ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV -12-2190
DATE: 2012-08-21

B E T W E E N:

DASHAM CARRIERS INC.

Ajay Duggal , for the Applicant

Applicant

• and -

DAVID CAMERON GERLACH, 2049574 ONTARIO LIMITED O/A JANDU TRUCK CENTRE and GURPREET SINGH JANDU

Devinder Bath , for the Respondent David Cameron Gerlach

Respondents

HEARD: August 8, 2012, at Brampton, Ontario

Price J.

Reasons For Order

NATURE OF MOTION

[ 1 ] Dasham Carriers Inc. (“Dasham”) complains that its landlord, David Gerlach (“Mr. Gerlach”), locked it out of the premises Mr. Gerlach had leased to it under a three year commercial lease, and then re-leased the premises to Dasham’s sub-tenants at a higher rent. Dasham submits that, in doing so, Mr. Gerlach failed to comply with section 19(2) of the Commercial Tenancies Act , which required him to give Dasham notice in writing of any deficiencies he alleged existed in Dasham’s performance of its obligations under the lease, with a reasonable opportunity to remedy the deficiencies, if they could be remedied, and specifying the amount of compensation he required, if they could not be remedied. Dasham applies for damages for the landlord’s breaches, pursuant to the Act .

[ 2 ] Mr. Gerlach claims that he properly terminated Dasham’s lease on March 3, 2011, and again a year later, on May 6, 2012, after Dasham persistently failed to comply with its obligations under the lease and breached the legislation governing health, safety, and the environment, including the safe storage of oil, on the premises. He asserts that he only re-rented the premises to Dasham’s sub-tenants after Dasham left.

THE ISSUES

[ 3 ] The main issues in the application are: 1) whether Mr. Gerlach complied with section 19(2) of Commercial Tenancies Act and, 2) if not, what remedy is appropriate, having regard to the fact that Dasham has now re-established its business elsewhere.

BACKGROUND FACTS

[ 4 ] Mr. Gerlach entered into a Commercial Lease Agreement with Dasham on May 1, 2010 (“the lease”), whereby he leased his property at 1082 Westport Crescent, Mississauga (“the premises”), to Dasham for a term of three years, with a right of renewal. The lease required Dasham to pay rent of $6,500.00 per month for the first year and $7,000.00 per month thereafter.

[ 5 ] The premises consisted of two truck garages, one on the east side and one on the west, with five rooms to be used as offices, and a yard at the back. Dasham accepted the premises in an “as is” condition. Any structural repairs or improvements were the responsibility of the landlord, Mr. Gerlach.

[ 6 ] Section 5(h) of the lease permitted Dasham to sublet the premises to others. Mr. Gerlach submits that this right was given to Dasham to protect it in the event that its operation ceased to be financially viable, not to enable Dasham to profit from sub-leasing the premises to others at a higher rent than it paid to Mr. Gerlach.

[ 7 ] On October 1, 2010, Dasham entered into a sublease with Jandu Truck Centre (“Jandu”), owned by Gurpreet Singh Jandu, for the westernmost of the garage spaces. This lease required the sub-tenant to pay rent in the amount of $4,000.00 per month to Dasham.

[ 8 ] On March 3, 2011, Mr. Gerlach sent a Notice of Termination of the lease to Dasham. Eleven days later, he met with Dasham’s owner, Mr. Brar, and observed that a number of the deficiencies had been rectified. Dasham continued to occupy the premises and to pay rent, which Mr. Gerlach accepted.

[ 9 ] In May 2011, Dasham entered into another sub-lease, this time with a company called Truck Spa, owned by Mr. Brar’s brother in law, for the easternmost of the garage spaces. This lease required the sub-tenant to pay rent in the amount of $4,800.00 per month to Dasham. In about October 2011, Truck Spa sold its business to Best Performance Truck Repairs Inc. (“Best Performance”), which assumed Truck Spa’s obligations under its sub-lease with Dasham.

[ 10 ] Collectively, the rent paid by the sub-tenants to Dasham under their sub-leases was $1,800.00 per month greater than the rent that Dasham owed to Mr. Gerlach ($4,000.00 due from Jandu, plus $4,800.00 due from Best Performance, less $7,000.00 which Dasham owed to Mr. Gerlach).

[ 11 ] On December 1, 2011, Mr. Gerlach entered into his own lease with Best Performance for the easternmost of the garage spaces. On May 1, 2012, he entered into his own lease with Jandu for the westernmost of the garage spaces, for a twelve month period beginning May 1, 2012.

[ 12 ] Mr. Gerlach submits that by the time he entered into the leases with Dasham’s sub-tenants, Dasham had ceased all business activity and vacated the premises. However, he does not dispute that Dasham continued to pay rent after moving out, and continued to park its trucks on the premises.

[ 13 ] On May 6, 2012, Mr. Gerlach issued a new Notice of Termination of his lease with Dasham, which he caused a bailiff to post on the premises. He also had the locks changed. He states that a week later, he sent the Notice, with a list of the deficiencies, to Dasham.

[ 14 ] Dasham asserts that he never received notice of the alleged deficiencies and was never given a reasonable opportunity to remedy them. It now seeks the following remedies:

1. An interpretation of its Commercial Lease Agreement dated May 1, 2010 (the lease), pursuant to Rule 14.05(3)(e) of the Rules of Civil Procedure, and a declaration that:

(a) It has a valid, binding lease of the premises for the duration of its three year term, with an option to renew when the lease ends.

(b) It is entitled to relief against forfeiture and has the right to remain on the premises for the duration of its three year term, with an option to renew when the lease ends.

(c) The lease is in good standing.

2. A declaration that:

(a) Mr. Gerlach breached the lease by effecting a wrongful termination and illegal re-entry of the premises.

