1497777 Ontario Inc. v. Leon's Furniture Limited et al.
[Indexed as: 1497777 Ontario Inc. v. Leon's Furniture Ltd.]
67 O.R. (3d) 206
[2003] O.J. No. 3708
Docket No. C38579
Court of Appeal for Ontario
Morden, Weiler and Charron JJ.A.
September 23, 2003
Landlord and tenant -- Forfeiture -- Relief from forfeiture -- Tenant breaching covenant against subleasing without consent of landlord -- Court having equitable jurisdiction to grant relief from forfeiture -- Subsection 20(7) of Commercial Tenancies Act not precluding resort to court's equitable jurisdiction -- Commercial Tenancies Act, R.S.O. 1990, c. L.7, ss. 20, 21, 23.
Leon's Furniture Limited ("Leon's") was the tenant of 1497777 Ontario Inc. (the "Landlord") under a 30-year lease of premises at 2902 and 2944 Danforth Avenue in the City of Toronto. The lease was to run to October 31, 2000, with two ten-year rights of renewal. The lease contained a proviso for "re-entry by the lessor on non-payment of rent or non-performance of covenants". The lease allowed Leon's to sublease with the leave of the Landlord, which leave was not to be arbitrarily or unreasonably withheld.
In 1992, Leon's subleased 6,770 square feet of its premises at 2902 Danforth Avenue to Marca Schools of Hair Design ("Marca") and Marca subleased its space at 2944 Danforth Avenue to the Board of Education of East York ("Board of Education"). The Landlord signed a consent form in which it consented to the sublease to Marca "for a term of less than that of the term of the Agreement" and subject to the condition that the consent "shall not be deemed to authorize any further or other subletting". The Landlord also signed a consent form relating to the sublease to the Board of Education that contained similar provisions. In 1997, Marca leased additional space with the written consent of the Landlord, which provided that the consent was "for a term of less than that of the term of the Agreement".
In 1999, Leon's exercised its option to renew the lease of 2902 Danforth Avenue for a ten-year term. It did not renew the lease for 2944 Danforth Avenue. It agreed with Marca that it would again sublet to Marca commencing September 1, 2000. It did not inform the Landlord that it would sublease again to Marca. In January 2001, the Landlord raised the issue that Leon's did not have the Landlord's consent to sublet, and it brought an application for a declaration that the lease was terminated for the failure to obtain the Landlord's consent. Leon's brought a counter-application for relief from forfeiture, and Marca moved for an order vesting in it a leasehold interest pursuant to s. 21 of the Commercial Tenancies Act. Rivard J. dismissed the Landlord's application and did not deal with the requests for relief by Leon's and Marca. The Landlord appealed.
Held, the appeal should be allowed.
The Landlord's consents to the 1992 and 1997 subleases did not authorize the subletting by Leon's to Marca of the five-year term commencing September 1, 2000 with an option to renew for a further five years. Contrary to the view of Rivard J., the outcome was not governed by the authority of St. Jane Plaza Ltd. v. Sunoco Inc. but, rather, it depended upon the proper interpretation of the consents given by the Landlord. Properly interpreted, the consents granted leave only for a sublease within the initial 30-year term of the lease. By their express terms, the consents did not cover any further subletting. The conclusion was that Leon's sublet to Marca without the consent of the Landlord and accordingly, under the proviso for re-entry in the lease, the Landlord was entitled to terminate the lease.
The conclusion raised the question of whether Leon's was entitled to relief from forfeiture. On the factual record, this question could not be resolved and it was necessary to direct a trial of an issue. It followed that it was not known whether Marca's motion for relief under s. 21 of the Commercial Tenancies Act need be considered, and this matter should be referred for determination in the Superior Court, if necessary. However, the substantial legal issues about relief from forfeiture could be resolved.
The most relevant statutory provisions concerned with relief from forfeiture are ss. 20(1) and 20(7) of the Commercial Tenancies Act. The Landlord relied on s. 20(7), which provides that relief provided by s. 20 does not extend to a covenant against the assignment or subleasing of the land leased. Although the question was not free of difficulty, s. 20(7) does not stand in the way of resort to the equitable jurisdiction of the court. The wording of s. 20(7) does not prohibit resort to another source of jurisdiction for relief from forfeiture and the issue was not resolved by authority in Ontario. The point was an open one. The decision of the Court of Appeal in England in Barrow v. Isaacs & Son supported the conclusion that the court's equitable jurisdiction existed in the circumstances of the immediate case.
Shiloh Spinners Ltd. v. Harding put a modern stamp on the scope of the court's equitable jurisdiction to grant relief from forfeiture than that previously believed to exist. In Ontario, Shiloh Spinners was applied in Liscumb v. Provenzano, in a judgment that was affirmed by the Court of Appeal. The application of these principles should follow the trial of an issue. In considering whether it was an appropriate case to grant relief from forfeiture, on the record, it was not possible to determine Leon's state of mind and whether its default was willful. The matters of the gravity of the breach, the damage caused by the breach, and whether the object of the covenant against subletting could be attained was uncertain, and an inquiry of whether the court might have permitted the sublease under s. 23(2) of the Commercial Tenancies Act was required because if the court would have permitted the sublease, then it could be said that the gravity of, or the damage caused by, the breach was not serious. On the state of the record, it was not possible to resolve the factual issues relating to relief from forfeiture.
APPEAL from an order of Rivard J., [2002] O.J. No. 2555 (QL) (S.C.J.) dismissing an application for a declaration that a lease was terminated.
