SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 06-CV-312337PD1
DATE: 20121219
RE: OPB Realty Inc. v. Transport North American Express Inc. et al.
BEFORE: Master Glustein
COUNSEL:
Roger B. Campbell for the plaintiff
Ivan V. Lavrence for the defendants except Marie Monique Julienne DeGuire
S.J. MacDonald for the defendant Marie Monique Julienne DeGuire [1]
HEARD: December 17, 2012
REASONS FOR DECISION
Nature of motion and overview
[ 1 ] The defendants Transport North American Express Inc., TNA Logistics Inc., TNA Express Inc., Steel Matrix Inc. and David Bazar (collectively, “the TNA Defendants”) bring this motion for partial summary judgment dismissing the claim by the plaintiff OPB Realty Inc. (“OPB”) against the defendant Transport North American Express Inc. (“Transport”) under paragraph 1(b) of the statement of claim for “damages during the balance of the term of the Lease in respect of loss of prospective Rent and other charges due by the Lease in the sum of $183,795.94” (the “Prospective Rent Claim”).
[ 2 ] For the reasons I discuss below, I find that there is a genuine issue as to a question of law with respect to whether OPB can succeed with its Prospective Rent Claim against Transport. Consequently, under Rule 20.04(4) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “ Rules ”), I adjourn the motion to a judge since the genuine legal issue could be determined by way of summary judgment.
Applicable law under Rule 20.04(4)
[ 3 ] In Neighborhoods of Cornell Inc. v. 1440106 Ontario Inc., 2006 37402 (Ont. S.C.J.) (“ Cornell ”), Master MacLeod set out the governing principle that if a genuine issue of law arises on a motion for summary judgment before a master, a master can either adjourn the motion to a motions judge (if the master concludes that the issue can be determined on a motion for summary judgment) or to a trial judge (if the master concludes that the genuine legal issue can only be determined at trial). Master MacLeod held ( Cornell , at para. 14 ):
It is important to understand what that means. Obviously the rule was not intended to preclude a master from deciding any legal issue or applying the law to the facts. A master is empowered to decide that there is no genuine issue of law in the same way as he or she may determine there is no genuine issue of fact. The rule only reserves a "genuine issue" of law to a judge. [2] To put this in simplest terms, if a point of law is unclear and it seems possible to determine it on a motion then the issue will be adjourned to a judge. In all other cases in which the law is clear and there is no genuine factual or legal issue, a master may grant summary judgment. [Emphasis added.]
[ 4 ] The above statement of the law was followed by the Divisional Court in Harlon Canada Inc. v. Lang Investment Corp. , [2010] O.J. No. 4237 at para. 13 .
Analysis
[ 5 ] In the present case, OPB raises two issues of law which it submits are “unclear” and as such requires the court to adjourn the motion to a judge. I address each of these issues below.
(a) Issue 1: Is the notice requirement under North Bay satisfied by issuing a statement of claim or does there need to be a distinct notice of termination and a distinct notice of claim?
[ 6 ] OPB submits that the law is unclear as to whether the “notice” requirement under the fourth course of action as set out in North Bay T.V. & Audio Ltd. v. Nova Electronics Ltd. [1983] O.J. No. 2527 (H.C.J.) (“ North Bay – HCJ ”), affirmed [1984] O.J. No. 3053 (C.A.) (“ North Bay – CA ”) can be satisfied by issuing a statement of claim or whether there needs to be a distinct notice of termination and a distinct notice of claim. I agree that the law on this issue is unclear.
