MAC’s understanding in the Spring of 2020, was that the Conditions Precedent had not yet been satisfied. This understanding was based on the belief that building permits were a core requirement of the approvals required in the Conditions Precedent, and that the building permit could not be determined until the fire alarm and health inspections were completed. Mr.

Assaf testified that, as a result of its understanding that the Conditions Precedent were not yet satisfied, MAC failed to obtain the necessary insurance so that it could receive possession of the Premises to proceed with inspections and fixturing work. While MAC’s understanding of the Conditions Precedent was an honest mistake, it was a mistake. Further, this does not explain why MAC did not take any steps for necessary

inspections or deal with the lighting conditions on the Development Permit in late February or early March. As well, it was not until June 8, 2020, that MAC raised concerns with the Landlord about not having possession of the Premises or that the Pandemic was creating any problems with respect to fixturing or inspections of the Premises. MAC was essentially silent during this period of time from March to June, other than its indications that it was pursuing obtaining insurance. [ 78 ] Mr.

Assaf testified to and provided undertakings with respect to MAC’s communications with the City regarding inspections and building permits. Essentially, when MAC contacted the City in “about the last week of March”, “probably” through the City’s 311 service, MAC was advised that the City would not

schedule inspections or meetings due to the Pandemic. At some unidentified point, MAC came to understand that it would be able to have inspections done starting approximately mid-June 2020. Mr. Assaf did not provide a date or specific details of any communications, the identity of MAC’s representative who had the conversations, or a source for the information, other than “the City”. MAC did not have any documentation from the City regarding the scheduling of inspections. No evidence from a City employee or representative was provided. Mr.

Assaf’s evidence is hearsay, and MAC did not provide any basis for an exception to consider such hearsay. [ 79 ] MAC submits that I should take judicial notice that the City would not engage in inspections due to the Pandemic, as the Courts themselves were shut down for a significant period of time, the Pandemic began in March 2020, and the months following the start of the Pandemic were a scary time for all of society.

The Landlord submits that it would be inappropriate to take judicial notice that the City was not engaging in inspections due to the Pandemic and this impacted upon MAC’s ability to perform fixturing work during the Fixturing Period. The Landlord states that I can do no more than simply acknowledge that the Pandemic existed and some government restrictions were in place.

It was incumbent upon MAC, who bears the onus to prove the Pandemic impacted its ability to meet its obligations under the Lease, to provide proof of the specific impact of COVID upon its ability to have inspections completed and it has failed to provide sufficient evidence. [ 80 ] The Supreme Court of Canada set out the test for judicial notice in R v Find , 2001 SCC 32 at para 48 : ...Facts judicially noticed are not proved by evidence under oath. Nor are they tested by cross-examination.

Therefore, the threshold for judicial notice is strict: a court may properly take judicial notice of facts that are either: (1) so notorious or generally accepted as not to be the subject of debate among reasonable persons; or (2) capable of immediate and accurate demonstration by resort to readily accessible sources of indisputable accuracy. [ 81 ] MAC is requesting that I take judicial notice of an “adjudicative fact”, which will be a central finding between the parties to this dispute and the many issues that have been raised. Therefore, the test for judicial notice must be strictly applied.

If the test set out in Find is not satisfied and the fact is “adjudicative” in nature, the fact will not be judicially recognized: R v Spence , 2005 SCC 71 at para 61-62 . [ 82 ] Judicial notice of facts regarding the COVID-19 pandemic has been the subject of numerous decisions across Canada. I agree with the Courts in R v Morgan , 2020 ONCA 279 at para 8 and LMS v JDS , 2020 ABQB 726 at paras 18 -19 , that I can take judicial notice of the fact of the Pandemic, its impact on Canadians generally, and commonly accepted precautions to avoid contracting COVID from public health officials.

I also find I can take judicial notice that, generally, many entities restricted or changed the way in which they provided services in response to the Pandemic.