Cases referred to Avlor Investments Ltd. v. J.K. Children's Wear Inc. (1991), 1991 7124 (ON SC), 6 O.R. (3d) 225, 85 D.L.R. (4th) 239, 22 R.P.R. (2d) 187 (Gen. Div.); Barrow v. Isaacs & Son, [1891] 1 Q.B. 417, 60 L.J.Q.B. 179, 64 L.T. 686, 55 J.P. 517, 39 W.R. 338, 7 T.L.R. 175 (C.A.); Dovale v. Metropolitan Toronto Housing Authority (2001), 2001 28024 (ON SC), 53 O.R. (3d) 181 (S.C.J.); Federal Business Development Bank v. Starr (1988), 1988 56 (SCC), 65 O.R. (2d) 793, 52 D.L.R. (4th) 767 (C.A.), varg (1986), 1986 2534 (ON SC), 55 O.R. (2d) 65, 28 D.L.R. (4th) 582, 41 R.P.R. 151 (H.C.J.); Greenwin Construction Co. v. Stone & Webster Canada Ltd. (2001), 2001 27993 (ON SC), 55 O.R. (3d) 345, 38 R.P.R. (3d) 125 (S.C.J.); Liscumb v. Provenzano (1986), 1986 2595 (ON CA), 55 O.R. (2d) 404n (C.A.), affg (1985), 1985 2051 (ON SC), 51 O.R. (2d) 129, 40 R.P.R. 31 (H.C.J.); McBride v. Comfort Living Housing Co-operative Inc. (1992), 1992 7474 (ON CA), 7 O.R. (3d) 394, 89 D.L.R. (4th) 76, 22 R.P.R. (2d) 126 (C.A.); Pink Panther Food Corp. v. N.D. McLennan Ltd. (1990), 1990 6727 (ON CA), 75 O.R. (2d) 651 (C.A.); Rexdale Investments Ltd. and Gibson (Re), 1966 218 (ON CA), [1967] 1 O.R. 251, 60 D.L.R. (2d) 193 (C.A.); St. Jane Plaza Ltd. v. Sunoco Inc. (1992), 24 R.P.R. (2d) 161 (Ont. Gen. Div.); Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691, [1973] 1 All E.R. 90, [1973] 2 W.L.R. 28, 117 Sol. Jo. 34 (H.L.); Taylor v. Ontario (Minister of Consumer and Commercial Relations), [1977] O.J. No. 1444 (QL) (Gen. Div.); Wakefield v. Cottingham, 1959 147 (ON CA), [1959] O.R. 551, 19 D.L.R. (2d) 511 (C.A.); Webb v. Box (1909), 19 O.L.R. 540, [1909] O.J. No. 155 (QL) (Div. Ct.); Wickman Machine Tool Sales Ltd. v. L. Schuler A.G., [1974] A.C. 235, [1973] 2 All E.R. 39, [1973] 2 W.L.R. 683, 117 Sol. Jo. 340 (H.L.), affg [1972] 2 All E.R. 1173, [1972] 1 W.L.R. 840, 116 Sol. Jo. 352 (C.A.)
Statutes referred to Commercial Tenancies Act, R.S.O. 1990, c. L.7, ss. 20(1), (7), 21, 23(2) Conveyancing and Law of Property Act, 1881, 44 & 45 Vict., c. 41 Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98 Landlord and Tenant Act, R.S.O. 1950, c. 199, s. 19(7) Landlord and Tenant Act, R.S.O. 1980, c. 232, s. 23(2)
Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 38.10(b)
Authorities referred to Halsbury's Laws of England, 4th ed., vol. 27(1) (London: Butterworths, 1981) Meagher, R.P., W.M. Gummow and J.R.F. Lehane, Equity, Doctrines and Remedies, 4th ed. (Sydney: Butterworths, 2000) Waddams, S.M., The Law of Contracts, 4th ed. (Toronto: Canada Law Book, 1999)
Charles Simco and Leslie Dizgun, for appellant. Geoff R. Hall, for respondent Leon's Furniture Limited. Barnet H. Kussner, for respondent Marca Schools of Hair Design Inc.
The judgment of the court was delivered by
MORDEN J.A.: --
Introduction
1The appellant is the landlord under a 30-year lease to the respondent Leon's Furniture Limited to run from November 1, 1970 to October 31, 2000, with two rights of renewal by Leon's for terms of ten years each. The appellant brought an application before Rivard J. for a declaration that the lease was terminated on the ground that Leon's had sublet the premises to the respondent Marca School[s] of Hair Design Inc. for the period September 1, 2000 to August 31, 2005 with a right of renewal for a further five years without seeking or obtaining the landlord's consent as required by the terms of the lease. Rivard J. dismissed the application. By reason of this conclusion, Rivard J. did not deal with a counter-application by Leon's for an order granting it relief from forfeiture, if necessary, nor a motion by Marca, the subtenant, for an order vesting in it a leasehold interest in the premises in the event that the application succeeded and the counter-application failed.
2The landlord had earlier, in 1992 and 1997, consented to subleases between Leon's and Marca respecting the landlord's premises at 2902-2904 Danforth Avenue, Toronto. The issue relating to the termination of the lease turns on the proper interpretation of the 1992 and 1997 consent documents. The application judge regarded them as authorizing the new sublease commencing on September 1, 2000. For the reasons that I shall give, it is my opinion that they did not authorize any further subletting beyond the 30-year term of the lease and that, accordingly, the landlord had not consented to the five-year lease that commenced on September 1, 2000. Following this, I give my reasons why Leon's is not entitled to relief from forfeiture and why Marca is not entitled to [the] relief that it seeks. I turn now to the facts.
The Facts
3The lease between the landlord and Leon's, which was to run from November 1, 1970 to October 31, 2000, with two rights of renewal for terms of ten years each, covered several properties on Danforth Avenue in the City of Toronto. The two properties in question in this proceeding are 2902 and 2904 Danforth Avenue which, as the addresses indicated, are beside each other. They appear to be referred to in the lease and in some of the documents relating to the lease as, simply"2902 Danforth Avenue".
4The habendum read as follows:
TO HAVE AND TO HOLD the said demised premises for and during the term of THIRTY (30) YEARS to be computed from the 1st day of November, 1970, and thence forth next ensuing and fully to be completed and ended on the 31st day of October, 2000.
5The lease contained the following lessee's covenant respecting assignment and subletting:
The Lessee will not assign the entire term or remainder thereof without leave and such leave may, notwithstanding any statutory enactment to the contrary, be arbitrarily or unreasonably refused by the Lessor in its sole and uncontrolled discretion. It is provided however that the Lessee may from time to time sub-lease the demised premises or any portion thereof for such portion of the term not exceeding in length of time the entire term less one day with the leave of the Lessor which shall not be arbitrarily or unreasonably withheld.
6The lease contained the following provision respecting renewal:
PROVIDED FURTHER that with respect to Premises 2902 Danforth Avenue, the Lessee shall have the right to renew the within lease for a further second term of TEN (10) YEARS on the same terms and conditions save that the rental payable shall be the sum of TWENTY THOUSAND DOLLARS ($20,000.00) per annum for said premises, upon delivery to the Lessor of the Lessee's intention to renew at least six months prior to the expiry of the first term of this lease, and provided further that the Lessee shall have the further right to renew the within lease with respect to said premises #2902 Danforth Avenue for a further third term of TEN (10) YEARS on the same terms and conditions save that the rental payable shall be the sum of TWENTY THOUSAND DOLLARS (20,000.00) per annum for said premises, and save and except as to any further renewal, upon delivery to the Lessor of the Lessee's intention to renew at least six months prior to the expiry of the second term of this lease.
7Finally, the lease contained a proviso "for re-entry by the lessor on non-payment of rent or non-performance of covenants".
8On July 6, 1992, Leon's and Marca signed an offer to sublease with respect to approximately 6,770 square feet at 2902 Danforth Avenue for five years commencing on August 1, 1992 with an option to renew for a further three years. This document contained the following condition:
The Lessor consenting in writing to this Sub-Lease Agreement, or failing such, the Sub-Lessor obtain [another version says "shall obtain"] judicial approval of the Sub-Lease Agreement.
