1305 Dundas W Inc. v. 2324702 Ontario Inc., 2019 ONSC 5068
CITATION: 1305 Dundas W Inc. v. 2324702 Ontario Inc., 2019 ONSC 5068 DIVISIONAL COURT FILE NO.: 228/19
DATE: 2019-08-29
SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT AND SUPERIOR COURT
RE: 1305 Dundas W Inc., Applicant/Respondent AND: 2324702 Ontario Inc., Respondent/Appellant/Moving Party
BEFORE: Kiteley J.
COUNSEL: Evan Presvelos and Sam Presvelos, for the Respondent/Appellant/Moving Party Julian Binavince, for the Applicant/Respondent
HEARD at Toronto: June 26 and 27, 2019
ENDORSEMENT
[1] 1305 Dundas W. Inc. is the owner of premises located at 1305 Dundas St. West and is the landlord of the commercial premises in which 2324702 Ontario Inc. operates a restaurant and lounge named Remix. The order under appeal was made following submissions heard on February 20, 2019 arising from the application by 2324702 and cross-application by 1305. For ease of reference, the parties will be referred to as “the Landlord” and “the Tenant”.
[2] This is a motion by the Appellant Tenant for an order, pending the appeal, to stay the order dated March 29, 2019 made by Nakatsuru J.[^1] that terminated the commercial lease and required the Appellant to vacate the commercial premises by May 28, 2019. For the reasons that follow, the motion is granted.
Background
[3] On March 1, 2008 the Tenant entered into the original commercial lease for the premises. On September 5, 2013 the Tenant entered into a lease amending agreement with the previous landlord. Pursuant to the lease amending agreement, the Tenant was granted the unilateral option to renew the lease for a further five years. The Landlord purchased the property in 2017.
[4] In February 2018 the Landlord gave written notice that the lease was terminated for non-payment of rent. Later in February 2018, the Tenant brought its application for a declaration that the lease agreement was in full force and effect, for an order for possession, and in the alternative, for an order for relief from forfeiture and an injunction against the landlord from interfering with the Tenant’s use and occupation of the premises.
[5] In July 2018 the Landlord brought its cross-application for, amongst other things, a declaration that the lease had not been properly renewed.
[6] The parties reached an interim agreement regarding payment of rent on a without-prejudice basis to avoid urgent applications and to allow the Tenant to remain in possession pending the hearing of the applications.
[7] The hearing of the applications was scheduled for September 11, 2018 and was adjourned at the request of the Tenant to December 7, 2018. When the Tenant changed counsel, the hearing was adjourned to February 20, 2019.
[8] The material before the application judge included affidavits setting out the evidence from both parties and transcripts of cross-examinations. No witnesses testified.
Decision dated March 29, 2019
[9] The application judge noted that he was familiar with the issues as he had been involved with the case on September 11, 2018 and on November 26, 2018. Counsel made submissions with respect to these issues:
(a) was the lease validly terminated by the Landlord in February 2018 for non-payment of rent and, if so, should the Tenant get relief from forfeiture;
(b) given that the lease between the Tenant and the Landlord expired September 30, 2018, did the Tenant validly exercise its option to renew for another five years and, if it did not, should it be permitted to do so on the basis of waiver or estoppel;
(c) what is the amount of realty tax and rent the Tenant owed to the Landlord?
[10] In the order dated March 29, 2019 the application judge held as follows:
THIS COURT DECLARES that the Lease was properly terminated by the Landlord for failure to pay rent.
THIS COURT ORDERS that the Tenant be granted, and the Tenant is hereby granted, relief from forfeiture with respect to the termination of the Lease by the Landlord.
THIS COURT DECLARES that the Tenant failed to properly exercise its right to renew the Lease pursuant to the terms and conditions set out in the Lease.
THIS COURT ORDERS that the Tenant deliver vacant possession of the premises that are the subject of the Lease . . . to the Landlord within 60 days of the date of this decision.
THIS COURT FURTHER ORDERS that the Tenant pay to the Landlord:
(a) the increased rent that became effective October 1, 2017, and
(b) the property tax owing to the end of the term of the Lease, being September 2018.
