1393069 Ontario Inc. (Cornell Hair Salon & Esthetics) v. Sarvom Corporation, 2010 ONCA 79

CITATION: 1393069 Ontario Inc. (Cornell Hair Salon & Esthetics) v. Sarvom Corporation, 2010 ONCA 79

DATE: 20100129

DOCKET: C51042

COURT OF APPEAL FOR ONTARIO

Moldaver, MacPherson and LaForme JJ.A.

BETWEEN:

1393069 Ontario Inc., c.o.b. as “Cornell Hair Salon & Esthetics”

Plaintiff (Appellant)

and

Sarvom Corporation and Somana Drugs Limited, c.o.b. as “Main Drug Mart”

Defendants (Respondents)

Terry Corsianos, for the appellant

Rahul Shastri, for the respondent Sarvom Corporation

M. Michael Title, for the respondent Somana Drugs Limited

Heard and released orally: January 27, 2010

On appeal from the order of Justice Craig Perkins of the Superior Court of Justice dated September 4, 2009.

ENDORSEMENT

[1] The appellant appeals from the order of Perkins J. dated September 4, 2009 dismissing its action, on a motion for summary judgment, in a commercial lease case.

[2] The appellant contends that the landlord was not entitled to terminate the lease because no rent was owing at the relevant time.

[3] We disagree. The landlord’s notice letter dated March 4, 2008 called on the tenant to “restore the security deposit to its original amount”. There is no question that the tenant’s security deposit was deficient on that date.

[4] The appellant submits that the landlord did not provide proper notice of default under the lease.

[5] We do not accept this submission. To the extent, if at all, that the tenant had to be alerted to the possibility that termination was a potential outcome, we agree with the motion judge’s conclusion that the landlord’s March 4, 2008 letter to the tenant was sufficient notice under s. 19(2) of the Commercial Tenancies Act. In our view, there is no ambiguity in the words in the letter “the landlord will move to protect its interests to the fullest extent of the Lease and law.” In a commercial lease context, these words point clearly to potential recourse by the landlord to the very remedies contemplated by the lease, namely, in this case, termination of the lease and/or re-entry into and repossession of the leased premises. As expressed by the motion judge: “[Cornell] was formally notified of its default and given a deadline to correct it. If Cornell did not comply, it acted at its peril.”

[6] The appellant contends that the post-termination agreement whereby the tenant was able to remove its property from the leased premises and accepted $5000, and wherein both parties agreed that they would have “no further liability or claim of any nature whatsoever against the other” was invalid because it was unconscionable.

[7] We observe, as a preliminary matter, that, strictly speaking, this issue is only relevant if the appellant was successful on at least one of its first two grounds of appeal. It has not been; accordingly, the landlord does not need to rely on the post-termination agreement to resist this appeal.

[8] However, for the sake of completeness, we state that we do not accept the appellant’s unconscionability argument. In Birch v. Union of Taxation Employees, Local 70030, 2008 ONCA 809, at para. 45, Armstrong J.A. said that “a determination of unconscionability involves a two-part analysis – a finding of inequality of bargaining power and a finding that the terms of an agreement have a high degree of unfairness”.

[9] There was no inequality of bargaining power in this case for several reasons, including the fact that both parties were commercial entities operating under the terms of a negotiated lease, and the principal of the appellant knew the legal consequences of defaulting on a lease.

[10] There is no unfairness in the post-termination agreement. The appellant sought compensation, accepted $5000 and immediately cashed the certified cheque. Not until ten months later, and long after a new tenant had commenced its business in the premises, did the tenant attempt to resile from its agreement. In these circumstances, fairness would suggest enforcing the agreement.

[11] The appeal is dismissed. The respondents are entitled to their costs of the appeal which we fix at $7500 for Sarvom and $4500 for Somana inclusive of disbursements and GST.

“M.J. Moldaver J.A.”

“J.C. MacPherson J.A.”

“H.S. LaForme J.A.”