9On July 14, 1992, Leon's sent to the landlord a draft copy of a sublease from Marca to the Board of Education of East York of space at 2944 Danforth Avenue, which was also one of the properties covered by the lease, then occupied by Marca as a subtenant of Leon's and, also, the offer to sublease at 2902 Danforth Avenue between Leon's and Marca. In its letter to the landlord Leon's said:
We are sending copies of both subleases to you for your review in order to obtain your consent to both as required under our head lease with you. If you have any questions concerning the subleases, please do not hesitate to contact the writer.
10The landlord signed a consent form dated August 20, 1992 to which was attached a copy of the 1992 sublease relating to 2902 Danforth Avenue. It read:
. . . [T]he Landlord having leased to Leon's Furniture Limited (the Tenant) by Lease Agreement and Indenture dated September 13, 1970 (the Agreement) certain premises, described in the Agreement and although acknowledges never having received any net rental income whatsoever, hereby consents to the subletting by the Tenant to the Subtenant of part of the leased premises for a term of less than that of the term of the Agreement on the following terms and conditions:
This Consent is given on the condition and understanding that:
The Landlord retains its rights against the Tenant and is not prejudiced in any way by this Consent in respect of its said right relating to any act, omission or other breach by the Tenant of any of the terms of the Agreement . . . .
This Consent shall not be deemed to authorize any further or other subletting or assignment of or with respect to the leased premises;
(Emphasis added)
11On the same day, August 20, 1992, the landlord signed a consent form relating to the sublease of part of 2944 Danforth Avenue by Marca to the Board of Education of the Borough of East York. In the heading of this document there appeared a line reading: "EXPIRY DATE OF SUBLEASE June 30, 2000". The document reads:
[The Landlord] hereby consents to the subletting of the sublease by the Subtenant 1 [Marca] in favour of the Subtenant 2 [the Board of Education] for the leased premises for a term less than that of the term of the Agreement on the following terms and conditions:
The Landlord retains its right against the Tenant and Subtenants and is not prejudiced in any way by this consent in respect of its right relating to any act, omission or other breach by the Tenant of any of the terms of the Agreement . . . .
This consent shall not be deemed to authorize any further or other subletting or assignment of or with respect to the premises occupied by agreement dated October 13, 1970;
12Terence Leon, an officer of Leon's, admitted under cross-examination that at the time of the 1992 sublease, Leon's did not then know whether it would elect to renew the main lease, which was set to expire on October 31, 2000. Joseph Chimenti, the sole officer, director, and shareholder of Marca, also admitted under cross-examination that he did not know whether Marca would want to enter into a new sublease for a term starting after August 31, 2000. Mr. Chimenti also specifically stated that the 1992 consent was only intended to be effective to August 31, 2000. He did not believe that the consent covered the next ten-year term.
13In 1997, when Marca wished to sublet additional space at 2902 Danforth Avenue (and 2904 Danforth Avenue), Leon's wrote the landlord on May 6, 1997 and requested the landlord's consent to the new sublease. The letter said:
Further to our recent telephone conversation, this letter will confirm that Marca Hair Styling School now wishes to sublease an additional three thousand square feet (3,000 sq. ft.) from us at 2904 Danforth Avenue. The term will run from June 1, 1997 until August 31, 2000 provided that we receive the Landlord's consent to the sublease.
During our conversation, you indicated you felt that the request was likely to be looked upon favourably since we are both familiar with Marca.
For your convenience we have drafted consents to the sublease in duplicate for your review.
If you have any questions, please do not hesitate to contact me. Otherwise we would appreciate obtaining the consents at your earliest opportunity.
14The landlord signed and returned its written consent in these terms:
. . . [T]he Landlord having leased to Leon's Furniture Limited (the Tenant) by Lease Agreement and Indenture dated September 13, 1970 (The Agreement) certain premises, described in the Agreement and although acknowledges never having received any net rental income whatsoever, hereby consents to the subletting by the Tenant to the Subtenant of part of the leased premises for a term of less than that of the term of the Agreement.
(Emphasis added)
15Leon's advised the landlord that the 1997 sublease would expire no later than August 31, 2000, which was less than the existing term of the main lease. Once again, Leon's representative admitted under cross-examination that at the time of the 1997 sublease Leon's did not know whether it would elect to renew the head lease which expired on October 31, 2000. Marca's representative also admitted that in 1997 Marca did not know whether it would want to enter into a new sublease for terms starting after August 31, 2000.
16In August 1999, Leon's agreed with Marca that if Leon's elected to renew its lease with the landlord, it would sublet the same space to Marca commencing on September 1, 2000. Leon's letter to Marca dated August 16, 1999 read as follows:
Further to your letter of July 23, 1999 and our telephone conversation of August 13, 1999, this letter will confirm our agreement that, upon our renewing our head lease with the Landlord, you will renew your subleases with us for 2902 and 2904 Danforth Avenue for five (5) years at $9.00 per square foot with a second five (5) year renewal option at $10.00 per square foot. The remaining terms of the lease will remain the same.
Would you kindly confirm your acceptance of these terms by signing below.
17Leon's informed the landlord by correspondence dated October 4, 1999 that it was exercising its option to renew the main lease of 2902 Danforth Avenue for a ten-year term. It did not inform the landlord whether it would sublet the premises for any part of the ten-year term. On May 2, 2000, Leon's further informed the landlord that it would not be renewing the lease for 2944 Danforth Avenue.
18The 1992 and 1997 subleases expired on August 31, 2000. The 2000 sublease commenced on September 1, 2000. The renewal term under the main lease commenced on November 1, 2000.
19Gary Blustein, the landlord's representative, stated on his cross-examination that the period of August to December 2000 was a difficult one as he was preoccupied with the condition of his hospitalized son and another family member who was stricken by a terminal illness. He was also contending with repair and lease difficulties affecting 2944 Danforth Avenue. He did not turn his attention to the subtenancy issue involving Marca until early January 2001 when his father informed him that he had not received rent cheques from Leon's for 2902 Danforth Avenue for the months of November and December 2000. The cheques were normally received by the elder Mr. Blustein on a monthly basis.
20On or about January 5, 2001, Mr. Blustein advised Leon's in a telephone discussion that the rent cheques were not received for 2902 Danforth Avenue. He also raised the issue that Leon's did not have the landlord's consent to sublet 2902 Danforth Avenue. The landlord's correspondence of the same date confirmed that any payments with respect to rent would be accepted without prejudice to any rights the landlord might have. I turn now to the issues to be resolved.
21The first issue is whether the landlord's consents to the 1992 and 1997 subleases authorized the further subletting by Leon's to Marca commencing on September 1, 2000. If they did not, Leon's claim for relief from forfeiture must be considered. Finally, if Leon's is not entitled to relief from forfeiture, Marca's claim for relief under s. 21 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7 must be considered.
