CITATION: 2503257 Ontario Ltd. v. 2505304 Ontario Inc. (Good Guys Gas Bar), 2021 ONSC 6101
DIVISIONAL COURT FILE NO.: DC-21-0012
DATE: 20210915
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Edwards RSJ., McKelvey, Favreau JJ.
BETWEEN:
2503257 Ontario Ltd. and Faith of Life Network
Applicants (Respondents in Appeal)
– and –
2505304 Ontario Inc. o/a Good Guys Gas Bar
Respondent (Appellant)
Bernie Romano, for the Respondents
Bryan Fromstein, for the Appellant
HEARD at Brampton (by videoconference): June 14, 2021
REASONS FOR DECISION
MCKELVEY J.:
Introduction
[1] This appeal deals with an application made by a numbered company, 2503257 Ontario Ltd. (“257”) and the Faith of Life Network for an order requiring another numbered company, 2505304 Ontario Inc. o/a Good Guys Gas Bar (“304”) to vacate the premises where their gas bar was located.
The basis for the application was the allegation that 304 occupied the premises pursuant to a month to month commercial tenancy. The position taken by 304 was that they did not lease the premises, but had a direct interest in the property.
[2] This application was incorrectly brought under Rule 14.05(3)(f) and (h). However, the application was argued under Rule 14.05(3)(e) which provides for,
(e) the declaration of an interest in or charge on land, including the nature and extent of the interest or charge….
[3] It was agreed by the parties that after the property was purchased the appellant paid the sum of $10,937.49 monthly to the respondents. The appellant asserted that this represented the cost of a mortgage for the land on which a gas bar was located. This in turn related to an expectation that this land would be severed from the property purchased and sold to the appellant. The appellant asserts that it had an interest in the property which was subject to an unsigned development agreement. It denies that it paid a “monthly rent” for the property on which the gas bar was located.
[4] In his decision, the application judge concluded as follows:
The Respondent however, disputes the characterization by the Applicants of the monthly payment as rent pursuant to a monthly tenancy. The Respondent in the Affidavit of Masud Raja has adduced evidence that the monthly sum was in respect of mortgage interest on the property and property tax.
Raja asserts in his affidavit, “There was no discussion framing our relationship with the Applicant as Landlord-Tenant. At no time was the lease discussed or even mentioned”.
Contrary to that assertion, in an e-mail dated February 18, 2016 sent by Raja he asserts to a representative of the Applicants that he is attaching details of “corporation for drafting lease agreement for land and Gas station business.”
Based on the evidence of Mr. Slimi set out above and that e-mail assertion by Mr. Raja, I am satisfied that a landlord and tenant relationship existed between the Applicants and the Respondent.
Further, based on the monthly nature of the payments, I am satisfied that the landlord and tenant relationship was a monthly tenancy.
Based on s. 28 of the Commercial Tenancies Act, R.S.O. 1990, c.L.7, I find that the letter of October 24, 2018 from M. A. A. Baig to the Respondent served on both October 24 and 25, 2018, was sufficient notice to terminate the tenancy.
Accordingly, I order that the Respondent provide to the Applicants vacant possession of the property.
Analysis
[5] I have concluded that the appeal must be allowed for the following reasons.
[6] The appellate standard of review applies to this appeal. Errors of law are to be reviewed on a standard of correctness, and errors of fact or mixed fact and law are to be reviewed on the palpable and overriding standard. In my view, the application judge made an error of law in this case by going beyond his powers on an application and by resolving issues of credibility and fact. The application judge also made a palpable and overriding error by disregarding 304’s evidence that it had a property interest in the land.
[7] The issue of a possible ownership interest by 304 in the property was an issue which was clearly in dispute. While there was an email dated February 18, 2016 sent by a representative of 304, this email was sent out before 257 and the Faith of Life Network took possession and ownership of the property and before a development agreement was drafted for the property. In his evidence given on cross-examination, Mr. Raja, the representative of 304, acknowledged that he had written an email to the respondent’s lawyer which made reference to the drafting of a lease agreement for the gas station business. He testified that he understood this email was required for the closing.
