Court File and Parties

COURT FILE NO.: CV-18-592504 DATE: 20190329 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2324702 ONTARIO INC. Applicant/ (Respondent on Cross-Application) – and – 1305 DUNDAS W INC. Respondent/ (Applicant on Cross-Application)

COUNSEL: Sam A. Presvelos and Evan Presvelos, for the Applicant/(Respondent on Cross-Application) Julian Binavince, for the Respondent/ (Applicant on Cross-Application)

HEARD: February 20, 2019

Nakatsuru J.

[1] 2324702 Ontario Inc. operates a restaurant and lounge named Remix (henceforth “Remix”) in the basement of a commercial building at 1305 Dundas Street West. This commercial building is owned by 1305 Dundas W. Inc. (henceforth the “Landlord”). Remix has existed at this location since 2008 and is owned and operated by Michael and Albert Assoon (henceforth the “Assoon brothers”). Remix entered into a lease in 2008 with the former landlord of the building. The former landlord renewed the lease term. The Landlord bought the building in July 2017 and became the landlord of the premises by an assignment agreement. The Landlord does not want Remix as a tenant. Remix wants to stay. Hence, this application and cross-application.

[2] A number of inter-related issues are involved. It is not necessary to discretely separate out the issues in the application from the cross-application. They overlap. I will henceforth refer to both of them as the “applications”.

[3] I have been involved with this case before. Hence, my familiarity with the issues and the motion heard within these applications.

[4] There are essentially three issues: 1) Was the lease validly terminated by the Landlord in February 2018 for non-payment of rent and if so, should Remix get relief from forfeiture; 2) Given that the lease between Remix and the Landlord expired September 30, 2018, did Remix validly exercise its option to renew for another five years and if it did not, should it be permitted to do so on the basis of waiver or estoppel; 3) What is the amount of realty tax and rent Remix now owes the Landlord?

A. THE LANDLORD’S MOTION TO STRIKE REMIX’S APPLICATION

[5] Remix brought an application for a declaration that its lease agreement with the Landlord is in full force and effect. As noted, this involves the issue of whether the lease was validly terminated in February 2018 for non-payment of rent. Remix brought its application on February 21, 2018. The Landlord brought its cross-application on July 12, 2018. Counsel reached an interim agreement regarding the payment of rent without prejudice to avoid urgent applications and to allow Remix to remain in possession of the premises pending the hearing of the applications.

[6] On September 11, 2018, I granted Remix an adjournment on terms. I re-scheduled the hearing to a new date of December 7, 2018. One term was that rent which was being held in trust by counsel was to be paid in accordance with the existing contractual arrangement. Going forward, Remix was to pay the Landlord directly. Another term of my endorsement was that Remix was to pay $19,000 to his counsel in trust. This amount was to be considered a part of the 2018 realty tax owed until I finally decided what the exact amount was. I wrote “[t]his amount shall be paid into trust before the hearing of the application. By December 6, 2018, at the latest, counsel for the applicant shall notify counsel for the respondent when that amount has been paid into trust.” I then set out a litigation schedule to be followed. I endorsed that any non-compliance with the order could be brought to my attention for proper remedy.

[7] Remix changed counsel. As a result, on November 26, 2018, it was granted an adjournment of the December 7, 2018, hearing date to February 20, 2019, with a new schedule. The Landlord raised issues with whether Remix had complied with my order of September 11, 2018. I deferred those matters until this hearing of the applications.

[8] The Landlord now brings this motion on the basis that Remix has breached my September 11, 2018, order and seeks dismissal of its application. It submits that two rent cheques since the making of my order were late. One was returned NSF. It further submits that Remix has only paid the original base rent despite increases in accordance with the terms of the lease. The Landlord further submits that the lease has expired and the expiry of the lease triggered the “overholding” rent provision of the lease requiring double the rent to be paid. Remix has not paid this amount. Finally, the Landlord submits that Remix did not pay $19,000 into trust before December 6, 2019, as required.

[9] Remix responds that there were some delays in processing its credit card or debit card that resulted in late payments. In addition, other business costs required them to access the monies set aside for rent. Remix submits that it never intended to pay rent late and has always sought to rectify the issue as soon as possible. With respect to the NSF cheque, once they were made aware, they paid it by way of a bank draft on December 4, 2018. With respect to amounts of rent owed, Remix argues that this was to be decided on the application. Thus, it has not submitted more than what it had been paying monthly before. Finally, Remix was of the view that my adjournment of the December 7, 2018 hearing date, “vacated” the previous endorsement and thus it did not have to pay the $19,000 until the day before the hearing of the applications on February 20, 2019. In any event, Remix submits that the Landlord has suffered no prejudice since it has paid the $19,000 into trust before this hearing date.

[10] Let me begin by acknowledging what I said in open court. It was my clear intention that my September 11, 2018, order was to be followed throughout the history of these proceedings. My adjournment of the hearing date of December 7, 2018, did not amend or “vacate” the order. That said, I also acknowledge that the wording of my endorsement could have been more explicit although any common-sense appreciation of it would have led to the conclusion that the $19,000 was to be paid by December 6, 2018. While I have a suspicion that the likely reason why Remix did not pay the $19,000 in a timely way was a financial one, I find that they did not deliberately flout my previous order. It seems that counsel was taking the same interpretation of my previous orders and likely advised their client the same. Finally, there is no prejudice suffered by the Landlord. The monies are now in trust. At the end of the day, I find that it is in the interests of justice that the applications be heard on the merits. The issues about the impugned conduct of Remix alleged by the Landlord can be considered when I deal with my equitable jurisdiction. This is the best way to properly settle all the issues in dispute.

