ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-0034
DATE: 2013-02-25
B E T W E E N:
Michael Angus McLean
Morris Holervich, for the Applicant
Applicant
- and -
1833216 Ontario Ltd.
Alan Jones, for the Respondent
Respondent
Gordon A Moir
Sarah Manilla, for the Intervener
Intervener
HEARD: February 14 & 15, 2013,
at Thunder Bay, Ontario
J. dep. Wright, J.
Reasons on Motion
[1] This is an application by a tenant pursuant to section 20 of the Commercial Tenancies Act R.S.O. 1990. C.L7 for relief from forfeiture.
[2] In 2003 a property was acquired by one Kishan Romji Chohan which had residential premises at the rear and a restaurant at the front. In 2004 the applicant, Michael Angus McLean, rented the restaurant. On April 1, 2010 a written lease was entered into. This was for a five-year term with rent fixed at $4,100 a month plus GST payable on the first of each month. The total amount payable per month is agreed to be $ 4,520.
[3] On September 24, 2010 the property was transferred to the respondent, 1832216 Ontario Ltd. The landlord. The owner of this Corporation is Alpesh Chohan the brother of the previous owner of the property. Subsequently the landlord put the property up for sale.
[4] On 19 October 2012 the landlord entered into an agreement of purchase and sale for the property with the intervener. This agreement provided for the purchaser assuming the lease in question and was subject to the usual conditions.
[5] On November 9 the purchaser waived a number of conditions and served notice of fulfillment of other conditions. (Respondents record pages 54, 55). The vendor waived the condition that he be able to find suitable accommodation. This was signed on behalf of the landlord. (Respondents record page 56). That signature is interesting given the subsequent dispute over the validity of rent receipts.
[6] On the same date the seller and purchaser agreed to amend the agreement of purchase and sale, amongst other things, to extend the date of completion to 31 January. The seller agreed to provide vacant possession on the date of closing and if it failed to do so the agreement was to be considered null and void (respondents record page 59). According to the schedule of payments tendered by the tenant (applicants record page 46) nothing had been paid on the November rent by that date. Allegedly $2260 was paid on November 13 and $2260 was paid on November 28. Both of these payments were said to have been made in cash and are claimed to be supported by receipts allegedly given on behalf of the landlord (applicants record page 59). Alpesh Chohan submits that it was not he who signed the receipts. In particular he notes that while one receipt is dated 13 November his passport (respondents record page 27) shows that he was in Tanzania between Nov 11 and Nov 26. Given the time necessary to travel there the question arises: who signed documents on behalf of the landlord on November 9? There is no evidence one way or the other whether it was Mr. Chohan or it was someone else. If it was Mr. Chohan then, as noted above, we have a good example of his signature at the respondent’s record page 56. If it was not Mr. Chohan then we have another signing officer for the company and both Mr. McLean and Mr. Chohan might be correct when the one says he received a valid receipt on behalf of the landlord and the other says he did not sign the receipt.
[7] On 16 November the purchaser waived further conditions (applicants record page 59)
[8] On 13 December Mr. Chohan signed an authorization to the bailiff to retake the property.
[9] On 19 December the bailiff took possession of the restaurant.
Law
[10] The general rule is that when a landlord seeks to re-enter commercial premises as a result of a breach of a lease, the landlord must first serve 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, before re-entering. In Law this general rule does not apply to breach of a proviso in respect to the payment of rent. (Section 19 (2) Commercial Tenancies Act). In Equity there is no reason why the absence of such a notice cannot be considered when determining whether a tenant is entitled to relief from forfeiture.
[11] By s. 20 (1) of the Commercial Tenancies Act R.S.O. 1990, c. L.7 , when a lessor is proceeding to enforce a right of re-entry or forfeiture whether for non-payment of rent or for other causes, the lessee may apply to the court for relief and the court may grant such relief as having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just.
Persistent late payment
[12] "Generally, forfeiture for mere non-payment of rent on its due date has been looked upon as a forfeiture against which relief will usually be granted by a court of Equity. If the landlord can be made whole by compensation and money, then relief will ordinarily be granted even where the non-payment of rent is persistent, unless the conduct of the tenant or intervening third-party interests dictate otherwise." (Olson, A Commercial Tenancy Handbook 8 – 51)
[13] The payment or acceptance of rent after the occurrence of an event entitling either party to terminate the lease will usually act as a waiver of the right to terminate the lease as a result of the default. (Olson 8 – 57). As I understand it this applies to rent as well. When the lease has been breached by late payment of rent subsequent acceptance of the rent acts as a waiver of the right to terminate the lease as a result of this delay in payment. Thereafter if the landlord wishes to insist upon timely payment he is advised to send notice to the tenant to this effect. This was not done in this case.
