Court of Appeal for Ontario

Date: 2022-08-15 Docket: C69692

Before: Doherty, Harvison Young and George JJ.A.

Between: Hudson’s Bay Company ULC Compagnie de la Baie D’Hudson SRI, Plaintiff (Appellant/Respondent to Cross-Appeal)

And: Oxford Properties Retail Holdings II Inc., CPPIB Upper Canada Mall Inc., Omers Realty Management Corporation, Montez Hillcrest Inc., Hillcrest Holdings Inc., Yorkdale Shopping Centre Holdings Inc., Square One Property Corporation, Scarborough Town Centre Holdings Inc., Oxford Properties Retail Holdings Inc. and Kingsway Garden Inc., Defendants (Respondents/Cross-Appellants)

Counsel: Jonathan C. Lisus and Carter Liebzeit, for the appellant/respondent Deborah E. Palter and Alexander Soutter, for the respondents/cross-appellants

Heard: April 19, 2022

On appeal from the decision of Justice C. Gilmore of the Superior Court of Justice, released June 24, 2021, and reported at 2021 ONSC 4515 and 2021 ONSC 4998.

Doherty J.A.:

I. Overview

[1] The arrival of COVID-19 in March 2020 changed everything. The pandemic and the drastic public health and safety measures taken by governments have affected virtually every facet of life in Canada.

[2] This appeal arises out of the impact on the retail sales sector of the pandemic and the steps taken to address the health risks posed by the pandemic. Retail stores were forced to close in March 2020. In the ensuing 15 months, retailers were subject to repeated lockdowns and re-openings on stringent restricted terms. For many retailers, sales were reduced to a fraction of pre-COVID-19 levels. However, costs associated with operating retail businesses continued. Rent payments made up a significant part of those ongoing costs.

[3] On this appeal and cross-appeal, the court is asked to determine the extent to which the remedy of relief from forfeiture, and in particular s. 20 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7 (“CTA”), can be used to spread the economic pain arising out of the pandemic between retail store tenants and their landlords.

[4] Counsel for the appellant/tenant submits that the very broad language of s. 20(1) contemplates a wide range of remedies, including rent reductions, abatements and deferrals. On this argument, s. 20 gives the court broad powers to override the terms of a lease, if justice so requires. Counsel contends that, in the unprecedented circumstances brought on by the pandemic, an abatement of the rent owing under the lease for a long-time “model tenant” like the appellant, is a “fit” and “just” remedy under s. 20 of the CTA.

[5] The respondent/landlord takes a different position. Counsel submits that relief from forfeiture was not intended to permit a court to rewrite the commercial bargain made by the parties to take into account unforeseen events that have had a negative impact on the tenant’s business. Counsel contends that relief from forfeiture is premised on preserving the contractual relationship created by the parties, not changing that relationship. Relief from forfeiture serves as a shield, in limited circumstances, to protect a tenant from termination of the lease, despite the tenant’s breach of the lease. That protection does not, however, extend to fashioning a new lease on more favourable terms to the tenant. Counsel submits the motion judge correctly held that s. 20 of the CTA does not contemplate orders abating or reducing the rent agreed upon in the lease.

[6] Alternatively, counsel for the landlord submits that, if abatement is available as part of relief from forfeiture pursuant s. 20 of the CTA, abatement is not a proper remedy in this case. Counsel submits that the tenant made a business decision to stop paying rent under the lease as part of a strategy to negotiate a lower rent during the pandemic. The landlord submits that this deliberate breach of the lease disentitles the tenant to any relief under s. 20 that would reduce the tenant’s obligations under the lease.

[7] On the cross-appeal, the landlord submits the motion judge erred in holding that relief from forfeiture under s. 20 permitted long-term deferrals of rent payments due under the lease. In addition, the landlord contends that s. 20 offers no authority for an order providing that interest on rent arrears should be fixed at a rate lower than the rate negotiated in the lease. The landlord further argues that, even if s. 20 allows for the substitution of a lower interest rate, there is no justification in this case for any departure from the interest rate negotiated by the parties to the lease.

