1212763 Ontario Limited v. Bonjour Café, 2014 ONSC 123

CITATION: 1212763 Ontario Limited v. Bonjour Café, Alikhani 2014 ONSC 123

DIVISIONAL COURT FILE NO.: 98/12

DATE: 20140107

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

KITELEY, WHALEN AND SACHS JJ.

BETWEEN:

1212763 ONTARIO LIMITED Plaintiff (Appellant)

– and –

BONJOUR CAFÉ, MEHDI ALIKHANI, MAHNAZ GOLCHIN, ALAUDIN VISRAM, MUMTAZ VISRAM, 1312215 ONTARIO INC., ALBERT C. K. AU (also known as CHUN-KEUNG AU), MAN SIK KIM, JEONG RAN PARK, MI KYUNG LEE, CAFÉ EBENZER INC., IN-PYO HONG, YINGJI INTERNATIONAL (CANADA) CORP., LIU LIHONG, XIAO YAN LI and CHUN MING LI Defendants (Respondents)

COUNSEL:

Howard J. Wolch, for the Plaintiff (Appellant)

Mark A. Ross, for the Defendants (Respondents), Café Ebenezer Inc. and In-Pyo Hong

HEARD at Toronto: January 6, 2014

KITELEY J. (ORALLY)

[1] This is an appeal from the judgment made by Grace J. dated February 3, 2012 in which he granted judgment against the defendants 1312215 Ontario Inc., Albert C. K. Au, Café Ebenezer Inc., and In-Pyo Hong in the amount of $13,934.27, together with pre-judgment interest in the amount of $3,721.02 for a total of $17,655.29 and costs.

[2] During the three day trial, Grace J. held that successive indemnifiers were liable to the landlord for rent when the tenancy of the final tenant was terminated. The trial judge concluded that the indemnities required payment to the end of the lease, namely, February 28, 2006. The trial judge held that the indemnifiers were not liable for the period March 1, 2006 to February 2009 which represented the period of the extension of the lease at increased rent.

[3] In the case of 131 and Au, the trial judge found that the indemnity did not extend beyond February 2006 because it contemplated future assignments but not an extension.

[4] In the case of Café Ebenezer and In-Pyo Hong, he found that the indemnity did extend beyond February 2006 and included the period of the extension of the lease. However, when the lease was extended, it was amended in a key respect, namely, an increase in base rent. The trial judge concluded that the higher cost exposed the indemnifier to increased risk and consequently, did not bind them. [Pax Management Ltd. v. Canadian Imperial Bank of Commerce, [1992] 2 S.C.R. 998].

[5] The appellant argues that the trial judge erred in failing to find that Café Ebenezer and Mr. In-Pyo Hong were liable for a further three year period and asks that the judgment be amended to impose additional liability in the amount of $43,315.72.

[6] In March 2002, the appellant/landlord consented to an assignment of the lease to Café Ebenezer Inc. ("2002 Consent").

[7] Paragraph H on page 2 of that consent indicated that the landlord, the assignor and the assignee (Café Ebenezer) agreed that the assignee had an assignable option to extend the lease for a further term of 5 years on the same terms and conditions except that the rent would be negotiated by the landlord and tenant having regard to fair market rent for premises of similar size, use, repair and location. It also indicated what the minimum and the maximum rent would be and what the assignee was required to pay until the rent for the extension term was determined. The rent at issue in this appeal fell within the range of rent contemplated by paragraph H.

[8] Schedule A to the 2002 Consent is an indemnity agreement between the landlord and Mr. In-Pyo Hong, pursuant to which Mr. Hong agreed to indemnify the appellant against any and all liabilities and obligations incurred by Café Ebenezer. Paragraph 6 indicates that the indemnity shall remain in full force and effect until the end of the term of the lease and any extensions thereof notwithstanding any future assignments of the lease. Café Ebenezer never exercised the option referred to in Paragraph H of the 2002 Consent.

[9] In February 2003, the landlord consented to an assignment of the lease from Café Ebenezer to Yingji International ("2003 Consent") attached to which is an indemnity agreement at Schedule B in which Café Ebenezer and Mr. In-Pyo Hong became supplementary indemnifiers. Paragraph C of the recitals indicates that the term of the lease had been extended until February 28, 2006. The same paragraph 6 appears in Schedule B as had appeared in Schedule A to the 2002 Consent.

[10] The 2003 Consent and indemnity contain no reference to the option and there is no evidence that the option was ever assigned to Yingji International. As found by the trial judge at para. 17 of his reasons:

In 2003, Ebenezer assigned the lease without exercising its option to further extend the term. Furthermore, the assignable option was not referenced in any of the documents executed in connection with that transaction.

[11] The appellant takes the position that since the 2002 Consent referenced the possibility of an option to renew or extend the lease and referenced a range of rent that was actually charged to the defaulting tenant, it was within the reasonable contemplation of the parties that the respondents would expect to pay increased rent over the extension of the lease.

[12] We do not agree that the contents of the 2002 Consent and indemnification in relation to the option to renew or extend inform the reasonable expectations arising from the 2003 Consent and indemnification. By the time of the 2003 Consent and indemnification, the option had neither been exercised nor assigned. Thus, it could no longer have been a relevant consideration in the minds of the parties.

[13] We agree with the respondents that the trial judge did not err in his findings at paras. 43-57. He did not fundamentally misapprehend the evidence. He did not err in failing to consider language in the 2002 Consent in relation to a range of rent applicable to an option to renew that was neither exercised by the entity to which it was granted nor assigned in 2003.

[14] For these reasons, the appeal is dismissed.

COSTS

[15] I have endorsed the Appeal Book"The appeal is dismissed. Costs to the respondent in the amount of $5,634.72."

KITELEY J.

WHALEN J.

SACHS J.

Date of Reasons for Judgment: January 7, 2014

Date of Release: January 13, 2014

CITATION: 1212763 Ontario Limited v. Bonjour Café, Alikhani 2014 ONSC 123

DIVISIONAL COURT FILE NO.: 98/12

DATE: 20140107

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

KITELEY, WHALEN AND SACHS JJ.

BETWEEN:

1212763 ONTARIO LIMITED Plaintiff (Appellant)

– and –

BONJOUR CAFÉ, MEHDI ALIKHANI, MAHNAZ GOLCHIN, ALAUDIN VISRAM, MUMTAZ VISRAM, 1312215 ONTARIO INC., ALBERT C. K. AU (also known as CHUN-KEUNG AU), MAN SIK KIM, JEONG RAN PARK, MI KYUNG LEE, CAFÉ EBENZER INC., IN-PYO HONG, YINGJI INTERNATIONAL (CANADA) CORP., LIU LIHONG, XIAO YAN LI and CHUN MING LI Defendants (Respondents)

ORAL REASONS FOR JUDGMENT

KITELEY J.

Date of Reasons for Judgment: January 7, 2014

Date of Release: January 13, 2014