Executive Summary: Key Legal and Evidentiary Issues

• Interpretation of a force majeure clause in a commercial parking management contract, specifically whether COVID-19–related revenue drops amounted to “interrupted” parking sales justifying pro rata rent reduction.
• Proper application of modern contractual interpretation principles (including Sattva and the factual matrix) to determine if the pandemic made performance impossible or merely less profitable.
• Allocation of the onus of proof on the tenant/operator (Target) to establish that the force majeure clause was triggered and properly invoked in practice.
• Treatment of an equitable set-off defence based on alleged landlord interference with revenue-enhancing measures such as gate installation, extended hours and improved signage.
• Limits on appellate review from arbitral awards under s. 45(1) of the Arbitration Act, 1991, restricting the court to pure questions of law and applying a correctness standard only if a legal error is shown.
• Assessment and confirmation of significant monetary consequences, including damages, arbitration costs and appeal costs, after the tenant’s legal challenges failed.

Factual background

Crown Property Management Inc. is a commercial real estate investment and property management firm that acquires, leases, manages and redevelops office assets across Canada. Target Park Inc. is an owner-operated parking management company that runs commercial parking lots on behalf of landlords. Their relationship arose from an April 2019 request for proposals issued by Crown for the operation of the parking lot serving its 15-storey office building at 5255 Yonge Street in Toronto. Target responded to the RFP in June 2019 and was selected as the successful proponent later that month.
Target began managing the parking facility on August 1, 2019, pursuant to a written contract dated September 27, 2019. Although Crown never signed the contract, both parties accepted that it governed their relationship and the terms of the parking lot operation. Under this contract, Target was responsible for monitoring and operating the lot and collecting all parking revenues. In return, Target owed Crown a guaranteed minimum monthly rent of $35,671 plus HST, along with a profit-sharing obligation under which Crown was entitled to 65% of “Net Revenue” collected in excess of that minimum rent. The initial term was three years from August 1, 2019, with an option to renew for an additional two-year period.
The contractual arrangement functioned normally until the onset of the COVID-19 pandemic. Beginning in 2020, remote work and public health measures sharply reduced office attendance and parking demand. Between April 2020 and April 2022, Target unilaterally remitted reduced monthly payments to Crown, asserting that the pandemic and related public measures justified a rent reduction under the force majeure language in the contract. Crown disagreed and treated the shortfalls as breaches of the agreed minimum rent and revenue-sharing obligations.

The contract and the force majeure clause

Central to the dispute was the force majeure clause in the parking management contract. It provided that if Target was prevented from operating or if parking sales were interrupted by reasons beyond Target’s reasonable control for more than five days in any 30-day period, the rent would be reduced on a pro rata basis against the period of interruption. The clause listed examples of force majeure, including “natural causes, such as Acts of God, fire, earthquakes, riot, war, and/or pandemics,” and also contemplated certain forms of government interference, such as road closures or regulatory closure of the parking facility.
Target relied heavily on this provision to justify paying Crown less than the stipulated minimum rent and reduced profit-sharing amounts during the pandemic period. It pointed to a dramatic fall in parking revenues beginning in early 2020, illustrating how monthly sales dropped from over $47,000 in January 2020 to roughly $30,000 in May 2020, with transient (short-term) parking revenue plummeting from more than $12,000 to around $1,200 over the same time frame. Target characterized these declines as an interruption in parking sales caused by the COVID-19 pandemic and argued that it was therefore entitled to a pro rata rent reduction. Based on its own retrospective pro rata calculations, Target contended that it had actually overpaid Crown by approximately $14,798, rather than underpaid.
Crown, for its part, acknowledged that revenues fell but argued that the contract was not designed to shift ordinary commercial risk or general downturns in demand to the landlord. In its view, the force majeure clause required something closer to an actual inability to operate or a legally compelled closure, not merely a substantial drop in usage and profitability. Crown also emphasized that Target had continued to operate the lot and collect revenue throughout the pandemic.

