Court of Appeal for Ontario

Date: 2025-06-12
Docket: COA-24-CV-1172
Panel: Lauwers, Miller and George JJ.A.

Between:
720443 Ontario Inc.
Plaintiff (Respondent)

and

2682543 Ontario Inc. and Shahab Rashid Savojbolaghi
Defendants (Appellants)

Appearances:
Sean N. Zeitz, for the appellants
Aaron Blumenfeld, for the respondent

Heard: 2025-06-09

On appeal from the judgment of Justice Robert Centa of the Superior Court of Justice, dated October 18, 2024.

Reasons for Decision

[1] We dismissed this appeal with reasons to follow. These are our reasons.

[2] This is a commercial landlord-tenant dispute. The trial judge found that the appellant tenant, 2682543 Ontario Inc., repudiated the lease for premises to be fixtured by the tenant and operated as a restaurant, and that the respondent landlord, 720443 Ontario Inc., properly accepted the tenant’s repudiation and terminated the lease.

[3] The trial judge determined that the tenant owed damages of $1,068,349.50 to the landlord as of October 8, 2024. The guarantor of the lease, and co-appellant with the tenant company, Shahab Rashid Savojbolaghi, is liable for the full amount.

[4] The tenant raises two issues on this appeal.

Joint Occupancy

[5] First, the tenant argues that the trial judge erred in finding that the lease permitted a period of joint occupancy by the landlord and tenant. While the landlord’s forces completed the work required under the lease to ready the premises for the tenant, the tenant’s forces could begin their work with a period of overlap.

[6] The premises comprised a gutted, empty unit, and the parties understood that the space required a significant amount of work before the tenant could open a restaurant. One of the purposes of the lease was to delineate which party was responsible for completing each necessary task. These were outlined in Schedule C to the lease.

[7] By letter dated November 28, 2019, the landlord advised the tenant that it was completing its required work under the lease and the premises would be ready for the tenant to take possession on January 2, 2020. On January 20, the landlord advised the tenant that it was extending the date to February 3, 2020. In the ensuing weeks, the COVID-19 pandemic arrived.

[8] The tenant took the position that it was not obliged to take possession of the premises until all of the landlord’s work was completed. There is no real dispute that, despite the landlord’s prospective deadlines, the landlord had not completed sufficient work to permit the tenant to begin fixturing the space. It is common ground that, by mid-April 2020, the landlord’s work was sufficiently advanced for the tenant to begin fixturing.

[9] The tenant did not take possession or begin the fixturing process. The landlord eventually rented the premises to a new tenant in the summer of 2021, mitigating its damages.

[10] The tenant argues that the language of Schedule C meant that it had no obligation to begin the fixturing period until the landlord had completely finished all of its work. The tenant argues that it was not obliged to undertake “joint occupancy” with the landlord.

[11] The concept of “joint occupancy” is not express in the lease, but it is explicitly mentioned in another lease the landlord entered into around the same time with a third party. The tenant argues this other lease forms part of the factual matrix. The implication is that the inclusion of that provision in the other lease and the absence of that provision in the lease under appeal means that the tenant was permitted to wait until the landlord had completed all of its work. The tenant’s argument is that the lease’s silence as to “joint occupancy” means that it could not be implied. But, in questioning from the bench, counsel agreed that the lease can be interpreted to contemplate that the forces of both the landlord and the tenant might be on the premises as the landlord was completing its work and the tenant was proceeding to fixture. We do not see the term “joint occupancy” to be a technical term of art that has any relevance to the analysis.

[12] The trial judge rejected the tenant’s argument, noting, at para. 31:

The text of s. 3.01.1 poses a significant problem for the tenant’s interpretation of the lease. The tenant submits that Schedule C means that it had no obligation to begin the Fixturing Period until the landlord had completely finished all of the landlord’s work. That interpretation is difficult to reconcile with s. 3.01.1, which expressly states that the landlord need not complete all of its work prior to the commencement of the Fixturing Period. Rather, the landlord needed only to complete its work “to a state sufficient to permit the Tenant to commence fixturing.” This clause strongly suggests that the parties agreed that there would be circumstances where the tenant and the landlord could each be working on their tasks at the same time.