[8] In response to the cross-appeal, the tenant submits that the language of s. 20 of the CTA does contemplate deferrals of the tenant’s rent obligation. Some deferral of the obligation to pay rent is virtually inevitable whenever the tenant has failed to pay rent and is granted relief from forfeiture. Nothing in s. 20 limits the length or quantum of any deferral of rent payments granted under the section.

[9] In response to the argument that the motion judge could not order interest on the arrears at a rate less than the rate provided for in the lease, the tenant argues that the powers under s. 20 are sufficiently broad to allow the motion judge to adjust the rate downward where appropriate in the circumstances. The tenant submits that the adjustment of interest rates is “a useful tool to craft a fair and just order that suits the facts”.

II. Facts

[10] The appellant, Hudson’s Bay Company ULC (“HBC”), Canada’s oldest company, operates 120 retail stores across Canada. Oxford Properties Retail Holdings II Inc. (“Oxford”), is a major property investor, developer and manager. It owns property across Canada. HBC leases properties from Oxford or its affiliates for nine stores at locations across Canada. This appeal involves the HBC store at Hillcrest Mall in Richmond Hill, Ontario. That mall is owned by Montez Hillcrest Inc. and Hillcrest Holdings, affiliates of Oxford. In the course of these reasons, I will refer to the landlord as “Oxford” or “Hillcrest”.

[11] HBC has been a tenant at Hillcrest Mall since 1978 and is the anchor store in the mall. HBC always paid its rent in full and on time until April 2020. HBC was a model tenant before April 2020.

[12] In late March 2020, the COVID-19 pandemic struck and forced the government to close all non-essential businesses. This included HBC and Hillcrest Mall. HBC remained closed until May 2020.

[13] Between March 2020 and June 2021, when the motion giving rise to this appeal was heard, HBC and Hillcrest Mall went through a series of government imposed lockdowns, followed by partial, but significantly restricted re-openings, followed by yet another lockdown.

[14] The serious negative economic impact on HBC caused by the lockdowns and restrictions placed on HBC and Hillcrest Mall is beyond doubt. By June 2021, there were 16 vacancies in the Hillcrest Mall. Ten had occurred after the COVID-19-related lockdowns and restrictions began. Foot traffic within the mall was substantially reduced. The food court no longer served as a public gathering place. HBC sales between March 2020 and April 2021 were down 60.5 percent compared to sales during the period from March 2019 to February 2020.

[15] The federal government instituted programs to assist retailers with rent payments during COVID-19. HBC did not qualify for those programs because of its revenues and the quantum of the rent payments involved. HBC did get some assistance from the federal government by way of a wage subsidy.

III. The Proceedings

[16] The first lockdown occurred in the latter half of March 2020. HBC unilaterally, and without any notice to Oxford, withheld payment of rent beginning with the rent payable for April 2020. There is no evidence that HBC was financially unable to pay the rent had it chosen to do so. After HBC stopped paying rent, it attempted to negotiate a compromise with Oxford that would take into account the effects of the pandemic. Those attempts failed.

[17] In September 2020, six months after HBC stopped paying rent, HBC gave notice to Hillcrest that Hillcrest was in breach of the terms of the lease. That lease required Hillcrest to operate the mall in accordance with “first-class shopping centre standards”. HBC alleged that Hillcrest was not doing so and provided certain specifics, including the contention that Hillcrest had failed to make necessary health and safety upgrades in the property in response to the pandemic. HBC continued to withhold rent owing under the lease.

[18] In late September 2020, Oxford initiated proceedings in Quebec against HBC for non-payment of rent owing in respect of two stores operated in Quebec.

[19] In October 2020, HBC commenced this action seeking a declaration that Oxford was in breach of the lease by failing to meet “first-class shopping centre standards”. HBC sought a further declaration that it was not required to pay rent unless and until Oxford remedied its breaches of the lease. Finally, HBC claimed damages for Oxford’s breaches of the lease.

