Case Summary

The applicant commercial tenant sought relief from forfeiture and a declaration of valid lease renewal after failing to exercise his option to renew in writing. The court dismissed the application, affirming the narrow scope of equitable relief for unexercised options and the importance of certainty in lease agreements. The court also found that promissory estoppel was not established. However, the court granted an order enjoining the landlord from evicting the tenant pending a planned appeal, finding a serious issue to be tried and irreparable harm to the tenant's business. interesting_citations_summary: > The decision reinforces the strict interpretation of lease renewal options, distinguishing them from ongoing covenants for which equitable relief from forfeiture is more readily available. It highlights the binding precedent of Ross v. T. Eaton Co. and the rationale from Delphi Management Corp. v. Dawson Properties regarding the need for clear, unambiguous exercise of options to ensure certainty for both landlords and tenants. The court also applies the three-part test for promissory estoppel from D.L.G. & Associates Ltd. v. Minto Properties Inc. and the RJR-MacDonald Inc. test for a stay pending appeal, finding a novel argument on appeal and irreparable harm to the tenant's business. final_judgement: > The application for relief from forfeiture and a declaration of valid lease renewal was dismissed. Costs were awarded to the respondent in the amount of $18,000. An order was granted enjoining the respondent from evicting the applicant until the conclusion of his intended appeal or until further order of the court. winning_degree_applicant: 3 winning_degree_respondent: 3 judge_bias_applicant: 0 judge_bias_respondent: 0 year: 2017 decision_number: 1985 file_number: "CV-17-570403" source: "https://www.canlii.org/en/on/onsc/doc/2017/2017onsc1985/2017onsc1985.html" cited_cases: legislation: - title: "Commercial Tenancies Act, R.S.O. 1990, c. L.7" url: "https://www.ontario.ca/laws/statute/90c07" - title: "Conveyancing Act 1919 No. 6" url: "https://legislation.nsw.gov.au/view/html/inforce/current/act-1919-006" case_law: - title: "Ross v. T. Eaton Co. (1992) , 11 O.R. (3d) 115" url: "https://www.canlii.org/en/on/onca/doc/1992/1992canlii7470/1992canlii7470.html" - title: "Beaver Fuels Management Ltd. Baker’s Dozen Holdings Corp ., [2006] O.J. No. 5743" url: "https://www.canlii.org/en/on/onsc/doc/2006/2006canlii41900/2006canlii41900.html" - title: "Delphi Management Corp. v. Dawson Properties, a division of 2182566 Ontario Inc., 2014 ONSC 354" url: "https://www.canlii.org/en/on/onsc/doc/2014/2014onsc354/2014onsc354.html" - title: "Dora v. 66 Degrees Inc. (2002), 30 R.P.R. (3d) 287 at para. 8" url: "https://www.canlii.org/en/on/onsc/doc/2002/2002canlii41800/2002canlii41800.html" - title: "D.L.G. & Associates Ltd. v. Minto Properties Inc. , 2015 ONCA 705" url: "https://www.canlii.org/en/on/onca/doc/2015/2015onca705/2015onca705.html" - title: "RJR-MacDonald Inc. v. Canada (Attorney General) , [1994] 1 S.C.R. 311" url: "https://www.canlii.org/en/ca/scc/doc/1994/1994canlii117/1994canlii117.html" keywords: - Commercial lease - Option to renew - Relief from forfeiture - Promissory estoppel - Stay pending appeal - Irreparable harm - Balance of convenience - Commercial Tenancies Act areas_of_law: - Real Estate Law - Contract Law - Civil Procedure --- # Court File and Parties **COURT FILE NO.:** CV-17-570403 **DATE:** 20170330 **SUPERIOR COURT OF JUSTICE - ONTARIO** **RE:** Vassilios Kassiouris **AND:** Tom Kalantzis **BEFORE:** Madam Justice J. T. Akbarali. **COUNSEL:** John Polyzogopoulos, for the Applicant Allan Dick, for the Respondent **HEARD:** March 27, 2017 --- # Endorsement ## Overview [1] The applicant, Mr. Kassiouris, is a commercial tenant who runs an auto body shop out of premises on Pape Avenue, in Toronto’s Greektown. The respondent, Mr. Kalantzis, is the landlord and owner of the property. [2] Mr. Kassiouris had an option to renew his lease for a five year term, but he failed to exercise the option in accordance with the terms of the lease. He brings this application seeking relief from forfeiture and for a declaration that he has validly exercised his option to renew. ## Background Facts [3] Mr. Kassiouris is currently 60 years old, and has been working