[11] The motion is therefore dismissed.

B. TERMINATION OF THE LEASE FOR FAILURE TO PAY RENT

[12] There is no question Remix did not pay the February 2018, rent. The cheque was dishonoured. There is no question that the Landlord had the right to terminate the lease under section 17.01(a) of the lease for default of the rental payment.

[13] Remix argues that the lease was not in fact terminated because although the Landlord had changed the locks on February 12, 2018, Remix remained in possession of the premises. Remix did not strongly press this argument before me. I agree with the Landlord that the authorities relied on by Remix regarding the common law remedies of a landlord for forfeiture and distress have little applicability here. Even apart from the right of re-entry under the lease and the common law, section 17.01(i) of the lease permits the Landlord to terminate the lease upon written notice to the tenant. Such a written notice was given on February 12, 2018. Mr. Michael Assoon, a principal of Remix, acknowledged that he received the notice and understood that the Landlord’s intention was to terminate the lease. All the subsequent events, including these legal proceedings, support the finding that the Landlord intended to terminate the lease, and Remix understood the Landlord’s action to show an intent to terminate the lease. I find that the lease was validly terminated by written notice.

C. RELIEF FROM FORFEITURE FOR NON-PAYMENT OF THE FEBRUARY RENT

[14] The critical issue regarding the termination of the lease for non-payment of the February 2018, rent, is the exercise of my jurisdiction under s. 98 of the Courts of Justice Act, R.S.O., 1990, c. C. 43 and s. 20 of the Commercial Tenancies Act, R.S.O. 1990, c. L. 7, to grant Remix relief from forfeiture against the loss of their interests or rights under the lease due to this non-payment of rent.

[15] The power to relieve from forfeiture is discretionary, fact-specific, and granted sparingly. The onus lies on Remix. It must show that enforcing the contractual right of forfeiture would lead to an inequitable consequence on Remix. Factors to consider include the conduct of Remix, the gravity of the breach, the disparity between what is forfeited and the damage caused by the breach: Saskatchewan Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, at para. 32. This assessment is based on a reasonableness standard: Ontario (Attorney General) v. McDougall, 2011 ONCA 363, at paras. 87 to 92. In the context of a default due to non-payment of rent, other specific factors to consider are whether the tenant comes to court with clean hands; whether there is an outright refusal to pay rent; the extent of the rental arrears; and whether the landlord has suffered serious loss due to the delay in paying rent: Michele’s Italian Ristorante Inc. v. 1272259 Ontario Ltd., 2016 ONSC 4888, at para. 36.

[16] A major argument raised by the Landlord is that Remix does not come to court with clean hands. They point to other conduct by Remix both before and after its February 2018, default, as evidence that Remix does not have clean hands and should be denied relief. Thus before I conduct the analysis regarding relief from forfeiture, I will review some law dealing with the limits of this principle of “clean hands.”

1. The Doctrine of “Clean Hands”

[17] According to Snell’s Equity, (32nd ed.) 2010, at p. 112, the full maxim is “he who comes into equity must come with clean hands”. In Peleshok Motors Ltd. v. General Motors Ltd. (1977), 2 B.L.R. 56 (Ont. H.C.), at para. 26, Goodman J. explains that maxim in this way:

[t]he plaintiff not only must be prepared now to do what is right and fair, but also must show that his past record in the transaction is clean; for “he who has committed Iniquity ... shall not have Equity”.

[18] In Cairney v. Golden Key Holdings Ltd. (1988), 40 B.L.R. 289 (B.C.S.C.), at para. 13, the court observes:

The author in the Principles of Equitable Remedies, by I.C.F. Spry, 3d ed. (1984), at p. 168 says:

The maxim that a plaintiff in equity must approach the court with clean hands is, in truth, best understood as a statement that alludes to a number of distinct rules whereby particular conduct may lead to a refusal of relief. Although it should not be regarded as laying down a principle of inflexible application in all cases where the plaintiff has acted in a way that is not fair or reasonable, nonetheless it represents a general equitable approach that may be found to be of relevance in new situations as they arise.

[19] On its face, the scope of the “clean hands” doctrine is not clear. For instance, in Snell’s Equity, (32nd ed.) 2010, at p. 112, the author notes that “this [clean hands] maxim provides no guidance concerning which past conduct … will disable the claimant from recovery [in equity]”. However, the “immediate and necessary relation” standard (outlined below) provides some insight into this analysis.

[20] Here Remix relies upon conduct that is said to have occurred both before and after the breach. In my opinion, the fact that impugned conduct occurred subsequent to the actions giving rise to the dispute does not mean it necessarily falls outside the scope of the “clean hands” doctrine. To determine whether a person has “unclean hands” for the purposes of a claim in equity, the impugned conduct must have “an immediate and necessary relation” to the equity sued for: see for e.g., Toronto (City) v. Polai (1969), 8 D.L.R. (3d) 689 (Ont. C.A.) aff’d Toronto (City) v. Polai, [1973] S.C.R. 38, at para. 46. As Goodman J. cautions in Peleshok Motors Ltd., at para. 26:

the [clean hands] maxim must not be taken too widely; “Equity does not demand that its suitors shall have led blameless lives.’ What bars the claim is not a general depravity but one which has “an immediate and necessary relation to the equity sued for”.