[20] Oxford responded to the HBC action by serving HBC with a Notice of Intention to forfeit the HBC lease on the property in the Hillcrest Mall. In seeking the forfeiture, Oxford relied on HBC’s failure to pay rent for some seven months. The arrears totalled over $1.3 million.

[21] On October 29, 2020, the late Justice G. Hainey granted an interim injunction enjoining Hillcrest from terminating the HBC lease, or interfering with HBC’s quiet enjoyment of the leased premises. The order was made pending the outcome of the proceedings and was specifically made subject to any further order, and without prejudice to the rights of the parties and the ultimate determination of all of the claims on the merits.

[22] Justice Hainey ordered, as a term of granting interim relief, that HBC immediately pay 50 percent of the unpaid rent arrears that accrued since April 2020 ($659,394.83). He also ordered that, on a go forward basis, HBC should pay 50 percent of the monthly rent as it came due.

[23] In November 2020, Hainey J. made a similar order in respect of an HBC store located in a different mall and owned by a different Oxford affiliate. In making that order, Hainey J. alluded to the earlier order he had made in respect of the store at the Hillcrest Mall. He said:

At that time, I concluded that equity requires that there should be a sharing of the effects of the COVID-19 pandemic.

[24] There was some discussion during this appeal of the statutory basis for the interim order made by Justice Hainey. The appellant submits Hainey J. invoked the discretionary power in s. 20 of the CTA. Hainey J. gave no reasons for his interim order and the order did not identify the statutory source on which it was based. The interlocutory and interim nature of the order suggest it was made under s. 101 of the Courts of Justice Act, R.S.O. 1990, c. 43 (“CJA”).

[25] Ultimately, it does not matter, for the purposes of this appeal, whether Hainey J. purported to resort to s. 20 of the CTA or not. He had the authority to make the order he did under s. 101 of the CJA. He also clearly did not intend to determine any legal issues relevant to the ultimate merits as between the parties. The claim advanced by HBC based on the alleged breaches of the lease remained alive as did Oxford’s claim for forfeiture of the lease based on non-payment of the rent. The terms of the order made by Hainey J. do not, in my view, assist one way or the other in determining the proper scope of the remedial powers in s. 20 of the CTA.

[26] HBC complied with the interim order of Hainey J. On June 8, 2021, the motion for relief from forfeiture was heard by the motion judge on its merits.

IV. The Motion Judge’s Reasons

[27] In reasons, released June 24, 2021, the motion judge found:

• Oxford was not in breach of any of the terms of the lease (Reasons, paras. 33, 49-52);
• HBC was in default for non-payment of rent, but in the circumstances was entitled to relief from forfeiture pursuant to s. 20 of the CTA (Reasons, paras. 21, 25, 53-58);
• the remedial power in s. 20 did not extend to orders abating or reducing the rent agreed upon by the parties in the lease (Reasons, paras. 48, 53); and
• s. 20 did, however, extend to orders deferring payment on rent owing (Reasons, paras. 54-58).

[28] In granting a deferral of part of HBC’s rent obligations, the motion judge fixed a schedule for payments intended to reflect the anticipated, gradual, and eventual unrestricted re-opening of retail store outlets. The order dated June 24, 2021 provided for the following schedule of payments:

• Hainey J. had ordered HBC to pay 50 percent of the rent owing for the period April – October 2020. In her order, the motion judge ordered the remaining 50 percent paid forthwith;
• Hainey J. had ordered HBC to pay 50 percent of the monthly rent on a go forward basis from October 2020. In her order, the motion judge required that the remaining 50 percent of the rent owed for that period (November 2020 – June 2021) be paid by January 31, 2022;
• the motion judge ordered that beginning in July 2021 (the month following the motion), HBC was to pay 65 percent of the rent owing under the lease; in August 2021 the payment was increased to 70 percent; in September 2021 to 75 percent; and in October 2021 to 90 percent. Full payments on the rent were to resume in November 2021.
• the amounts that were not required to be paid between July 1 and November 1, 2021 became payable on March 31, 2022; and
• all arrears of rent attracted interest at TD prime rate plus 2 percent.