THIS COURT FURTHER ORDERS that the Tenant pay the Landlord, from October 1, 2018 to the date the Tenant delivers vacant possession of the Premises to the Landlord, a monthly amount equal to the sum of monthly base rent and additional rent under the Lease, as damages.
THIS COURT FURTHER ORDERS that any sums held by the Tenant’s lawyers in trust be paid to the Landlord to satisfy this judgment.
[11] In his endorsement, the application judge dealt with the following issues that are not reflected in the signed and entered order:
(a) The Landlord had not waived the requirement in the lease that the Tenant give written notice of the intention to exercise the option to renew. [paragraph 55]
(b) The Landlord was not estopped from relying on the requirement that the Tenant give written notice of the intention to exercise the option to renew. [paragraphs 56 to 61]
(c) The Court did not exercise its equitable jurisdiction to relieve the Tenant from the consequences of failing to provide written notice of the intention to exercise the option to renew. [paragraphs 62 to 67]
(d) The Tenant did not take issue with the fact it owed the Landlord additional money for rent and realty tax. The issue was how that additional amount should be calculated. The Landlord was estopped from retroactively claiming an increase in realty taxes for the period July 2017 to September 30, 2018 based upon strict compliance with the condition that the Tenant was required to pay a third of the taxes pursuant to section 2.05(5). [paragraphs 74 to 80]
(e) It was inequitable and unfair to require the Tenant to pay the amount set out in the “Overholding Rent” provision because the parties had taken the matter to court to determine whether the lease was validly renewed. For the period from October 1, 2018 to the Tenant vacating the premises, the Tenant owes effectively the 2017 base rent and its share of the realty taxes to be determined. [paragraph 81]
(f) If the reasonable allocation of the realty tax cannot be agreed to, the matter will be referred to a tax consultant chosen by the Landlord whose decision will be binding. [paragraph 83]
(g) The actual sums paid to the Landlord owing from this judgment should take into account monies that have already been paid in the interim. If there are any issues arising out of the decision or how it can be effected, counsel could contact the application judge. [paragraph 84]
Appeal by the Tenant
[12] The notice of appeal was delivered on or about April 26, 2019. It includes a request that the judgment be set aside; that judgment be granted finding that the Tenant properly renewed its lease agreement with the Landlord; that the Tenant is entitled to a further five-year extension; and, an order for costs. The Tenant asserted that the Court’s jurisdiction to hear the appeal from the final order was found in s. 19(1) and s. 19(1.2) of the Courts of Justice Act, R.S.O. 1990, c. C. 43 and Rule 61 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
Motion by the Tenant for stay pending the hearing of the appeal
[13] The record before me includes the Tenant’s notice of motion; the affidavit of Michael Assoon, co-owner of the business, sworn May 9, 2019; and, an affidavit sworn May 15, 2019 by a professional in the commercial lease industry, purporting to express an expert opinion to assist the court in deciding whether the Tenant would suffer irreparable harm.
[14] The Landlord has filed a responding motion record that contains the affidavit of Pouneh Rouhani sworn June 20, 2019. She is a director of the Landlord. She deposed that she had reviewed the evidence the Landlord filed in connection with the applications and that the evidence remained accurate. She also provided evidence as to payment of rent and realty taxes. She asserted that the Tenant should pay overholding base rent defined as twice the monthly rent and a portion of the “additional rent and charges”. She also deposed that as of the date of her affidavit, most of the residential tenants had vacated their units and that interior construction work was set to commence in July 2019. She deposed that the Landlord had obtained a building permit to perform exterior construction work, which would cut off access to the premises.
[15] In her affidavit, Rouhani said she relied on the evidence that had been before the application judge. Only some of that evidence was before me on June 26. Because of the preliminary issues referred to below, I adjourned the hearing from June 26 to June 27. Counsel agreed to proceed without the entire record that had been provided to the application judge on the basis that each could file a supplementary compendium.
Preliminary Issues
[16] Section 19 of the Courts of Justice Act provides that an appeal lies to the Divisional Court as described in subsection (1.2)(a) or (1.2)(b).
