Simon's Megalomaniacal Legal Resources

Landlord and Tenant (Commercial) - Interpretation

. Convocation Flowers Incorporated v. Anisa Holdings Ltd.

In Convocation Flowers Incorporated v. Anisa Holdings Ltd. (Ont CA, 2026) the Ontario Court of Appeal dismissed a landlord's appeal, this involving "a commercial lease dispute where the tenant alleges that the landlord fundamentally breached the lease and that it is entitled to damages".

Here the court considered the interpretation of a commercial lease - which may not be distinct from the interpretation of a contract:

[9] In her careful treatment of this issue, the application judge correctly set out the applicable principles of contract interpretation. She reviewed the Lease in detail, including clause 2 (the “permitted use” of the leased unit being “flower storage/warehouse/distribution”); clause 20 (specifying that the landlord would make the improvements as set out in the schedule appended to the Lease); the definition of “Common Areas and Facilities” (including entrances, exits, and the loading docks); and clause 38 (providing that the landlord could establish rules and regulations governing use and occupancy of the premises, including common areas, in its sole discretion). Citing this court’s decision in Goodlife Fitness Centres Inc. v. Rock Developments Inc., 2019 ONCA 58 and Primo Poloniato Grandchildren's Trust (Trustee of) v. Browne, 2012 ONCA 862, 115 O.R. (3d) 287, she explicitly declined to admit evidence of surrounding circumstances related to the negotiation of the Lease as an interpretive aid.

[10] The application judge found as a fact that, in the context of this leasing arrangement, the improvements, were to satisfy the particular needs of CFI so that it could receive its flower deliveries. Further, she found that even if some parts of the Lease gave Anisa discretion to alter the common areas, it could not do so in a manner that would alter or eliminate CFI’s use of the negotiated improvements to the property which were a term of the Lease.

[11] Reading the Lease as a whole in a commercially reasonable manner, the application judge concluded:

In conclusion on this issue, taking into account the surrounding circumstance that this was a multi-tenanted property, the definition of Common Areas, the schedule that set out the contractually agreed-upon Enlarged Door Improvement, and reading the Lease as a whole in a commercially reasonable manner, the objective intention, as well as the reasonable expectations of the parties, was that the Tenant [CFI] would have access to the Loading Docks, and the North Driveway so that it could access the Enlarged Door improvement to receive deliveries. The New Landlord [Anisa] could not redesignate the North Driveway and Loading Docks to itself in such a manner that it rendered the contractually agreed upon Enlarged Door Improvement unusable by the Tenant.

[12] The application judge’s interpretation of the Lease is comprehensive and entitled to deference. Anisa can point to no palpable and overriding error — as is required for this court to interfere: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50. There is no question that the text of the Lease, including the schedule, can “reasonably bear” the interpretation given to it by the application judge: Horn Ventures International Inc. v. Xylem Canada LP, 2023 ONCA 408, 52 R.P.R. (6th) 171, at para. 18. This ground of appeal cannot succeed.

. Bloor Street West Corporation v. Barry's Bootcamp Canada Inc.

In Bloor Street West Corporation v. Barry's Bootcamp Canada Inc. (Ont CA, 2025) the Ontario Court of Appeal considered an appeal in a commercial lease dispute, here from orders regarding "the method that 100 Bloor proposed to use to calculate the proportion of realty taxes attributable to the building’s two-storey underground parking garage" and "substantial indemnity costs ... in the amount of $709,017.39".

Here the court applies Sattva for lease interpretation:

[44] ... It was open to the motion judge to come to the decision he did, based on the principles of contractual interpretation affirmed in Sattva Capital Corp. v. Creston Moly Corp, 2014 SCC 53, [2016] 2 S.C.R. 633, at paras. 47-48.

. Royal Bank of Canada v. Peace Bridge Duty Free Inc.

In Royal Bank of Canada v. Peace Bridge Duty Free Inc. (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from a tenant's motion (in an application) denial of "rent adjustment or abatement" under a 'material adverse effect' negotiation lease provision, during the COVID pandemic.

Here the court considered contractual interpretation, in this commercial lease context:

(a) The Governing Principles

[24] The purpose of contractual interpretation is to determine the objective intentions of the parties; it is a fact-specific exercise: JPM Trade Capital Inc. v. Blanchard, 2024 ONCA 876, at para. 11, citing Earthco Soil Mixtures Inc. v. Pine Valley Enterprises Inc., 2024 SCC 20, 492 D.L.R. (4th) 389, at para. 28.

[25] The Supreme Court laid out the principles of contract interpretation in relation to the “factual matrix” in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. This court in Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, 77 B.L.R. (5th) 175, at para. 65, per Brown J.A., rev’d on other grounds, Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, [2019] 4 S.C.R. 394, summarized the principles guiding the approach to interpreting commercial contracts as follows:

When interpreting a contract, an adjudicator should:

(i) determine the intention of the parties in accordance with the language they have used in the written document, based upon the “cardinal presumption” that they have intended what they have said;

(ii) read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(iii) read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and

(iv) read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed. [Emphasis added.]

[26] There are therefore limits to the effect that can be given to the factual matrix surrounding the formation of a contract: Sattva, at para. 58. The Supreme Court noted:

1. The surrounding circumstances must never overwhelm the words of an agreement. The interpretation of a contract is necessarily grounded in its text and read in light of the whole contract: Sattva, at para. 57.

2. Courts may never use the surrounding circumstances to deviate from the text of the contract such that it creates a new agreement: Sattva, at para. 57.

3. The surrounding circumstances must only consist of evidence that is objective of the background facts at the time of the contract’s execution: Sattva, at para. 58.

. 2249778 Ontario Inc. v Smith (Fratburger)

In 2249778 Ontario Inc. v Smith (Fratburger) (Ont CA, 2014) the Court of Appeal, without comment, applied principles of contractual interpretation to the interpretation of a commercial lease, thus confirming that it was treating real estate leases as a form of contract. This is a variation from traditional law which viewed contracts and real estate leases as qualitatively distinct types of legal obligations [paras 16-18]. The Court also restated principles of interpretation applicable to commercial contracts, with particular attention to the role of 'surrounding circumstances' in interpretation (aka parole evidence), and the principle of contra proferentum:

[19] As stated in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205 (CanLII), 85 O.R. (3d) 254 (C.A.), at para. 24, a commercial contract is to be interpreted:

(a) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended what they have said;

(c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract),

(d) in a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity.

[20] In Sattva, the Supreme Court addressed the issue of surrounding circumstances. Rothstein J. wrote, at para. 57:

While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement. The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement. [Citations omitted.]

[21] Evidence of surrounding circumstances should consist only of objective evidence of the background facts at the time of execution of the contract: knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting: Sattva, at para. 58.

[22] Finally, the rule of contra proferentum applies in cases where the contractual terms are ambiguous: Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888, at p. 900 and Manulife Bank of Canada v. Conlin, 1996 CanLII 182 (SCC), [1996] 3 S.C.R. 415, at pp. 425-426.