However, I cannot accept that any shutdowns, restrictions, or changes in the provision of services specifically by the City necessarily meant that the City would not perform building inspections prior to June 2020, as a fact so notorious or generally accepted as not to be the subject of debate among reasonable persons. [ 83 ] In the cases submitted by the parties where the impacts of the Pandemic on a commercial lease were in dispute, the Courts relied upon specific legislation, enactments, or directives that clearly established the impacts or restrictions specific to the particular situation.

In this case, MAC did not provide any documents, let alone recognized readily accessible sources, such as a notice or publication by the City as to its restrictions on providing inspections and in what timeframe. The documents from the City set out in MAC’s brief provide information on some steps taken by the City, but do not establish immediately and accurately any information with respect to that particular fact.

Therefore, the second criteria for judicial notice has also not been met. [ 84 ] Other than the hearsay of its corporate officer, MAC has not provided any evidence that inspections by the City after February 14, 2020, were rendered impossible, until at least mid-June 2020, because of any medical or legal restriction relating to the Pandemic or the City’s response to the Pandemic. [ 85 ]

Section 4.2 states that the Tenant will take possession of the Premises at the start of the Fixturing Period. The Fixturing Period started on March 1, 2020, as set out in the Landlord’s notice to MAC. This was prior to any actions taken by either GOA or the City with respect to the Pandemic, regardless of whether the Pandemic impacted MAC’s ability after March 13 to obtain necessary inspections. I find that MAC was required to take possession of the premises at the start of the Fixturing Period, but was unable to do so as a result of its failure to obtain the necessary insurance.

MAC cannot take advantage of the benefits under the Lease where possession of the Premises is not provided, when its failure to meet its obligations to obtain insurance was the reason possession was not provided. [ 86 ] Therefore, MAC did not engage in the Fixturing Period, because MAC erroneously believed that the Conditions Precedent had not been satisfied and had not obtained the necessary insurance. The failure of MAC to engage in fixturing work during the Fixturing Period did not arise substantially from the COVID situation. 5.

Does the force majeure clause in the Lease apply to relieve MAC of its obligations under the Lease? a. MAC – The Pandemic prevented the triggering of rent becoming payable under the Lease and so the force majeure clause relieved MAC of its obligations [ 87 ] MAC submits that the force majeure clause of the Lease was triggered by the Pandemic.

[ 88 ] The clause specifically includes epidemics, which covers the Pandemic, and legislative or administrative action. By CMOH Order 01-2020, the GOA shut down schools. On March 17, 2020, the GOA declared a state of emergency and the provincial lockdown came into place. The City also put in place its own state of emergency and lockdown measures. It was not until mid-May 2020 that some restrictions began to be lifted. [ 89 ] While the force majeure clause does not protect against the payment of rent, the obligation to pay rent had not arisen by the time the force majeure clause was triggered.

In Braebury Development Corporation v Gap (Canada) Inc , 2021 ONSC 6210 , the Court considered the impact of the Pandemic on a force majeure clause. While the force majeure clause was similar in that case as it also excluded the payment of rent, MAC distinguishes the result on the basis that MAC was not yet obligated to pay rent. [ 90 ] MAC submitted that two situations prevented the obligation of rental payment from arising prior to the Pandemic. First, inspections were required for the Conditions Precedent.

It would only be after the inspections that insurance obligations would arise, followed by a transfer of possession, a fixturing phase and, finally the payment of rent. As a result of the Pandemic, any necessary inspections could not proceed and so none of the other obligations or steps arose. Second, even if the Conditions Precedent were met, the Landlord could not withhold possession during the Fixturing Period due to MAC’s lack of insurance. As possession was not provided, rent had not yet become payable.

MAC relied upon these two situations as core considerations in determining the application and impact of the force majeure clause, as rent had not become due and payable under the Lease. [ 91 ] The three part test to determine the application of the force majeure clause was met: (

a) the triggering events were the Pandemic and the resulting legislative actions; (

b) the impact was that MAC was unable to meet its obligations of obtaining approvals and fixturing between March and May 2020 as a result of the Pandemic; and (

c) the consequence was that MAC’s obligations were paused until MAC could carry out the obligations with the exercise of reasonable diligence. Rent would not become due until these specific obligations were completed. In June 2020, MAC exercised that due diligence by attempting to reach an agreement with the Landlord for the continuation of the Lease, but the Landlord refused and so prevented MAC from completing its diligence. Thus, MAC was relieved of its obligations by the force majeure clause. b.