[17] Neither the endorsement nor the judgment reflects specific amounts to be paid. The parties had not returned to the application judge to finalize the accounting, and hence it was not possible to identify an amount owing. Paragraphs 82 and 83 of the endorsement indicate that more than one payment is required. There is no basis for finding that subsection 19(1.2)(a) or (1.2)(b) applies.
[18] As a final order not captured by subsection 19(1.2)(a) or (1.2)(b), pursuant to s. 6(1)(b) of the Courts of Justice Act, the appeal lies to the Court of Appeal.
[19] Following a recess, counsel agreed to the following:
(a) Pursuant to s. 6(1)(b), the appeal of the final order is properly before the Court of Appeal, not the Divisional Court;
(b) Pursuant to s. 110(1), the Divisional Court should transfer the appeal to the Court of Appeal;
(c) The Appellant should pay costs thrown away for the attendance on June 26 in the amount of $500;
(d) Pursuant to Rule 63.02(1)(a), sitting as a judge of the Superior Court, this Court has jurisdiction and will hear the motion to stay the order dated March 29, 2019. The motion was adjourned to June 27 to be heard on the basis of the material filed in the Divisional Court together with supplementary compendia;
(e) The issues with respect to the motion to stay were those listed in paragraph 18 of the Tenant’s factum in the appeal.
Analysis
[20] Section 106 of the Courts of Justice Act provides that a court may stay any proceeding “on such terms as are considered just”. Rule 63.02 similarly provides that an interlocutory or final order may be stayed “on such terms as are just”.
[21] In Anne of Green Gables Licensing Authority Inc. v. Avonlea Traditions Inc.,[^2] Charron J.A. heard a motion by the licensee under rule 63.02 for a stay pending appeal of the order enjoining the licensee from making, selling or otherwise dealing with particular goods. She held as follows:
It is common ground between the parties that the appellant must meet the tripartite test set out in RJR-MacDonald Inc. v. Canada (1994), 1994 117 (SCC), 54 C.P.R. (3d) 114 in order to succeed on this motion. It is my view that the motion cannot succeed.
First, the appeal must present a serious issue for adjudication. The appellant, in its notice of appeal, essentially reiterates the arguments that it advanced at trial in defence of the respondents’ claim. It is apparent from the extensive reasons delivered by the trial judge that all of the issues were fully canvassed and that many of the arguments were unsuccessful because they were simply not sustainable on the evidence. The appellant will have to contend with the same evidentiary basis, or lack thereof, on appeal. Therefore, to the extent that the appeal reiterates those same arguments, it is not apparent to me that it presents a serious issue to be determined.
Nonetheless, the court on this motion is not in a position to assess the merits of the appeal in any depth and, since some of the legal issues appear to be arguable, I am prepared to accept, for the purpose of this motion, that the appeal raises issues of sufficient merit to warrant consideration of the balance of the test.
As a second criterion, the appellant must show that it will suffer irreparable harm if the relief is not granted. Ms. Gallagher, who is the president and appears to be the directing mind of the appellant corporation, alleges that the continued injunction will force Avonlea Traditions Co. out of operation because 70% of its business deals with Anne of Green Gables products.
Based on the material before the court, I am not satisfied that the irreparable harm that is envisaged is one that can be avoided if a stay is granted.
Finally, and perhaps most importantly, it is my view that the balance of convenience does not favour the appellant. I find much credence to the respondents’ position that it is they who will suffer more harm if the status quo that was in existence at the time of judgment is restored.
At this point in time, the findings of the trial court must be taken to be prima facie correct. The trial judge has found that Ms. Gallagher held an irrational yet firm view that the respondents did not deserve payment of royalties as it was she who was exerting all of the effort and work. The trial judge also noted that at the heart of this lawsuit is a “very distorted sense of fairness” held by Ms. Gallagher that makes her totally unable to appreciate the respondents’ point of view. In essence what Ms. Gallagher is seeking on this motion for her company is the ability to maintain a status quo that was found to be untenable at trial. There is evidence the material that Ms. Gallagher has vowed that she will continue selling the products even if unsuccessful at trial. In fact, the appellant has continued to advertise and sell Anne of Green Gables products after the injunction was issued on March 10, 2000. No credible explanation has been offered to justify this conduct.
