Court of Appeal for Ontario

Date: 2021-06-02 Docket: C68708

Before: Strathy C.J.O., Feldman and Sossin JJ.A.

Between:

8573123 Canada Inc. o/a Elias Restaurant Applicant (Respondent)

And:

Keele Sheppard Plaza Inc. and Castlehill Properties Inc. Respondents (Appellants)

Counsel:

Benjamin Salsberg and Bruce E. Bussin, for the appellants Miguna Miguna, for the respondent

Heard: May 20, 2021 by video conference

On appeal from the order of Justice Edward M. Morgan of the Superior Court of Justice, dated September 11, 2020, with reasons reported at 2020 ONSC 5457.

Reasons for Decision

[1] Keele Sheppard Plaza Inc. (the “Landlord”) appeals an order enjoining it from terminating the tenancy of 8573123 Canada Inc. o/a Elias Restaurant (the “Tenant”) due to the Tenant’s failure to give timely written notice of its intention to exercise an option to renew the lease. The order extended the term of the lease until July 31, 2022, when the first five-year extension would have ended.

[2] The Tenant took an assignment of the lease on July 30, 2013. The lease was for a five-year term, ending July 31, 2017. There were two options to renew for additional five-year periods. The lease provided that written notice of the exercise of the option was to be given by registered mail at least six months prior to the expiry of the lease (i.e., by January 31, 2017).

[3] The Tenant did not give written notice of its exercise of the option prior to the date set out in the lease. The Landlord kept the Tenant as an overholding tenant from August 2, 2017 to May 28, 2020. On that date, the Landlord terminated the lease because, according to its evidence, it wished to replace the Tenant with a more “suitable” business. At the hearing of the application, the Landlord submitted that the Tenant was “unattractive”, and its business did not attract “family-oriented customers”. The Tenant operates a restaurant that serves African and Caribbean food. As the application judge noted, the Tenant was a “family business”, operated by a husband and wife team.

[4] The Tenant sought relief from forfeiture pursuant to s. 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[5] The application judge found that the Tenant had initiated the lease renewal process by attempting to contact the Landlord and its property manager both before and after the option exercise date. He found that the Tenant’s calls were not returned and were “studiously avoided”, because the Landlord and property manager did not want the Tenant to continue to occupy the premises.

[6] The application judge found that both the equities and the balance of convenience weighed in the Tenant’s favour. His conclusions were based on the following findings, among others:

• The Tenant was not in breach of lease; its business was successful, it had never missed a rent payment and it continued to pay rent during the pandemic, while operating a take-out service.
• The Tenant had made substantial investments in the premises, installing approximately $150,000 worth of improvements.
• The Tenant had acted in good faith.
• The Landlord had established no financial loss – it failed to provide information that would accurately compare the revenues between the current Tenant and a prospective tenant.

[7] The application judge found that the affidavits of the Landlord and its agents were “almost a caricature of racially derogatory themes”. Moreover, the Landlord’s position was logically inconsistent – they wished to evict a family-run business to have more “family-oriented customers” and they complained of drinking on the premises when the Tenant’s business was licensed to sell alcohol and it was permitted in the lease. The application judge observed that the Landlord’s “economic” justification for seeking a new tenant, combined with the Landlord’s statements about the nature of the Tenant’s clientele, suggested that the Landlord’s desire to replace the Tenant was motivated by racism, rather than the prospect of higher rent.

[8] The application judge found that while the Landlord’s position may not have been consciously racially motivated, the understanding of these facts was nevertheless relevant to weighing the prejudice to the Tenant.

[9] On appeal, the appellant does not challenge the application judge’s legal analysis concerning relief from forfeiture, but submits there was no evidence that the Tenant made diligent and timely efforts to exercise its option to renew. The Landlord takes issue with the application judge’s conclusion that it “studiously avoided” the Tenant’s calls and refers to evidence of one of the Landlord’s employees contradicting the Tenant’s evidence.

[10] This was a factual issue and the appellant has not demonstrated a palpable and overriding error in the application judge’s assessment of the evidence. There was some evidence to support the application judge’s conclusions, including not only the Tenant’s direct evidence, but inferences the application judge drew from circumstantial evidence. The latter included evidence of the Landlord’s lack of responsiveness to the Tenant’s efforts and the Landlord’s insulting response to a communication from the Tenant’s lawyer. It bears noting, as well, that the parties agreed to proceed to the hearing of the application without cross-examinations, with the result that the Landlord did not directly confront the Tenant concerning its evidence.

[11] In the context of all the evidence, the application judge was entitled to accept the Tenant’s evidence in preference to the Landlord’s.

[12] The Landlord also takes issue with the application judge’s observations with respect to anti-Black racism. In addressing this question, it is important to consider both the evidence and the application judge’s use of the evidence.

[13] There was language in the Landlord’s affidavits that suggested its concern to find a tenant that would attract “like minded family-oriented customers” as opposed to a “liquor bar” was stereotypical labelling. The evidence supported the application judge’s conclusion that the real issue for the Landlord was the fact that the “Tenant is a Black-owned and operated business and caters to an Afro-Caribbean community”.

[14] The application judge was entitled to take judicial notice of anti-Black racism in Canada. He found that whether the Landlord’s racial stereotyping was conscious or not, it was a matter he could take account in the exercise of his discretion to grant relief from forfeiture. As he put it, at para. 38, “the societal realities pertaining to Black businesspeople like the Tenants must be factored into the exercise of the Court’s discretion in considering equitable remedies like injunctions and relief from forfeiture.”

[15] Based on all the evidence, including the Tenant’s evidence and the evidence of the Landlord’s own witnesses, the application judge was entitled to conclude that anti-Black racism was relevant to the Landlord’s refusal to negotiate a renewal of the lease, regardless of whether the Landlord’s actions were consciously motivated by racism.

[16] In light of the application judge’s finding that there would be no prejudice to the Landlord in renewing the lease, his acceptance of the Tenant’s evidence that it would suffer significant damage to its business if the lease were terminated, and his findings that the Tenant acted in good faith and demonstrated its intention to renew the lease prior to the expiry of the option, all of which are supported by the evidence, we would not interfere with the exercise of his discretion in granting the equitable remedy of relief from forfeiture.

[17] We therefore dismiss the appeal with costs to the respondent in the amount sought on a partial indemnity basis, namely $20,579, inclusive of taxes and disbursements.

“G.R. Strathy C.J.O.” “K. Feldman J.A.” “L. Sossin J.A.”