SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-12-445078
DATE: 20120201

RE: 1158161 Ontario Limited c.o.b. as THE REAL JERK, Plaintiff

AND:

2310125 ONTARIO LTD, Defendant

BEFORE: Low J.

COUNSEL:
Albert G. Formosa and Rachel F. Waks, for the plaintiff
David A. Weisman, for the defendant

HEARD: January 31, 2012

ENDORSEMENT

[ 1 ] The plaintiff, the defendant’s commercial tenant, seeks an interim and interlocutory order prohibiting the defendant landlord from terminating the plaintiff’s tenancy and re-entering and obtaining possession of the premises.

[ 2 ] The statement of claim, issued January 27, 2012, seeks, inter alia, a declaration that the plaintiff is an over-holding tenant on a year to year basis and a declaration that the notice to quit delivered on December 30, 2011 is invalid.

[ 3 ] This motion was served on but one day’s notice. Affidavits have been filed in support of the moving and responding parties, but have not been tested by cross-examination. For that reason, this ruling is interim only and either party may bring the matter back on, upon notice in accordance with the Rules.

[ 4 ] The landlord is restrained from re-entry or otherwise interfering with the tenant’s quiet enjoyment of the premises pending trial or further order of the court. The tenant is to deliver to the landlord the certified cheques for the January and February rent. In the event that the matter is not resolved before March 1, 2012, the tenant is to pay, in addition to rent directly to the landlord, the sum of $5,700 per month into court to the credit of the action.

[ 5 ] I am satisfied, on the basis of the material presently before the court that it would be just and equitable for an interim order to issue having regard to the factors in RJR-MacDonald Inc. v Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311.

[ 6 ] The plaintiff has been in occupation of the premises for 23 years. It operates as a restaurant and employs 25 people.

[ 7 ] The plaintiff entered into a written lease with the defendant’s predecessor in title on November 24, 1995 for a five year term commencing January 1, 1996 and ending December 31, 2000. The lease contained an option to renew and a right of first refusal in favour of the plaintiff in the event that the owners, Mike Kalentzis and Sultana Kalentzis, (hereinafter Kalentzis) decided to sell.

[ 8 ] At the end of the five year term, it appears that no formal renewal lease was entered into but the plaintiff has continued in occupancy with rent being paid and accepted.

[ 9 ] On November 15, 2011, Kalentzis entered into an agreement to sell the property to the defendant. According to the evidence before the court, Kalentzis did not accord to the plaintiff a first refusal and, to the contrary, represented to the plaintiff both on that date and thereafter that he did not intend to sell the premises. He reassured the plaintiff that in the event of a sale, the plaintiff would be given at least 3 to 6 months to vacate so that it could locate new premises and not be forced to shut down the business.

[ 10 ] On November 15, 2011, the defendant appears to have entered into an agreement to rent the premises with an individual, Rick Auiler, with a possession date of February 1, 2012. The agreement also provided “Tenancy will be cancelled due to Landlord not being able to provide possession within 30 days of the current projected possession date of February 1st 2012. All monies received from tenant will be returned in full no later than March 31st 2012.” A second agreement to rent was entered into on December 12, 2011, between those parties with similar basic terms.

[ 11 ] The defendant’s purchase of the property from Kalentzis closed on December 29, 2011.

[ 12 ] On December 30, 2011, the defendant delivered its notice to quit, giving notice of termination of the tenancy effective January 31, 2012. The defendant indicated that it would be applying the deposit of $4,000 toward the January rent of $6,300 plus tax and HST.

[ 13 ] As alluded to above, the action was commenced on January 27, and this motion was served on January 30 and heard on January 31, 2012.

[ 14 ] I am satisfied that the plaintiff has shown a serious issue for trial. This is not a high threshold.

[ 15 ] The relationship of landlord and tenant where a tenant over-holds following a term of years and pays rent which is accepted is presumptively a year to year tenancy unless there is evidence to displace the presumption. This is so notwithstanding that the original lease does not stipulate a yearly rent payable monthly. (See Williams & Rhodes, Canadian Law of Landlord and Tenant at 4-12 as cited in S.L. Ivans Jewellery Ltd. v. Bradbrooke (c.o.b. Wally’s Jewellers) [1997] S.J. No. 318; [1997] 9 W.W.R. 95 per Gunn J. at paras. 5–6.)

[ 16 ] An over-holding tenant on a year to year tenancy is entitled to 6 months’ notice of termination of the tenancy ending with a year of the tenancy. (See Sons of England Benefit Soc. v. Ezrin, [1962] O.J. No. 719; [1962] O.W. N. 42.)

