SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-0015-00
DATE: 20120106

RE: Aim Health Group Inc., formerly known as CPM Health Centres Inc.

v.

40 Finchgate Limited Partnership

BEFORE: Fragomeni J.

COUNSEL: J. Russo and M. D. Whiteley, for the Applicant

N. Schernitzki, for the Respondent

HEARD: January 4, 2012

APPLICATION UNDER Section 20(1) of the Commercial Tenancies Act , R.S.O. 1990, c. L.7 and Rule 14.05(3) , (d), (g) and (h) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194.

E N D O R S E M E N T

[ 1 ] The applicant, tenant, (hereinafter referred to as AIM) seeks the following relief:

(1) a declaration that the respondent landlords (hereinafter referred to as 40 Finchgate) termination of the lease was invalid and unlawful;

(2) a declaration that the lease is valid and subsisting;

(3) a declaration that AIM is an overholding tenant pursuant to the lease;

(4) a declaration that AIM is entitled to re-enter the leased premises;

(5) a mandatory injunction requiring AIM’s property be returned to the leased premises

In the alternative AIM seeks:

(6) an order granting AIM relief from forfeiture pursuant to Section 20 of the Commercial Tenancies Act , R.S.O. 1990, c.L.7; and

(7) an interim, interlocutory or permanent injunction preventing 40 Finchgate from interfering with AIM’s possession of a quiet enjoyment of the premises until March 31, 2012 or by further order of the court.

Overview of the Facts

[ 2 ] The background facts and grounds for the application are set out by AIM in its notice of motion at paragraph 2, as follows:

2. The grounds for the application are:

(a) The Applicant operates a specialized chronic pain management facility (the “Clinic”) from leased premises located at 40 Finchgate Blvd[.], Unit 224A, in Brampton[,] Ontario (the “Property”).

(b) The Respondent, 40 Finchgate Limited Partnership (the “Landlord”), is a limited partnership registered in the Province of Ontario under the Limited Partnerships Act , R.S.O. 1990 c.L. 16, as amended.

(c) The premises are owned by the Landlord who executed a commercial lease agreement with the Applicant on or around February of 2007 (the “Lease”). The term of the Lease was for 5 years expiring on December 31, 2011, with an option to renew for an additional 5 years.

(d) The Clinic is staffed with four physicians and seven full and part-time staff and technicians and facilitates approximately 700 patient care visits per month.

(e) Over the course of the spring, fall and winter of 2011, AIM made known its intention to relocate the Clinic and corresponded with the Landlord’s property manager, Susanne Gilbert, regarding the timing of the said relocation.

(f) During this period of time, the Clinic was undergoing a mandatory inspection process by the College of Physicians and Surgeons of Ontario (the “CPSO”). The inspection was a new initiative of the Ontario government introduced in the spring of 2010.

(g) Before the Clinic can be relocated it must pass the CPSO’s inspection regime. By law, the Clinic cannot operate from another location prior to receiving a passing designation.

(h) The CPSO’s inspection process proved sufficiently uncertain so as to prevent AIM from conclusively communicating its intentions about relocating the Clinic to the Landlord’s property manager, who had earlier in the process expressed empathy with respect to the uncertainties surrounding the CPSO inspection.

(i) In October of 2011, AIM communicated to the Landlord’s property manager that it would likely require an extension of the Lease until mid or late February, 2012, as [a] result of the delays experiences with the CPSO inspection. There was no indication that such a request would be problematic.

(j) In mid-December of 2011, AIM communicated to the Landlord’s property manager that it would likely require a greater extension of the Lease as a result of further delays experience with the CPSO inspection.

(k) Despite these communications, on December 19, 2011, the Landlord purported to terminate the Lease and require vacant possession on or before December 31, 2011, notwithstanding the over holding provisions contained in article 3.05 of the Lease.

(l) After further discussions with and encouragement by the Landlord’s property manager, AIM made a written request for a short term (3-month) extension of the Lease. The request was denied as a new tenant had been secured and, despite earlier communications, the Landlord’s property manager mistakenly alleged that no earlier arrangements had been made to facilitate the extension.

(m) While the Landlord offered AIM alternative space in the Property from which to run the Clinic, this was not a viable alternative as any relocation would still be subject to CPSO inspection regime. Relocation without CPSO approval would cause severe and irreparable harm to AIM and its stakeholders.