[14] Should relief from forfeiture be granted under the general rule above or are there other factors which act to deny the tenant from the benefit of Equity?
[15] Intervening third-party interests may be such a factor. In this particular case the potential purchaser of the property appeared and submitted that if the landlord could not provide vacant possession then the agreement of purchase and sale would be null and void to the detriment of both the seller and the purchaser. I do not consider that the purchaser in this case has such an intervening interest that the operation of Equity should be deflected. The purchaser has always had actual notice of the existence of the lease and, originally, had specifically agreed to purchase the property subject to this lease. This is not a case where a purchaser submitted an offer to purchase subsequent to the landlord's re-entry and in ignorance of the tenant’s application for relief from forfeiture.
[16] On its part, the landlord has known the pattern of rent payments for years and, however inconvenient and aggravating it may have been, was content to accept the rent when paid. It neither took an earlier opportunity to terminate the lease for late payment of rent nor did it at any time put the tenant upon notice that future late payment of rent would result in forfeiture (not that such notice was required by Law)
[17] The tenant notes that it was Nov 9 when the landlord agreed with the purchaser to give the purchaser vacant possession but it was content to accept the November rent subsequently. No action was taken to take possession until immediately before Christmas when the tenant was faced with serious problems obtaining legal redress. (Of course the landlord argues that the November payment was never made nor were previous payments which are still outstanding.)
[18] I make no determination of the account between the parties. The tenant admits he was in default of December rent and that the re-entry was lawful as a result. Nor has he paid the January or February rent.
[19] The landlord argues that the tenant’s persistent delay in making its rent payments has imposed a severe hardship upon the landlord's principal over the years and has impacted upon Mr. Cohan’s credit rating. The landlord argues that as a result of the intermittent cash flow and his poor credit rating it was unable to renew it’s existing mortgage and had to take one at the very high rate of 11% which mortgage will fall due in June. Unfortunately, this argument runs afoul of the doctrine of waiver and the separation and of a corporate entity from its shareholders.
[20] The landlord refers the court to the alleged misconduct of the tenant in the handling of this lease and the conduct of this litigation. Specifically the landlord refers to receipts tendered by the tenant as proof of payment of rent. As noted, Mr. Chohan denies having signed any receipts whatsoever and points specifically to the receipt of November 13, 2012 a date when he was entering Tanzania. In assessing his evidence I note Mr. Cohan’s assertion that he never signed any receipts for cash received. I note that on occasion substantial sums of money in excess of several thousands of dollars changed hands in cash. I note that employees of the tenant testified that they have seen such sums paid and receipts taken. Since Mr Chohan says that others collected rent on behalf of the tenant besides himself it is entirely possible that he personally never signed any receipts but that others representing the landlord did. His assertion that no receipts were ever given for cash payments offends the laws of probability.
[21] The landlord argues that the cheque found at page 10 of the respondents application record (the original of which was filed as an exhibit) is evidence of underhanded conduct by the tenant. It is equally consistent with a cheque having been made out for the landlord, presented to the landlord who refused to accept a cheque and insisted upon cash and accordingly endorsed the cheque back to the tenant where it was stamped "deposit to the credit of[the tenant]" because the cheque, having been endorsed, was now payable to the bearer.
[22] The landlord submits that the tenant was guilty of attempting to interfere with the commercial relationship between the landlord and the purchaser of the property. The landlord submits that the tenant denigrated the property improperly in an attempt to destroy the pending sale. This, of course, would have been against the interests of the tenant. The purchaser had initially agreed to assume the lease. The evidence of interference with the landlord's commercial relationship is based upon hearsay and I am not prepared to accept it in the context of this hearing.
[23] There are no grounds for denying the application for relief.
[24] The tenant admits that there are three months rent owing, viz. December January and February at $4,520 per month. The landlord alleges more than this.
[25] The parties have agreed that notwithstanding the outcome of the application the tenant shall pay as costs the sum of $1,800, otherwise there shall be no other costs payable by anyone on the application.
[26] Upon the tenant paying to the landlord by 4:30 pm March 4, 2013 :
a) the sum of $18,080 being the rent for December, January, February and March without prejudice to the landlord's right to claim, in other proceedings, arrears in excess of this,
b) the utilities and any other charges accrued between December 1 and February 2,
c) costs of $1,800.
forfeiture is removed and the tenant shall be entitled to immediate possession under the lease.
The Hon. Mr. Justice J. deP. Wright
Released: February 25, 2013
COURT FILE NO.: CV-13-0034
DATE: 2013-02-25
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Michael Angus McLean
Applicant
- and –
1833216 Ontario Ltd.
Respondent
Gordon A Moir
Intervener
REASONS FOR MOTION
J. deP. Wright J.
Released: February 25, 2013
/mls