[21] As stated in Maximum Ventures Inc. v. de Graaf, 2008 BCSC 199, at para. 29, “the clean hands doctrine does not concern itself with a party’s conduct generally. It is concerned with bad conduct in the transaction which is before the court”. In Sherwood Dash Inc. v. Woodview Products Inc., [2005] O.T.C. 1061 (Ont. S.C.J.), Perell J. stated, at para. 52:

As commentators and judges have noted, the metaphor that a claimant for equitable relief must have clean hands must be put into context. Judges of the courts of equity do not deny relief because the claimant is a villain or wrongdoer; rather, the judges deny relief when the claimant's wrongdoing taints the appropriateness of the remedy being sought from the court. In Argyll v. Argyll, [1967] Ch. 302, Ungoed-Thomas, J. described the principle nicely at pp. 331-2, when he said: "A person coming to Equity for relief ... must come with clean hands; but the cleanliness required is to be judged in relation to the relief sought."

[22] Similarly, in Polai, at para. 46, the Ontario Court of Appeal emphasized that to fall within the scope of the “clean hands” doctrine, the impugned conduct should arise from the parties’ relationship:

The misconduct charged against the plaintiff as a ground for invoking the maxim against him must relate directly to the very transaction concerning which the complaint is made, and not merely to the general morals or conduct of the person seeking relief; or as is indicated by the reporter's note in the old case of Jones v. Lenthal, (1669) 1 Cas. Ch. 154…“That the iniquity (sic) must be done to the defendant himself.”

[23] Canadian National Railway v. Brant (2009), 4 C.N.L.R. 47 (Ont. S.C.), contained an illustrative example of this doctrine’s application. The issue in that case involved whether CN had a right to operate through Indigenous territory. CN sought an equitable remedy in relation to the dispute. The defendants argued that CN was not coming to the court with “clean hands”, noting the historic treatment of First Nations peoples, and the role of railways generally, and CN in particular, in disrupting the lives and lands of First Nations peoples. The defendants’ allegations were struck on the basis that they were outside the scope of the “clean hands” doctrine and had little bearing on the questions arising in the context of the action.

[24] In the case before me, as my analysis will show, some of the conduct complained of by the Landlord – such as Remix’s continued failure to pay rent in a timely fashion – occurred after the breach in question. I am inclined to think that because the subsequent conduct involved the same parties and arose in the context of their ongoing landlord/tenant relationship, those actions are “immediately and necessarily” related to the equity sued for. Indeed, as we will see, the very continuing existence of this landlord/tenant relationship is the very question to be determined by me. That said, as my reasons will also show, some conduct relied upon by the Landlord should not be considered under this doctrine.

2. The Relief from Forfeiture Analysis for Non-Payment of Rent

[25] In terms of the gravity of the breach, I find it important that for present purposes, I am only dealing with one late payment of rent. Soon after the NSF cheque came to Remix’s attention, Mr. Albert Assoon, another principal of Remix, contacted the Landlord’s principal, Ms. Pouneh Rouhani, to explain the issue and attempt to resolve it. Remix explained that unbeknownst to them, the Canada Revenue Agency had frozen Remix’s bank account thereby causing the rent cheque to bounce. Mr. Michael Assoon testified that this was due to a negligent accountant who failed to remit the proper HST.

[26] On February 13, 2018, the Landlord’s lawyer, Mr. Binavince, contacted Mr. Albert Assoon with a settlement offer regarding this default. No settlement was reached. On February 15, 2018, Mr. Daniel Waldman, Remix’s former lawyer, sent a letter to Mr. Binavince with a cheque dated February 14, 2018, with the February rent. This eventually led to a without prejudice interim agreement and these court proceedings.

[27] Based on the whole of the evidence, I do not find this breach to be particularly grave. An explanation was given for it that if believed, would nearly totally exonerate Remix’s fault for the dishonoured February cheque. However, the Landlord takes issue with that explanation. Mr. Michael Assoon did not produce the bank account records that he says the Canada Revenue Agency froze. Given this, I am prepared to draw an adverse inference from this failure. Such records would be very strong confirmatory evidence supporting the explanation. Remix did not produce them although it could have readily done so as they were under its control.

[28] Thus, I do not accept Remix’s explanation. That said, I equally do not accept the Landlord’s characterization of this as an outright refusal to pay rent. Given the whole history of the relationship, both before and after, I find the likely reason for the dishonoured cheque is that Remix for whatever reason, (probably financial) did not have the funds available in its account at the time for the cheque to pass. I find that this is not a case where Remix deliberately refused to pay rent.

[29] The Landlord also argues that since the matter has come to court, Remix has refused to pay the 2017 rent increase and the proper amount of the property taxes. It is submitted that this failure to pay the monthly rent and property tax, and by only paying the pre-increase base rent and a 2017 estimate of the realty tax, Remix has outright refused to pay what it owes. I do not see it that way. Remix has sought the assistance of the court to determine what it rightfully owes. The interim agreement and my previous orders were meant to manage this dispute until it could be resolved in court. I do not find this to be an outright refusal to pay on-going rent.

[30] Furthermore, the fact that Remix soon contacted the Landlord and then diligently tried to remedy the situation supports their claim for relief from forfeiture. The rent cheque has been paid. Failure to pay rent was the sole reason for the termination of the lease. Remix has continued to pay rent (although I fully appreciate the proper amounts are in contention and there are further late rent payments) up to the hearing of these applications. The authorities state that relief from forfeiture is particularly appropriate where the Landlord’s rights can be fully vindicated without resort to forfeiture. Put another way, the Landlord here has suffered no damages from the late payment of rent.