Landlord – A force majeure occurred but it neither caused nor materially contributed to MAC’s failure to meet its obligations and the payment of rent is specifically excluded from force majeure, so MAC must still pay [ 92 ] The Landlord submits that Braebury is on all fours with the facts of this case. The Pandemic would be a triggering event, under either “epidemic” or the resulting “legislative, administrative or judicial action.” The Landlord disputes that MAC met the second part of the test, as MAC has not proven that the Pandemic prevented it from meeting its obligations under the Lease.

Further, the Landlord disputes that rent was not payable as a result of a failure by the Landlord to deliver possession of the Premises. The lack of transfer of possession arose from MAC’s failure to provide proof of insurance, which coloured the Landlord’s ability to deliver possession.

Further, if the Pandemic was the cause for the lack of insurance or an inspection, then the failure to provide possession was also caused by the Pandemic and the force majeure clause would excuse the Landlord from providing possession. [ 93 ] Even if the Pandemic or the government restrictions had the impact of preventing the performance of either MAC’s or the Landlord’s obligations, MAC is expressly not excused from the obligation to pay rent.

This situation is not changed even if the rent was not yet due and owing as a result of other obligations being unfulfilled, because the relief of the force majeure clause upon all other obligations prevents MAC from relying on those obligations to excuse the failure to pay rent: Braebury at para 32. Ultimately, the obligation to pay rent is not excused in the force majeure clause and effect must be given to that part of the clause. The Landlord also submits that the other caselaw is distinguishable or does not support MAC’s position, based on the treatment of rent in the force majeure clause. c.

Analysis – The required impact for force majeure did not occur and the force majeure clause did not excuse MAC’s obligation to pay rent [ 94 ] The three part test for force majeure from Atcor Ltd v Continental Energy Marketing Ltd , 1996 ABCA 40 , is explained in Braebury at para 14: Three questions need to be addressed when addressing the effect of a force majeure clause: (

a) what are the triggering events under the clause; (

b) what is the required impact on the party invoking the clause; and (

c) what are the consequences of that impact on the invoking party’s contractual obligation: Atcor Ltd v Continental Energy Marketing Ltd , 1996 ABCA 40 , 178 AR 372, at para 12 . [ 95 ] Each case therefore turns upon the wording found in the particular contract at issue: Windsor-Essex Catholic District School Board v 231846 Ontario Limited , 2021 ONSC 3040 at para 19 .

The Lease’s force majeure clause reads (emphasis added): 20.19 Force Majeure Save and except for the obligations of the Tenant as set forth in this Lease to pay rent and other moneys to the Landlord, if either party fails to meet its obligations hereunder within the time prescribed, and such failure is caused or materially contributed to by force majeure (and for the purpose of this Lease, force majeure will mean any... epidemics,...any legislative, administrative or judicial action which has been resisted in good faith by all reasonable legal means , any act, omission or event whether of the kind enumerated or otherwise not within the control of such party, and which by the exercise of due diligence such party could not have prevented or remedied (but lack of funds on the part of such party will be deemed not to be a force majeure), such failure will be deemed not to be a breach of the obligations of such party hereunder but such party will use reasonable diligence to put itself in a position to carry out its obligations hereunder. i.

The triggering event

[ 96 ] The cases that looked at force majeure clauses during the Pandemic determined that the force majeure clause was triggered, not by the Pandemic itself, but rather by the governmental laws and regulations that were put in place to deal with the Pandemic: Braebury , Windsor-Essex . As in those cases, the government lockdowns in Alberta occurred during the time period in issue and such events were not the fault of the parties to the Lease. Therefore, the triggering event of legislative or administrative action occurred.