as an auto body mechanic since 1970. He has a grade six education from Greece. He has limited spoken English. He does not read English at all. [4] Mr. Kassiouris bought an auto body business some ten years ago from Mr. Kalantzis’s previous tenant. At that time, Mr. Kassiouris leased the premises on Pape Avenue. The original lease provided for a five year term with an option to renew for a further five years. To exercise the option, Mr. Kassiouris was required to provide notice in writing at least six months before the end of the term. [5] Mr. Kassiouris did not provide notice in writing of his intent to renew. In 2011, Mr. Kalantzis’s lawyer, Mr. Pantazis, wrote to Mr. Kassiouris to advise that the landlord “may require that you vacate the premises on the expiry of the term…or may consider providing you with a new lease…” Mr. Pantazis also put Mr. Kassiouris on notice with respect to certain issues relating to the lease, including that Mr. Kassiouris was persistently late in making rental payments, cheques had been returned NSF, and some other issues relating to the ceiling and roof of the premises. [6] There is some debate as to whether Mr. Kassiouris received this letter. It was delivered to his then-stepson who, at that time, had a role in the business. However, the issues that had been raised in the letter were successfully addressed and a new lease was negotiated. I infer that the contents of the letter came to Mr. Kassiouris’s attention. [7] The new lease that the parties negotiated had a five year term with an option to renew for a further five years. To exercise the option to renew, Mr. Kassiouris had to meet the condition that he “has duly and regularly paid Rent and has observed and performed each and every material covenant and provision contained in this Lease…” The option also required that Mr. Kassiouris provide notice in writing six months before the end of the lease term, or by June 30, 2016. [8] Although Mr. Kassiouris had counsel during both lease negotiations, his evidence is that neither counsel told him he had to renew the lease term in writing. ## Problems during the Lease Term [9] During the currency of the 2011 lease, there were some problems. Mr. Kassiouris was sometimes late with the rent. Usually he would let Mr. Kalantzis know if the rent would be a few days late. There were at least six NSF cheques during the second lease. [10] There is a dispute over whether $2,400 in rent remains owing for November 2015. [11] At some point, Mr. Kassiouris incorporated a company through which to run the auto body business, but he did not arrange an assignment of the lease. However, Mr. Kalantzis knew about the company because he received rent cheques from it. He never asked about an assignment of the lease. [12] There is a dispute over HST. Mr. Kalantzis states that the lease requires Mr. Kassiouris to pay HST on his rent, but he did not. Mr. Kalantzis states that Mr. Kassiouris said he could not afford the HST. As a result, Mr. Kalantzis states that he has remitted the HST but has not collected it. Mr. Kassiouris states that Mr. Kalantzis never asked him to pay the HST. [13] Mr. Kalantzis also raises an insurance fraud in which Mr. Kassiouris’s business may have been involved. If there were fraudulent activities, they took place during a period of time when Mr. Kassiouris was unable to work due to health issues, and his stepson was running the business. ## The Option to Renew [14] Mr. Kalantzis went to Greece for a lengthy period – over a year – and returned in October 2016. While he was away, his son, Dimitri Kalantzis, managed the premises. Mr. Kassiouris deposes that “sometime in the summer of 2016” he had a conversation in Greek with Dimitri Kalantzis. He deposes that he said “Dimitri, let’s do something with the lease, eh?” Mr. Kassiouris states that Dimitri Kalantzis responded by saying “Those things with dad, now that he will come.” [15] Mr. Kassiouris states that his comment to Dimitri Kalantzis meant that the five year term of the lease was coming to an end, and he wanted to get together to discuss the rent he would pay for the next five years. Mr. Kassiouris states that he thought the lease renewal was automatic. He deposed that by his response, Dimitri Kalantzis was telling him the matter could wait until Mr. Kalantzis returned from