[31] On the other hand, I am mindful of what forfeiture would mean to Remix. There remains a number of months left on the then-existing lease. I can readily infer from the evidence that Remix has a significant investment in their restaurant/lounge and given its long presence in this location has built up some goodwill amongst its clients and customers. I find there would be a disparity between what Remix will forfeit and the harm that has befallen the Landlord for this one instance of a late payment of rent.

[32] There is then the Landlord’s position that relief should be denied because Remix does not come to court with clean hands. As noted above, I intend to take a liberal approach to what I am entitled to consider. That said, there are limits.

[33] There are a number of factors argued by the Landlord to demonstrate that Remix does not have clean hands and should not be granted relief. I will assess the weight of each of these considerations and the evidence in support of them.

[34] The first factor is what the Landlord submits is a history of late rent payments to the former landlord of the building. The Landlord became owner of the property and became Remix’s landlord by an assignment agreement dated July 21, 2017. Of course, while late or non-rental payment has an immediate and necessary relation to the equity sued for, this history being put forward is with respect to a previous and different landlord. I fully appreciate that it is about the same rental premises, but the commercial landlord/tenant relationship is a different one. Thus, I find that this conduct is not material to my decision. In addition, the evidence, including an allegation of outstanding rent arrears owed to the previous landlord at the time the building was sold, is based upon hearsay evidence. It is further unsupported by any documentary evidence and Remix denies this course of conduct. Lastly, there is no evidence that the previous landlord did not accept the late payments or ever treated any of these instances as a breach of the lease agreement. Given the lack of materiality and the nature of the evidence, I do not consider this a significant factor in deciding whether I should grant relief.

[35] There are then the Landlord’s evidence about Remix’s poor behaviour as a tenant. This includes allegations of noise and vibration complaints by other residential tenants of the building, the deposit of cigarette butts, vomit, and urine at the entryway of Remix, congregation of smokers, fire inspections that found fault with Remix’s premises, and garbage being added to the Landlord’s pile of garbage. I have reviewed this evidence carefully. While I accept that this is material conduct relevant to the general landlord/tenant relationship at issue, I do not find the evidence relied upon by the Landlord all that probative. For instance, it is speculative to find that it is Remix that was responsible for the added garbage. The noise and vibration complaints are hearsay and only really arose when the Landlord went looking for them after this legal dispute arose. The fire inspection issues were resolved. Other alleged bad conduct is based on isolated and partial investigations by Remix. I am left unclear about how much of it Remix is truly responsible for. Finally, there is merit to Remix’s position that they never received a notice from the Landlord as required under the lease about these issues and did not have a chance to remedy any problems. Given the lack of required notice, however problematic these things are to the Landlord, they do not amount to defaults under the lease.

[36] I do not doubt that the Landlord views Remix as a less than an ideal tenant and wants it out. Ms. Rouhani admitted this on cross-examination. She further admitted its presence makes it harder for the Landlord to lease the ground floor premises. However, when the evidence is looked at as a whole, I find that while not unproblematic, Remix’s behaviour as a tenant is not such that it should preclude it from relief from forfeiture for one late rental payment.

[37] There is then Remix’s conduct as a tenant since the termination of the lease and the commencement of the court proceedings. Again, the Landlord relies upon this as showing Remix does not come to court with clean hands. I have already decided that although such conduct occurred post-termination, it should still be considered on the issue of whether Remix has clean hands. This makes sense to me since it is at this moment before me Remix is suing for equity. Not at the time of the breach of the lease.

[38] Remix’s behavior was not sufficient for me to strike the motion. I am not particularly concerned by the issue that during the time of my order’s existence, Remix has not paid the full rent or realty tax owed since these applications were brought in part to decide these issues. However, the fact that Remix on two occasions has failed to pay the rent in a timely way, one being a NSF cheque, with no other explanation except that it was not financially able to and chose to prioritize other expenses, is of grave concern to me. This goes to the heart of the issue, the non-payment of rent, for which equity is asked. It also raises the concern whether Remix is able and willing to maintain this relationship with the Landlord. Despite matters getting to the point where these issues have to be decided by a judge, Remix did not strictly comply with the lease arrangements. More astonishingly, it did not strictly comply with my order despite my warning that failure to comply could lead to the dismissal of its application.

[39] At the end of the day, while there are troubling concerns about clean hands, I am satisfied that given the isolated nature of the breach, the reasonably quick remedying of it, the lack of any loss or damage suffered by the Landlord for this one breach, and the disparity if relief was not granted, Remix has satisfied its onus that it should get relief from forfeiture. Thus, I declare that the amending agreement of September 5, 2013, is not terminated and did, in accordance with its terms, continue to exist up to its expiry date of September 30, 2018.

D. RENEWAL OF THE LEASE IN OCTOBER, 2018

[40] As I just said, the amended lease expired September 30, 2018. There is an option to renew for a further five-year term. This option is exercisable on no less than nine months and no more than eleven months written notice to the Landlord prior to the expiry of the lease. That period of time was November 1 to December 31, 2017. According to the terms of the lease, the basic rent is to be the then fair market “Minimum Rent” rate for comparable premises in the area provided it was not less than the amount 12 months preceding the commencement of the then current extension. If the parties were unable to agree on this Minimum Rent, before 60 days to the commencement of the extension, the Minimum Rent was to be determined by arbitration.