Did the Landlord's Consents to the 1992 and 1997 Sub-leases Authorize the Subletting by Leon's to Marca of the Five-Year Term Commencing September 1, 2000 with an Option to Renew for a Further Five Years?
22In addressing this issue I should begin with a statement of the application judge's reasons. He accepted the submission of the respondents that, because the landlord had confirmed in 1992 and again in 1997 that it had no objection to Marca as a subtenant, the purpose of the sublease provisions in the lease respecting the landlord's consent would not be furthered by requiring a fresh consent to the 2000 sublease. He was of the view that the facts of the case were sufficiently similar to those in St. Jane Plaza Ltd. v. Sunoco Inc. (1992), 24 R.P.R. (2d) 161 (Ont. Gen. Div.), a decision of Borins J., to be governed by the result in that case. Because the application judge's conclusion is based squarely on St. Jane, I shall examine that case in some detail.
23The central facts in St. Jane were as follows. The landlord entered into a lease with Sun Oil Company Limited for the period of 25 years from April 15, 1966 to April 14, 1991. The lease contained three successive five-year options permitting the tenant to renew the lease on the same terms and conditions.
24In 1977, as a result of a restructuring of Sun Oil, it became necessary for it to assign its leases to Sunoco Inc., a newly incorporated wholly owned subsidiary of Sun Oil. In 1977, Sun Oil twice wrote to St. Jane asking for its consent to the assignment and received no response. In 1978, Sunoco wrote to the landlord to notify it that the lease had been assigned and to advise that all aspects of the relationship would remain unchanged. Borins J. found that Sun Oil's letters were received by the landlord.
25In February 1990, Sunoco wrote to the landlord to advise it that it was exercising its right to renew the lease for the first of the five-year renewal terms commencing April 15, 1991. This was the event that triggered the landlord's application to terminate the tenancy on the ground that Sun Oil had assigned the lease to Sunoco without the landlord's consent, contrary to a term of the lease that stated:
. . . AND The Tenant will not assign or sublet without leave except that no subletting to one of the Tenant's authorized dealers shall require any such consent.
and, also that the term had been breached by a subletting to two authorized dealers concurrently.
26At pp. 165-66 R.P.R. Borins J. said:
St. Jane's primary ground for seeking to terminate the lease is that its assignment from Sun Oil to Sunoco on June 1, 1977, occurred without its consent, as required by cl. (f). There are several reasons why St. Jane cannot succeed on this ground. Before reviewing them, it is helpful to state a number of facts on which they are based. The primary fact is that for 14 years St. Jane sat back and accepted rent cheques from the assignee of the lease, Sunoco. It was in frequent correspondence with Sunoco over that period. It was not until the spring of 1991 that it complained that the lease had been assigned without its consent. . . . As well, of course, St. Jane was notified of the proposed assignment and its consent was requested, but it failed to respond to the request and, until the spring of 1991, made no objection to Sunoco's right to continue as a tenant of the property. Finally, because the lease and its extension are disadvantageous to St. Jane, as the annual rent is much below the current market rent, St. Jane has now raised the question of the assignment in order to terminate the lease to enable it to attempt to obtain a higher rent for the premises.
27At p. 166 R.P.R. he said:
The purpose of a clause in a lease prohibiting a lessee from assigning it without the lessor's permission is for the protection of the lessor. It is to permit the lessor to ascertain whether or not the proposed assignee would be objectionable as a tenant, or the business which it would carry on would be undesirable: McCallum, Hill & Co. v. Imperial Bank of Canada (1914), 1914 293 (SKSC), 7 Sask. L.R. 333, 7 W.W.R. 981, 22 D.L.R. 203 (S.C.), at p. 208 [D.L.R.]. . . . As well, I share the view of Herold D.C.J. in Ordex Developments Ltd. v. Sherwood Communications Group Ltd., released August 10, 1990 [Docs. York 367752/89, M175623/89 (Ont. Dist. Ct.), that where a tenant requests the landlord's consent to an assignment and the request is refused or ignored, the tenant may, after subletting without the landlord's consent, bring an application under s. 23(2) of the Landlord and Tenant Act, R.S.O. 1980, c. 232, to determine if the consent was unreasonably withheld. Approached from this perspective, I am satisfied that the landlord's consent was unreasonably withheld, and that the assignment of the lease from Sun Oil to Sunoco was not in violation of cl. (f) of the lease.
28Following this he said at pp. 166-67 R.P.R.:
The acceptance by St. Jane from Sunoco of rent for period of 14 years constitutes the acceptance of Sunoco as the tenant and constitutes a waiver by St. Jane of the forfeiture of the balance of the lease: Colwell & Jennings Ltd. v. J.W. Creaghan Co., 1950 259 (NB SC), 28 M.P.R. 40, [1951] 4 D.L.R. 840 (N.B. S.C.) at p. 841 [D.L.R.]; Roman Catholic Episcopal Corp. of St. Albert v. R.J. Sheppard & Co. (1913), 1913 329 (AB KB), 6 Alta. L.R. 128, 3 W.W.R. 814, 9 D.L.R. 619 (T.D.); Mascan Corp. v. 278143 Ontario Ltd. (1984), 3 O.A.C. 225 (C.A.). Furthermore, St. Jane's delay of 14 years in seeking to terminate the lease has created a situation which would result in an inequity in favour of Sunoco were an order to be made declaring its lease to be terminated.
29He concluded his reasons at p. 167 R.P.R.:
It follows that St. Jane's application is dismissed and that the cross-application of Suncor [Sun Oil's successor] and Sunoco is granted. Accordingly, there will be an order declaring that St. Jane unreasonably withheld its consent to the assignment of the lease from Sun Oil to Sunoco, that the assignment was a valid assignment, that the lease is in full force and effect, that Sunoco validly exercised its option to extend the lease, and that Sunoco is entitled to possession of the premises known municipally as 2665 Jane Street, North York, Ontario.
30The application judge in the present case, stated the "main issue" before him to be as follows [at para. 18]:
Given that the landlord had already given consent in 1992 and 1997 to Marca being a subtenant of 2902 Danforth, was Leon's required to obtain a fresh consent to renew Marca's subtenancy in 2000?
31Soon after this, he quoted what Borins J. said at p. 166 R.P.R. of his reasons on the purpose of a consent to assignment clause in a lease. He then said [at paras. 21-22]:
The Respondents submit that since the landlord confirmed in 1992 and again in 1997 that it had no objection to Marca or its business, the purpose of the sublease provision would not be furthered by requiring fresh consents in 2000.
In my view, the fact situation in the St. Jane Place Ltd. case is sufficiently similar to the facts of this case to warrant the application of the same principles.