As well, even though the Pandemic did not directly cause any hindrances, it "materially contributed” to the lockdowns, states of emergency, and the resulting impacts upon how services could be provided by various entities. I am satisfied that the force majeure clause was triggered by the Pandemic, as an epidemic, and by resulting legislative and administrative action, which the Lease specifically provides constitute a force majeure. ii.

Required impact [ 97 ] In the Lease’s force majeure clause, the required impact is: ... if either party fails to meet its obligations hereunder within the time prescribed, and such failure is caused or materially contributed to by force majeure... [ 98 ] I repeat my earlier findings. The Conditions Precedent were met as of February 14, 2020, so they were not impacted by the Pandemic. MAC failed to take possession of the Premises, as required for the Fixturing Period, because it failed to obtain insurance and not because of the Pandemic.

Without possession of the Premises, MAC could not engage in fixturing or obtaining building permits or inspections. MAC did not prove that the Pandemic prevented the City from performing inspections of the Premises. The Fixturing Period was properly commenced and the subsequent obligation to pay rent was not impacted by the Pandemic. [ 99 ] The Pandemic did not cause or materially contribute to MAC’s failure to obtain insurance, as there is no evidence to explain why MAC did not obtain insurance.

The Pandemic did not cause or materially contribute to MAC’s inability to engage in fixturing; this inability arose because MAC did not have possession. If MAC had met its insurance obligations in a timely fashion, it could have obtained possession of the Premises as of March 1, 2020, approximately two weeks before GOA and the City started to take action to deal with the Pandemic. MAC could have taken various steps during that time frame, but it did not. And there is insufficient evidence as to the contribution of the Pandemic with respect to obtaining insurance or inspections after March 13, 2020.

Therefore, the required impact of the force majeure clause has not been met and so the force majeure clause in the Lease is not triggered and does not impact any of MAC’s obligations under the Lease. iii. Consequence of the impact, or the Effect on contractual obligations [ 100 ] MAC did not establish the third part of the test either, in respect of the payment of rent.

The consequences of the impact are detailed in the force majeure clause: ... except for the obligations of the Tenant as set forth in this Lease to pay rent and other moneys... such failure [of a party to meet its obligations] will be deemed not to be a breach of the obligations of such party hereunder but such party will use reasonable diligence to put itself in a position to carry out its obligations hereunder. [ 101 ] In Braebury , the force majeure clause expressly did not excuse the tenant from the timely payment of rent.

The tenant could not access the premises to run its business, because the government’s COVID-19 measures required all non-essential businesses to shut down. This also prevented the landlord from providing quiet enjoyment of the leased property. But the landlord’s failure to meet its obligation of quiet enjoyment was excused by the force majeure clause, such that it could not validly be used by the tenant as a reason not to pay rent. Therefore, the tenant was not excused by force majeure from paying rent. [ 102 ] The Landlord terminated the Lease, because of MAC’s failure to pay rent.

MAC seeks to have the force majeure clause apply, to prevent the Landlord from terminating the Lease. But the clause does not excuse the payment of rent. Prior to any events that triggered the force majeure clause, the Fixturing Period had been properly commenced and it was to run for a two month period. The two month time period was not an obligation upon MAC; the time period ran regardless of MAC’s activity or inactivity. It would only be extended by agreement of the parties.

While the obligation to pay rent arose on May 1, 2020, after the Pandemic began, MAC’s inability to engage in fixturing, however caused, did not impact when rent became due and owing. Therefore, the force majeure clause did not, either directly or indirectly, permit MAC to be excused from the obligation to pay rent. 6. Does frustration of the Lease apply to relieve MAC of its obligations under the Lease? a.

MAC – The Pandemic radically altered and thus frustrated the Lease [ 103 ] The question to be answered is whether the supervening event, restrictions during the Pandemic, radically altered the original terms of the Lease. The Permitted Use was as a “private school and religious assembly”. The Conditions Precedent required government clearances, as specified by GOA, to operate a private school. It became impossible for MAC to obtain the necessary inspections with respect to the applicable health, safety, and building standards, in order to obtain the necessary GOA approval.