[41] The law is settled that an option to renew, which is a unilateral contract, must be strictly complied with by the entity exercising that option and it has to demonstrate its compliance in clear and unequivocal terms: 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., [1991] O.J. No. 1507, at paras.11-14 affirmed [1993] O.J. No. 2801 (C.A.). Conditional or equivocal expressions of the tenant’s intentions to renew to the landlord despite the tenant making up its mind to renew, will not suffice. As the Court of Appeal stated in 120 Adelaide Leaseholds Inc., at para. 2:

… The words “exercised in writing” must mean something which takes place between those parties and not between the tenant and someone who is not a party to the lease. Moreover, the word "exercised" connotes the completion of an act not the intention to perform the act sometime in the future. Thus the communication of the intention to do something in the future does not amount to the communication of something which one has in fact done.

When the parties agreed that the option be exercised in writing we think that they expressed their intention that if the tenant renewed the lease it was to communicate with the landlord in writing advising that it was by that document exercising its right to renew. Moreover, the evidence demonstrates that the tenant fully understood that that was the understanding between the parties. Communication of its intention to do so in the future could not amount to compliance with the provisions of clause 12(b).

It is common ground that it was not until July 9, 1990 that the tenant wrote to the landlord that “...we are exercising our option to renew...”. If that letter had been timely it would have fulfilled the requirements of clause 12(b). July 9, 1990 was, however, approximately 15 months prior to the date of expiration of the current renewal term. The exercise of the option to renew at that time was too late.

[42] The rationale underlying this strict requirement was explained by Low J. in Doria v. 66 Degrees Inc., [2000] O.J. No. 136 (S.C.J.), at para. 8:

It is not sufficient that the parties engage in a dance with each other; it is necessary that the option 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 option or 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 a 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 a 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 have 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 a waiver of compliance with the requirements of the option clause would effectively destroy the certainty that the parties bargained for. ...

[43] In terms of the evidence before me, there is the expected difference in the parties’ positions. Remix submits it had given written notice. The Landlord takes the opposite view. Mr. Michael Assoon when asked how he exercised his right to renew, replied that he made offers to Ms. Rouhani and he tried to negotiate the renewal. An undertaking for the written notice was given and emails between him and Ms. Rouhani were provided in answer to the undertaking. Mr. Assoon admitted there was no agreement regarding the Minimum Rent and he did not write to Ms. Rouhani to ask to have the matter arbitrated. Ms. Rouhani in cross-examination testified that during the renewal period, she discussed renewal with Remix. She testified that she agreed to renew their lease if they could reach an agreement on the rent. She agreed that she did not tell Remix that their lease was not properly renewed. It was her position that it was not.

[44] Remix’s argument on the applications is that it had given the required written notice and that they were just negotiating the price, which they were entitled to do, before resorting to arbitration.

[45] I cannot accept that. In my view, there is no expressed written notice in the emails that Remix was exercising its option to renew the lease. There is an expression on the part of Remix of a desire to renew the lease but not that it had. I have come to this conclusion for the following reasons.

[46] First of all, the main email relied upon by Remix was sent on October 16, 2017. This is outside of the notice period and cannot be the written notice contemplated by the lease. If that was the only defalcation, this may support a form of equitable relief.

[47] However, more importantly, when that October 16, 2017, email is closely assessed it is far from being the written notice required. Mr. Assoon at the highest, advises he wanted to “discuss” their 5-year lease option. Nowhere does he say he is exercising it. Immediately following this, he makes it clear that this discussion was important because his investors were waiting for this information “to decide on their new plans for the venue.” He then goes into detail about other venues that are paying less rent and his belief Remix was already paying a high rent. He ends with the comment “hopeful we are able to work this out with you as soon as possible.” The only reasonable interpretation of this email is that Remix was looking to negotiate a rent it wanted and the exercise of the option could well be conditional on this. I find that this is far from an unequivocal and clear exercise of its option to renew. It is really an invitation for negotiations using the potential exercise of the option as a tactical mechanism to obtain the rent it wanted. It should be noted that at this point, there is no suggestion that the relationship between Remix and the Landlord had deteriorated.

[48] In my view, the other emails, focusing on rent prices confirm this. Even back on June 5, 2017, Ms. Rouhani refers to the Landlord’s plans for the building and she states that she looks forward to an “overall discussion about the extension of the lease and the price with you guys”. She states that the Landlord has decided the rent will be closer to the market value of the lease prices for commercial spaces in the area.

[49] From October 16, 2017 to November 3, 2017, there is back and forth about the information they have secured from real estate agents with both sides taking their expected positions: Ms. Rouhani advising rents have gone up and Mr. Assoon taking the reverse position. On November 3, 2017, Ms. Rouhani advises that once Mr. Assoon gets more information, the Landlord would be “happy to discuss more in details and hopefully reach an agreement.” The same day, Ms. Rouhani asks Mr. Assoon for his “best offer so we can see how to move forward.” Mr. Assoon says the same day “Regarding making the best offer we are waiting for the compatibles as well and will get back to you early next week.” Mr. Assoon never did so in writing.

[50] Throughout these written email exchanges no reference to the option being exercised is made. Remix argues that the option was exercised and they were only negotiating the price since otherwise arbitration would be required. To me, that is not how the emails read. There is no reference to the arbitration process under the lease. Further, a reasonable inference cannot be drawn from these exchanges that the negotiations were being conducted in order to avoid arbitration. In short, the emails do not read the way Remix now contends. Furthermore, the timeline to where they could negotiate and agree to the Minimum Rent before the amount of the rent would have to go to arbitration was up to 60 days before the commencement of the renewal. All these email exchanges took place close to or in the renewal period. None took place after.

