In Windsor-Essex Catholic District School Board v. 2313846 Ontario Limited o/a Central Park Athletics, 2022 ONCA 235, two school boards rented space in a commercial multi-purpose sporting facility from the landlord. In the parties’ lease agreements, there was a force majeure clause. A force majeure clause generally excuses non-performance in circumstances that are beyond the parties’ control. The leases also included a rent abatement clause, which stipulated that the school boards would be entitled to a rent abatement in the event of force majeure.
In response to the COVID-19 pandemic, various levels of government ordered lockdowns. As a result, the school boards could not use the leased premises as intended from March 17, 2020, to August 11, 2020.
At the beginning of the lockdown period, the school boards continued to pay rent. Subsequently, however, they informed the landlord that they were invoking the rent abatement provisions pursuant to the force majeure clauses and ceased paying rent for the balance of the lockdown period.
The landlord disagreed with the school boards’ position on the rent abatement and force majeure clauses and filed an application with the court.
At trial, the school boards argued that the COVID-19 pandemic and the resulting government lockdowns prevented them from making use of the leased premises. They submitted that this constituted a classic force majeure situation and the relevant clauses in the lease had been triggered, resulting in a right to rent abatement.
The landlord argued that the COVID-19 pandemic lockdowns did not excuse the school boards’ rent obligations. In part, the landlord argued that the language in the lease only allowed the landlord to invoke the force majeure clauses, which it had not done.
The trial judge began by explaining that force majeure has no set or specialized meaning and whether such a clause is triggered will depend on the proper interpretation of the particular clause.
After reviewing the language used in the lease, the trial judge ruled that there was a force majeure event through no fault of any of the parties due to the closures ordered by the government in response to the COVID-19 pandemic. Thus, the trial judge ruled that the school boards were entitled to rent abatement.
The landlord appealed the decision.
On appeal, the landlord did not challenge the trial judge’s finding that the government lockdowns in response to the COVID-19 pandemic had triggered a force majeure event, nor did it dispute that the lockdowns had been prevented the school boards from using the leased spaces. Rather, the landlord claimed that the trial judge had erred in interpreting the triggering event under the lease. It argued that, pursuant to the leases, only the landlord could claim that the force majeure clauses had been triggered, which it did not do. Thus, the landlord argued that the trial judge had erred in ruling that the triggering event was the COVID-19 lockdown.
The Court of Appeal respectfully rejected the landlord’s argument, ruling that the trial judge had considered the landlord’s position but had rejected its submission, which the trial judge was entitled to do. Thus, the Court stated that the case did not involve an extricable error of law. Rather, the case was about contractual interpretation, which involves questions of mixed fact and law, and therefore engages the standard of palpable and overriding error.
Having found that the trial judge had not committed a palpable and overriding error, the Court dismissed the appeal.