The arbitration proceedings and award

Crown initiated arbitration on June 19, 2023, alleging that Target had breached the contract by failing to pay the full minimum rent and profit-sharing amounts during the relevant period. Crown’s claimed shortfall exceeded $326,000. The parties did not dispute the raw figures of how much Target had remitted; the real contest was over whether Target’s short payments were excused or justified by the contract or other legal doctrines.
Target advanced three main defences before the arbitrator. First, it relied on the force majeure clause, arguing that the pandemic and associated government shutdowns had interrupted parking sales and therefore triggered a contractual right to reduce rent on a pro rata basis. Second, Target invoked Ontario’s Limitations Act, 2002, arguing that some of Crown’s claimed amounts were statute-barred by the basic limitation period. Third, Target asserted a defence of equitable set-off, contending that Crown’s own conduct had undermined Target’s ability to increase revenue and that any amounts found owing should be offset against the harm caused by Crown’s alleged failures.
The arbitration hearing took place over three days in September 2024. In a detailed written award of 220 paragraphs delivered on February 26, 2025, the arbitrator rejected Target’s force majeure argument, accepted in part its limitations defence, and dismissed its equitable set-off claim. On the force majeure issue, the arbitrator held that Target had not proven that the pandemic triggered the clause for a lot that continued to earn parking revenue, and that Target had not actually invoked the clause or established a shared understanding with Crown regarding any period of interruption or reduction formula. On limitations, the arbitrator concluded that some of Crown’s claims were out of time, thereby narrowing the recoverable shortfall. On set-off, she found that Crown had not materially prevented Target from implementing most of the revenue-enhancing measures Target alleged it wanted to pursue.
In the result, the arbitrator ordered Target to pay Crown $201,243.34 in damages for breach of contract, reflecting the amounts still owing after the limitations adjustment. She later issued a separate costs award on May 3, 2025, holding Target liable for $148,628.55 in arbitration costs.

The leave to appeal and scope of the court’s review

Target then sought and obtained leave from the Ontario Superior Court of Justice (Commercial List) to appeal the arbitral award on questions of law under s. 45(1) of the Arbitration Act, 1991. The parties had agreed in their arbitration clause to waive all appeal rights except as allowed by that provision, which limited any appeal to pure questions of law. As a result, the Court could not revisit pure findings of fact or issues of mixed fact and law unless a distinct legal error could be identified.
In an October 14, 2025 endorsement, the leave judge, Justice Steele, granted leave on the basis that there was at least one arguable error of law regarding the arbitrator’s approach to contractual interpretation of the force majeure clause. Justice Steele accepted that the case was important to the parties and that the interpretation of the clause significantly affected their rights, satisfying the statutory leave test. While Target also alleged an error in the arbitrator’s treatment of equitable set-off, the leave decision specifically highlighted the arguable issue around the principles of contractual interpretation and did not explicitly address the set-off component.
On the appeal, both sides accepted that if a legal error was found, the applicable standard of review would be correctness, meaning the Court would substitute its own view of the law. However, Target first had to show that the arbitrator had in fact misapplied or failed to apply the governing legal principles in a way that created an extricable question of law.