[51] In my view, all of this supports the conclusion that Remix was interested in negotiating the rent it wanted before it would clearly and unequivocally exercise the option it was entitled to. I reject Remix’s argument that the fact that they engaged in negotiations over the rent should be prima facie proof that they understood that the lease was renewed as I do not interpret the emails in that fashion. To the extent Remix’s affidavit evidence is contrary to my interpretation, I do not accept it. Furthermore, to accept Remix’s position on this factual record would go counter to the rationale so well expressed by Low J. in Doria.

[52] There is force to the Landlord’s submission that if the shoe was on the other foot, based on this factual record, and the Landlord was trying to enforce the renewal on Remix who was denying it (for instance if Remix had moved out of the premises after the expiry of the lease), a court would undoubtedly conclude that no renewal was exercised. I find that argument persuasive.

[53] Given my conclusion that the lease was not validly renewed, I do not need to deal with the Landlord’s further argument that Remix could not properly exercise its right of renewal as it was in default of the lease.

E. WAIVER AND EQUITABLE REMEDIES SOUGHT REGARDING THE RENEWAL

[54] Let me address the issues of waiver and the equitable remedies that Remix seeks given my conclusion that the renewal option was not properly exercised.

[55] I find that the strict requirements of waiver have not been met. Waiver will be found only where the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them: Saskatchewan River, at para. 20. While it is likely that the Landlord had full knowledge of its rights for the renewal under the lease, the evidence does not show on a balance of probabilities the unequivocal and conscious intention to abandon them. Ms. Rouhani’s testimony is to the contrary that the Landlord did not. It was her position that the lease was not properly renewed. Further, the emails and communications demonstrate an intention on the Landlord’s part to negotiate the rent on the basis that Remix had not clearly given the written notice required under the lease that it renewed. Put another way, they do not show an intention to abandon their right to a written notice to renew. The change in the content of the emails supports this. The last email exchange about particulars of a renewal was from Mr. Assoon to Ms. Rouhani on November 3, 2017, saying that he would get back to her about their best offer after getting comparables of rent in the neighbourhood. He did not do so. Thereafter in emails from Ms. Rouhani to Mr. Assoon on November 14, 15, and 17, 2017, no further discussion was had about the renewal option and the emails were only about rent cheques and a fire inspection. There are no responses back from Remix. Although Ms. Rouhani did not specifically tell Remix that they had not given the required written notice, the Landlord and Remix did not continue negotiations past this point, beyond the renewal period. The ready inference from this evidence is that the Landlord stopped discussing it as Remix stopped pushing for it because it had not given the required written notice.

[56] Let me turn to the doctrine of estoppel. The classic formulation of estoppel was described by the Supreme Court of Canada in Canadian Superior Oil Ltd. v. Hambly, [1970] S.C.R. 932, at para. 19 as requiring the following:

(a) A representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made;

(b) An act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made; and

(c) Detriment to such person as a consequence of the act or omission.

[57] There is no requirement to establish an actual intention to induce the course of conduct taken by the party raising estoppel. The positive or passive conduct when viewed through the eyes of the party raising the doctrine, must be such that it would reasonably lead that person to rely upon it.

[58] In my view, this is not a case of estoppel by silence or otherwise: Becker Milk v. Goldy (1977), 82 D.L.R. (3d) 598 (Ont. H.C.) affirmed Becker Milk v. Goldy (1978), 87 D.L.R. (3d) 608 (Ont. C.A.). Remix relies heavily on the November 3, 2017, email written by Ms. Rouhani where she said that they would be more than happy to extend Remix’s lease. In my opinion, this passage must be read in the context of what the rest of the email says, the email chain on the issue, and what the lease says. First of all, Ms. Rouhani in this email is stating that the Landlord’s investigation showed that their agent had information that contradicted Remix’s position about it being less desirable premise because it was a basement rental. Secondly, the phrase used by Ms. Rouhani about their happiness to extend the lease was conditional on the rent being adjusted to market price. The later emails show that there was no meeting of the minds on this issue. I find that this singular phrase of being happy to extend the lease isolated from context cannot reasonably raise the issue of estoppel.

[59] With respect to silence, this is not a situation where the Landlord was aware of the inadequacy or a deficiency in the written notice and chose not to alert Remix; rather this is a case where the Landlord was of the view that Remix had not given written notice to renew and had exercised its option. Thus, the Landlord did not lead Remix on in believing it had effectively exercised its option. Most importantly, I find that even though the threshold for establishing inducement is low and does not require a finding of intent, when the whole of the conduct and emails are looked at between Remix and the Landlord, what the Landlord did or said could not have reasonably lead Remix to believe that they had given the required written notice to renew.

[60] In this way, the case can be distinguished from authorities relied upon by Remix where continued negotiations by the landlord beyond the renewal period estopped it from relying upon the adherence to the technical requirements of a renewal provision: Directors Film Co. v. Vinifera Wines Services Inc., [1998] O.J. No. 1053 (O.C.J. Gen. Div.), at para. 12.

[61] While Remix’s argument can be dispensed with on the first requirement alone, I go on to say that I have significant doubts that the other two requirements have been met. Remix did not later give proper written notice that was merely untimely. It was only some time later through counsel that Remix took the position it had already given proper written notice through the emails. It was not the acts or omissions of the Landlord that caused Remix to fail to give proper written notice. Put another way, it did not rely on the emails sent to it by the Landlord. It simply later took the position that it already had given written notice. A position that I have rejected.