(b) The lease agreement that Mr. Gerlach entered into with Jandu Truck Centre is null and void or, in the alternative, is subject to Dasham’s rights under its lease.

3. An order requiring Mr. Gerlach to compensate Dasham for the costs, expenses, and damages it incurred as a result of his wrongful termination of the lease.

4. Pre-judgment and post-judgment interest.

5. Costs of the proceeding on a substantial indemnity basis.

PARTIES’ POSITIONS

[ 15 ] Dasham claims that once Mr. Gerlach discovered that it had leased the premises to sub-tenants at a higher rent, he embarked on a campaign to force Dasham to leave so that he could re-rent the premises himself to Dasham’s sub-tenants. He constantly interfered with Dasham’s quiet enjoyment and possession of the premises, using his master key to enter the premises in Dasham’s absence and without its knowledge, displacing and damaging Dasham’s tools, damaging Dasham’s truck, and dumping his garbage on the premises, eventually forcing Dasham to vacate the premises in December 2011.

[ 16 ] Mr. Gerlach asserts that he was forced to enter upon the premises to monitor Dasham’s operation and ensure that it complied with health, safety, and environmental laws. He admits that he removed material that he had stored at the back of the premises in order to move it to another of his properties, but denies damaging Dasham’s truck.

[ 17 ] Mr. Gerlach states that Dasham failed to respond to his requests to obtain proper certifications, licensing, permits and proper fuel storage to prevent continued oil spills and contamination on the premises. He submits that Dasham’s failure to perform standard cleaning procedures resulted in catastrophic damage to the premises that went unreported to Mr. Gerlach. He asserts that he gave notice of these deficiencies to Dasham and that Dasham failed to remedy them.

[ 18 ] Dasham denies that it received notice of the deficiencies or a reasonable opportunity to remedy them. He asserts that Mr. Gerlach breached its lease when he entered into new leases with Dasham’s sub-tenants at a higher rent. Additionally, it says, because it had no timely notice of the deficiencies which Mr. Gerlach says existed in 2010 or 2011, it can no longer determine whether they were ones that Mr. Gerlach himself had an obligation to repair pursuant to their lease.

ANALYSIS AND EVIDENCE

1. Did the landlord comply with section 19(2) of the Commercial Tenancies Act ?

a) General principles

[ 19 ] Section 19(2) of the Commercial Tenancies Act states:

Contents of notice

(2) A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease, other than a proviso in respect of the payment of rent, is not enforceable by action, entry, or otherwise, unless the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach , and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach. [Emphasis added]

b) Application of principles to this case

(i) Did the Notice of Termination dated March 3, 2011, satisfy the notice requirements of section 19(2) ?

[ 20 ] Mr. Gerlach submits that as a result of Dasham’s history of extensive property damage, non-compliance with safety standards, and unwillingness to respond to his complaints, he issued a notice of termination of the lease on March 3, 2011. He states:

11. After getting frustrated at not achieving much to convince the tenant about mending the unhealthy and unsafe business practices I was compelled to issue a notice of termination of lease on March 3, 2011. A bailiff by the name of Kevin was involved by me… The tenant undertook to rectify the damages and agreed to deposit an additional $5,000.00 as security. On March 14, 2011, a meeting was set up with the tenant and it was observed that tenant have (sic) rectified some of the deficiencies. A list was provided to the tenant of the outstanding deficiencies.

[ 21 ] Mr. Gerlach tendered a document worded as follows:

March 3, 2011

This letter is to inform that David Gerlach has as of March 3, 2011 terminated the lease for Value Truck Sales Inc. at 1082 Westport Cres. Mississauga Ontario. A list of articles for breach of contract, damages and outstanding monies owed is as follows:

Main Costs Ensued

1. Broken door (east side of building) $1000.00
2. Landscaping (3 days total) $200.00
3. Tire Dumping $500.00
4. Concrete floor damaged $500.00
5. Damaged Driveway (asphalt damaged) $6000.00
6. Damaged Fence (east side of building) $1100.00
7. Garbage Removal (debris strewn around property) $2000.00
8. Missing Tool Container $1000.00
9. Fine for lack of permit on Fire door $400.00
10. Damaged Office window (broken window) $300.00
11. Cleaning bill for Manhole (sludge filled) $500.00
12. Painting bill (main office) $300.00
13. Exaust (sic) Fan for roof $1000.00
14. Cleaning cost for Contract cleaner $2000.00
15. Painting of Wearhouse (sic) $5000.00
16. Drywall taping $400.00
17. Overpayment for electrical bills $400.00

Total: $22,600.00

Additional non-expense Items

• Broken door
• Unattached Compressor caused injury (electrocuted/ hospitalized individual), due to use of unlicensed electrician
• Numerous calls to emergency services
• Dumping of Industrial waste in sewer
• Un-serviced trucks
• Unpaid electrical bills
• Door not fire rated
• No permit for drywall partition
• Oil fumes everywhere
• Oil tanks not M.O.E. approved
• Unpaid Taxi bills
• Implied property was only to be used for vehicle cleaning, NOT repair (repairs were conducted on ongoing (sic)

Termination of Lease effective immediately.

(Signed) David Gerlach

[Text continues exactly as in the original decision…]

CONCLUSION AND ORDER

[ 89 ] Based on the foregoing, it is ordered that:

1. Mr. Gerlach shall pay Dasham its damages in the amount of $130,600.00.

2. Mr. Gerlach shall refund Dasham’s security deposit in the amount of $14,735.00.

3. Mr. Gerlach shall pay post-judgment interest on the sum of $145,335.00 from today’s date.

4. If the parties are unable to agree on costs, they may make submissions in writing, not to exceed three pages, with a Costs Outline, by August 31, 2012.

Price J.

Released: August 21, 2012