In all the circumstances, I accept the respondents’ submission that if this situation is allowed to continue any longer, it will cause irreparable harm to the respondents…. [Citations omitted.]
[22] In Longley v. Canada (Attorney General),[^3] Weiler J.A., hearing a motion to stay a judgment pending appeal, held as follows:
The test for staying an order pending an appeal is the same as the test for an interlocutory injunction: Circuit World Corp. v. Lesperance et al. (1997), 1997 1385 (ON CA), 33 O.R. (3d) 674 (C.A.) at 676-677. First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be determined on the appeal. Second, the court must determine if the appellant would suffer irreparable harm if the application were refused. Finally, the balance of convenience must be determined by assessing which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.
The three requirements necessary to support the granting of a stay are not to be considered as separate hurdles but as interrelated considerations: Apotex Fermentation Inc. v. Novopharm Ltd. 1994 16694 (MB CA), [1994] M.J. No. 357 (C.A.). Accordingly, strength respecting one criterion may compensate for the weakness of another: Circuit World Corp., supra. The overarching consideration is whether the interests of justice call for a stay: International Corona Resources Ltd. v. LAC Minerals Ltd. (1986), 21 C.P.C. (2d) 252 (Ont. C.A.).
[23] In Warren Woods Land Corporation v. 1636891 Ontario Inc.,[^4] Weiler J.A. heard a motion to stay an order that had required removal of all notices filed by the Manager on the land of the owner. In making the order, the application judge held that, at the time the notices were registered, the Manager did not have an interest in the land in issue. Weiler J.A. held as follows:
There is no serious question to be determined.
The arguments made before the application judge as to whether article 3.14 of the Agreement created an interest in land, were also made before me. I agree with the application judge’s conclusion that article 3.14 did not give the Manager an interest in the land at the time it registered the notices on title. My reasons for doing so are, however, somewhat different than his. . . .
[24] In Stuart Budd & Sons Limited v. IFS Vehicle Distributors ULC,[^5] Epstein J.A. dealt with a motion for a stay of an order that had dismissed the motion challenging the jurisdiction of the Ontario Court. She held as follows:
In RJR-MacDonald Inc. . . . the Supreme Court of Canada set out a three-part test for obtaining a stay of a judgment pending appeal. . . .
The first component, whether there is a serious question to be determined on the appeal, requires a preliminary assessment of the merits of the appeal: RJR-MacDonald Inc., at p. 334.
This assessment begins with a presumption of correctness of the decision. . . . The onus is on the moving parties to establish a case for a stay. . . . The threshold to be met in connection with this first component of the test is a modest one: Horsefield v. Ontario (Registrar of Motor Vehicles) (1997) 1997 2546 (ON CA), 35 O.R. (3d) 304 . . . at 311; RJR-MacDonald Inc., at p. 337. The moving parties must demonstrate that the appeal is not frivolous or vexatious: Longley . . . at para. 16
[25] At paragraphs 24 and 25, Epstein J.A. listed the expected and possible serious issues raised in the appeal which she held satisfied the first requirement. She went on to assess the criteria of irreparable harm and balance of convenience, noting in paragraph 43 that in Circuit World, Laskin J.A. had held that the “three criteria are not watertight compartments. The strength of one may compensate for the weakness of another. Generally, the court must decide whether the interests of justice call for a stay”. At paragraph 46, Epstein J. A. granted the order for a stay pending appeal.
[26] In Canada Trust v. Potomski,[^6] Pardu J.A. dealt with a motion to stay a judgment ordering the mortgagee to pay the deficit in the tax account and to vacate with leave to issue a writ of possession if the mortgagor failed to vacate. The case has unusual procedural complexities that are not relevant. Pardu J.A. held as follows:
The test for staying an order pending an appeal under rule 63.02 . . . is. . . RJR-MacDonald. . . .
In analyzing these factors the overarching question is whether the interest of justice call for a stay: Longley . . .
In my view, the appellant has not demonstrated that a stay is appropriate. He has not identified any error in the reasoning of the summary judgment motion judge. . . .
. . . I infer that the purpose of filing the appeal was to delay enforcement of the judgment.