[62] Although not specifically requested, let me turn more generally to my equitable jurisdiction to grant relief from forfeiture. In terms of the gravity of the breach, I appreciate that one could characterize the failure to give the explicit and unequivocal written notice to be on the less serious end of the spectrum. It could be argued that the Landlord, regardless of not receiving such a notice, was aware Remix was interested in renewing. However, I do not see it in that fashion. The whole point of such a notice is to provide certainty to the Landlord in assessing what to do with the premises. Given the lack of such a notice, the Landlord has found itself in an extended period of uncertainty which has been prolonged by this court proceeding. The very ill this legal requirement was put into place to avoid has come to pass. Something that could have been readily avoided if it was Remix’s intention to properly exercise that option.

[63] I do not find the conduct of Remix as being reasonable. It would have been simple to have given written notice. When looked at as a whole, the conduct of Remix as evidence by the emails, which is the most probative of the evidence, supports the description of Mr. Binavince that Remix was “hedging” or “hedging its bets.” In other words, it was trying to negotiate the best rent before exercising its option to renew for five years. One of the conditions necessary for equitable jurisdiction to be exercised 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: 120 Adelaide Leaseholds Inc. (C.A.)., at para. 3. I do not find this to be the case here.

[64] Additionally, I note that Remix had renewed the lease before with the previous landlord. This was not a novel experience for them. They were also a business and a commercial tenant who, as events showed, knew how to avail themselves of real estate advisors and lawyers. They were not unsophisticated individuals who could not be expected to know their rights and obligations.

[65] I appreciate that from the email evidence, it seemed as if Ms. Rouhani on behalf of the Landlord appeared to have been under the mistaken belief that the Landlord had to agree to the renewal. The lease clearly contemplates a unilateral exercise of the renewal option. If the rent could not be agreed to, the issue was to be referred to arbitration. However, I cannot see how Ms. Rouhani’s statements that evince an apparent mistaken belief helps Remix. If this was her purported belief at the time, it does not advance any suggestion that the Landlord knowingly led Remix to believe that it had given appropriate written notice. Further, it is in such circumstances that clear and unequivocal written notice would have assisted. Then the Landlord would have not been under any illusion that Remix was going to be a tenant for a further five-year period. Here, it was as if both parties were starting from square one on whether the lease was going to be renewed.

[66] I further find that the circumstances in this case differ from the authorities relied upon by Remix in that in this case, there were no material misrepresentations by the Landlord, conduct by the Landlord that led Remix to believe it had effectively renewed, or a knowledge on the part of the Landlord that Remix was under a misapprehension about this issue: Veloute Catering Inc. v. Bernardo, [2016] O.J. No. 6143 (S.C.J.); Firkin Pubs Metro Inc. v. Flatiron Equities Ltd., [2011] O.J. No. 4039 (S.C.J.).

[67] Finally, in looking at the evidence the Landlord has pointed to as showing Remix does not have clean hands when it asks for equitable relief, this has some impact here. Remix asks that strict compliance to the written requirement for notice not be enforced. This would mean a renewal of the lease for a further five years. This means an ongoing commercial landlord and tenant relationship for another five years. I find the fact that Remix has now missed paying its rent on time to the Landlord some three times to be a consideration. On two of those occasions I ordered Remix to comply with the lease. This is conduct that goes to the heart of the relationship. It seems that Remix is a tenant that has, and will likely continue to have, trouble paying the rent on time to this Landlord. To be blunt, it would not be fair to the Landlord to enforce a renewal that Remix did not properly renew, in these circumstances.

F. RENT AND REALTY TAXES OWING TO THE LANDLORD

[68] At the time the building was sold to the Landlord, Remix had been paying $7,374.66 a month in combined base rent and realty tax. On July 27, 2017, at the Landlord’s request, Remix provided 12 post-dated cheques in that amount starting in August 2017.

[69] Pursuant to the Amending Agreement dated September 5, 2013, the base rent increased from $5,037.50 to $5,166.67 plus HST on October 1, 2017. There can be no real dispute about this. Remix has not paid this amount. Mr. Assoon acknowledged this lease term although Remix has disputed the amount in this application. Thus, I find that Remix owes this additional amount of rent from that date to the end of the lease: September 30, 2018.

[70] Remix really does not take issue with the fact it owes the Landlord additional money for rent and realty tax. Prior practice with the old landlord was that the monthly sum combined both the base rent and realty tax. This practice continued under the Landlord. This sum depended on the estimate of that tax as well as any adjustment when the tax bill was received. Remix’s position is that it is unclear exactly what is owing given their contractual obligation to pay a portion of the realty taxes.

[71] Before getting to this, it is agreed that HST should not have been assessed against the realty tax. Any HST on the tax should be deducted from any amount owing.

[72] Let me start by referring to section 2.05(5) of the lease, upon which the Landlord relies heavily, that states that “not withstanding anything to the contrary in the lease”, Remix is responsible to pay one-third of the realty taxes for the property.

[73] Despite this clear provision, before me, Remix takes two positions: 1) It points to section 5.04 of the lease that deals with the allocation of taxes which states that the Landlord, after receiving separate allocation of taxes for the premise from the taxing authority, is to make reasonable allocations of taxes. If there is a dispute about the method or amount of the allocation, a professional tax consultant retained by the Landlord would decide; and 2) regardless of whether Remix is required to pay a third of the realty taxes, the Landlord should be estopped from demanding this.

[74] I find that there is merit to Remix’s second argument. The lease does in clear terms require that Remix pay a third of the realty tax. Section 5.04 is inconsistent with section 2.05(5). However, on its express terms, section 2.05(5) must govern as evincing the intention of the parties. That said, I am persuaded that in all the circumstances, it would be unfair for the Landlord to insist upon strict compliance with this. In coming to this conclusion, I recognize that the Assoon brothers in cross-examination were aware of the provision in the lease that required Remix to pay one-third of the realty tax.