[8] Mr. Raja gave evidence by way of affidavit on the application and in part stated at para. 29,
The reason we were remitting the mortgage payments on 2.5 million dollars is that it represented a 1 acre segment of the entire property.
[9] Mr. Raja’s evidence was that there was an agreement between the parties that 257 and the Faith of Life Network would purchase the property which is the subject matter of the litigation and that a good faith effort would then be undertaken to apply to the Committee of Adjustment to sever a portion of the property where the gas bar was located and this in turn would be sold to 304. In the meantime 304 would pay the cost of the mortgage on the land where the gas station was located.
[10] At para. 31 of his Affidavit, Mr. Raja states,
There was no discussion framing our relationship with the Applicants as Landlord-Tenant. At no time was the lease discussed or even mentioned.
[11] The application judge as noted in his decision relied on the email of February 18, 2016, to conclude that there was a monthly tenancy. In doing so, however, he ignored the other evidence of Mr. Raja which called into question whether there was a tenancy agreement and which suggested there was an agreement to sever the gas station property and that the monthly payments were to cover the cost of the mortgage on that portion of the property where the gas station was located.
[12] An application is not a motion for summary judgment. In Jackson v. Solar Income Fund Inc., 2016 ONCA 908, the Court of Appeal allowed an appeal of an application brought under Rule 14.05(3)(h). The appellant argued that the application judge erred by failing to look beyond the face of a promissory note to the factual matrix. The Court stated,
What is at issue is not the interpretation of the promissory note, but the determination of whether the promissory note was modified by a subsequent agreement such that, despite its clear wording, it is not enforceable on demand. This requires an understanding of the broader factual matrix, which includes the other agreements that may or may not conflict with the promissory note. This cannot be determined simply by reading the promissory note in isolation from the larger transaction of which it appears to be a part, or of understanding what the various agreements together were expected to achieve.
For the same reason, the respondent cannot rely on Rule 14.05(3)(h), which authorizes proceeding by way of application “where it is unlikely that there will be any material facts in dispute.” There are material facts in dispute, in particular, whether there was an agreement to convert the promissory note from a demand note to a note not payable on demand, and the resolution of this dispute requires the trial of an action.
[13] There may be an issue as to whether this principle applies to cases brought under other subsections of Rule 14.05(3). In McKay Estate v. Love (1991), 1992 7508 (ON SC), 6 O.R. (3d) 511, the application judge found that the provisions in Rule 14.05 that an application not contain disputed facts is limited to subrule (h). This decision was affirmed on appeal without specific comment on this principle. In a subsequent decision of the Court of Appeal, however, in Maurice v. Alles, 2016 ONCA 287, the Court held that the provisions of Rule 20 apply in the context of an action, but not an application. The court went on to hold that, “where there is conflicting evidence that required credibility determination on central issues the application must be converted to an action”.
[14] A similar conclusion was reached by the Court of Appeal in Gorden Glaves Holdings Ltd. v. Care Corporation of Canada Ltd., 2000 3913 (ON CA) at para. 30.
[15] Similarly, in this case I am of the view that the application judge was in error when he concluded that a landlord tenant relationship existed between the appellant and the respondents. This issue was subject to a dispute on the evidence which involved a broad factual matrix and which involved a larger transaction where the terms were in dispute.
[16] This case was, therefore, not one which was amenable to a summary decision on the application. The appeal is therefore allowed and the application is to proceed to trial in accordance with Rule 38.10(b).
[17] In accordance with an agreement between the parties, costs are payable by the respondents to the appellant in the sum of $12,500 all inclusive of fees, taxes and disbursements.
MCKELVEY J.
I agree
EDWARDS RSJ.
I agree
FAVREAU J.
Released: September 15, 2021
CITATION: 2503257 Ontario Ltd. v. 2505304 Ontario Inc. (Good Guys Gas Bar), 2021 ONSC 6101
DIVISIONAL COURT FILE NO.: DC-21-0012
DATE: 20210915
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
2503257 Ontario Ltd. and Faith of Life Network
Applicants (Respondents in Appeal)
– and –
2505304 Ontario Inc. o/a Good Guys Gas Bar
Respondent (Appellant)
REASONS FOR DECISION
MCKELVEY J.
Released: September 15, 2021