Undoubtedly, enforcement of the writ of possession will be troublesome for the appellant. However, in this case I am not convinced that the balance of convenience or the interests of justice call for a stay of enforcement of the judgment for possession and the writ of possession.
[27] In Abuzour v. Heydary,[^7] Huscroft J.A. heard a motion to stay pending an appeal in which the circumstances were unusual. At paragraph 26 he adopted the RJR Macdonald test including the following:[^8]
Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.
[28] At paragraph 28, Huscroft J.A. held as follows:
In my view, this submission fails to appreciate the low threshold at the serious issue step. I need not conclude that the appellants have a strong argument or that they will succeed on appeal. Their appeal is neither vexatious nor frivolous, and that is enough at this stage to allow me to conclude that there is a serious issue to be tried.
[29] Huscroft J.A. found that the moving parties had established irreparable harm and balance of convenience. At paragraphs 37 and 38, he concluded that the strongest argument in favour of granting a stay was one of basic fairness and that the overall justice of the case required the grant of a stay.
[30] In the Superior Court, in Lakeshore Landmark Development Corp. v. TCI Realty Holdings Inc.[^9] Dambrot J. heard a motion for a stay pending the hearing of the appeal from the decision of the Master. At paragraph 32, Dambrot J. adopted the RJR Macdonald test for a stay. At paragraph 33, he held that the appellant could not meet the test of “serious issue to be determined on the appeal” and found that the appeal was devoid of merit and had no prospect of success.
[31] In Kassiouris v. Kalantzis[^10] Akbarali J. heard and dismissed a motion by the tenant for a declaration that he had validly exercised his option to renew and for relief from forfeiture. She found that the tenant had not exercised the right to renew pursuant to the lease. At paragraph 39, Akbarali J. concluded that relief from forfeiture is not available in Ontario to relieve against a tenant’s failure to exercise an option to renew a lease and that the only relief available is described in Ross v. T. Eaton Co.[^11] She found that the tenant had not made diligent efforts to comply with the terms of the lease and therefore the narrow jurisdiction available in Ross did not apply. At paragraph 49, Akbarali J. noted that, if the tenant was not successful on his motion, the tenant asked for an order enjoining the Landlord from evicting him pending the disposition of his planned appeal. Akbarali J. referred to the test applicable to a stay. She found that the tenant’s argument as to relief from forfeiture was novel but not frivolous. She also found that the tenant had demonstrated irreparable harm because his clientele would be lost and his business would, in effect, be destroyed. In addition, the balance of convenience favoured the tenant.
[32] In RJR MacDonald,[^12] the Supreme Court described the threshold for deciding that there is a “serious question to be tried” is a low one that can be met once the court is satisfied that the application is neither vexatious nor frivolous. In the context of a motion for stay of a judgment pending an appeal, the motion judge should take the following approach.
[33] First, the judgment is considered to be prima facie correct.
[34] Second, in order to assess whether there is a serious question for an appellate court, the judge on a motion to stay must, by implication, consider the standard of review. That engages an analysis as to whether the decision under appeal is based on a finding of fact or a finding of mixed fact and law, in which case the standard of review is palpable and overriding error, or on a question of law, in which case the standard of review is correctness.[^13]
[35] Third, in that context, the threshold for deciding that there is a serious question is low. The threshold is met if the motions judge is satisfied that the appeal is neither frivolous nor vexatious. A prolonged examination of the merits is neither necessary nor desirable. Even if of the opinion that the appellant is unlikely to succeed, the motions judge should proceed to consider the second and third tests because the three criteria are not separate hurdles but interrelated considerations.
[36] Fourth, after considering the three criteria separately and how they interrelate, the motions judge should consider whether the interests of justice call for a stay.
A. Serious question to be tried
[37] I have considered paragraph 18(a) and (b) of the Tenant’s factum on the appeal to which counsel referred, the factum filed on this motion, and the submissions. The Respondent insists that the Tenant is challenging only findings of fact. However, most of the findings reflect the application of the law to the facts and accordingly are largely findings of fact and law. The standard of review is the same, namely palpable and overriding error. I summarize the grounds of appeal relevant to this motion as follows:
(a) Did the application judge make a palpable and overriding error in finding that the Landlord did not waive the right to require written notice of the lease renewal?
