The Ontario Court of Appeal recently relied on email negotiations to interpret the meaning of a lease agreement in 1079268 Ontario Inc. v. GoodLife Fitness Centers Inc., 2017 ONCA 12. The dispute arose over the amount of rent due under a contract that contained contradictory clauses regarding the total area leased and the formula for calculating rent.
The lease agreement between 1079268 Ontario Inc. and GoodLife Fitness Centers Inc. contained two conflicting clauses about the premises’ total area. The first clause defined the premises as “the entire property,” whereas the second clause listed a price per square foot and implied that the premises excluded the basement.
At trial, the application judge applied the ruling in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, which confirmed that contractual interpretation is a mixed question of fact and law. This standard requires judges to look beyond the ordinary meaning of individual words and analyze the surrounding context to determine the parties’ intent.
During email negotiations, the landlord clarified that the lease applied to the entire building except for a portion of the basement, which the landlord would use for storage. The parties ultimately removed the basement-related clause, and the landlord confirmed that the “entire premises” would be leased on a lump-sum basis, including the basement. This context allowed the Ontario Court of Appeal to overturn the application judge’s decision.
The case serves as a reminder that, when interpreting agreements, counsel should consider evidence beyond the face of the contract. Previous drafts, written negotiations, and other contextual evidence can help determine the parties’ intent and assist courts in interpreting unclear clauses.