[29] As can be seen from the schedule, HBC was required to begin making the full monthly rent payments required under the lease by November 2021, almost five months after the motion judge’s order. All of the arrears had to be paid by March 2022, some nine months after the motion judge’s order.

V. The Appeal

[30] The motion judge found that Oxford was not in breach of the lease. Specifically, she found that Oxford had not breached either its covenant to provide HBC with quiet enjoyment, or its obligation to operate the mall “in accordance with first-class shopping centre standards”. The motion judge rejected HBC’s argument that Oxford’s compliance with government-imposed COVID-19 restrictions in the mall could be relied on to establish that Oxford had breached the terms of the lease.

[31] HBC has not appealed from the motion judge’s finding that Oxford did not breach the lease. Consequently, those cases which grant a rent abatement in response to a landlord’s ongoing breach of the terms of a lease have no application here: e.g. see Bosak et al. v. 3930441 Canada Inc. et al., 2014 ONSC 1138, at paras. 69-74.

[32] Under the terms of the lease, HBC was obliged to pay all rent due without deduction or setoff. That obligation was independent of any obligation owed by Hillcrest to HBC. HBC stopped paying rent in April 2020. By the time the motion was heard in June 2021, HBC had not been in compliance with the rent obligations under the lease for 14 months. Subject to HBC successfully obtaining an order under s. 20 of the CTA, Oxford was entitled, by virtue of HBC’s refusal to pay rent owing under the lease, to terminate the lease and take possession of the leased premises.

[33] HBC sought relief from forfeiture under s. 20 of the CTA. The section reads:

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 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 s. 19 and 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. [1]

[34] Relief from forfeiture is a venerable remedy with a history reaching back over 300 years: Williams & Rhodes: Canadian Law of Landlord and Tenant, (6th ed.) Carswell, s. 12:56-12:58. An order granting relief from forfeiture allows a tenant who has breached the lease to escape termination of the lease, even though the terms of the lease provided for termination upon the tenant’s breach. Relief under s. 20 of the CTA only becomes necessary after the landlord has established the tenant’s breach and its right to forfeiture of the lease and possession of the property as a consequence of that breach: The Second Cup Ltd. v. 2410077 Ontario Ltd., 2020 ONSC 3684; 1397633 Ontario Inc. v. Oxford Properties Group Inc., 2003 Carswell Ont. 1291 (OSC).

[35] A tenant seeking relief from forfeiture must convince the court that it would be inequitable in the circumstances to permit the landlord to exercise its rights under the lease, terminate the lease and take possession of the property. Not surprisingly, relief from forfeiture is granted sparingly: Ontario (Attorney General) v. 8477 Darlington Crescent, 2011 ONCA 363, at 87; Hunt’s Transport Limited v. Eagle Street Industrial G.P. Inc., 2020 ONSC 5768, at 63.

[36] Relief from forfeiture is a discretionary equitable remedy which responds to the circumstances of the individual case. The case law has identified a variety of criteria to be taken into account in determining whether to grant relief from forfeiture in various contexts: e.g., see Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Company, [1994] 2 S.C.R. 490, at 504; Liscumb v. Provenzano (1985), 51 O.R. (2d) 129, at 137 (S.C.), aff’d, 55 O.R. (2d) 404 (C.A.); The Second Cup Ltd. v. 2410077 Ontario Ltd., at 56-59. The relevant factors can be grouped into two broad categories. The first concerns the conduct of the parties and the second, the impact on the parties of either granting or refusing the request for relief from forfeiture.

[37] Given the equitable roots of relief from forfeiture, it is not surprising that the conduct of the parties will weigh heavily in the balance in the s. 20 analysis. For example, a tenant’s deliberate refusal to pay its rent obligations may well preclude any relief from forfeiture: e.g., 1383421 Ontario Inc. v. Ole Miss Place Inc. (2003), 67 O.R. (3d) 161, at 80; Ross v. Eaton Co. (1993), 11 O.R. (3d), 115-125 (C.A.).