This inability was solely due to the Pandemic restrictions, which specifically impacted schools and religious assemblies. As such, the Conditions Precedent were not met and MAC could not therefore deal with its other obligations, such as fixturing and obtaining insurance. They could not use the Premises for the intended purpose of the Lease, being the Permitted Use. Thus, the supervening event of the Pandemic radically altered the terms of the lease and frustration of contract occurred.

As the Landlord terminated the Lease before MAC had the ability to perform its obligations, the impact of the Pandemic restrictions became permanent. [ 104 ] The cases relied upon by the Landlord rejecting the Pandemic as a basis for frustration are all distinguishable, because the fundamental nature of those contracts were loans or mortgages. Further, frustration did not arise under the Lease for economic reasons.

Rather, it arose as the Pandemic impeded MAC from carrying out its obligations. Thus, the purpose of the Lease could not be carried out. b. Landlord – The Pandemic was not permanent and did not alter the terms of the Lease, so frustration was not established [ 105 ] The Landlord submitted that any supervening event needs to be permanent or substantially permanent, rather than temporary or transient. A disruption may be significant, but that does not make it permanent.

Government restrictions of a few months, from March to June, would not meet the standard of permanent, especially considering the 10 year term of the Lease that had only started on May 1, 2020. [ 106 ] Canadian courts have consistently rejected the Pandemic as a basis for frustration in different contractual contexts. While the Pandemic is a unique event, the consequences of it are not necessarily so. Both the triggering event and its consequences must be considered to determine if the supervening event is unforeseen.

As well, there is a distinction between an event that renders performance radically different and one that increases the cost of performance or makes performance less economically desirable. Even if MAC was prevented from obtaining certain inspections to obtain GOA accreditation (which the Landlord submits has not been proven), Pandemic restrictions did not affect or radically alter the nature, meaning, purpose, effect or consequences of the Lease. [ 107 ] Another element of frustration requires that the Lease contain no provision, express or implied, for a supervening event.

As the Lease contains a force majeure clause that deals with pandemics and government restrictions, the Lease has contemplated such supervening events. This is a complete bar to the establishment of frustration of contract. c.

Analysis – Frustration of Contract [ 108 ] The Supreme Court of Canada set out and explained the doctrine of frustration of contract in Naylor Group Inc v Ellis-Don Construction Ltd , 2001 SCC 58 at para 53 and 55 (citations omitted): Frustration occurs when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes “a thing radically different from that which was undertaken by the contract” ... ... ...The court is asked to intervene...to relieve the parties of their bargain because a supervening event (the OLRB decision) has occurred without the fault of either party.

For instance, in the present case, the supervening event would have had to alter the nature of the appellant’s obligation to contract with the respondent to such an extent that to compel performance despite the new and changed circumstances would be to order the appellant to do something radically different from what the parties agreed to under the tendering contract... [ 109 ] Frustration does not apply simply because performance of the contract becomes unreasonably harsh or onerous due to the change in circumstances: New City/Safety Mortgage Fund Inc v Pacific Point Holdings Ltd , 2020 BCSC 1792 at para 53 .

The onus of proving frustration lies with MAC. [ 110 ] To frustrate a contract, the impact of the supervening event must be permanent, not temporary: Braebury at para 44. Any government restrictions that may have prevented MAC from getting the inspections necessary for it to move forward with the accreditation and fixturing processes were temporary, from mid-March 2020 to Summer 2020. The Lease was in its infancy, with a 10 year Term that commenced on May 1, 2020.

The government restrictions would no longer have such a significant impact within a matter of a few months and did not permanently impact MAC’s ability to meet its obligations under the Lease. [ 111 ] At the time the Lease was entered, MAC did not yet have the necessary approvals to operate a private school in the Premises, the Permitted Use. When the Pandemic hit in mid-March 2020, the City’s development approval was in place, but not GOA approval. However, the Pandemic and subsequent restrictions did not radically alter the terms of the Lease into something completely different than that intended.