32The "sufficiently similar" facts in the two cases that he observed were, briefly:
(1) Both leases were for lengthy periods and contained options to renew (para. 23);
(2) "In the St. Jane Plaza Ltd. case, Borins J. said at p. 162: 'Provided that the lessee exercises its option to renew the lease, in reality it is a lease for a term of forty years'. Similarly, in the event Leon's exercised its options to renew in this case, it was a lease for a term of 50 years" (para. 25);
(3) In both cases the landlord was searching for reasons to terminate the lease because the rent was below market value and in neither case was the assignee (St. Jane) or subtenant (this case) an undesirable tenant (paras. 28 and 29).
33With respect, it is difficult to see what "principles" in St. Jane the learned application judge had in mind. The possible factual similarities do not indicate any principles. As I have said earlier in these reasons, I think that the case must turn on the proper interpretation of the consents given by the landlord. There is no mention of the terms of these consents in the application judge's reasons.
34I accept that an important purpose of requiring a landlord's permission for assignment (or subletting) is as stated in St. Jane but it does not, of course, automatically follow if Marca could have satisfied these purposes, no consent was required in 2000 or that the earlier consents carried through to the final renewal term provided for in the lease.
35Further, I have difficulty in appreciating the bearing of the statement in para. 25 of the reasons respecting this lease being for a term of 50 years "in the event Leon's exercises its options to renew". It may be that it is part of an implicit statement that the terms of the consent have to be read as extending to a time just short of the 50 years. If this is so, I shall address the point in the course of my interpretation of the terms of the consent.
36The application judge's comparison of the case before him with St. Jane does not consider what appears to me to be the essential reasoning underlying Borins J.'s conclusion. This reasoning is founded on the fact that the tenant had sought the landlord's consent to the assignment of the lease and that the landlord had unreasonably refused to give it. Borins J. granted an order on the cross-application of the tenant (assignee) declaring that St. Jane had unreasonably withheld its consent to the assignment and that the assignment was a valid one.
37In the present case, Leon's never sought the landlord's consent to the 2000 sublease and, accordingly, in its counter-application it could not claim a declaration that the consent had been wrongfully withheld. Rather, Leon's sought, if necessary, an order granting it relief from forfeiture of the lease.
38In short, I do not think that St. Jane is of assistance in resolving the present case. As I have said, its resolution turns on the terms of the consents to the 1992 and 1997 subleases. I turn to this issue now.
39The consent documents are set forth in paras. 10 (the 1992 consent) and 14 (the 1997 consent) above. The duration of the consents is stated to be "for a term less than that of the term of the Agreement". What is "the term of the Agreement"? In my view it is the 30-year term in the habendum in the lease, set forth above. I say this because this was the only term in existence at the time the consents were given. The possible future terms that would result from the exercise of the option to renew were just that, possibilities, and, according to the evidence of Terence Leon, referred to above, in both 1992 and 1997 Leon's did not know whether it would in fact exercise its right to renew.
40Other considerations support this interpretation. I refer to the following provision in the 1992 consent:
- This Consent shall not be deemed to authorize any further or other subletting or assignment of or with respect to the leased premises;
41This appears to be a direct answer to the contention that the 1992 consent covered any further subletting. Further, if the consent were intended to cover a period just "less than" the term resulting from the exercise of the two renewal options there would be no room for any "further or other subletting".
42The consents have to be read in a particular context and not as unprompted and unilateral gestures on the part of the landlord. They were given in response to requests by Leon's for consents to two specific subleases. The first, 1992, was to end on August 31, 2000. The second sublease was to end on the same date. These requests naturally assist in interpreting the scope of the consent document granted in response to them. It makes eminent sense that they should be read as covering a period ending just short of October 31, 2000"a term of less than that of the term of the Agreement", which is just two months more than the termination dates of the subleases.
43With respect, it does not make sense to interpret the scope of the consent to include a period of time slightly more than 20 years in addition to that sought in the requests.
44I deal now with two specific submissions made by Leon's in support of the view that the consents covered a period of time ending just before the end of the second renewal term.
45First, Leon's submits that a fresh consent in 2000 was unnecessary because the purposes of the requirement of a consent to sublease as set forth in St. Jane were met, i.e., the landlord must be taken to have approved both Marca and its use of the premises in the 1992 and 1997 consents. In this regard, Leon's contrasts the case of a proposed new subtenant. I have dealt with a part of this argument earlier in these reasons in considering the application judge's reasons but would add the following consideration at this point.
46In my view, quite apart from the time limit indicated in the consent itself, it does not automatically follow that an earlier consent to a sublease to a subtenant can reasonably be regarded as a consent for all time, particularly in the case of a corporate subtenant. The ownership, management and employees of a corporation can all change over time such that at a later date quite new facts may be presented to a landlord whose consent to a sublease is sought. Accordingly, it does not make sense that one consent should be regarded as good for all time.
47I might add that even if the general purpose of requiring a consent could be said to have been met in this case such that it would be reasonable to say that it should cover the period to 2020, this would not carry the day for Leon's unless the actual terms of the consent reflected this purpose. I have already dealt with the terms, contrary to Leon's position.
48Second, Leon's bases an argument on a comparison of the form of the 1992 consent respecting Marca's sublease to the Board of Education of the Borough of East York respecting the premises at 2944 Danforth Avenue with the consent relating to 2902 Danforth Avenue which is referred to and quoted in para. 11 of these reasons. The former consent has the words "EXPIRY DATE OF SUBLEASE June 30, 2000" in its heading, whereas the heading of the consent relating to 2902 Danforth Avenue did not have wording of this kind in its heading. Leon's submits that "[u]nlike the consent with respect to 2944 Danforth, which refers to the expiry date of the subject sublease, the consent with respect to 2902 Danforth does not refer to the expiry date of the subject sublease but instead consents 'to the subletting by the Tenant [Leon's] to the Subtenant [Marca] of part of the leased premises for a term less than that of the term of the Agreement [the Head Lease]'."
49With respect, there is no "instead" about it. There is no significant difference between the two consents. The consent relating to 2944 Danforth Avenue contains substantially the same operative language respecting the temporal scope of the consent as the consent relating to 2902 Danforth Avenue, that is"for a term less than that of the term of the Agreement". The statement of the expiry of the sublease does not make the 2944 Danforth Avenue consent different. In this regard it may be noted that the 2902 Danforth Avenue consent had a copy of the sublease, which was to expire on August 31, 2000, attached to it.
50Finally, with respect to what may be considered to be the legal framework relating to this issue, I note that it has been held that an option to renew a lease, when exercised, results in a fresh demise relating to a new term: see Avlor Investments Ltd. v. J.K. Children's Wear Inc. (1991), 1991 7124 (ON SC), 6 O.R. (3d) 225, 85 D.L.R. (4th) 239 (Gen. Div.), at p. 231 O.R. "Where a lease contains an option to renew the lease the exercise of the option will ordinarily involve the creation of a new lease, . . .": Halsbury's Laws of England, 4th ed (London: Butterworths, 1981), vol. 27(1), para. 467, at p. 435. This supports the view that "the term" in the consent was the initial 30-year term in the lease and that the renewal terms would be new terms.