[38] Relief under s. 20 is also available when the landlord’s interests under the lease can be fully vindicated without resort to forfeiture. If the bargain as reflected in the lease can effectively be maintained without resort to forfeiture, the court will grant relief under s. 20: A.G. (Ontario) v. 8477 Darlington Crescent, at 87; 1497777 Ontario Inc. v. Leon’s Furniture Ltd., [2003] O.J. No. 3708, 67 O.R. (3d) 206, at 69.

[39] Oxford and HBC agree that the motion judge correctly ordered relief from forfeiture under s. 20. They disagree as to the proper scope of that order. HBC submits the motion judge did not go far enough and should have abated or reduced the rent owing by 50 percent for some indefinite time while the economic effects of COVID-19 continued. Oxford maintains the motion judge went too far in the relief she granted. Counsel submits HBC was in a position to pay the amounts owing under the lease, including interest, forthwith and the motion judge should have ordered payment within 10 days.

[40] The different positions taken by HBC and Oxford reflect their different views as to the scope of the relief provided for in s. 20. HBC relies heavily on the broad language in the section, stressing the phrases “as the court thinks fit” and “the court considers just”. That language clearly suggests a broad discretion.

[41] The discretion in s. 20 must, however, be exercised in the context of providing the remedy contemplated by s. 20. Section 20 provides for a specific and narrow remedy. The tenant may gain relief from forfeiture of the lease. Any terms granted as part of the order are granted to make the relief from forfeiture an effective remedy.

[42] Section 20 allows the court to intervene and prevent the forfeiture of the lease, even though the landlord is entitled to forfeiture under the terms of the lease. In my view, relief from forfeiture does not contemplate a recalibration of existing rights and obligations under the lease on a go forward basis to reflect what the court sees as a fair arrangement in light of unforeseen developments. Nothing in s. 20 empowers the court to create what the court regards as a fair lease for the parties. Section 20(5) of the CTA specifically provides that when relief from forfeiture is granted the tenant holds the leased premises “according to the lease”.

[43] Section 20 aims to preserve the relationship between the parties as reflected in the lease. The broad discretion in s. 20 allows the court to impose terms that will bring and keep the tenant in compliance with the existing lease: see Clark Auto Body v. Integra Custom Collision Ltd., 2007 BCCA 24, at 30. To order that a tenant is not required to pay the agreed upon rent is not to grant relief from forfeiture of the lease, but is to grant relief from compliance with the terms of the lease. Nor does the abatement or reduction of the rent agreed upon in the lease preserve the lease. Instead, it alters a basic and fundamental term of the lease.

[44] HBC relies on s. 20(6) of the CTA to support its interpretation of the scope of the relief provided for in s. 20. Section 20(6) forecloses parties from contracting out of s. 20.

[45] I agree with counsel for Oxford’s submission that s. 20(6) does not advance the appellant’s argument. Oxford does not suggest the parties did, or could, contract out of s. 20(1) under the terms of their lease. Oxford submits that s. 20(1) does not contemplate rent reductions or abatements as terms of an order granting relief from forfeiture. I agree.

[46] HBC also argues that the scope of the relief available under s. 20(1) is limited only by the specific limitations found in ss. 20 (7) and 20(8) of the CTA. I cannot accept this argument. The question for this court is not whether a rent reduction or abatement is exempt from the remedial reach of s. 20, but whether granting a rent reduction or abatement as a term of granting relief from forfeiture is consistent with the rationale underlying that remedy. As explained above, it is not.

[47] The parties referred the court to two decisions from British Columbia involving HBC stores and applications for relief from forfeiture. The first, Hudson’s Bay Company ULC v. Pension Fund Investment Ltd., 2020 BCSC 1959, involved an application for interim relief by HBC. HBC sought to regain possession of its store in a mall.

