Crystalline Investments Limited v. Domgroup Ltd.

Crystalline Investments Limited v. Domgroup Ltd. Burnac Leaseholds Limited v. Domgroup Ltd. [Indexed as: Crystalline Investments Ltd. v. Domgroup Ltd.]

58 O.R. (3d) 549

[2002] O.J. No. 883

Docket No. C36097

Court of Appeal for Ontario

Carthy, Weiler and Cronk JJ.A.

March 6, 2002

• Application for leave to appeal to the Supreme Court of Canada was granted with costs December 12, 2002 (Gonthier, Major and Arbour JJ.). S.C.C. File No. 29196.

Bankruptcy and insolvency -- Lease containing provision that tenant liable despite assignment of lease -- Original tenant assigning lease -- New tenant filing notice of intention to make proposal -- Trustee delivering notice of repudiation pursuant to s. 65.2 of Bankruptcy and Insolvency Act -- Landlord not challenging repudiation and receiving payment pursuant to Act -- Section 65.2 not terminating lease for all purposes -- Insolvent assignee's repudiation of lease not affecting agreement between landlord and original tenant -- Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 65.2.

Landlord and tenant -- Assignment -- Liability of original tenant -- Bankruptcy and insolvency -- Lease containing provision that tenant liable despite assignment of lease -- Original tenant assigning lease -- New tenant filing notice of intention to make proposal -- Trustee delivering notice of repudiation pursuant to s. 65.2 of the Bankruptcy and Insolvency Act -- Landlord not challenging repudiation and receiving payment pursuant to Act -- Section 65.2 not terminating lease for all purposes -- Insolvent assignee's repudiation of lease not affecting agreement between landlord and original tenant -- Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 65.2.

By a 1979 lease, Crystalline Investments Limited ("Crystalline") leased space in a shopping centre in New Brunswick to Dominion Stores Ltd. ("Dominion Stores"), the predecessor of Domgroup Ltd. The lease contained a provision that the tenant shall remain liable notwithstanding any assignment. By assignment dated May 25, 1995, Dominion Stores assigned the lease to CF Ltd., which subsequently amalgamated with TFG Inc. In 1994, after TFG Inc. had filed a notice of intention to make a proposal, the proposal trustee, pursuant to s. 65.2 of the Bankruptcy and Insolvency Act ("BIA"), delivered a Notice of Repudiation of the lease to Crystalline, which did not apply to the court to challenge the repudiation. Further, Crystalline confirmed with the trustee that it would not take any action to object to the application for approval of the proposal. The proposal was approved and, pursuant to the court's order, Crystalline received and accepted payment in the amount of $131,154.54 in respect of the compensation payable under s. 65.2(3) of the BIA for the termination of the lease effective March 31, 1994. However, on January 20, 1995, Crystalline wrote Domgroup Ltd. alleging that it was in default of payment of rent due under the lease. The letter did not acknowledge the termination of the lease as of March 31, 1994. When Domgroup did not pay, Crystalline sued and its action was dismissed on a motion for summary judgment. Crystalline appealed.

Held, the appeal should be allowed.

In ordinary circumstances, a landlord may respond to a failure to pay rent by terminating the lease. [Section 65.1](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-b-3/latest/rsc-1985-