The Court of Appeal for Ontario in North Elgin Centre Inc. v. McDonald’s Restaurants of Canada Limited, 2018 ONCA 71 allowed an appeal by McDonald’s from a decision on applications by both parties to determine whether the subject lease came to an end on a described date because McDonald’s had not complied with the renewal provision in the lease.
The Court of Appeal allowed the appeal of the decision of the application judge, that despite that the parties were in negotiations, and that the respondent had waived its right to insist on strict compliance with the terms of the renewal provision (to refer the determination of the renewal rental rate to arbitration), that the respondent had effectively revoked its waiver and reverted to its strict legal rights, namely to terminate the lease in the absence of the referral of the dispute on renewal rental rate to arbitration within the permitted time.
On the issue of waiver, the Court of Appeal described that the principle of waiver provides that “…if one party leads another party to believe that its strict legal rights under a contract will not be insisted upon, intending that the other party will act upon that belief and the other does so, then the first party may not afterwards insist on its strict legal rights when it would be inequitable to do so: Petridis v Shabinsky, 35 O.R. (2d) 215 (H.C.), at para 20.” and found that the application judge made no error in concluding that the respondent had waived strict compliance with the renewal provision under the lease.
However, the Court of Appeal found that the application judge erred in finding that such waiver had been revoked, since a revocation of waiver to be effective, must provide (i) reasonable notice to the receiving party, and to be reasonable notice it must make it clear that the party who granted the waiver will insist upon strict enforcement of its legal tights, and (ii) the notice must also afford the opposite party an opportunity to cure any defect resulting from its reliance on the waiver.
The Court of Appeal ruled that the email relied upon by the respondent failed to revoke its waiver since “There is no clear revocation of waiver.”
Please see our related practice area webpages on Commercial Lease Litigation, Contract Termination, Commercial Arbitration, and on Urgent Remedies.
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