(b) If the Landlord did not waive the right to require written notice of the lease renewal, did the application judge make a palpable and overriding error in finding that the Tenant was not entitled to relief from forfeiture as a result of the Tenant’s failure to deliver a notice of renewal by the date stipulated in the lease? This requires reference to the findings of the application judge as to estoppel and clean hands.
[38] The relevant section of the lease is as follows:
Section 2.02.1 (as amended in the Lease Amending Agreement dated September 5, 2013)
(a) Provided that the Tenant is (a) 2324702 Ontario Inc.; (b) in occupation of the whole of the Premises; and (c) not in default under this Lease, the Tenant shall have the option exercisable on no less than nine (9) months’ and no more than eleven (11) months’ written notice to the Landlord prior to the expiry of the then current Term to extend the Lease with respect to the Premises for one (1) additional term of five (5) years each on the same terms and conditions as the Term save and except:
(i) there will be no further right to extend the Term following the second extension term;
(ii) the basic rent rate for each extension term shall be the then fair market Minimum Rent rate for comparable premises in the area, provided that in no event shall such rate be less than the Minimum Rent payable during the last twelve (12) month period immediately preceding the commencement of the then current extension term; and
(iii) there shall be no leasehold improvement allowance, Landlord’s Work, rent-free period or other inducements.
(b) If the parties are unable to agree on the Minimum Rent for an extension term on or before that date that is sixty (60) days prior to the commencement of such extension term, then such Minimum Rent shall be determined by arbitration before a sole arbitrator in accordance with the Arbitration Act, 1991 (Ontario), or its successor legislation. The parties shall execute a lease extension agreement prepared by the Landlord to reflect the terms of the extension term. [Emphasis added]
[39] The term of the lease ended on September 30, 2018. At paragraph 40, the application judge found that the period during which the option was exercisable was November 1 to December 31, 2017. The 60-day deadline for agreement on the Minimum Rent ended August 1, 2018 after which arbitration was required.
[40] The evidence before the application judge was that as early as May 15, 2017 both parties engaged in discussions to extend the lease for a further term. The email on which the Tenant relied as constituting written notice is dated October 16, 2017. The last email exchange about particulars of a renewal was from Assoon to Rouhani on November 3, 2017 saying that he would get back to her about their best offer after getting “comparables” for rent in the neighbourhood.
[41] On February 1, 2018 the Tenant did not pay rent for reasons explained in the evidence. The Landlord attempted to lock out the Tenant from the premises and to terminate the lease agreement. When the Landlord’s agent attended at the premises, left notification that it was taking possession, and changed the lock on the front door, a representative of the Tenant was in the premises and, as a result, the Landlord did not take possession. The Tenant launched an application for relief from forfeiture.
[42] In this motion for a stay pending appeal, the Tenant challenges findings of fact and law and, in the appeal, will have to persuade the court that the application judge made palpable factual errors and an overriding error that is sufficiently significant to vitiate the challenged findings of fact.[^14]
[43] I am satisfied that the Tenant has met the low threshold required to establish a “serious question to be appealed”. The application judge dealt with a written record and, while he rejected evidence of the Tenant, he made no findings of credibility. In the renewal analysis, the application judge’s interpretation of the emails and the evidence led him to conclude that the Tenant had not given the written notice required by section 2.02.1(1). In the waiver of notice analysis, the application judge held that the evidence did not demonstrate an unequivocal and conscious intention to abandon the right to have the Tenant comply with the time requirements and written notice. In each analysis, the application judge drew inferences from emails and from the evidence that may not been supported on the record. In the estoppel analysis, the application judge failed to consider relevant the evidence that the Landlord had the mistaken impression that the renewal was not a unilateral right of the Tenant. In the clean hands analysis (at paragraph 67), the application judge relied on evidence as to three late rental payments even though section 17.01 of the lease provided that the Tenant was not in default of payment of rent until the non-payment continued for five business days and, as the Landlord conceded, none of the three late payments exceeded that deadline. As the court held in Anne of Green Gables, some of the legal issues appear arguable.