Greece. [16] Mr. Kassiouris deposes he made at least a couple similar inquiries of Dimitri Kalantzis later in the summer and into September 2016 and each time, he was told to await Mr. Kalantzis’s return from Greece. [17] In cross-examination, Mr. Kassiouris testified that whenever he had seen Dimitri Kalantzis in the last year he would say that they had to do something in regard to the option for the renewal, and Dimitri Kalantzis would respond that he should deal with Mr. Kalantzis on those issues. Mr. Kassiouris did not depose to this evidence in his affidavit. I do not accept that Mr. Kassiouris had any such discussion with Dimitri Kalantzis before the summer of 2016. [18] Dimitri Kalantzis deposes that there was only one conversation, in August 2016, during which he told Mr. Kassiouris to deal with his father with respect to any issues regarding the lease. He deposes that he understood Mr. Kassiouris to mean either that he wanted to renew the lease or that there was an issue with the lease. I do not accept Dimitri Kalantzis’s evidence that he thought Mr. Kassiouris might have been raising a problem with the lease. Dimitri Kalantzis was managing the premises in his father’s absence. If there was a problem, he would have dealt with it. He knew Mr. Kassiouris wanted to talk about the next term of the lease. [19] Mr. Kalantzis returned from Greece in October 2016. Although he and Mr. Kassiouris dealt with each other a couple of times after his return with respect to the property, neither of them raised the lease. [20] On November 22, 2016, Mr. Pantazis wrote to Mr. Kassiouris and advised that the lease had not been renewed, and that the landlord required he vacate the premises at the end of the lease term, just over a month away, but invited Mr. Kassiouris to contact Mr. Kalantzis if he wanted to arrange a new lease. [21] New negotiations began. Mr. Kassiouris argues these were sham negotiations. I do not accept that argument. The evidence does not establish it. [22] No new lease was concluded. Mr. Kassiouris has been in possession of the property on a monthly basis since December 31, 2016 as an overholding tenant. ## The New Tenant [23] Mr. Kalantzis has signed a new lease with a new tenant, John Tsatsos, to commence on April 1, 2017. Mr. Tsatsos intends to operate an auto body shop out of the premises. [24] Mr. Tsatsos is known to Mr. Kassiouris because a few years ago, Mr. Tsatsos approached Mr. Kassiouris to discuss buying his business. Mr. Kassiouris said he would be willing to sell for $150,000, but he did not hear from Mr. Tsatsos after that. Mr. Kassiouris later learned that Mr. Tsatsos had been telling people that Mr. Kassiouris did not have a lease for the premises. Mr. Kassiouris phoned Mr. Tsatsos to tell him the rumour was wrong, and faxed him a copy of his lease to prove it. [25] Mr. Tsatsos may have used that lease to locate Mr. Kalantzis. An acquaintance arranged a discussion between Mr. Tsatsos and Mr. Kalantzis in which Mr. Tsatsos said he was interested in leasing the premises. Mr. Kalantzis deposes that he told Mr. Tsatsos the property was rented. However, he thereafter agreed to drive to Georgetown to meet Mr. Tsatsos for coffee. I infer the parties were discussing whether Mr. Tsatsos might be interested in leasing the property if it became available. [26] Mr. Kassiouris deposes that he purchased the auto body business ten years ago for $30,000 and has put approximately $82,000 into the business since then. He argues that Mr. Tsatsos, who was not interested in buying his business, has now in effect acquired it for nothing, because he will enjoy the business’s clientele, many of whom live in the neighbourhood and speak Greek, which is important for Mr. Kassiouris whose English is limited. Mr. Kassiouris deposes it is difficult to find a location for an auto body shop and even if he can relocate, he will lose much of his clientele because any new premises is unlikely to be nearby. [27] In multiple letters to Mr. Kassiouris, Mr. Pantazis has made clear that Mr. Kassiouris must leave behind any improvements that he made to the auto body shop that are fixtures, including new garage doors Mr. Kassiouris installed. [28] Mr. Kalantzis argues that Mr. Kassiouris has little in the way of receipts for the improvements he claims to have made. The receipts he has