[ 7 ] In North Bay – HCJ , Rutherford J. reviewed the decision of Laskin J. (as he then was) in the Supreme Court of Canada in Highway Properties Ltd. v. Kelly, Douglas and Co., 1971 123 (SCC), [1971] S.C.R. 562 (“ Highway Properties ”). Rutherford J. held that in Highway Properties , Laskin J. set out four courses which a landlord may take when a tenant has repudiated a lease. Rutherford J. held ( North Bay - HCJ , at para. 10):
When a tenant abandons premises rented under a commercial lease, the landlord has available a number of remedies. In Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd., 1971 123 (SCC) , [1971] S.C.R. 562 at p. 570, 17 D.L.R. (3d) 710 at p. 716, [1972] 2 W.W.R. 28 , Laskin J. (as he then was), identified four courses of action that a landlord might follow:
The landlord may do nothing to alter the relationship of landlord and tenant, but simply insist on performance of the terms and sue for rent or damages on the footing that the lease remains in force.
The landlord may elect to terminate the lease, retaining of course the right to sue for rent accrued due, or for damages to the date of termination for previous breaches of covenant.
The landlord may advise the tenant that he proposes to relet the property on the tenant's account and enter into possession on that basis.
The landlord may elect to terminate the lease but with notice to the defaulting tenant that damages will be claimed on the footing of a present recovery of damages for losing the benefit of the lease over its unexpired term.
[ 8 ] Even if the court accepts that there is no genuine issue of law that “option 4” above requiring notice before a claim for prospective damages under a commercial lease is a proper reading of Highway Properties (an issue I discuss below), there remains a genuine issue as to whether the “notice” requirement under option 4 is satisfied by the issuance of a statement of claim.
[ 9 ] In North Bay – CA , Blair J. in a one paragraph endorsement agreed with the “disposition” of Rutherford J., and “more particularly with his conclusion that notice of intention to claim damages for prospective loss of rent need not be given contemporaneously with the termination of the tenancy and that the notice given by the commencement of proceedings was sufficient to found the claim for damages in this case .” [Emphasis added.] Consequently, Blair J.A.’s endorsement leaves open the possibility that commencing proceedings may constitute sufficient notice.
[ 10 ] In Malva Enterprises Inc. v. Rosgate Holdings Ltd., 1993 8675 (ON CA) (“ Malva ”), Morden A.C.J.O adopted the language of the author Ewart that “ the institution of an action for the recovery of such rent furnishes similarly satisfactory evidence” of the landlord’s intention ( Malva , at para. 29 ) [Emphasis added.]. Malva supports an argument that the issuance of a claim can constitute notice under option 4 of Highway Properties .
[ 11 ] There are other cases which appear to support an argument that notice is satisfied by issuing a statement of claim. In Falwyn Investors Group Ltd. v. GPM Real Property (6) Ltd. , [1998] O.J. No. 5258 (Gen. Div.) (“ Falwyn ”) , Lederman J. held ( Falwyn , at para. 45):
On the fourth option, there are two requirements, namely, termination of the lease and notice of a claim for damages by the landlord. The remedy is available even if termination and notice do not occur contemporaneously. (See North Bay T.V., supra , at 346.) Additionally, notice may be given by the commencement of court proceedings. (See Court of Appeal endorsement of North BayT.V., supra , at 584.) [Emphasis added.]
[ 12 ] Similarly, In 722924 Alberta Ltd. v. Sinn , [2002] A.J. No. 3 (Prov. Ct.) (“ Sinn ”) , Hess J. held that “I am also satisfied the plaintiff put the defendant on notice by commencing these proceedings that the plaintiff would be seeking damages equal to the rent reserved by the terms of the Agreement ” ( Sinn , at para. 14) [Emphasis added.].
[ 13 ] The TNA Defendants submit that the above cases are “incongruous”, since they submit that other cases support a requirement of notice of termination as well as a notice of claim. The TNA Defendants rely on cases in which the court refers to “service” or “delivery” of the claim as constituting notice, and to the decision of the Court of Appeal in TNG Acquisition Inc. (Re), 2011 ONCA 535 (“ TNG ”) in which the court held that “In the absence of proof of both the acceptance of the repudiation and notification of the acceptance, the lease will be treated as subsisting” ( TNG , at para. 35 ). [3]
[ 14 ] The TNA Defendants also rely on what they submit are admissions of fact by OPB’s counsel at an examination for discovery that “the lease was not terminated”; “there was no notice of termination provided”; “the lease eventually ran its course” and that the pleaded fact that the lease was terminated “is not substantiated”.