[75] I have come to this view for the following reasons. The previous landlord never required Remix to pay a third of the realty taxes. When the Landlord took over the property in 2017, by asking for the twelve post-dated cheques, the taxes were calculated based upon the rent rolls in effect at the time. For 2017, Remix was paying about 22% of the realty tax. Before, under the previous landlord, Remix was paying less than a third of the realty tax. There is some evidence to support the inference that the previous landlord was able to delineate the actual realty tax paid for the basement premises in proportion to other premises in the building.

[76] When the Landlord took over the lease in July of 2017, it could be presumed that the Landlord had all the records available to it to perform its due diligence and if it chose to, ensure that section 2.05(5) was strictly adhered to by requiring Remix to pay a third of the realty taxes. However, it did not.

[77] This situation can be distinguished from the payment of the rent. The request for post-dated cheques does not relieve Remix from paying the rental increase in October of 2017. This is because there is not the same equivalent evidence of past practices regarding rental increases as the tax calculations. Put another way, Remix reasonably believed that the Landlord had accepted a different method of calculating rent than the one strictly set out in the lease, given that the Landlord simply adopted the previous landlord’s existing calculations by requesting the series of post-dated cheques in the same amount. With respect to the rental increases, the time for the increase in October 2017, had not yet passed when the cheques were requested.

[78] I find that the Landlord should be estopped from retroactively claiming an increase in realty taxes based upon a strict compliance with the condition it pay a third. It was only after the issue of the termination of the lease came up and counsel were involved, that in the summer of 2018, the issue of the realty tax was raised between the Landlord and Remix. Up until then, and most importantly, from July 2017 to February 2018, Remix was led to believe that the previous practice of the landlord had simply been adopted by the new Landlord when it came to the assessment of realty taxes. This proves an intention on the part of the Landlord not to rely on the strict terms of the lease. Remix has relied upon this. It would be unfair now, once a dispute has arisen between them, to permit the Landlord from relying on section 2.05(5).

[79] In this regard, I am persuaded by a similar holding on a similar fact situation made by Platana J. in Hreit Holdings 45 Corp. v. R.A.S. Food Services (Kenora) Inc., [2009] O.J. No. 506 (S.C.J.) at paras. 51-62.

[80] As a result, the Landlord is estopped from relying upon section 2.05(5) for the remaining relevant term of the lease, July 2017 to September 30, 2018, in terms of the realty tax owing. Given my ruling, it may well be that the parties can agree, based upon documentation existing or that can be secured, what a reasonable allocation of the realty tax owing to the Landlord for the premises should be. If so, there is no need to go further than to provide that amount to the Landlord. If that cannot be agreed to, then as set out in s. 5.04, the Landlord will obtain the opinion of a tax professional whose opinion will be conclusive in terms of the assessment of the amount of tax Remix owes to the Landlord.

G. CONCLUSION

[81] I have found that the lease expired on September 30, 2018. It has not been renewed. Remix has been in possession of the premises since then. Amounts have been paid to the Landlord to permit Remix to remain in possession pursuant to an interim agreement and my order. There is an “Overholding Rent” provision in the lease. I find that it will be inequitable and unfair to require Remix to pay the amount set out in the “Overholding Rent” provision. Remix and the Landlord came to court in order to determine whether the lease was validly renewed. They did the right thing. It would be wrong and unfair to charge this “Overholding Rent” amount now that the issue was resolved against Remix. However, during this period of time from the expiry of the lease to the time Remix vacates the premises, Remix does owe the Landlord effectively what is the 2017 base rent and its share of the realty taxes as to be determined in accordance with my decision. This shall be ordered. Whether as damages or as some other remedy, this will be included in my judgment.

[82] The Landlord is entitled to possession of the premises. The Landlord has agreed to give Remix 60 days to vacate the premises. In my view, this is a reasonable position.

[83] I make the following orders: 1) declaring the lease was terminated for failure to pay rent but Remix is granted relief from forfeiture of its rights under the lease; 2) declaring that Remix failed to properly exercise its right of renewal under the lease; 3) Remix has 60 days from the date of this decision to deliver vacant possession to the Landlord; 4) Remix shall pay the rental increase of October 2017, and the property tax owing to the end of the lease: September 30, 2018. If the reasonable allocation of the realty tax cannot be agreed to, the matter will be referred to a tax consultant chosen by the Landlord whose decision will be binding; 4) Remix shall pay the Landlord an amount in the same monthly sum as the rental and property tax as damages from October 1, 2018, to the date they deliver possession to the Landlord; 5) any sums still held by Remix’s lawyers in trust shall be paid to the Landlord to satisfy this judgment.

[84] Of course, the actual sums paid to the Landlord owing from this judgment should take into account monies that have already been paid in the interim. If there are any issues arising out of my decision or how it can be effected, I may be spoken to.

[85] If the issues of costs cannot be resolved between the parties, I will entertain written submissions, each one limited to two pages regarding when the issue of costs should be resolved, and the nature of the costs award. The plaintiff shall file within 20 days of this decision. The defendant shall file within 10 days thereafter. There will be no reply submissions without leave of the court.

Justice S. Nakatsuru Released: March 29, 2019

COURT FILE NO.: CV-18-592504 DATE: 20190329 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2324702 ONTARIO INC. Applicant/ (Respondent on Cross-Application) – and – 1305 DUNDAS W INC. Respondent/ (Applicant on Cross-Application)

REASONS FOR JUDGMENT

NAKATSURU J. Released: March 29, 2019