been able to produce date from 2006 and 2007, during the currency of the original lease. Thus, Mr. Kassiouris enjoyed the benefit of at least some of the improvements he made during the currency of the original lease. Since the original lease provided for an extension of the term to 2016, Mr. Kassiouris could not have reasonably expected that the improvements he made in 2006 and 2007 would accrue to his benefit in 2017 and beyond. [29] I note that Mr. Tsatsos is not a party to this application; no claim is made against him in this proceeding. Whatever Mr. Tsatsos may or may not have done is a different question than what Mr. Kalantzis has done. Mr. Kalantzis may well have wanted a new tenant in view of the complaints he has about Mr. Kassiouris as tenant. I cannot find that Mr. Kalantzis has colluded with Mr. Tsatsos to deprive Mr. Kassiouris of the premises. ## Issues and Position of the Parties [30] This application seeks relief from forfeiture. [31] Mr. Kassiouris argues that relief from forfeiture ought to be available in cases where a tenant has failed to exercise its option to renew. Mr. Kassiouris argues that an option to renew is a property right. He argues that the current, narrow jurisprudence (of which Ross v. T. Eaton Co. (1992) , 11 O.R. (3d) 115 at para. 30 is the leading case) that allows relief from failure to exercise an option is too narrow and is based on Australian authorities that do not support the approach adopted in Ontario. He argues that a thorough examination of the basis for the current approach is required. Mr. Kassiouris argues that the approach to relief from forfeiture set out by Perell J. in Beaver Fuels Management Ltd. Baker’s Dozen Holdings Corp ., [2006] O.J. No. 5743 at para. 43 should apply where a tenant seeks relief for failure to exercise its option to renew. [32] Mr. Kassiouris also argues that his position on relief from forfeiture is supported by the doctrine of promissory estoppel, which he argues applies here. [33] Mr. Kalantzis argues that the approach in the jurisprudence is well-settled, and Mr. Kassiouris is not entitled to relief from his failure to exercise his option unless he made diligent efforts to comply with the terms of the lease which are unavailing through no default of his own. He argues that the Australian law and academic authorship is premised on an Australian statute which makes relief from forfeiture available in the case of an option to renew a lease, and that no comparable provision is found in the Commercial Tenancies Act , R.S.O. 1990, c. L.7. He argues that estoppel is not made out. Finally, he argues that Mr. Kassiouris’s many breaches of the lease mean that the condition precedent to the exercise of the option is not made out, and he was never entitled to exercise the option in the first place. ## Analysis [34] The court’s jurisdiction to grant relief in equity for a tenant’s failure to deliver a notice of renewal of a lease is narrow. At least one condition necessary for a tenant to obtain relief is that the tenant has made diligent efforts to comply with the terms of the lease which are unavailing through no default of his or her own: Ross at para. 30 . [35] Ross relies on an article by an Australian academic, Andrew G. Lang, “Forfeiture of Interests in Land” (1984), 100 Law Q. Rev. 427, in which Lang argues in favour of the recognition of options to renew leases as property rights. Accordingly to Lang, the failure to perform a condition precedent to the exercise of an option to renew should attract equitable jurisdiction to grant relief against forfeiture. [36] However, as Mr. Kalantzis points out, the Australian jurisprudence and academic scholarship Mr. Kassiouris provides is of limited assistance because a New South Wales statute, the Conveyancing Act 1919 No. 6 , specifically makes relief from forfeiture available in the case of unexercised options. [37] Moreover, while I appreciate the logic of Mr. Kassiouris’s argument that options ought to be thought of as property, there is also good reason for the distinction in the availability of equitable relief for a breach of an ongoing covenant (like the payment of rent) and the failure to exercise an option to renew. In Delphi Management Corp. v. Dawson Properties, a division of 2182566 Ontario Inc., 2014 ONSC 354 , the court quoted with approval