A deadline had not been imposed by which MAC was required to have a private school operating in the Premises and the possibility of operating a private school was never removed. In May 2021, MAC was granted preliminary approval by GOA to operate a school on the Premises, subject to providing proof of compliance with municipal zoning bylaws, municipal fire and building standards, and provincial health and safety standards.

Even had MAC established that the City inspections were impossible to obtain until Summer 2020 as a result of the Pandemic, at best, it can be said that the restrictions delayed the ability of MAC to obtain the approvals it needed to continue moving forward. This was a more onerous situation than MAC anticipated when it entered the Lease, but it does not amount to a radical change of the purpose or nature of the Lease. [ 112 ] Finally, the parties did contemplate the impact of government restrictions and pandemics in the force majeure clause: Braebury at para 46; Perkins v Sheikhtavi , 2019 ONCA 925 at para 16 .

They also specifically provided that the force majeure clause would not exempt the payment of rent. Regardless, MAC’s failure to pay rent was not related to the Pandemic. Such failure to pay rent led to the termination of the Lease by the Landlord, in accordance with the terms of the Lease. As the Lease dealt with both the impact of this type of situation on the Lease and the requirement to pay rent, the doctrine of frustration cannot apply. 7.

If the Lease is valid and enforceable, has MAC established that the Landlord breached its statutory obligations under the Commercial Tenancies Protection Act , SA 2020, c C-19.5 (the “ CTP Act ”), thereby committing a substantial breach? a. Background [ 113 ] On June 16, 2020, the Landlord issued a demand for unpaid rent to MAC (“June Notice”), with a deadline of 4:00 pm on July 2,

2020. MAC did not respond. On July 1, 2020, Colliers sent a Tenant Ledger to MAC, but the Landlord did not take any steps of enforcement with respect to the June Notice. [ 114 ] The CTP Act and the Commercial Tenancies Protection Regulation , Alta Reg 138/2020 (the “ CTP Reg ”) came into force on July 23, 2020, but imposed obligations and limits upon landlords for the period of March 17, 2020 to the defined emergency end date, August 31, 2020. [ 115 ] On August 21, 2020, the Landlord issued a Notice of Default (“August Notice”) for failure to pay rent owing up to and including August 21, 2020.

Later that same day, the Landlord revoked the August Notice. [ 116 ] On September 2, 2020, the Landlord issued a default notice to MAC for failure to pay amounts owing for base rent, management fees, and operating costs, and failure to provide proof of insurance, providing for 15 days to remedy the default (“September Notice”). If the default was not remedied by 4:30 pm on September 17, 2020, the Landlord would exercise its right to terminate the lease and seek damages. As MAC did not pay any of the amounts owing, the Lease terminated on September 17, 2020 in accordance with the September Notice. b.

MAC – The thresholds of the CTP Act were met and the Landlord was in substantial breach of the Lease [ 117 ] MAC submitted that the Landlord could not take any steps against MAC for the non-payment of rent pursuant to s 3 of the CTP Act , because the Pandemic caused the non-payment due to its prevention of the removal of the Conditions Precedent or necessary performance of the Lease. As a result, the Landlord was also obligated under s 6 to enter into a rent payment plan.

Pursuant to s 7, non- compliance with the CTP Act is a substantial breach of the Lease. [ 118 ] The Landlord’s corporate officer, Samam Beheshti, confirmed that the Landlord did not review its obligations under the CTP Act . The Landlord failed to propose or even attempt to enter into a payment plan, pursuant to its obligations under the statute. MAC attempted to do so on June 8, prior to the CTP Act first reading, and on July 27, 2020 specifically in response to the CTP Act .

When the Landlord proposed meeting to discuss resolution as required under the CTP Act on August 21, MAC agreed, but the Landlord did not respond any further. [ 119 ] All three Notices sent by the Landlord were breaches of the Act. The June Notice was sent before the CTP Act came into force, but the retroactive effect of the legislation resulted in the June Notice being a breach as of July 23, 2020, and it was never retracted by the Landlord.