[48] The motion judge granted relief from forfeiture under the Law and Equity Act, R.S.B.C. 1996, c. 253. She granted relief for two months on the condition that HBC pay 50 percent of the rent owing to the landlord and the other 50 percent into the trust account of HBC’s counsel, to be held pending further order of the court. In making her order, the motion judge referred to several cases but did not ultimately determine whether rent could be reduced or abated as a term of granting relief from forfeiture. She did, however, indicate at para. 59:

Further, Hudson’s Bay understandably places great emphasis on the extraordinary circumstances that the parties, and particularly Hudson’s Bay, are facing arising from the pandemic. I agree that those are extraordinary circumstances. In my view, it would be unimaginable that the circumstances would not be a factor to be considered by the court in the exercise of its equitable jurisdiction.

[49] In the second case from British Columbia, Cherry Lane Shopping Centre Holdings v. Hudson’s Bay Company ULC, 2021 BCSC 1178, the landlord sought to remove HBC for non-payment of rent. The motion judge determined that, under the terms of the lease, HBC was obliged to pay the rent without abatement or suspension. Subject to an order granting relief from forfeiture, the landlord was entitled to forfeiture of the lease and possession of the lease premises.

[50] The motion judge concluded HBC should receive relief from forfeiture of the lease. She rejected the landlord’s argument that it was an invariable condition of relief from forfeiture that all rent owing be paid within a specified time. She said, at para. 83:

I do not accept that relief from forfeiture must always be granted on terms that outstanding and ongoing rent be paid. That would seem an excessive and unreasonable limitation on the exercise of the court’s equitable discretion. However, I do accept that such a condition is common. In my view, that is all the authorities establish.

[51] Although the motion judge granted HBC relief from forfeiture, she also decided that HBC should be required to pay all outstanding and ongoing rent as a condition of relief from forfeiture. In the motion judge’s view, there was nothing “inequitable” about holding HBC, a highly sophisticated commercial entity, to the bargain it had struck with the landlord.

[52] To the extent the British Columbia cases can be read as accepting that rent abatements or reductions can be ordered as a term of granting relief from forfeiture, I must, with respect, disagree. I accept that the impact of COVID-19 and the restrictions on retail businesses that followed can be taken into account when setting the terms of relief for forfeiture. For example, the problems associated with COVID-19 may dictate a term allowing the tenant some additional time to bring itself into compliance with the lease. I do not, however, accept that the economic impact of COVID-19 can be taken as a basis for fundamentally altering the remedy from one of relief from forfeiture to one imposing new terms in the lease.

[53] Finally, while it would appear that the British Columbia cases may accept that a rent abatement or reduction is available as a term of relief from forfeiture, I note that in neither case did the court grant a rent reduction or abatement. The facts of those cases are similar to the facts of this case.

[54] My analysis to this point is sufficient to dispose of HBC’s appeal. For the sake of completeness, I would, however, add that I agree with Oxford’s submission that adoption of the broad interpretation of s. 20 favoured by HBC would have negative consequences. Certainty is important in commercial relations, as is the autonomy of the parties to settle the terms governing their commercial relationship. HBC’s reading of the remedial powers in s. 20 potentially generates considerable uncertainty in the ongoing relationship between the landlord and tenant. HBC’s interpretation of s. 20 would inevitably encourage litigation as a means of redefining a tenant’s obligations under a lease in response to unforeseen changed economic circumstances: see Clark Auto Body Ltd. v. Integra Custom Collision Ltd., 2007 BCCA 24, at paras. 27-29.

[55] I would dismiss the appeal.

VI. The Cross-Appeal

(i) Did the motion judge err in deferring rent payments as a term of granting relief from forfeiture?

[56] I have summarized the terms of the order the motion judge made under s. 20 of the CTA above (see para. 28). Those terms deferred part of HBC’s rental obligation over several months. The deferrals applied to rent arrears owing and the payment of rents going forward. Rental arrears did not have to be fully paid until about nine months after the motion judge’s order. Full regular monthly rental payments were to begin some four months after the motion judge’s order.

