LEXPERTIMPLIED OBLIGATION OF GOOD FAITH

June 2, 2015 Toronto, ON

Good Faith and LeasingPrepared by Natalie Vukovich

Daoust Vukovich LLPToronto, ON

Bhasin & Good Faith

Per Bhasin, Good Faith is a minimum standard – no undermining of the other party’s interests and no misleading the other party (but no duty to forego advantages)

A commercial lease is a conveyance AND a contract (Highway Properties v. Kelly, Douglas – SCC, 1971)

Good Faith and Leasing

Is Good Faith an Interpretive Aid or its own term?

Empress Towers v. Bank of Nova Scotia (BCCA, 1990) Cadillac Fairview v. Canstar (Ont. Ct. Gen. Div., 1991) Gateway Realty v. Arton (NSCA, 1992) MDS v. King Street Medical (Ont. Ct. Gen. Div., 1994) Canada Trustco v. Canyyz (Ont. Ct. Gen. Div., 1999) Martel Building v. Canada (SCC, 2000)

Leasing Cases where Good Faithcould have been but was not Invoked

CNR v. Inglis (Ont. C.A., 1997)* rent rate “opinion” must be reasonable

Sam the Record Man v. Cambridge Leaseholds (Ont. Ct. Gen. Div., 1997)

* lease structure to avoid exclusive was a “sham” Chisos v. Houlahan (Ont. Ct. Gen. Div., 1999)

* failure of inducement = fundamental breach

Common Lease Terms

Consent/Approval may/may not be unreasonably withheld

Determination based on sole and absolute discretion As may be required/deemed necessary by [LL]/[TT] Reasonable efforts v. Best efforts v. Commercially

reasonable best efforts

Other Terms where Good Faitha la Bhasin could impact significantly

Renewal/Extension Options and Pre-Conditions to Exercise Form of Lease/Deadline for Execution/Negotiating Certain

Elements Evolving Use Rights to Expand and Contract Landlord’s Right to Relocate Tenant

Implications forLandlords and Tenants

Enforcement and pursuit of Lease Rights Decision making Lease Negotiations NB: The court in Bhasin effectively rewarded a

contracting party for loss of an expectation, not an entitlement, due to bad behaviour

Case Citations

Highway Properties Ltd v Kelly, Douglas and Co Ltd, [1971] SCR 562.Empress Towers Ltd v Bank of Nova Scotia, (1990), 50 BCLR (2d) 126.Cadillac Fairview Corp v Canstar Sports Inc, [1991] OJ 1560 (Gen Div). Arton Holdings Ltd v Gateway Realty Ltd, (1992),112 NSR (2d) 180.MDS Health Group Ltd v King Street Medical Arts Centre Ltd, [1994] OJ 630 (Gen Div).Canada Trustco Mortgage Co v 1098748 Ontario Ltd (Canyyz Properties Limited Partnership), [1999] OJ 963.Martel Building Ltd v Canada, 2000 SCC 60.Canadian National Railway Co (CNR) v Inglis Ltd, [1992] OJ 1606.Sniderman Radio Sales and Service Ltd (Sam the Record Man) v Cambridge Leaseholds Ltd, [1997] O.J. 4070.Chisos Investment Co v Houlahan, [1990] OJ 1374 (Ont. Gen. Div).Bhasin v Hrynew, 2014 SCC 71.