Leon's Claim to Relief from Forfeiture
51By reason of my conclusion that Leon's sublet to Marca without the consent of the landlord and that, accordingly, the landlord, pursuant to the proviso for re-entry in the lease, is entitled to terminate the lease, I am obliged to consider Leon's claim for relief from forfeiture.
52Before doing so I should deal with a preliminary argument raised by Leon's. It is that its breach is not sufficiently serious to warrant the remedy of termination. It cites Waddams, The Law of Contracts, 4th ed. (Toronto: Canada Law Book, 1999), at pp. 425-26, and Wickman Machine Tool Sales Ltd. v. L. Schuler AG, [1974] A.C. 235, [1973] 2 All E.R. 39 (H.L.), at p. 251 A.C. The appellant did not respond to this argument. I think that it is answered by the parties' express agreement in the proviso in the lease that the landlord was entitled to re-enter the premises on non-performance of any of the covenants. The tenant's only relief, if any, must be sought in the claim for relief from forfeiture to which I now turn.
53I should say at this point that what follows is my conclusion on the substantial legal issues that were raised but not an ultimate resolution of the claim for relief from forfeiture. This latter question turns on important issues of fact which, on the materials before the court, I am unable to decide in a fair or satisfactory manner. With respect to it, I feel obliged to direct the trial of an issue under rule 38.10(b) [Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. It follows that, at the present time, it is not known whether the respondent Marca's motion for relief under s. 21 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7, need be heard and determined. For this reason I would refer it for determination in the Superior Court, if necessary.
54The most relevant statutory provisions concerned with relief from forfeiture are ss. 20(1) and 20(7) in the Commercial Tenancies Act:
20(1) Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture, whether for non-payment of rent or for other cause, the lessee may, in the lessor's action, if any, or if there is no such action pending, then in an action or application in the Ontario Court (General Division) [now the Superior Court of Justice] brought by the lessee, apply to the court for relief, and the court may grant such relief as, having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just.
(7) This section does not extend,
(a) to a covenant or condition against the assigning, underletting, parting with the possession, or disposing of the land leased; or to a condition for forfeiture on the bankruptcy of the lessee, or on the lessee making an assignment for the benefit of creditors under the Assignment and Preferences Act, or on the taking in execution of the lessee's interest; or . . .
55The landlord relies on s. 20(7) as a complete answer to Leon's claim for relief. Leon's counters with the submission s. 20(7) does not stand in the way of the application of the equitable relief from forfeiture provided in s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43 which reads:
- A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.
56I acknowledge that the question is not free of difficulty but I conclude, for the reasons I shall give, that s. 20(7) does not stand in the way of resort to the equitable jurisdiction of the court.
57First, I note that the wording of s. 20(7) does not prohibit resort to another source of jurisdiction for relief. It merely says that the "section", itself, does not extend to the case described. It does not impose or provide for forfeiture. Accordingly, the decisions relied upon by the landlord, all of which held that the general equitable jurisdiction provided by s. 98 of the Courts of Justice Act, or its predecessors, could not override statutory provisions imposing penalties and forfeitures are not in point: Webb v. Box (1909), 19 O.L.R. 540, [1909] O.J. No. 155 (QL) (Div. Ct.); McBride v. Comfort Living Housing Co-operative Inc. (1992), 1992 7474 (ON CA), 7 O.R. (3d) 394, 89 D.L.R. (4th) 76 (C.A.); Taylor v. Ontario (Minister of Consumer and Commercial Relations), [1997] O.J. No. 1444 (QL) (Gen. Div.); and Dovale v. Metropolitan Toronto Housing Authority (2001), 2001 28024 (ON SC), 53 O.R. (3d) 181 (S.C.J.).
58I do not think that the issue has been resolved by authority in Ontario. It is true that in Wakefield v. Cottingham, 1959 147 (ON CA), [1959] O.R. 551, 19 D.L.R. (2d) 511 (C.A.), in an appeal by a tenant from a forfeiture order based on the tenant's subletting without the landlord's consent, Porter C.J.O., speaking for a majority of the court, gave s. 20(7) (then s. 19(7) of the Landlord and Tenant Act, R.S.O. 1950, c. 199) as a reason why the tenant was not entitled to relief from forfeiture. He said, at p. 555 O.R.:
Further, the procedure provided in s. 19 for relief against forfeiture does not apply to the covenant in issue. Subsection (7) provides
This section shall not extend,
(a) to a covenant or condition against the assigning, under-letting, parting with possession, or disposing of the land leased[.]
59No express reference to the court's equitable jurisdiction was made in either the reported argument or the court's reasons. I would point out, however, that before he made reference to what is now s. 20(7), Porter C.J.O. said [at p. 554 O.R.]: "I think Barrow v. Isaacs & Son, [1891] 1 Q.B. 417 applies". I discuss Barrow v. Isaacs & Son later in these reasons. The court in that case considered at length the equitable jurisdiction of the court and exercised it in refusing relief from forfeiture. Accordingly, it may be that Porter C.J.O. also exercised the equitable jurisdiction of the court in denying relief from forfeiture.
60In the subsequent decision of this court in Pink Panther Food Corp. v. N.D. McLennan Ltd. (1990), 1990 6727 (ON CA), 75 O.R. (2d) 651 (C.A.), the court approved the holding in Wakefield that the court could not approve a subletting under s. 23(2) of the Landlord and Tenant Act, R.S.O. 1980, c. 232 (now s. 23(2) of the Commercial Tenancies Act) where the tenant had not sought the required consents before entering into the subleases. It addressed the equitable jurisdiction of the court as follows, at p. 658 O.R.:
We should record that the present appeal did not raise before the judge of first instance and does not raise before us any question of the possible invocation of the equitable jurisdiction of the court to grant relief to a tenant who has entered into a sublease and permitted the subtenant to enter into possession of the premises without first seeking the consent of the landlord required by the lease, and that nothing in our disposition of this appeal affects the possible invocation of such equitable jurisdiction, if it exists.
61I should also refer to the judgment of Laskin J.A. in Re Rexdale Investments Ltd. and Gibson, 1966 218 (ON CA), [1967] 1 O.R. 251, 60 D.L.R. (2d) 193 (C.A.), at p. 260 O.R., in which he referred to the "possibility" of resort to the equitable jurisdiction of the court to relieve from forfeiture in a case that might not be covered by the relief from forfeiture provided for in the Landlord and Tenant Act. In addition, I refer to Greenwin Construction Co. Ltd. v. Stone & Webster Canada Ltd. (2001), 2001 27993 (ON SC), 55 O.R. (3d) 345, 38 R.P.R. (3d) 125 (S.C.J.), at pp. 351-52 O.R. where the court, apparently claiming more for Rexdale Investments than Laskin J.A. stated, held that s. 20(7) did not "occupy the field" and that resort could be had to the equitable jurisdiction of the court.