from the decision of Low J. in Dora v. 66 Degrees Inc. (2002), 30 R.P.R. (3d) 287 at para. 8 : > The case law is now settled that the exercise of an option must be done in a manner which is clear, explicit, unambiguous and unequivocal. … It is not sufficient that the parties engage in a dance with each other; it is necessary that the optionee declare his intentions. And it is not, in my view, a sufficient exercise of an option to express a will to exercise it on conditions. Such an expression is no commitment at all and leaves the optionor without the degree of certainty that option clauses with time limitations are designed to provide. In a lease where there is a requirement for written exercise of an option on or before the stipulated date prior to the end of the lease term, there is little if any doubt that the business rationale for those requirements is to provide both landlord and tenant with certainty as to their future rights and obligations vis-à-vis each other. It gives the landlord certainty that if the option is not exercised in time, he is free to re-market the premises to another prospective tenant or indeed to the existing one. It gives the tenant the certainty that if he exercises the option in conformity with the lease, the landlord is bound to him, and if he does not so exercise, that he is at liberty to negotiate a new lease with the landlord without obligation if those negotiations do not lead to a concluded agreement. To hold that a course of negotiation in the absence of a clear and unambiguous exercise of the option may constitute of waiver of compliance with the requirements of the option clause would effectively destroy the certainty that the parties bargained for. [38] I agree with Low J. The certainty provided by an option clause is crucial to allow landlords and tenants to organize their affairs. [39] Accordingly, I conclude that relief from forfeiture is not available in Ontario to relieve against a tenant’s failure to exercise an option to renew a lease. Rather, the only relief available is described in Ross , a decision that is binding upon me. [40] I cannot find that the narrow jurisdiction to relieve against Mr. Kassiouris’s failure to exercise his option to renew the lease exists in this case. Mr. Kassiouris did not make diligent efforts to comply with the terms of the lease. He could simply have renewed the lease [1] . It was his responsibility to be aware of its terms. Moreover, I have found that the contents of Mr. Pantazis’s 2011 letter came to his attention. He should have known what his obligation was based on the events in 2011, when he had to negotiate a new lease because he failed to renew the original one. [41] Nor do I find that estoppel applies in this situation. In D.L.G. & Associates Ltd. v. Minto Properties Inc. , 2015 ONCA 705 at para. 46 , the Court of Appeal reiterated the three elements of promissory estoppel: (i) a pre-existing legal relationship between the parties, (ii) a promise or assurance, express or implied, by one party to the other that it would not hold the other party to the performance of an obligation imposed under the pre-existing legal relationship, and (iii) reliance on the promise or assurance by the other party who acts in some way to change its position because of the promise or assurance. [42] The second element of the test is not made out. When Mr. Kassiouris spoke to Dimitri Kalantzis, he did not clearly seek to renew the lease. His statement “…let’s do something with the lease, eh?” is not a clear, explicit, unambiguous and unequivocal exercise of an option: Delphi at para. 32. And Dimitri Kalantzis’s statement, “Those things with dad, now that he will come” does not amount to a promise that Mr. Kalantzis would not hold Mr. Kassiouris to the terms governing the exercise of the option to renew. Moreover, it is not established on the evidence that this conversation between Mr. Kassiouris and Dimitri Kalantzis occurred before the expiry of the time within which the option had to be exercised. The most Mr. Kassiouris can say is that it occurred in the summer 2016. Dimitri Kalantzis’s evidence is that it occurred after he returned from a trip to Greece in August 2016. Mr. Kassiouris has not met his burden to prove that this conversation, which he argues creates an estoppel, occurred while he