Background
Hillmond Investments Ltd. owned a shopping plaza in Mississauga, Ontario where Metro Ontario Inc. and Metro Ontario Real Estate Limited (collectively, the Tenant) operated a Food Basics grocery store as anchor tenant from 1978 to 2023. The original 1978 lease was renewed five times on five-year terms. In 2009, the Tenant disputed how rent and common area maintenance (CAM) charges had been calculated throughout the renewal periods, launching litigation that eventually produced a trial record spanning pleadings and amendments from tab A to tab Q.
Three claims went to trial before Justice Centa of the Superior Court: (1) overpayment of additional percentage rent during the 2003–2023 renewal periods, based on the Tenant’s reading of s. 38 of the Lease; (2) the cost of replacing the roof over the leased premises, which the Tenant ultimately undertook itself after the Landlord refused; and (3) overcharging of CAM expenses, including the Landlord’s own counterclaim for underpaid CAM charges for 2009–2011. The trial judge accepted the Tenant’s position on all three claims, rejected the Landlord’s principal witness as neither credible nor reliable, and awarded the Tenant damages of $1,359,799.88 plus costs of $690,000, all inclusive.
The Landlord appealed on all three issues and also sought leave before the hearing to amend its notice of appeal to characterize a 2008 option exercise as a “third amendment to the Lease” — an argument never made at trial. The Court of Appeal dismissed that motion before oral argument, then heard and dismissed the full appeal.
The Court’s Holding
On additional rent, the Court found no error in the trial judge’s interpretation of s. 38, which unambiguously modified the percentage-rent formula during renewal periods so that the threshold was the greater of $10 million or average annual sales in the three preceding fiscal years. The Landlord’s assertion that s. 38 created a separate layer of “premium rent” on top of unchanged percentage rent was rejected. The Court also confirmed that the limitation period for unjust enrichment runs from the moment the defendant retains each overpayment without juristic reason — not from when the plaintiff first made the erroneous payment — citing McConnell v. Huxtable, 2014 ONCA 86.
On the roof, the Court upheld the finding that s. 10 of the Lease imposed two distinct obligations on the Landlord: repairs arising from land subsidence or structural defects, and — separately — all needed repairs and replacements to the exterior of the premises including the roof. The Landlord’s reading, which would have confined s. 10 solely to structural-defect repairs, was rejected as rendering the exterior-repair language meaningless and producing a commercially absurd result. Because s. 10 was unambiguous, the Court confirmed it would have been a legal error to admit subsequent-conduct evidence to vary its meaning.
On the CAM limitation issue, the Court affirmed that the six-year limitation period under s. 17(1) of the Real Property Limitations Act began to run when the CAM charges were incurred in 2009–2011, not when the Landlord chose to issue invoices in July 2013. Permitting a party to delay invoicing strategically — here, after litigation had already commenced — would allow unilateral tolling of the limitation period, an outcome squarely rejected by the trial judge and the Court of Appeal alike.
Key Takeaways
- A commercial lease provision requiring the landlord to make “all needed repairs and replacements to … the exterior of the leased premises including the … roof” is unambiguous and imposes a replacement obligation, not merely a repair obligation limited to structural defects.
- Subsequent-conduct evidence is admissible in contract interpretation only where the contractual text remains ambiguous after considering the text and its factual matrix; where the language is clear, admitting such evidence would itself be a legal error.
- For unjust-enrichment claims, the limitation period is triggered by each act of the defendant retaining an overpayment — not by the date the plaintiff made the first erroneous payment — so claims are not necessarily time-barred simply because the underlying error began years earlier.
- A landlord cannot toll a statutory limitation period on CAM arrears by delaying the issuance of invoices; the limitation period runs from when the obligation accrued, not from the landlord’s self-chosen billing date.
- A party seeking leave to amend a notice of appeal to advance a legal characterization (option exercise as lease amendment) that contradicts its own trial pleadings and closing submissions will be denied; appellate courts review decisions made below, not fresh theories.
Why It Matters
This decision is a practical guide for counsel advising on long-term commercial leases. It reinforces that landlords bear full exterior-maintenance and replacement obligations when the lease says so in plain terms, and that courts will not rescue a landlord from clear lease language simply because the financial consequences are significant. The roof-replacement analysis — treating the “land subsidence and structural defects” language as one obligation and the enumerated exterior-repair items as a separate, broader obligation — illustrates how Ontario courts parse repair covenants when the drafting layers multiple duties in a single section.
The limitation-period ruling on CAM charges carries equal practical weight. Landlords in multi-tenant plazas sometimes accumulate and invoice reconciliation charges strategically, particularly when disputes are already in litigation. The Court’s confirmation that this conduct cannot extend the limitation clock sends a clear signal: the clock runs from accrual, and deliberate invoicing delays will not be rewarded. Combined with the unjust-enrichment analysis on the rent overpayment claims, the decision underscores that Ontario courts will look past procedural or billing mechanics to identify when a cause of action substantively arose.