[ 3 ] It is important to set out as well the contents of the various e-mails that were exchanged between Mr. Bill Danis, the Senior Vice President of Operations and Finance at AIM and Susanne Gilbert, the Property Manager at 40 Finchgate.

Tab G: May 10, 2011 (E-mail: Gilbert to Danis)

Hi Bill,

Sorry to bother you, just wondering if any progress has been made on a date for potential relocation of the clinic located in Suite 224A.

Thank you,

Susanne Gilbert

Property Manager

Tab H: May 10, 2011 (E-mail: Danis to Gilbert)

Susanne

We are still waiting on the college to conduct their inspection. We have not forgotten about you.

Tab J: July 22, 2011 (E-mail: Gilbert to Danis)

Hi Bill,

It’s been some time since I’ve followed up with you and was just wondering whether there have been any new developments on the plans to relocate this clinic from 40 Finchgate Blvd.

Please advise.

Tab K: July 22, 2011 (E-mail: Danis to Gilbert)

Susanne

No news is no news. That said, we have not forgotten your offer of early departure.

Hope you are enjoying your summer.

Tab L: July 22, 2011 (E-mail: Gilbert to Danis)

Thank you for the quick response. I hope that you will receive the news you are waiting on sooner than later. It can be difficult to put a plan into action when you aren’t in control of all the pieces.

Stay cool and have a good weekend.

Tab M: October 20, 2011 (E-mail: Gilbert to Danis and Danis to Gilbert)

Hi Bill, Sorry to bother you, just inquiring about a status update for the inspection on this location.

Thank you,

Susanne

Can you call me: 905-475-9321?

[Bill]

Tab O: December 16, 2011 (E-mail: Danis to Gilbert)

Susan

Can you call me please: 905-475-9321

Thanks, Bill

Tab P: December 19, 2011 (Letter: Gilbert to Danis)

December 19, 2011

Dear Bill:

Re: 40 Finchgate Blvd., Suite 224A, Brampton, ON

Further to our conversation on Friday December 16, 2011, we write to confirm that we will require vacant possession of your suite in accordance with your lease agreement on or before December 31, 2011.

As evidenced by our many conversations and emails with you, we originated contact with you in March 2011, to determine your intentions upon expiry of the current term. The response expressed was this clinic would be amalgamated with another location possibly before the end of the current term. This set our leasing program into motion searching for a new tenant.

When we secured a suitable tenant for your space, we phoned you to ascertain whether an early departure would be possible given that our new tenant wanted the space as early as possible. During this conversation, we offered to terminate the lease early if convenient.

This past Friday in our conversation, you inquired about extending your stay. We informed you that we have already secured a new tenant based on the knowledge that you would no longer require the premises.

Our new lease is based on a commencement date of January 1, 2012. Any delay to obtain the suite in a timely manner will cause irreparable damage to our business with this new tenant. We must have vacant possession of the leased premises on or before December 31, 2011 in accordance with your lease agreement.

Further to this matter, please accept this letter as notice to enter the premises on Thursday December 29, 2011 at 3:00 p.m. for the purpose of a move-out inspection.

We expect your cooperation in this matter.

Sincerely,

THE TYPHON GROUP LTD.

Susanne Gilbert

Property Manager

Tab Q: December 21, 2011 (E-mail: Danis to Gilbert)

Suzanne

Further to our conversation we wish to reiterate our position.

As you know we have mentioned for a few months that we are delayed in our relocation efforts be recent changes made by the College of Physicians and Surgeons of Ontario (“CPSO”).

The CPSO, through its premises inspection group (Out of Hospital Premises Inspection Program – OHPIP), precluded us from relocating our operations at Suite 224A, 40 Finchgate Ave., until they have inspected our replacement site. To-date they have not inspected our new site and, based on our recent experience in dealing with OHPIP, the earliest that we can realistically expect them to complete the inspection is mid to late February.

We ask that you extend our lease by 3 months to accommodate this situation brought upon us by these extenuating circumstances.

Thank you for your assistance.

Tab R: December 23, 2011 (Letter: Gilbert to Danis)

We are in receipt of your email dated December 21, 2011, sent in response to our letter of December 19, 2011 wherein you indicate that an extension of the aforementioned lease is requested. Unfortunately, we have committed this space to a new tenant and will be unable to accommodate this request. The new tenant’s occupancy date is January 1, 2012.