[ 15 ] However, the above statements by OPB’s counsel must be read in the context of his prior positions on the issue of termination, in which he was discussing whether a “notice of termination” had been sent, and stated that if no such notice had been sent, then the issuance of the statement of claim was the act by which the landlord accepted the repudiation and terminated the lease. Those statements are positions taken which are entirely consistent with the statement of claim.
[ 16 ] As OPB counsel acknowledged, it may be that OPB cannot seek a remedy based on the principle that the lease continued, given the statement of claim and positions taken before the court to obtain interim relief. However, counsel’s position as to a party’s available remedies in law have no bearing on the court’s determination of a legal issue and ought not be considered admissions of “fact” which then preclude a legal argument that the landlord elected to treat the lease as terminated.
[ 17 ] On the basis of the above law, I conclude that this issue of law is unclear and that a motions judge can determine the issue on summary judgment. Consequently, I adjourn the motion to a judge as required under Rule 20.04(4) .
(b) Issue 2: Is there a notice requirement under Highway Properties ?
[ 18 ] OPB submitted that “option 4” as set out by Rutherford J. in North Bay – HCJ was not a proper reading of the law set out in Highway Properties . In particular, counsel for OPB took the court to the reasons in Highway Properties to submit that Laskin J. never imposed a notice requirement to claim prospective rent. OPB submitted that Laskin J. only overruled earlier common law that the lease and its covenants ceased to exist with the surrender such that the landlord could only recover for damages up to the date of surrender. In other words, OPB reads Highway Properties as standing for the proposition that a landlord may claim prospective rent upon termination, and does not set out a notice requirement.
[ 19 ] The TNA Defendants submit that “option 4” requiring notice has been part of the settled law of Ontario ever since North Bay – HCJ and is binding on this court or before any judge who might hear the adjourned motion or address the issue at trial.
[ 20 ] Given my findings on “Issue 1” above, I do not address whether it is unclear that there is a notice requirement under Highway Properties , or whether OPB can challenge the existing law on the basis that it was derived from an alleged misreading of Highway Properties by Rutherford J. in North Bay- HCJ . That will remain an issue for the judge hearing the adjourned summary motion or addressing the issue at trial. As this is a legal issue that can also be determined on a motion for summary judgment, I adjourn the motion to be head by a judge under Rule 20.04(4) .
Order and costs
[ 21 ] For the reasons I discuss above, I adjourn the partial summary judgment motion to be heard by a judge under Rule 20.04(4) . Both parties incurred significant costs in reviewing all of the relevant case law, and preparing factums and motion records. Those costs are properly determined either at the adjourned motion for summary judgment or at trial, when the substantive issues are decided. I award costs only for preparation and attendance to argue the issue of adjournment under Rule 20.04(4) as I ruled in favour of OPB on that issue. I fix only those costs in the amount of $1,250 inclusive of taxes and disbursements payable by the TNA Defendants to OPB within 30 days of this order.
[ 22 ] I thank counsel for their thorough submissions which were of great assistance to the court.
Master Benjamin Glustein
DATE: December 19, 2012
[1] Counsel for Ms. DeGuire appeared only at the outset of the hearing as a courtesy to the court and made no submissions.
[2] In his footnote at this point, Master MacLeod states “Adjournment to a motions judge will be necessary if the court decides it is appropriate to determine the point of law on the Rule 20 motion. If the court is of the view a trial is necessary then the motion should be dismissed.”
[3] OPB submits that TNG can be distinguished because different notice requirements arise in insolvency proceedings which OPB submits is the genesis in TNG of any notice requirement to protect other creditors.