[13] The trial judge added, at para 33:

Section 13.02.2(c) clearly contemplates the tenant and the landlord completing their work at the same time. First, the lease expressly gives the landlord the right to require the tenant’s work prior to the completion of the landlord’s work in any case where the nature or state of the work causes the landlord to consider it necessary or desirable. Second, the lease requires the tenant to ensure that its contractors and employees complete the tenant’s work without interfering with the landlord’s contractors and employees:

13.02.2(c) Prior to commencement of any work on the Leased Premises by or on behalf of the Tenant, the Tenant shall submit to the Landlord complete drawings and specifications which shall be subject to the Landlord’s approval, such approval not to be unreasonably withheld. The Tenant’s Work shall be performed at the expense of the Tenant and the Landlord shall have the right to require the Tenant to perform part of the Tenant’s Work prior to completion of the Landlord’s Work in any case where the nature or state of the work is such that the Landlord considers it necessary or desirable to do so. The Tenant’s Work shall be carried out in a good and workmanlike manner and be subject to the approval of the Landlord. During the time that the Tenant is in occupancy of the Leased Premises for the purpose of carrying out the Tenant’s Work, but prior to the Commencement Date, it shall be bound by all of the provisions of this Lease, except those requiring payment of rent or contribution in respect of taxes and operating costs, the Tenant shall, however, pay for the cost of all utilities consumed by it with respect to the Leased Premises. The Tenant shall cause its employees and contractors to do their work so as not to interfere with the Landlord’s contractors and employees. [Emphasis in original.]

[14] We see no error in the trial judge’s interpretation.

Repudiation and Termination

[15] The tenant’s second argument is that the trial judge erred in finding that the tenant repudiated the lease, and that the landlord’s acceptance of the tenant’s repudiation was a proper way for the landlord to terminate the lease. The tenant draws a radical distinction between termination on the one hand and repudiation on the other hand. There is no such distinction on the facts of this case.

[16] The motion judge found that the tenant was obliged to take possession of the premises no later than 15 days following the beginning of the fixturing period, and it repudiated the lease when it failed to do so. The landlord notified the tenant when the fixturing period/possession date would begin and extended this deadline once. As noted, the tenant conceded that the landlord’s work was sufficiently advanced for the tenant to begin fixturing no later than mid-April 2020 but did not take possession. The landlord gave the tenant a final opportunity to remedy the default by taking possession of the premises by June 20, 2020, to begin fixturing. Because the tenant failed to take possession, the landlord was entitled to conclude the tenant had repudiated the lease, and to accept the repudiation and terminate the lease.

[17] The tenant also argues that after it had been given notice to begin fixturing, and after the COVID-19 pandemic hit, it continued to work with the landlord to find a solution. The argument is that it was searching for a way to preserve the lease and did not want to repudiate it. As Gillese J.A. held in TNG Acquisition Inc. (Re), 2011 ONCA 535, 107 O.R. (3d) 304, at para. 34:

Repudiation occurs when one party indicates, by words or conduct, that they no longer intend to honour their obligations when they fall due in the future. It confers on the innocent party a right of election to, among other things, treat the lease as at an end, thereby relieving the parties of further performance, though not relieving the repudiating party from its liabilities for breach.

[18] The motion judge found that the tenant repudiated by refusing to take possession and commence fixturing. There is no palpable and overriding error in this finding.

Disposition

[19] The appeal is dismissed with costs payable by the appellants to the respondent in the amount of $15,000, all-inclusive.

“P. Lauwers J.A.”
“B.W. Miller J.A.”
“J. George J.A.”