After receiving your request yesterday, we contacted our tenant to inquire about an extension for you. However as they had already committed to the space for January 1, 2012 and are well involved with planning and scheduling their move, they were adamant that the commencement remain as committed.

Through our numerous phone calls and emails, no agreement to extend this lease was ever negotiated nor requested and it was made abundantly clear that we had secured a new tenant. With this new tenant in place, we are unable to accommodate this late request for an extension.

Tab S: December 28, 2011 (E-mails: Danis to Gilbert)

Susanne

Thank you for your response following our conversation of December 21 st .

Unfortunately I was taken aback as your response is not at all in keeping with our discussion. You had indicated that we would have an extension of up to three months as this has always been our understanding of our relationship and open communication.

As we have explained we are being delayed in our relocation by forces beyond our control. As you acknowledge, I mentioned to you as early as August 2011 that we may have need to extend our stay. Contrary to what you have indicated, you never mentioned at that time that there was no flexibility in extending our December 31 st departure date. This was confirmed when I contacted you in October and I then mentioned that we were then looking at late January to early February to relocate. Again, you never indicated that this would be problematic and, it was with this verbal commitment, that we continued with our lease.

As per my previous e-mail, we ask that you extend our lease by 3 months to accommodate this situation brought upon us by extenuating circumstances.

As we have only just been notified through your e-mail that the (sic) you are now considering December 31 st as a lease end date we advise you that such a date is not reasonable in light of our numerous verbal updated. Any unilateral action taken by the landlord to enforce this will result in serious ramifications to our patients and doctors and I kindly ask that you readdress your proposed timeliness as soon as possible.

Tab W: January 3, 2012 (E-mail: Gilbert to Danis)

Bill:

Further to your lease expiry on December 31, 2011, we have made arrangements to take possession of this suite. The locks have been changed and today all items in the suite will be removed to a storage facility. Please contact us to make arrangements to retrieve these furnishings and supplies.

[ 4 ] In her handwritten affidavit sworn January 4, 2012, Susanne Gilbert states at paragraph 10 and 11 that all items, except the safe, had been removed from the premises on January 3 and 4, 2012. The locks had earlier been changed by the Superintendant on January 1, 2012. Ms. Gilbert also states that as a result of AIM not vacating the premises, 40 Finchgate has been delayed in commencing renovations required by the new tenant.

[ 5 ] The lease is at Tab 2C of the application record. The following sections are relevant:

Para 1.01 Summary of Basic Terms

(g) (i) Term: Five (5) Years,

subject to Section 3.04.

(ii) Commencement

Date: January 1, 2007,

subject to Section 3.04.

(iii) End of Term: December 31, 2011,

subject to Sections 3.03 and 3.04.

Notwithstanding the Commencement Date, the Tenant shall be granted vacant possession of the Leased Premises upon the later of receipt by the Landlord of the Deposit and proof of the Tenant’s insurance, in order to carry out its leasehold improvements. All terms and conditions of this Lease shall apply to the Leased Premises from the date of possession up to the Commencement Date, save and except for the requirement to pay Basic Rent or the Tenant’s proportionate share of Operating Costs or Realty Taxes.

3.05 Overholding

If, at the expiration of the initial Term or any subsequent renewal or extension therefore, the Tenant shall continue to occupy the Leased Premises without further written agreement, there shall be no tacit renewal of this Lease, and the tenancy of the Tenant thereafter shall be from month to month only and may be terminated by either party on one month’s notice. Rent shall be payable in advance of the first day of each month equal to the sum of 150% of the monthly instalment of Basic Rent payable during the last year of the Term and one twelfth (1/12) of all Additional Rent charges herein provided for, determined in the same manner as if the Lease had been renewed and all terms and conditions of this Lease shall, so far as applicable, apply to such monthly tenancy.

7.08 Surrender of Leased Premises

At the expiration or sooner termination of this Lease, the Tenant shall peaceably surrender and give up unto the Landlord vacant possession of the Leased Premises in the same condition and state of repair as the Tenant is required to maintain the Leased Premises throughout the Term and in accordance with its obligations in Section 7.07 hereof.