[44] On a preliminary assessment of the merits, even though I am of the opinion that the appeal is unlikely to succeed, I am satisfied that the Tenant has established that there is a serious question to be determined on the appeal.
[45] The consideration of whether there is “a serious question” must be juxtaposed with that of whether the appeal is frivolous and vexatious.[^15] The Respondent disagrees with the issues raised in the appeal and argues that the Tenant has “virtually no chance of success” because the issues raised do not constitute “palpable and overriding errors”. However, the Respondent does not go so far as to argue that the appeal is frivolous and vexatious. Unlike Dambrot J. in Lakeshore Landmark, I cannot find that the appeal is devoid of merit and has no prospect of success. Unlike Pardu J.A. in Canada Trust v. Potomski, I cannot find that that the purpose of filing the Notice of Appeal was simply to delay enforcement. I am satisfied that the appeal is not frivolous and vexatious.
[46] As Charron J.A. held, there is sufficient merit to warrant consideration of the other factors.
B. Appellant will suffer irreparable harm if the stay is not granted
[47] In Assoon’s affidavit sworn May 9, 2019 he deposed as follows. The Lounge has been operating at 1305 Dundas since 2008. He had been managing the business for seven years and had been a co-owner for five years. The owners have invested well over $500,000 in the business to upgrade fixtures and make leasehold improvements. The Lounge has a sizeable customer base in the area with long-standing regular customers. Advertisements demonstrate that local musicians have played at the Lounge. The Lounge has developed relationships with various local organizations and often holds charitable events as demonstrated in the advertisements. The Lounge participates in various citywide events such as Canadian Music Week and International Women’s Day as demonstrated in the advertisements and notices.
[48] The application judge ordered the owners of the Lounge to evacuate within 60 days. Assoon said that evacuating on such short notice would have a profound financial and reputational impact on the family business and would cause them to lose their life savings from the significant investment made in upgrading and in developing goodwill. He said that “most importantly, however, our business would also lose its brand and the benefit of the relationships it has built over the last seven years”. Assoon also noted that such an evacuation would prejudice the business and creditors, and that he would not have sufficient time to find another unit. Assoon noted that if the stay is not granted and if the Tenant is successful on the appeal, they would suffer significant financial hardship in ceasing operating and removing goods and fixtures, only to move back in at a later date. Assoon also noted he would have to terminate or lay off employees which would expose them to notice provisions under the Employment Standards Act.
[49] The Tenant also provided an affidavit of a professional in the commercial lease industry who gave evidence as to the difficulty in finding a commercial landlord who would agree to a short-term commercial lease, and the extent of renovations that would be needed to make such a space suitable for the operation of the Lounge and compliant with municipal regulations.
[50] In the responding motion record, the Landlord did not challenge any of that evidence. In submissions, the Landlord took the position that the evidence of the professional demonstrated that there would be a cost associated with relocation but not that there would be irreparable harm. Otherwise, counsel argued that the evidence on behalf of the Tenant amounted to “bald allegations” and there was no evidence that patrons would not follow.
[51] Based on the compelling uncontradicted evidence, I am satisfied that the Tenant will suffer irreparable damage if a stay is not granted. The loss of investment, the uncertainty as to whether the Lounge would ever be reconstituted, the impact on staff, and the reputational damage are self-evident.
C. Balance of convenience
[52] In her reply affidavit, Rouhani deposed that the Landlord had obtained a building permit to perform exterior construction work that would cut off access to the premises. She said that she had been told by the contractors bidding on the exterior construction work that the basement premises would not be accessible for 3 to 4 months during construction. She also said that most of the residential tenants had vacated and interior construction work was to commence in July 2019. The Landlord wanted to have the interior and exterior construction work carried out at the same time so as to minimize the impact on the occupants of the building.
[53] That evidence does not sway the balance of convenience in favour of the Landlord. While the Landlord has a building permit, there was no evidence as to time sensitivity or cost. Indeed, in submissions, the Landlord conceded that the balance of convenience likely favoured the Tenant.
[54] I am satisfied that the balance of convenience does favour the Tenant.
