Court File and Parties

COURT FILE NO.: CV-21-152-00 DATE: 2023 04 14 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

DOBCOR INVESTMENTS INC. Applicant

Edwin G. Upenieks and Frank Pinizzotto, for the Applicant

- and -

BARGAIN CAR AND TRUCK RENTAL and TAMER ALGAMAL Respondent

W. Xavier Navarette, for the Respondent

HEARD: April 5, 2023

REASONS FOR JUDGMENT

Wilkinson J.

[1] The Applicant and owner of the subject property, Dobcor Investments Inc., seeks to terminate its lease with the Respondent and lessee, Bargain Car and Truck Rental and its guarantor, Tamer Algamal, (collectively referred to hereinafter as “the Respondent”) as of May 30, 2021, and to secure a Writ of Possession of the subject property pursuant to section 68 of the Commercial Tenancies Act. The Applicant’s pleadings state that it is entitled to terminate the lease for two reasons. First, the time for the Respondent to provide written confirmation of its intention to renew the lease as set out in Schedule K of the lease, subsection 3(a)(ii), expired prior to the Applicant’s receipt of a written notice from the Respondent to renew its lease. Second, the Applicant claims that the behaviour of the Respondent constituted a breach of the terms of the lease, which disentitled the Respondent from requesting to renew the lease pursuant to Schedule K subsection 3(a)(i) of the lease. The Applicant chose not to make oral submissions setting out the details of the alleged breaches of the terms of the lease by the Respondent, as the Applicant submits that evidence regarding the extent, severity, and timing of the breaches ought to be determined by way of a trial, and further, that a trial will not be necessary as a finding that the Respondent failed to properly exercise its renewal option during the renewal period, will end the litigation.

[2] The Respondent filed a cross application seeking a declaration that the lease was validly renewed, and in the alternative, relief from forfeiture.

[3] The Respondent has been continuing to lease the premises in question on an overhold basis since the May 30, 2021 expiry of the original lease.

ISSUES FOR THE COURT TO DETERMINE

1. Was notice given within the required time as set out in the lease?
2. In the event that the notice was not adequate, should the Respondent be given equitable relief from forfeiture?
3. Is a trial required to address if the Respondent breached the terms of the lease, and if not, is relief from forfeiture available to the Respondent with respect to the alleged breaches?

[4] The Respondent requests an adjournment of the motion, taking the position that it was not aware that the timing of its renewal notice was at issue in this litigation until it received the Applicant’s supplementary factum a week before the motion. The Respondent now states that it has evidence to submit regarding oral conversations between the parties that relate to the issue of notice, and that it wishes to conduct cross examinations and file additional affidavit evidence. The Applicant takes the position that the timing of the Respondent’s renewal notice has always been an issue in this litigation, and that the Respondent should have brought this information forward long before the motion date if it wishes to rely upon that evidence at the motion, particularly as the motion date was arranged by special appointment, and applied for over two years ago. The request for an adjournment is denied.

[5] For the reasons that follow, I find that the written request to renew the lease was submitted out of time, and accordingly, I find the renewal notice to be null and void. I further find that the lease was terminated effective May 30, 2021.

BACKGROUND

[6] The Applicant owns 6198 Netherhart Road, Mississauga. This property is a commercial building which has eight units leased to various commercial tenants. The Respondent, Bargain Car and Truck Rentals and guarantor Tamer Algamal, currently lease Unit 1 of that property.

[7] The Respondent, guarantor, Tamer Algamal, also owns Falcon Auto, which is an automotive repair business. The Respondent, Bargain Car and Truck Rental, subleases the subject premises to Falcon Auto.

[8] There are some facts upon which the parties agree.

[9] It is agreed that the date of the signed lease agreement is March 22, 2016, and that it is the contract that sets of out the terms of the lease agreement between the parties. It is agreed that the lease agreement commenced on June 1, 2016, and was set to expire on May 30, 2021.

[10] It is also agreed that under Schedule “K” of the lease, subsection 3(a)(ii), the tenant had the option to extend the original term of the lease, unilaterally, for an additional 5 years beyond May 30, 2021. The parties also agree that subsection 3(a)(ii) of Schedule K requires the tenant to exercise the renewal option in writing "not more than 9 months and not less than 6 months prior to the expiration of the original Term, failing which this right to extend shall be rendered null and void". As there were no submissions to the contrary, there appears to be agreement that the renewal period commenced on August 30, 2020 (nine months prior to the May 30, 2021 expiration of the lease). The parties agree that the renewal provision in the release was clearly worded.

