Cases Considered: Orbus Pharma Inc. v. Kung Man Lee Properties Inc., 2008 ABQB 754.
PDF Version: A Welcome Primer on Interpreting Covenants in Leases
This case is about the proper interpretation of a term in a commercial lease concerning the ability of the tenant to assign or sublet the premises. The provision appeared to say that when the tenant asked for the landlord’s consent to an assignment or sublease, the landlord could either consent or refuse consent or – and this was the controversial point – cancel the lease altogether. Although this clearly reasoned and well-written decision turns on the exact wording of the relevant provision in the lease, there is nevertheless a great deal of precedential value in this decision because of the principles of law used by Justice Scott Brooker in his approach to the interpretative task. Characterizing the provision as “astute bargaining” on the part of the landlord that allowed it to terminate a lease with a rent substantially below market rates (at para. 68), this judgment is also a marked contrast with the decision in 550 Capital Corp. v. David S. Cheetham Architect Ltd., 2008 ABQB 370. In that earlier case, the tenant’s contorted efforts to evade the consequences of a similar clause in its lease were rewarded: see the critique of this decision written by Nick Rafferty and myself in “What’s Wrong with Landlord’s Rights?”