Conclusion on the criteria for a stay pending appeal
[55] Having considered the individual criteria separately, I now consider them together. As indicated in Longley, they are not separate hurdles but interrelated considerations.
[56] In my view, the evidence with respect to irreparable harm if a stay is not granted demonstrates the enormous prejudice that the Tenant would suffer. That same evidence, compared with the evidence of the circumstances of the Landlord, compellingly demonstrates that the balance of convenience favours the Tenant. I have indicated above that I am satisfied that there is a serious question to be decided on the appeal and that the appeal is not frivolous or vexatious. To the extent that the record on that criterion is modest, that is all that is required and it is compensated by the strength of the evidence on the other two criteria. The interests of justice call for a stay pending the appeal.
"On terms that are just"
[57] Section 106 and Rule 63.02 provide that the court may grant a stay on terms that are just. Counsel for the Respondent took the position that if the court granted a stay, the court should “craft an order” that reflected rent and property taxes consistent with the lease, and that required the Tenant to pay overholding rent. Counsel also pointed out paragraph 7 of the order and the outstanding issue of costs.
[58] At my urging, after submissions, counsel assisted the parties in arriving at an agreement as to the amount of rent plus HST and the amount of realty tax that the Tenant would pay pending the hearing of the appeal if a stay was granted. As a result, paragraph 6 of the order should be stayed. I see no reason to stay enforcement of paragraph 5 bearing in mind that if the parties are unable to agree as to the property tax owing, in paragraph 80, the application judge directed that the opinion of a tax professional is conclusive. I do agree that there is no reason to stay paragraph 7 of the order. Furthermore, counsel should follow the direction of the application judge with respect to costs.
Costs
[59] Counsel agreed that the successful party was entitled to costs of the motion in the amount of $5000 all in.
ORDER BY THE DIVISIONAL COURT AS FOLLOWS:
[60] The appeal is transferred from the Divisional Court to the Court of Appeal.
ORDER BY THE SUPERIOR COURT AS FOLLOWS:
[61] The motion is granted in part as follows:
(a) paragraphs 1, 2, 3, 4 and 6 of the order dated March 29, 2019 are stayed pending the disposition of the appeal;
(b) paragraphs 5 and 7 are not stayed.
[62] If by September 15, 2019 the parties are unable to agree as to the costs of the hearing before the application judge, then by September 25, 2019 the Tenant shall file submissions limited to two pages and by October 9, 2019 the Landlord shall file submissions limited to two pages. There will be no reply submissions without leave of the application judge.
[63] On consent as to the amount, the Landlord shall pay costs of this motion in the amount of $5000, all in, payable by September 15, 2019.
Kiteley J.
Date: August 29, 2019
[^1]: 2324702 Ontario v. 1305 Dundas, 2019 ONSC 1885, 100 R.P.R. (5th) 223. The style of cause in the Notice of Appeal is as above which is the style of cause in the cross-application. [^2]: [2000] O.J. No. 1064 (C.A.), at paras 6-9 and 13-16. [^3]: 2007 ONCA 149, [2007] O.J. No. 929, at paras 14-15. [^4]: 2012 ONCA 12, 2012 CarswellOnt 97, at paras 14-15. [^5]: 2014 ONCA 546, 122 O.R. (3d) 472, at paras 21-23. [^6]: 2015 ONCA 324, 72 C.P.C. (7th) 232, at paras 23-27. [^7]: 2015 ONCA 249, 126 O.R. (3d) 101, at paras 24, 26, 28, and 37-38. [^8]: RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, at p. 334. [^9]: 2016 ONSC 3289, [2016] O.J. No. 2671, at 32-33. [^10]: 2017 ONSC 1985, 2017 CarswellOnt 4877, at paras 39 and 49. [^11]: (1992) 1992 7470 (ON CA), 11 O.R. (3d) 115, at para. 30. [^12]: RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, at p. 337. [^13]: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. [^14]: Waxman v. Waxman, 2004 39040 (ON CA), [2004] O.J. No. 1765, at paras. 295-297. [^15]: Pickard v. London Police Services Board, 2010 ONCA 643, [2000] O.J. No. 4169, at para 19.