retained the right to exercise the option to renew. [43] Given my findings on these issues, it is not necessary to consider whether the breaches of lease alleged by Mr. Kalantzis affect Mr. Kassiouris’s entitlement to renew his lease. ## Disposition [44] The application is dismissed. ## Costs [45] The parties each delivered a bill of costs seeking partial indemnity costs should they be successful. Mr. Kassiouris argued that if the application was unsuccessful, he should not have to pay costs, pointing to Mr. Kalantzis’s collusion with Mr. Tsatsos. [46] I have not found that Mr. Kalantzis colluded with Mr. Tsatsos. I have not found any objectionable conduct on the part of Mr. Kalantzis, either in the lead-up to this application or in the conduct of the application. There is thus no reason to depart from the general rule that costs follow the event. [47] I have reviewed the bill of costs of the parties. While the amounts sought are similar, Mr. Kalantzis’s bill is $5,550 higher in its claim for fees, although it was Mr. Kassiouris who placed before me the novel argument, drawing largely on Australian legal sources, that relief from forfeiture should be available for failure to exercise an option. [48] Costs must reflect the principle of indemnity, and must be fair and reasonable. I conclude that costs in the amount of $18,000 inclusive of HST and disbursements are appropriate. Mr. Kassiouris owes this amount to Mr. Kalantzis. ## Stay/Order Enjoining Mr. Kalantzis from Evicting Mr. Kassiouris [49] In the event he is unsuccessful, Mr. Kassiouris seeks an order enjoining Mr. Kalantzis from evicting him pending the disposition of his planned appeal. He argues that the test applicable to stays applies to my decision to grant such an order. Mr. Kassiouris argues he will suffer irreparable harm if the order is not granted because he will lose the premises, which is unique in view of Mr. Kassiouris’s business. He argues that his employees will be out of work. He argues that Mr. Kalantzis will continue to receive rent and so will suffer no prejudice. [50] Mr. Kalantzis argues that Mr. Kassiouris in fact seeks a stay. He argues that Mr. Kassiouris’s loss is quantifiable, because there is evidence as to his income. He argues that he will suffer irreparable harm if a stay is granted because he may lose his incoming tenant. [51] In my view an order enjoining Mr. Kalantzis from evicting Mr. Kassiouris pending his intended appeal is appropriate. [52] The parties agree the appropriate test to apply is the test as to whether a stay should be granted. There are three relevant factors: (i) Is there a serious issue to be decided? (ii) Would compliance with the order under appeal cause irreparable harm? (iii) What is the balance of convenience? See RJR-MacDonald Inc. v. Canada (Attorney General) , [1994] 1 S.C.R. 311. [53] There is a serious issue to be tried on the appeal of this application. Mr. Kassiouris’s argument is novel, but it is not frivolous. [54] Mr. Kassiouris has demonstrated irreparable harm if he is forced to leave the premises. His clientele will be lost. His business will, in effect, be destroyed. This is not just a matter of his income, but of the viability of his business and his ability to earn income in the future. [55] In contrast, Mr. Kalantzis has not demonstrated that he will lose his incoming tenant if Mr. Kassiouris is not evicted pending appeal. The evidence demonstrates that Mr. Tsatsos was willing to wait for this property, having expressed interest in it in 2015 or earlier. Mr. Kalantzis will continue to receive rent for the property. [56] The balance of convenience favours a stay pending Mr. Kassiouris’s appeal. Mr. Kassiouris will suffer greater harm if my decision is enforced than Mr. Kalantzis will suffer if it is not. Mr. Kalantzis will continue to collect rent and there is no evidence on which to conclude he cannot lease the property to Mr. Tsatsos if the intended appeal is unsuccessful. [57] Accordingly, an order shall go enjoining Mr. Kalantzis from evicting Mr. Kassiouris until the conclusion of his intended appeal or until further order of the court. --- Madam Justice J. T. Akbarali Date: March 30, 2017 [1] I assume, without deciding, that he was entitled to do so notwithstanding the various breaches of the lease about which Mr. Kalantzis complains.