[11] The Respondent sent an email to the Applicant on December 9, 2020, confirming its intention to renew the lease for another five years beyond the May 30, 2021 lease expiration date.

NOTICE

[12] The parties do not agree as to the date upon which the renewal period expired. The Applicant takes the position that the expiry date for the renewal period six months prior to the end of the May 30, 2021 lease was November 30, 2020. The Applicant therefore submits that the December 9, 2020 renewal notice from the Respondent is out of time pursuant to the terms of the lease, and therefore null and void.

[13] The Respondent submits that as it was the Applicant that drafted the lease agreement, if there is any uncertainty as to how the language in the lease should be interpreted, the contra proferentem rule requires that any uncertainty be resolved in favour of the party that did not draft the contract, which in this case, is the Respondent.

[14] The Respondent takes the position that as the lease agreement did not stipulate the manner in which the six month deadline to declare an intention to renew the lease was to be calculated, the six month period can be calculated in terms of days as an alternative to calculating the expiry of the renewal period in terms of months. In particular, the Respondent argues that the exact number of days between November 30, 2020 and May 30, 2021 is 172 days, and that by providing the landlord with its renewal option 172 days before the expiry of the lease, it satisfied the contractual timeline to exercise the renewal option.

[15] The Applicant submits that it is industry practice to calculate renewal periods using months instead of days, and it points to Bedard v. 1526924 Ontario Limited, as authority to confirm that renewal periods in leases are to be calculated using months, not days. Furthermore, the Applicant states that six months, or half a year is 182.5 days (half of 365 days), which means that even using a daily calculation for the six month renewal period in question, the renewal notice was provided only 172 days before the expiration of the lease, which is still at least ten days short of the six month notice requirement using 182.5 days as the daily equivalent of a six month notice period.

[16] I was not provided with any authority by the Respondent to suggest that lease contracts ought to be interpreted by considering the number of days in a renewal period as opposed to considering the plain, ordinary meaning of the word “months”. The Bedard decision which also involved the exercising of a renewal option shortly after the time to exercise the renewal option had expired considered the extent of the renewal period in terms of months as opposed to days.

[17] This is a commercial tenancy. The term of the lease that it was expiring on May 30, 2021 was clear. The language in Schedule K subsection 3(a)(ii) requiring the tenant to exercise its renewal option no earlier than nine months and no later than six months before the expiration of the lease was clear and unambiguous. I repeat the words of Justice Walters in the Bedard case at paragraph 9 of the decision:

There are no circumstances in this case which would justify the court’s interference in a commercial transaction freely entered into by the parties. Commercial certainty dictates, that the terms of the contract should be strictly complied with by the parties to the agreement unless there is some evidence of bad faith, misrepresentation, or other reason not to hold the parties to the bargain that they made.

[18] I further find that whether the six month renewal period is calculated by months or by days, either way the December 9, 2020 email from the Respondent was out of time, and ought to have been sent to the Applicant by November 30, 2020.

[19] I also acknowledge the finding of this court in 2 324702 Ontario Inc. v. 1305 Dundas W. Inc., 2019 ONSC 1885 at paragraph 41 that: “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”. This decision was upheld on appeal, with the court finding at paragraph 12 of the decision that “Ontario case law requires strict compliance with the renewal provisions of a lease” (2020 ONCA 353).

[20] I find that the Applicant did nothing to indicate to the Respondent that it was abandoning its right to expect a written notice of renewal within the notice period, and indeed, the affidavit evidence of the Applicant indicated that the Applicant was surprised when the notice from the Respondent was received on December 9, 2020 asking to extend the lease.

[21] I therefore find that the Respondent’s December 9, 2020 renewal notice was out of time, and consequently, it is null and void.

RELIEF FROM FORFEITURE

[22] The Respondent requests that the Court grant it relief from forfeiture pursuant to the Courts of Justice Act (s.98), and the Commercial Tenancies Act (s.20).

[23] Section 98 of the Courts of Justice Act states:

A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.