Court’s analysis of the force majeure clause

Target’s principal submission on appeal was that the arbitrator had failed to apply the contractual interpretation framework from the Supreme Court of Canada’s decision in Sattva Capital Corp. v. Creston Moly Corp. It argued that the arbitrator did not sufficiently engage with the contract as a whole, the ordinary and grammatical meaning of the words “parking sales are interrupted,” and the surrounding circumstances at the time of contract formation. Target also suggested that the arbitrator had placed undue weight on Target’s failure to formally invoke the clause or engage Crown in contemporaneous discussions about a pro rata reduction.
Justice Dietrich rejected these arguments. The Court accepted that, under Sattva, interpreting a contract requires reading the agreement as a whole, grounding interpretation in the text, and considering only objective background facts, while not allowing surrounding circumstances to overwhelm the language or morph the bargain into something new. The Court further noted that questions of contractual interpretation are usually issues of mixed fact and law, but a pure question of law can be “extricated” where an incorrect legal principle is applied or a required element of a legal test is ignored.
After reviewing the award contextually and functionally, the Court was satisfied that the arbitrator had, in substance, applied the Sattva principles even if that case was not expressly cited. The arbitrator began by setting out the actual wording of the force majeure clause and then examined relevant case law, including the Supreme Court of Canada’s discussion in Atlantic Paper Stock Ltd. v. St. Anne-Nackawic Pulp and Paper Company Limited regarding the purpose of such clauses—to address events beyond the parties’ control that make contractual performance impossible, not merely more onerous or less profitable. She recognized that a fact-specific inquiry was needed to determine whether Target had been “prevented from operating” or whether “parking sales were interrupted” to the extent contemplated by the clause.
On the evidence, the arbitrator found that Target was never prevented from operating the parking facility: it continued to operate the lot and collect revenue, even if at reduced levels. With respect to the phrase “parking sales are interrupted,” she accepted that revenues fell significantly but questioned whether this economic downturn amounted to an “interruption” in a legal sense sufficient to render contractual performance impossible. She ultimately held that Target had not satisfied its onus to show that the clause was triggered, particularly in light of continuing revenue generation throughout the pandemic.
The Court also reviewed the arbitrator’s comments on Target’s failure to actually invoke the clause, notify Crown, or agree on any shared method of calculating a pro rata reduction at the time. Justice Dietrich treated these points as part of a holistic assessment of how the clause was intended to operate in practice, rather than as a new or extraneous legal requirement. Considering the award as a whole, the Court concluded that the arbitrator had correctly anchored her analysis in the text of the clause, the contract read as a whole, and the relevant legal authorities. As a result, there was no extricable legal error in the interpretation of the force majeure clause, and Target’s appeal on this ground was dismissed.

Court’s analysis of the equitable set-off defence

Target also argued that the arbitrator had misapplied the legal test for equitable set-off articulated in Telford v. Holt and later cases, which requires, among other things, some equitable ground for protecting the debtor from the creditor’s monetary demand. Target contended that Crown’s conduct had undermined its ability to maximize revenue by allegedly failing to allow installation of a gate system, extension of parking hours to include overnight parking, and improved signage. This alleged interference, Target said, gave rise to an equitable claim that should be set off against any amounts owed to Crown.
The Court noted that the arbitrator had properly stated the legal test for equitable set-off and had expressly relied on binding authority when doing so. Target’s criticism focused on the application of the first element of the test—namely, whether there were equitable grounds to justify set-off. Target suggested that the arbitrator had improperly dismissed these grounds by concluding that the supposed revenue-enhancing measures were not reflected as contractual obligations.
Justice Dietrich found that this characterization overlooked crucial aspects of the award. In assessing the set-off defence, the arbitrator went beyond the written terms and examined Target’s factual allegations about Crown’s conduct. She evaluated each of Target’s complaints in detail and found, as a matter of fact, that Crown had not actually prevented Target from implementing most of the changes it said it wanted, save for one minor issue relating to a banner. These factual findings, rather than any misunderstanding of the test for equitable set-off, led the arbitrator to conclude that Target had not established a sufficient equitable basis to reduce or cancel Crown’s monetary claim.
Because these determinations were factual, and the Court’s jurisdiction under s. 45(1) did not extend to re-weighing evidence or revisiting factual findings, there was no reviewable legal error. The Court therefore rejected Target’s argument on equitable set-off and left that aspect of the award intact.

Outcome and overall monetary consequences

Having found no errors of law in the arbitrator’s treatment of either the force majeure clause or the equitable set-off defence, the Court dismissed Target Park Inc.’s appeal in its entirety. The underlying arbitral award, which had already ordered Target to pay Crown Property Management Inc. $201,243.34 in damages for breach of contract, remained in force, as did the arbitrator’s separate costs award of $148,628.55. In addition, the parties had agreed that the unsuccessful party on the appeal would pay fixed costs of $22,000 (inclusive of HST), and the Court ordered Target to pay that amount within 30 days. Taken together, these outcomes confirm Crown as the successful party overall, with total damages and costs orders in its favour amounting to $371,871.89 ($201,243.34 in damages, $148,628.55 in arbitration costs, and $22,000 in appeal costs).