COURT OF APPEAL FOR ONTARIO

CITATION: L'Ouvrier Inc. v. Leung, 2017 ONCA 589
DATE: 20170707
DOCKET: C63222

MacPherson, Cronk and Benotto JJ.A.

BETWEEN

L'Ouvrier Inc.

Plaintiff (Respondent)

and

Yen Ping Leung and Michael Cheng

Defendants (Appellants)

AND BETWEEN

Yen Ping Leung and Michael Cheng

Plaintiffs by Counterclaim (Appellants)

and

L'Ouvrier Inc., and Justine Fowler and Angus Bennett

Defendants by counterclaim (Respondents)

J. Gardner Hodder and Christopher Stienburg, for the appellants

David Barbaree, for the respondents

Heard: July 6, 2017

On appeal from the judgment of Justice Thomas R. Lederer of the Superior Court of Justice, dated December 7, 2016, with reasons reported at 2016 ONSC 6993.

REASONS FOR DECISION

[1] The appellants, Yen Ping Leung and Michael Cheng, appeal from the judgment of Lederer J. of the Superior Court of Justice granting the respondents L'Ouvrier Inc., Justine Fowler, and Angus Bennett summary judgment and dismissing the appellants’ counterclaim.

[2] The action related to a dispute involving the renewal of a commercial lease. In March 2011, L'Ouvrier and Leung entered into an agreement to lease a unit (to be used as a restaurant) in a building owned by Leung and managed by her husband Cheng (the “Agreement”).

[3] The Agreement governed the relationship between the parties. It contained an option for renewal that could be exercised by L'Ouvrier so long as it was not in default of the terms of the Agreement and provided written notice of its intention to exercise the option. In addition to the rental payments of $3,300 per month, L'Ouvrier was also liable for additional rent to be paid in monthly installments calculated as the estimated proportionate share of direct costs associated with the occupancy and use of the premises.

[4] In 2013, the appellants demanded a further amount in additional rent. L'Ouvrier took the position that this demand did not comply with the Agreement and refused to pay it. The matter was not resolved.

[5] On September 25, 2015, L'Ouvrier sent the appellants’ son a text message essentially indicating that it wanted to exercise its renewal option under the Agreement. The appellants took the position that they would not renew the Agreement due to L'Ouvrier’s refusal to pay the additional rent demanded. They did not allege, then or later, that the notice of renewal was deficient or in non-conformity with the Agreement.

[6] The parties tried to negotiate a renewal of the Agreement but negotiations broke down in November 2015. During this time period, L'Ouvrier was trying to sell its business to a third party.

[7] In early 2016, L'Ouvrier commenced an action seeking specific performance, an injunction to prevent the appellants from interfering with its rights under the Agreement, and damages for losses caused by the appellants’ breach of contract.

[8] L'Ouvrier then brought a motion for an injunction to prevent the appellants from evicting it on February 29, 2016. After a series of adjournments, the parties agreed to settle the matter. However, the appellants failed to honour the settlement.

[9] In September 2016, the appellants locked the doors of the premises, posted a notice of distress, and took over L'Ouvrier’s liquor licence as a landlord in possession. As a result, L'Ouvrier’s planned sale of its restaurant business fell through.

[10] L'Ouvrier then brought a motion for summary judgment seeking damages associated with the loss of its ability to sell the business, the money it paid in furtherance of an arbitration hearing and the settlement agreement, and the amount it paid as a security deposit at the beginning of the tenancy. L'Ouvrier also sought punitive damages.

[11] The appellants brought a counterclaim alleging unpaid arrears, damage to rental property, and punitive damages.

[12] The appellants unsuccessfully sought an adjournment of the hearing of the summary judgment motion.

[13] The motion judge found that L'Ouvrier was not in breach of the Agreement. He also held that the appellants had breached the Agreement and engaged in conduct warranting the imposition of punitive damages.

[14] The motion judge awarded these damages: $140,000 for loss of the ability to sell the business; $12,000 relating to the aborted settlement agreement; $6,837.49 relating to the arbitration; $5,000 for the security deposit, and $20,000 in punitive damages.

[15] By reasons dated December 7, 2016, the motion judge granted judgment in favour of L'Ouvrier. The reasons did not refer to the appellants’ counterclaim. On a motion for directions made on March 2, 2017, the motion judge dealt with the counterclaim and dismissed it on the merits. His formal judgment deals with both the respondent’s claim and the appellants’ counterclaim.

[16] The appellants appeal on several grounds.

[17] First, the appellants contend that the motion judge erred by not granting an adjournment because they did not have a lawyer, were representing themselves, and speak Cantonese and are not fluent in English.

[18] We disagree. The appellants had been represented by a lawyer earlier in the proceedings. They had also filed a notice of intent to act in person. An interpreter was present and participated in the hearing. The request for an adjournment came 90 minutes into the hearing. In these circumstances, the motion judge’s discretionary decision to refuse an adjournment was reasonable.

[19] Second, the appellants submit that L’Ouvrier did not give proper written notice of its intent to exercise its renewal option.

[20] We do not accept this submission. As we have said, the appellants did not advance this complaint at the time of the notice. Nor is there any suggestion that they did not receive actual notice of the intention to renew. Further, L’Ouvrier’s text message to the appellants’ son led to extensive negotiations between the parties. Accordingly, the appellants, by their conduct, acknowledged receiving notice of L’Ouvrier’s desire to renew the lease.

[21] Third, the appellants claim that the motion judge erred in finding that L’Ouvrier was not in rent default of the Agreement, especially with regard to not paying the required additional rent.

[22] We disagree. The motion judge carefully considered this issue and agreed with L’Ouvrier’s submission that it was not subject to additional rent in the amounts sought by the appellants. We see no error in his analysis.

[23] Fourth, the appellants assert that the motion judge erred by failing to address the issue of non-rent default.

[24] We disagree. The appellants’ position before the motion judge was that L’Ouvrier had breached the Agreement by not making sufficient rental payments. The appellants did not raise potential non-rent default issues on the summary judgment motion. They cannot do so now: see Sawdon Estate v. Sawdon, 2014 ONCA 101, at para. 75.

[25] Finally, the appellants claim that Cheng was not properly named as a party in these proceedings and that the motion judge erred in granting summary judgment against him.

[26] We disagree. This issue was not raised in the court below. In addition to the fact that the appellants should not be permitted to raise on appeal an issue that was not before the motion judge, Cheng fully participated in the proceedings and never requested that he be removed as a named party. Accordingly, the motion judge committed no error in granting summary judgment against him.

[27] The appeal is dismissed. The respondents are entitled to their costs of the appeal fixed at $18,000, inclusive of the costs of the motion before Pardu J.A. dated February 17, 2017, disbursements and HST. It is also ordered that the $75,000 paid into court to the credit of the proceeding be released to the respondents.

“J.C. MacPherson J.A.”

“E.A. Cronk J.A.”

“M.L. Benotto J.A.”