[24] Section 20 of the Commercial Tenancies Act states:

Relief against re-entry or forfeiture

20 (1) Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture, whether for non-payment of rent or for other cause, the lessee may, in the lessor’s action, if any, or if there is no such action pending, then in an action or application in the Superior Court of Justice brought by the lessee, apply to the court for relief, and the court may grant such relief as, having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just.

[25] There was uncontroverted evidence that upon the commencement of the lease, the Respondent performed substantial improvements of nearly $100,000.00 to the property including: new walls, painting the entire premise, a new drop ceiling, installing a new heating and cooling unit, new lights, ducts, new ceramic flooring and a new bathroom.

[26] Although the failure to renew the lease is not a breach of the lease, the court may grant relief from forfeiture where a party seeks to renew the lease but has not complied with the formal requirements or preconditions for doing so. However, this relief is available only in circumstances more narrowly confined than the three-pronged test from Saskatchewan River Bungalows. In McRae Cold Storage Inc. v. Nova Cold Logistics ULC, 2019 ONCA 452, the Court of Appeal provided additional guidance, at para. 10:

With respect to the renewal of a lease, a precondition for the exercise of any such equitable discretion 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., at para. 9; Ross v. T. Eaton Co. (1992), 11 O.R. (3d) 115 (C.A.), at pp. 124-125; 1383421 Ontario Inc. v. Ole Miss Place Inc. (2003), 67 O.R. (3d) 161 (C.A.), at para. 80; Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc., 2016 ONCA 93, 344 O.A.C. 363, at paras. 55-56.

[27] The cases supplied by the Respondent addressing relief from forfeiture dealt primarily with situations where the lease was terminated as a result of alleged breaches by the lessee. In the present case, the Applicant bases the strength of its case on the assertion that the Respondent failed to exercise its option to renew in a timely manner, which is a circumstance entirely of the Respondent’s own decision making.

[28] The Applicant further takes the position that the financial investment of the Respondent into the subject property cannot preserve the Respondent’s right to lease the premises, as it failed to exercise its renewal option in a timely fashion, as was stated by the Court of Appeal in 2424702 Ontario Inc v. Dundas W. Inc. para. 24:

Although the appellant has a large investment in the premises which it stands to lose, this consequence is effectively a result of its own decisions regarding its conduct in relation to the respondent.

CONCLUSION

[29] There was no evidence submitted by the Respondent to provide any explanation as to why the Respondent did not exercise its option to renew the lease within the contractual lease renewal period. I am therefore left with the simple fact that the Respondent failed to exercise its renewal option in accordance with the clear and unambiguous terms of the lease. There was no evidence that the landlord led the tenant to believe that it did not need to comply with the strict terms of the lease. Accordingly, I find that the Respondent’s failure to exercise the renewal option during the renewal period is not a circumstance which should engage the equitable remedy of relief from forfeiture. Accordingly, the Respondent’s claim for relief from forfeiture is dismissed.

[30] I find that the Respondent’s renewal notice dated December 9, 2020 is null and void, and that the lease between the parties expired and was terminated effective May 30, 2021. The Applicant is therefore granted a Writ of Possession with respect to the leased premises, effective immediately.

[31] As I have found that the lease is terminated as a result of the Respondent’s failure to exercise its renewal option in a timely manner, there is no need for me to consider if any of the other actions of the Respondent constituted a breach of the terms of the lease, which could potentially also have been a legitimate basis upon which to terminate the lease, pursuant to Schedule K, subsection 3(a)(i) of the lease agreement. Had I not found that the December 9, 2020 renewal notice was null and void, I would likely have ordered that the matter proceed to trial, given that issues of credibility are involved with respect to the alleged breaches of the lease.

[32] In the event that the parties are unable to resolve the issue of costs of the motion, the following timeline will apply:

a) The Applicant shall serve and file its written submissions on costs within ten days of the release of this decision;

b) The Respondent shall serve and file its responding written submissions on costs within ten days of receipt of the Applicant’s cost submissions;

c) The Applicant shall serve and file any reply within five days;

d) If no costs submissions are received it will be presumed that the issue of costs for this motion has been resolved. Should the parties resolve the issue of costs without the need to make submissions, please advise the trial office forthwith.

Wilkinson J. Released: April 14, 2023