13.04 Notices

Any notice, delivery, payment or tender of money or documents to the Landlord hereunder may be delivered personally or sent by prepaid registered or certified mail to it addressed at the address set out in Section 1.01(a) (i) hereof, with copy to the Property Manager at the address set out in Section 1.01(a) (ii) hereof, or to such other address as the Landlord may in writing direct, and any such notice, delivery or payment so delivered or sent shall be deemed to have been well and sufficiently given or made and received upon delivery of the same or on the next business day following such mailing of same as the case may be.

Any notice, delivery, payment or tender or money or documents to the Tenant hereunder may be delivered personally or sent by prepaid registered or certified mail to the Tenant at the Leased Premises, or to such other address as the Tenant may in writing direct, and any such notice, delivery or payment so delivered or sent shall be deemed to have been well and sufficiently given, made and received upon delivery of the same on the second business day following such mailing of the same, as the case may be.

Notwithstanding the foregoing, any notice, delivery, payment or tender of money or documents to be given or made to either party hereunder during any disruption in the service of the Canada Post Office shall be deemed to have been received only if delivered personally.

Position of AIM

[ 6 ] AIM submits that it is currently on overholding tenant pursuant to Section 3.05 of the Lease. As such, the lease has now become a month to month tenancy. 40 Finchgate has not provided notice to terminate the month to month tenancy.

[ 7 ] The landlords’ entry into the premises and removal of AIM’s property was in breach of the terms of the lease.

Position of the Landlord

[ 8 ] The landlord argues that as of December 31, 2011 the lease had expired and that AIM was required to vacate the premises of 40 Finchgate. Relying on AIM’s representation that it would be re-locating, 40 Finchgate entered into a new tenancy agreement with a new tenant for 4 years commencing January 1, 2012. At paragraph 10 of her type-written affidavit, sworn January 4, 2012, Ms. Gilbert states:

The Tenant did not deliver vacant possession of the Premises on January 1, 2012 and as a result, the Landlord had no alternative but to re-take possession of the Premises at the end of the term of the Lease.

Analysis and Conclusion

[ 9 ] On the record before me it is clear that Susanne Gilbert was aware that AIM was delayed in its plans to relocate and AIM set out the reasons for the delay. The affidavits are conflicting with respect what in fact, was said between Danis and Gilbert that may not have been captured in the e-mail correspondence. For example, at paragraph 30 and 31 of his January 3, 2012 affidavit, Danis, deposes as follows:

30. After speaking with Ms. Gilbert on December 21, 2011, I had been encouraged by Ms. Gilbert’s verbal response and at her suggestion, made a written request for a short term extension of the Lease. Attached to this my affidavit and marked as Exhibit “Q” is a true copy of my email from December 21, 2011.

31. Two days later on December 23, 2011, Ms. Gilbert again wrote another letter to my attention with respect to the Lease agreement and possession of the Property. Attached to this my affidavit and marked as Exhibit “R” is a true copy of the letter. While I believe the letter speaks for itself, I take exceptions to portions of the letter as being inaccurate. In particular the following:

(a) Ms. Gilbert never definitively told me that the Landlord was committed to a new tenant;

(b) Ms. Gilbert has omitted reference in her chronology of our October, 2011 phone conversation where the need for a short term extension of the lease was discussed at length;

(c) Ms. Gilbert inaccurately states that I neither requested nor negotiated for an extension of the Lease.

[ 10 ] On the record before me it is difficult to resolve those conflicts, however, I am satisfied that the e-mails confirm that Danis was making it clear to Gilbert that there were delays in moving forward with their relocation. I am also satisfied that Danis expressed to Gilbert the need for an extension.

[ 11 ] It is true that 40 Finchgate relied on AIM’s representation and indication that they would be re-locating but at the time 40 Finchgate entered into a new tenancy agreement on or about December 21, 2011, it was clear that AIM would not be able to re-locate by the December 31, 2011 date. In the face of that, 40 Finchgate went ahead and entered into a new lease.

[ 12 ] It is important to note that the lease agreement between AIM and 40 Finchgate does not contain a renewal term. It simply states that the term of the lease ends December 31, 2011.

[ 13 ] The sections that deal with what happens at the expiration of the initial term are 7.08 and 3.05.

