Key Facts

• Peace Bridge Duty Free Inc. leased a duty-free shop on the Canadian side of the Peace Bridge.
• Lease (signed in 2016) included a base rent of $4 million annually plus percentage-based rent.
• COVID-19 border restrictions (March 2020 - November 2021) severely impacted Peace Bridge’s business.
• Peace Bridge invoked Section 18.07 of the lease, which required the landlord to consult with the tenant if regulatory changes had a material adverse effect on business.
• Despite negotiations, the parties could not agree on rent adjustments for the closure period.
• The Superior Court ruled against Peace Bridge, denying judicial imposition of a rent adjustment.
• Peace Bridge appealed the decision.

Issues on Appeal

1. Interpretation of Section 18.07

   • Did the motion judge err in excluding pre-contractual discussions about its meaning?
   • Did the clause entitle Peace Bridge to a rent reduction?

2. Judicial Imposition of Rent Adjustment

   • Should the court impose a specific rent reduction since negotiations failed?

3. Good Faith Negotiations by the Landlord

   • Did the Buffalo and Fort Erie Public Bridge Authority negotiate rent relief in good faith?

Court of Appeal’s Decision

• Appeal Dismissed
  • The motion judge properly interpreted Section 18.07.
  • The clause required consultation but did not mandate a rent adjustment.
  • The Authority acted in good faith by engaging in negotiations over several years.
• Costs Awarded: $20,000 to the respondent

Key Legal Findings

• The court upheld that Section 18.07 only obligated the landlord to discuss rent adjustments, not to grant them.
• Courts cannot rewrite contracts to impose specific rent reductions where no formula or criteria exist in the lease.
• The Authority’s refusal to grant full rent abatement did not constitute bad faith since it participated in prolonged negotiations.