The August Notice was a clear breach of the CTP Act , which the Landlord attempted to retract on the same day, but the CTP Act does not expressly permit retraction of a notice to cure the breach. The September Notice was also improper, as it was simply an extension of the August Notice. The Landlord’s intention was to terminate the Lease or demand payment of all amounts it believed was owing, despite the CTP Act . [ 120 ] Therefore, the Landlord was in substantial breach of the Lease and MAC could enforce its remedies under the Lease for substantial breach. c.

Landlord – MAC’s failure to pay rent was not the result of the Pandemic and so the CTP Act does not apply [ 121 ] The Landlord argues that the threshold for the tenant to engage the protection of s 3 or the obligations of s 6 of the CTP Act is the inability of the tenant to pay rent as a result of circumstances caused by COVID-19. There is no evidence that MAC’s failure to pay rent arose due to COVID. MAC’s evidence only relates to an inability to obtain inspections, permits or approvals required to commence fixturing. Therefore, neither s 3 nor s 6 apply.

As a result, the Notices did not contravene the legislation. [ 122 ] Regardless, the Landlord did not breach the CTP Act , because it did not exercise its remedies for non-payment under the Lease from March 17, 2020 to August 31, 2020, apart from the August Notice which was immediately revoked. Enforcement steps were only taken in September 2020, after the protections of the CTP Act no longer applied. Further, MAC never sought a payment plan, but rather a delay in the start of any rents owing due to non-performance by MAC.

On August 21, the Landlord advised that it was willing to discuss a potential resolution under the CTP Act and MAC did not respond substantively to that request. Therefore, MAC cannot seek the protection of the Act when it did not engage in the attempt to discuss resolution. d. Analysis – The necessary threshold in the CTP Act regarding the payment of rent was not met and so the Landlord did not have any obligations to meet [ 123 ] The first issue to be determined with respect to the CTP Act is whether it applies to the Lease.

The parties agree that the CTP Act applies generally, as the Landlord met the definition of “landlord”, MAC met the definition of “tenant”, and the Landlord did not enter into any relief programs related to the premises. [ 124 ] The Landlord took the position at the hearing that the CTP Reg did not apply, because MAC did not meet the financial threshold in s 2(1)(b). MAC was taken by surprise by this argument and had not relied upon s 2(1)(b), but ultimately MAC did not suffer any prejudice. The legislation can apply if only one of s 2(1)(

a) or s 2(1)(

b) are met. As the Landlord and MAC did not engage in any federal relief programs, the first criteria applies. Therefore, the legislation applies to the Lease, pursuant to s 2 of the CTP Act and s 2(1) (

a) of the CTP Reg . [ 125 ] However, to trigger the tenant protection of s 3 or the landlord obligations of s 6 of the CTP Act , further thresholds must be met related to the Pandemic. [ 126 ] Section 3(1) of the CTP Act provides protection from a landlord’s remedies of default, distrain, eviction or termination in

relation to the non-payment of rent or arrears, where the non-payment is due to circumstances beyond the tenant’s control caused by COVID-19 or the applicability of a force majeure clause or frustration caused by COVID-19. MAC did not meet either of these thresholds. Similarly, the landlord is required to enter into a payment plan for the payment of rent, if the Pandemic caused a tenant to be unable to meet their rent obligations, pursuant to s 6 of the CTP Act . [ 127 ] There is no evidence that MAC could not pay the rent as a result of COVID.

Rather, MAC’s position is that the Pandemic prevented the rent from becoming due and owing, because the Conditions Precedent were not met and the fixturing could not occur. As set out above, the Landlord properly set out the start date of the Fixturing Period. MAC failed to take possession at the start of the Fixturing Period, because it failed to obtain appropriate insurance. MAC would not be able to engage in any fixturing, whether the Pandemic occurred or not, because it was never in a position to take possession. Therefore, MAC’s failure to complete the Fixturing Period was not caused by the Pandemic.

When the Fixturing Period ended two months later, the obligation to pay rent commenced on May 1, 2020. As the obligation had commenced and MAC has not established that it was unable to pay rent due to circumstances beyond its control caused by the Pandemic, the threshold is not met. In addition, the force majeure clause was not applicable and frustration is not estab

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