[ 14 ] I am satisfied that Section 3.05 applies. Although the lease term had ended as per paragraph 1.01 (g) (iii), AIM continued to occupy the leased premises. The lease became a month to month tenancy and as set out in Section 3.05 “may be terminated by either party on one month’s notice.”

[ 15 ] In Medalist Holdings Ltd. (c.o.b. Harvester Executive Park) v. General Electric Capital Equipment Finance Inc. , [1997] O.J. No. 1995 , Greer J. stated at paragraph 58:

The overholding clause defines the rights and obligations of the parties in the event that the tenant overholds without any agreement with the landlord on a further term. See: International Aviation Terminals Inc. v. Harnett , [1996] B.C.J. No. 10 , DRS 96 -03938 (B.C.S.C.). Landlords and Tenants enter into a business arrangement when a formal Lease is executed by them on advice of legal counsel. The overholding provision in the Lease was well-known to the parties when they entered into the Lease and it was there to protect the rights of the Landlord if the Tenant did not execute a new Lease but remained in possession which is exactly what happened. In my view, the parties never reached any agreement on a further term, and while there was mention of a possible 3 year term, the Tenant never confirmed by letter to Harvester any of the terms as set out in Grubisa’s many letters to it. Therefore, I hold that the rights of the parties are governed by the overholding provision of the old Lease.

[ 16 ] On appeal, however, reported at Medalist Holdings Ltd. (c.o.b. Harvester Executive Park) v. General Electric Capital Equipment Finance Inc. , [1998] O.J. No. 4505 , the court set out the following at paragraphs 1 to 4:

1. THE COURT (endorsement): -- This was an action brought by a commercial landlord against the tenant for damages for “overholding” on a lease – The trial judge framed the issue before the court as follows:

The issue before me was whether the defendant was overholding on the lease, or whether the parties had come to a new arrangement between themselves, or whether the defendant was now a year to year tenant; and, depending on what terms were in place between the parties, how the damages were to be calculated.

2. The parties agree that the trial judge correctly framed the issue. In our view the trial judge erred in concluding that, “any further written agreement” necessarily required the parties to enter into, as she put it, “a new lease” and that in the absence of a new lease or an agreement to lease the overholding provision applied.

3. The trial judge did find that:

... the only agreement reached by the parties was the rental rate of $12 which was not to be the rent under the written Lease but an interim rent until a written agreement was entered into about the renovations.

4. This agreement was reduced to writing in the letter of June 14 th , 1991 and was “a further written agreement” within the meaning of s. 9.04. Accordingly, the trial judge’s finding that the overholding provision applied cannot stand.

[ 17 ] In the case at bar there was no further written agreement as set out in 3.05. Further, the correspondence sent to Danis indicating that AIM must vacate the premises by December 31, 2011 is not proper notice in accordance with 13.04.

[ 18 ] The landlord was, therefore, in breach of the lease terms by changing the locks on the premises and removing the tenant’s property from the leased premises.

[ 19 ] The words in Section 3.05 are clear and must have been included for a reason. In accordance with those words, AIM became a month to month tenant when it continued to occupy the leased premises without a further written agreement following the expiration of the lease.

[ 20 ] In all of these circumstances therefore, the following order shall issue:

(1) abridging the time for service of the application;

(2) a declaration that the respondent’s termination of the lease is invalid and unlawful;

(3) a declaration that the lease is valid and subsisting;

(4) a declaration that the tenant is an overholding tenant pursuant to Section 3.05 of the lease;

(5) a declaration that the tenant is entitled to re-enter the leased premises;

(6) the landlord shall forthwith return to the leased premises the property of the tenant; and

(7) the parties shall file written submissions on costs within 20 days.

Fragomeni J.

DATE: January 6, 2012

COURT FILE NO.: CV-12-0015-00
DATE: 20120106

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Aim Health Group Inc., formerly known as CPM Health Centres Inc. v. 40 Finchgate Limited Partnership

BEFORE: Fragomeni J.

COUNSEL: J. Russo and M. D. Whiteley, for the Applicant

N. Schernitzki, for the Respondent

HEARD: January 4, 2012

APPLICATION UNDER Section 20(1) of the Commercial Tenancies Act , R.S.O. 1990, c. L.7 and Rule 14.05(3) , (d), (g) and (h) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194.

ENDORSEMENT

Fragomeni J.

DATE: January 6, 2012