[ 17 ] The plaintiff has been over-holding since the termination, in 2000, of its five year lease and has paid rent which the defendant’s predecessor in title has accepted. Presumptively, there is a year to year tenancy. While at a trial of the action, the evidence as there developed might displace the presumption, the evidence presently before the court raises, in my view, a sufficient serious issue for purposes of the considerations required under RJR-MacDonald.

[ 18 ] The defendant’s position is that no presumption of a year to year tenancy arises or that it is displaced by evidence in the form of a document signed by Lilieth Pottinger found at Exhibit N of the affidavit of William Mandelbaum, a document titled “Tenant’s Acknowledgement”. The document is signed by Lilieth Pottinger who signed above the line “Tenant’s Name”. At the second numbered paragraph, the document states: “The tenancy is on a month to month basis. There is no written Lease.” The document recites that good and valuable consideration and the sum of $1.00 is paid by the Vendor to the Tenant.

[ 19 ] It is not the function of the court on a motion for an interim injunction to make findings of fact that are at the heart of the action. Whether the tenant was a month to month tenant or a year to year tenant is the crux of the action. The document is a piece of evidence that is certainly to be taken into consideration on the ultimate findings to be made, but I am not persuaded that it displaces the presumption of a year to year tenancy to the degree that it could be said that no serious issue for trial has been raised.

[ 20 ] Lilieth Pottinger is not the tenant. There is no evidence that she was an officer or director of the tenant. Lilieth Pottinger is the spouse of the president of the plaintiff. There is no evidence that she had actual authority to make the acknowledgement with binding effect on the plaintiff and I am not persuaded that it is within the ostensible authority of a spouse, even of the president of the corporate plaintiff, to enter into an agreement that significantly affects the legal relationship of the corporation with a third party.

[ 21 ] It is pointed out also that there was, despite the recital in the document, no consideration. The recital of consideration is not conclusive and can be rebutted by evidence of the actual facts. The evidence discloses that there was no consideration, and, to the contrary, if Lilieth Pottinger’s evidence is true, the document was procured by deceit.

[ 22 ] The plaintiff argues also that an assignee of the freehold takes subject to the equities as between the predecessor in title as landlord and the plaintiff as tenant. This submission is made in connection with the evidence that Kalentzis represented that in the event of a sale of the property, the plaintiff would be entitled to stay on as tenant for a further 2 to 5 years. The plaintiff relies on 473807 Ontario Ltd. v. TDL Group Ltd., [2006] O.J. No. 3050; 271 D.L.R. (4th) 636. It seems to me unnecessary to opine as to whether the principle as expressed in the context of that case would apply here given the limited ambit of the injunctive relief granted.

[ 23 ] The evidence before the court is that if the defendant is not enjoined from re-entry on January 31, the plaintiff will have to shut down immediately and go out of business, and that it could not, on one month’s notice re-establish elsewhere. The plaintiff’s 25 employees will lose their jobs.

[ 24 ] The defendant argues that there are premises elsewhere into which the plaintiff could relocate and that the plaintiff is now in default of rent and utilities payments.

[ 25 ] I am satisfied that the allegations as to failure to pay utilities has no merit. Second, at the date of the notice to quit, there was no default of rent as the January rent was not due. The plaintiff was understandably, in my view, thrown into a state of disarray upon being served with a notice to quit and the rents for January and February are dealt with in this order.

[ 26 ] The moving party need not demonstrate irreparable harm beyond a reasonable doubt or even on a balance of probabilities and damages are not an adequate remedy where the plaintiff seeks to maintain the operation of its business and to protect its relationship with customers, goodwill and market share (see Tlowitsis-Mumtagila Band v. MacMillan Bloedel Ltd., [1991] 2 C.N.L.R. 164, at 29 and Omega Digital Data Inc. v. Airos Technology Inc. (1996), 32 OR (3d) 21 at 35.).

[ 27 ] Finally, it is my view that the balance of convenience favours the plaintiff and maintenance of the status quo. It is significant that the defendant’s agreement to rent with Mr. Auiler specifically contemplates inability by the defendant to deliver possession on February 1, 2012 and stipulates a contractual remedy in that circumstance – termination of the agreement with return of deposit. In contrast, if an order is not granted, the plaintiff’s business will have to close and some 25 individuals will lose their jobs.

[ 28 ] Evidence has been adduced that casts doubt on the ability of the plaintiff to comply with its undertaking in damages should it appear after trial that the injunction ought not to have been given. There is some equity in another real property, but similarly, there is existing debt apart from that secured by the property. For that reason, I am imposing as a term of the order that the plaintiff pay into court the sum of $5,700 per month commencing March 1 should the matter not be resolved by then. That is the difference between the rent that the defendant could expect from Mr. Auiler if that tenancy were to come to fruition and the rent being paid by the plaintiff.

[ 29 ] Costs reserved to the trial judge or the motions judge upon an interlocutory return of the motion.

Low J.

Date: February 1, 2012