62On the foregoing, it is fair to say that the point is an open one.
63I think that the decision of the Court of Appeal in England in the much-cited case of Barrow v. Isaacs & Son, [1891] 1 Q.B. 417, 60 L.J.Q.B. 179 (C.A.), referred to above, establishes that the equitable jurisdiction does exist in the circumstances of this case. In Barrow, the tenant, in breach of a covenant in a lease, sublet part of the leased premises without seeking the landlord's consent. The sublease was prepared by the tenant's solicitors who omitted to look at the head lease and forgot that it contained the covenant against subletting without consent.
64It might have been thought that the case would have been governed by s. 14(6)(i) of the Conveyancing and Law of Property Act, 1881, 44 & 45 Vict., c. 41 which was in identical terms to s. 20(7) of the Commercial Tenancies Act in all of relevant respects. It read:
14(6) This section does not extend --
(i) To a covenant or condition against the assigning, under-letting, parting with the possession, or disposing of the land leased; or to a condition for forfeiture on the bankruptcy of the lessee, or on the taking in execution of the lessee's interest
Section 14(2) provided for relief from forfeiture in substantially the same terms as does s. 20(1) of the Ontario Act set forth earlier in these reasons.
65Lord Justice Kay, for himself and Lopes L.J., considered the court's equitable jurisdiction and held that, on the facts, the tenant was not entitled to relief in forfeiture. Lord Esher M.R. gave separate reasons for arriving at the same conclusion. Kay L.J. addressed s. 14 of the Conveyancing and Law of Property Act, 1881, as follows at p. 430:
Now, by the Conveyancing Act, 1881, these enactments [earlier statutes] are repealed; but a locus penitentiae is given to the lessee by requiring, in case of any breach of covenant, that the lessor shall serve upon him a notice specifying the breach and requiring him to remedy it, and to make compensation in money, before exercising his right of re-entry; otherwise the High Court may grant relief upon proper terms. But it is expressly provided that this does not extend to a covenant against assigning, under-letting, parting with the possession or disposing of the land leased. Forfeiture for breach of this covenant is left to be dealt with according to the ordinary law and practice of Courts of Equity.
(Emphasis added)
66Because s. 20(7) is a copy of s. 14(6)(i) in the 1881 legislation, I think that it should receive the same interpretation. I have not seen any authority that departs from or criticizes this holding in Barrow v. Isaacs & Son. In fact, it appears to have been approved by the House of Lords in Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691, [1973] 1 All E.R. 90 (H.L.), at p. 725 A.C. I do not think that Barrow v. Isaacs & Son is distinguishable on the basis that what was s. 14(1) in the English legislation (which provided for the service on the lessee of a notice specifying the particular breach complained of and other matters) is s. 19(2) in the Ontario Act and not in s. 20.
67Barrow v. Isaacs & Son has been cited for its statement of the principles of the equitable jurisdiction of the court relating to relief from forfeiture. In view of what may reasonably be considered to be a re-statement of these principles in Shiloh Spinners Ltd., I shall not relate what Barrow v. Isaacs & Son said on this subject. Shiloh Spinners Ltd. was applied by McKinlay J. in Liscumb v. Provenzano (1985), 1985 2051 (ON SC), 51 O.R. (2d) 129, 40 R.P.R. 31 (H.C.J.) whose judgment was affirmed by this court (1986), 1986 2595 (ON CA), 55 O.R. (2d) 404n, [1986] O.J. No. 598 (QL) (C.A.).
68In Shiloh Spinners Ltd., Lord Wilberforce put a modern stamp on the scope of the equitable jurisdiction to grant relief from forfeiture that was wider than that previously believed to exist: see Meagher, Gummow and Lehane's Equity, Doctrines and Remedies, 4th ed. (Sydney: Butterworths, 2000), at pp. 581-87.
69The core of Lord Wilberforce's opinion is set forth in the following passage on pp. 723-24 A.C.:
I would fully endorse this: it remains true today that equity expects men to carry out their bargains and will not let them buy their way out by uncovenanted payment. But it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result. The word "appropriate" involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.
70The reasons as a whole appear to indicate that the strict view that there could not be relief from forfeiture except under the two "classical" headings of (1) where the object of the transaction and the insertion of the right to forfeit is to secure the payment of money, and (2) the heads of fraud, accident, mistake or surprise, was not endorsed. See, particularly, pp. 722 c-e and 724 e-g A.C.
71I turn now to a consideration of the application of the principles relating to relief from forfeiture to the evidence in this case. As I have said, I do not think that I can decide the question in a fair and satisfactory manner on the materials before the court and that the decision should follow the trial of an issue. I shall now state the basis of my concerns.
72Is this an "appropriate" case in which to relieve against forfeiture? In addressing this question, one would first consider Leon's "conduct" and whether its default was "wilful". The landlord has submitted that it was wilful because Leon's knew that the landlord was concerned with the failure of Leon's and Marca to police the obligations to repair under the subleases relating to 2944 Danforth Avenue and that, accordingly, it did not seek the consent. (I shall say more on the subject of the alleged non-repair later in these reasons.) Leon's evidence on this, given in relation to whether there was a breach of the lease, appears to be that it misread (as matters have turned out) the existing consents. For what relevance it may have, I refer back to the evidence given by Marca's representative on cross-examination that the 1992 consent was only intended to be effective to August 31, 2000 and that he did not believe that it covered the next ten-year term. As was noted in Shiloh Spinners Ltd., at p. 722 A.C. the heads of fraud, accident, mistake or surprise "entailed the exclusion of mere inadvertence and a fortiori of wilful defaults". On the record I cannot properly determine Leon's state of mind on this question.
73With respect to the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach, I would have to say that because the rent payable under the lease was substantially less than that which would have been payable at current market rates, the loss to Leon's would be substantial.
74I should say something about one aspect of the foregoing. Leon's has argued that the landlord should not succeed because its motivation in proceeding against Leon's is to rid itself of an unprofitable lease. Leon's refers to previous proceedings by the landlord against Leon's in this regard. I do not think that this is a relevant consideration. If the law and the facts support the landlord's claim to termination of the lease, the basis of its motivation is irrelevant.
75I turn now to what may be considered to be the composite subject of the gravity of the breach, the damage caused by the breach, and (turning from specific factors to the general basis of relief from forfeiture) whether "the stated result" of the object of the covenant against subletting without the consent of the landlord "can effectively be attained when the matter comes before the court". It seems to me that these three matters overlap each other in some substantial respects.
76On one level, it can be said that the breach is serious because the landlord is saddled with a subtenant who has occupied and is now occupying the premises without the landlord's consent.
