Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220512 DOCKET: C69860

Huscroft, Thorburn and George JJ.A.

BETWEEN

Drop and Run Inc. Applicant (Appellant)

and

1909703 Ontario Inc. operating as Integral Health Group Inc. Respondent (Respondent)

Counsel: Adrienne Zaya and Sara J. Erskine, for the appellant Theodore Nemetz, for the respondent

Heard: May 5, 2022

On appeal from the judgment of Justice Lucy K. McSweeney of the Superior Court of Justice, dated August 17, 2021.

Reasons for Decision

[1] On September 7, 2020, the appellant Drop and Run Inc. was locked out of premises it was subleasing from the respondent, 1909703 Ontario Inc. (operating as Integral Health Group Inc.), for failure to pay rent. The appellant obtained an interlocutory injunction to restore its possession and resumed its tenancy on October 2, 2020.

[2] The appellant sought a declaration that the lockout was unlawful and damages for the 26 days it was locked out. The appellant argued that the respondent had agreed to reduce the rent by 75% and that it had paid the reduced rent. As a result, there was no failure to pay rent and no basis to lockout the appellant.

[3] The application judge found that the respondent did not agree to reduce the rent. She also found it was not necessary to determine whether the lockout would have been unlawful as of October 1, when the Helping Tenants and Small Businesses Act, 2020, S.O. 2020, c. 23 – Bill 204 (HTSBA) came into force and amended the Commercial Tenancies Act, R.S.O. 1990, c L.7 (“the Act”), because the appellant re-entered the premises on October 2.

[4] The appellant argues that the application judge erred in finding that the respondent was entitled to lock it out of the premises on September 7, 2020. The appellant also seeks leave to appeal the costs award.

[5] The appeal is dismissed for the reasons that follow.

[6] The application judge found that the parties never entered into a rent reduction agreement, preferring the evidence of Mr. Stefanov, the respondent’s principal, to that of the appellant’s principal, Mr. Batchelor. This is a factual finding that is entitled to deference in the absence of a palpable and overriding error. The appellant has not established any such error. The application judge’s finding is amply supported by the record, which includes text message communications from the respondent demanding full payment after the appellant began paying a reduced amount of rent.

[7] The appellant’s argument that it is entitled to damages under the Act for the lockout from September 7 to October 1 is misconceived. The appellant was not locked out during the non-enforcement period established by the HTSBA. That period commenced on October 1, 2020 pursuant to s. 79 of the Act.

[8] Landlords that locked out tenants between September 1 and September 30, 2020 were required to restore possession to the tenant (unless the tenant declined to accept possession) as soon as reasonably possible, failing which the landlord was liable to pay damages under s. 86(1) of the Act. In this case, the appellant regained possession pursuant to the injunction on October 2 – the day after the HTSBA came into force. The respondent is not liable for damages in these circumstances.

[9] The appeal is dismissed.

[10] There is no basis to interfere with the application judge’s costs order. The motion judge reserved costs on the injunction motion to the application judge. It was open to the application judge to conclude that costs for the motion were not warranted given the respondent’s success on the application, and the application judge did not award costs to the respondent on the motion because it did not attend or file any materials. The application judge made no error in law or in principle, nor is her award plainly wrong.

[11] Accordingly, the appeal is dismissed. Leave to appeal the costs order is dismissed.

[12] The respondent is entitled to costs in the agreed amount of $7,000, all inclusive.

“Grant Huscroft J.A.”

“J.A. Thorburn J.A.”

“J. George J.A.”