[57] I accept that a judge making an order under s. 20 of the CTA which includes a term requiring the tenant to do something, e.g., pay rent, must give the tenant a reasonable time to comply with that term. Otherwise, the relief would be illusory. The time needed to comply with the terms of the order will depend on the entirety of the circumstances, particularly the nature of the term with which the tenant must comply: e.g., see Tauro v. Yu, 2018 ONSC 7319 (Div. Ct.). If the motion judge concludes that the tenant cannot bring itself into compliance with the lease within a reasonable, specified time period, relief from forfeiture will not be an appropriate remedy.

[58] The schedule of payments fixed by the motion judge for payment of rent and arrears did not have anything to do with HBC’s ability to meet its rent obligations under the lease. There was no evidence that HBC could not pay the rent it owed.

[59] The payment schedule fixed by the motion judge was not intended to give HBC time to pay the rent arrears, but was rather intended to mitigate the economic harm suffered by HBC as a result of COVID-19 and the restrictions on the retail sector that followed. The motion judge gave HBC a relatively brief and partial respite from the full weight of its rent obligations, not because HBC could not carry that weight, but because the circumstances surrounding the pandemic made it unfair, in the motion judge’s view, to require HBC to carry that burden without the help of the landlord.

[60] For the reasons set out on the main appeal, I do not accept that the terms on which relief from forfeiture is granted extend beyond terms necessary to give meaningful effect to the order granting relief from forfeiture to terms intended to do economic justice in the broader sense between the tenant and the landlord. The motion judge erred in deferring HBC’s rent obligations for reasons unrelated to HBC’s ability to bring itself into compliance with the terms of the lease relating to rent payment. The length of any deferral should have reflected the time needed by HBC to bring itself into compliance with the lease.

(ii) Did the motion judge err in ordering interest on the arrears of the rent owed at a rate less than the amount agreed upon in the lease?

[61] Under the terms of the lease, HBC was required to pay interest on arrears of rent at the rate of TD prime rate plus 4%. In her order, the motion judge set the rate at TD prime rate plus 2%. She made no reference to interest in her reasons for decision. In her costs decision, the motion judge alluded to the change she had made in the interest rate indicating that in her view, interest rate was not “a fundamental term of the lease”.

[62] HBC did not argue before the motion judge that she should reduce the interest rate payable on rent arrears as a term of granting HBC relief from forfeiture. It is unclear to me how reducing the interest rate agreed upon by HBC and Oxford could be seen as preserving the relationship between them as described in the lease. Changing the interest rate on arrears owing on the rent as a term of granting relief from forfeiture, does not strike me as qualitatively different than changing the monthly amount owing on the rent as a term of granting relief from forfeiture.

[63] In any event, in the circumstances of this case there is no justification for varying the interest rate agreed upon by the parties in the lease. HBC and Oxford are sophisticated commercial entities. HBC obviously knew the interest it had agreed upon in the lease. When HBC decided to stop paying rent and use its cash for other things, HBC presumably took into account the interest it had agreed to pay on rent arrears. I see no reason why, as a term of granting HBC relief from forfeiture, it should be provided the added advantage of relief from the payment of interest at the rate it had agreed upon in the lease.

Conclusion

[64] HBC has made all of the payments required in the order of the motion judge. As of the hearing of the appeal, there were no arrears owing and rent was being paid as agreed upon in the lease. There is no need to vary the payment schedule fixed by the motion judge.

[65] I would dismiss the appeal.

[66] I would allow the cross-appeal, vary the interest on rent arrears from TD prime plus 2% to TD prime plus 4%. I assume the parties can calculate the amount owing to Oxford in light of this variation of the order made by the motion judge.

[67] Oxford has been successful on both the appeal and the cross-appeal. In keeping with counsel’s submissions, I would order costs of the appeal to Oxford in the amount of $30,000, inclusive of relevant taxes and disbursements.

Released: August 15, 2022 Doherty J.A.

I agree. Harvison Young J.A.

I agree. J. George J.A.

[1] Relief from forfeiture is also potentially available under s. 98 of the CJA. It does not appear that the remedy under s. 98 is broader than the remedy under s. 20 of the CTA. In any event, the appellant relies only on s. 20.