77I think, however, that in addressing this question we should go deeper. The covenant in question enables the lessee to sublet with the leave of the landlord and that the leave "shall not be arbitrarily or unreasonably withheld". Further, in cases where the landlord does not grant leave, the tenant may apply to the court under s. 23(2) of the Commercial Tenancies Act for an order determining that the leave is unreasonably withheld and permitting the sublease to be made.
78On the evidence, it appears that the landlord would not have granted its consent to the sublease and so the question is: what would a court have decided on an application under s. 23(2)? If the answer is that the court would have permitted the sublease to be made, then it could be said that the gravity of, or the damage caused by, the breach is not serious.
79It may be that this line of inquiry ending with this conclusion does not literally satisfy the requirements of "obtaining" before the court the "stated result" but I think that it serves the same purpose.
80Following on from this, the question is what would the result of a s. 23(2) application have been in this case?
81The landlord's reason why it would not consent to the sublease to Marca is its position that Marca was in breach of its repair obligations under the sublease of 2944 Danforth Avenue. There is dispute in the evidence with respect to the nature and extent of the alleged disrepair. Marca submits that when it vacated the premises at 2944 Danforth Avenue they were in better condition than when the sublease began and, further, the landlord never raised any concerns about the state of disrepair before May 2000.
82Further, there is evidence the landlord could not have had any real concern with Marca as an occupier of its building because the landlord's representative had said that if Marca were interested in moving back to 2944 Danforth Avenue, maybe a deal with it could be made.
83Related to the foregoing, the landlord did, in fact, ultimately enter into a direct lease of 2944 Danforth Avenue with the school board, the occupier of the premises when a substantial part of the alleged non-repair occurred. Further, no claim for non-repair was ultimately made against Leon's and Marca. This, it is submitted, shows that the alleged non-repair could not have been significant.
84With respect with the foregoing, the landlord's position is that it was obliged, because of economic pressure, to make a deal with the school board and this involved the landlord assuming part of the cost of the repairs and not asserting a claim against Leon's and Marca because this would have enabled them to pursue a claim for indemnity against the school board.
85Marca submits, further, that the alleged repairs relate to capital improvements respecting the elevators, electrical and mechanical features of the building, and the roof and walls, all of which are the landlord's obligation.
86Leon's advances the further position that the disrepair at 2944 Danforth Avenue should not be a relevant consideration because it does not relate to the particular premises in question in this proceeding, those at 2902-2904 Danforth Avenue (albeit that both properties were covered by the same lease) and, further, that their repair obligations had been "passed on" to the school board, the subtenant. I do not think that it is necessarily an answer to the landlord's concerns with respect to the suitability of Marca as a tenant that the non-repair occurred at 2944 Danforth Avenue and not at the leased premises. It is open to a court to conclude that it has some bearing on the suitability on Marca as a subtenant of the premises in question.
87Further, assuming it to be the case that all of the alleged non-repair occurred while the school board was the sole occupant of 2944 Danforth Avenue, this does not absolve Marca from responsibility respecting the non-repair. The 1992 sublease between Marca and the school board included a covenant by the board to repair and the sublease also provided that the board covenanted to indemnify and save Marca harmless "from all claims, actions, costs and losses . . . arising during the Term". The foregoing position is reflected in a letter from Leon's to Marca dated August 24, 2000 which forwarded the landlord's specific request for repairs at 2944 Danforth Avenue and reminded Marca that its obligations under the sublease included repair, replacement and indemnification and requested Marca to "make the appropriate repairs consistent with your obligations under your lease".
88The foregoing respecting the nature, extent, and responsibility for the alleged non-repair cannot be properly determined on the materials before the court.
89With respect to the governing principles relating to an application under s. 23(2), I refer to Federal Business Development Bank v. Starr (1988), 1988 56 (SCC), 65 O.R. (2d) 793, 52 D.L.R. (4th) 767 (C.A.) in which this court affirmed [in part] a judgment of Donnelly J. reported at (1986), 1986 2534 (ON SC), 55 O.R. (2d) 65, 28 D.L.R. (4th) 582 (H.C.J.) in which he said, at pp. 72-73 O.R.:
These cases illustrate that the test of a landlord's reasonableness extends beyond and is moving away from the restrictive two-part test based on the personality of the proposed assignee or the intended use of the premises as established in the early English authorities.
The more liberal approach, close to the "reasonable man" standard, is to consider the surrounding circumstances, the commercial realities of the market-place and the economic impact of an assignment on the landlord . . .
90The cases reviewed by Donnelly J. show that the onus of demonstrating that a landlord's refusal is unreasonable rests upon the applicant for an order under s. 23(2).
91With reference to the foregoing, I feel obliged to refer to the following statement of the application judge, which was made in the context of his consideration of whether Leon's had breached the lease. "In this case, there is no evidence that Marca was an undesirable tenant, nor is there any reason given by the landlord for refusing to consent to the sublease." With respect, quite apart from the consideration that the landlord was not asked for its consent, I do not read the record the same way. What the findings on the evidence should be is, of course, another matter.
92The onus on Leon's to satisfy the court that it is entitled to relief from forfeiture is a particularly heavy one. With respect to the s. 23(2) aspect, the onus, as I have just noted, would have been on Leon's. This is reinforced by the burden on Leon's now to satisfy the court it is entitled to relief from forfeiture. It must be kept in mind that the cause of this proceeding is Leon's failure to seek consent at the proper time. I do not think that any doubts on the significance of evidence and the weight to be assigned to relevant factors should be resolved in its favour.
93In the foregoing, I have referred to certain key factual issues relating to relief from forfeiture that I am unable to resolve on the state of record before the court. I recognize that there may be other relevant factual issues. After the facts have been found, the decision whether or not to grant relief from forfeiture is a matter of judicial discretion to be exercised within the framework of the relevant equitable principles. I have set forth the major principles. I recognize, further, the possibility that after all the facts have been found other principles may be seen to be relevant to the exercise of the discretion.
Disposition
94For the foregoing reasons, I would: (1) allow the appeal, set aside the judgment below, and in its place grant a declaration that the lease dated October 13, 1970 with respect to the premises at 2902/2904 Danforth Avenue, Toronto, has been terminated and that the appellant is entitled to possession of these premises, unless the respondent Leon's Furniture Limited obtains an order granting it relief from forfeiture; (2) direct that Leon's Furniture Limited's claim for relief from forfeiture proceed to trial in the Superior Court of Justice and that its application be adjourned to the Superior Court for this purpose; (3) direct that Marca School of Hair Design Inc.'s motion for leave under s. 21 of the Commercial Tenancies Act also be determined in the Superior Court of Justice, should Leon's Furniture Limited claim for relief for forfeiture be dismissed; (4) direct that any of the parties may make a motion in the Superior Court of Justice for an order directing what steps, if any, ought to be taken respecting pleadings and discovery before trial; and (5) reserve to the trial judge the determination of the costs of the original application, of this appeal, and of the trial.
Order accordingly.
