SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 4808/08
DATE: 2013-03-27

RE: LISSARD HOLDINGS LIMITED, Plaintiff

AND:

1383497 ONTARIO LIMITED O/A STANDARD AUTO SALES AND PHAT TRAN A.KA. PATRICK TRAN, Defendants

BEFORE: MURRAY J.

COUNSEL:
F. Poon, Counsel for the Plaintiff

J. Thomas, Counsel for the Defendants

HEARD: January 29, 2013

ENDORSEMENT

[1] Lissard Holdings Limited (hereinafter referred to as “Lissard”) is a corporation and landlord of a commercial property located at 1211 Caledonia Road in Toronto. The defendant, 1383497 Ontario Limited, operating as Standard Auto Sales (hereinafter referred to as “Standard”), is an Ontario company which carried on business at the property as a tenant of units 1211 and 1213A (hereinafter referred to as the “leased premises”). Mr. Tran (hereinafter referred to as “Tran”) was the principal of Standard Auto and indemnifier of Standard’s lease obligations.

Overview

[2] In 2002, Standard leased unit 1213A from Lissard. Standard agreed to lease both Units 1211 and 1213A after Unit 1211 became available. A new lease was eventually entered into between Lissard and Standard for the two units. Tran, as indemnifier, agreed, inter alia, to make due and punctual payment of all rent charges and other amounts of any kind whatsoever payable under the lease, to effect prompt and complete performance of all the terms and covenants of the lease and to indemnify the landlord from any loss, costs or damages arising out of any failure by Standard to pay any amounts due under the lease.

[3] The lease is described by the landlord as being a net carefree lease to the landlord with the tenant, Standard, responsible for additional charges and/or expenses for its proportionate share of the costs of maintaining and operating the property. These charges and expenses were to be estimated by the landlord and payable by Standard on a monthly basis in advance and subject to adjustment based on actual costs when known.

[4] Lissard claimed that rent fell into arrears and in September of 2007 Lissard provided a Notice of Rent Default to Standard. Lissard asserts that Standard continued to be in breach of its obligations to pay rent and, on January 13, 2008, the landlord terminated the lease. On January 7, 2008, the landlord claimed that rental arrears amounted to $17,601.27.

[5] An action was commenced by the plaintiff in August of 2008 for, inter alia, rental arrears, bailiff’s fees, clean-up costs and forgone rent. The defendants filed a statement of defence in which they denied owing any money to the plaintiffs at the time the lease was terminated and asserted that the termination of the lease was unlawful and that in terminating the lease, the plaintiff landlord breached its obligation to act reasonably and in good faith. The defendant also counterclaimed for damages incurred as a result of having to relocate its business when the lease was terminated improperly without notice. The defendants also claim punitive damages resulting from the high-handed and unreasonable conduct of the plaintiff landlord.

The Motions Before the Court

[6] The landlord asserts that Standard was in arrears and was entitled to terminate the lease for non-payment of rent. Lissard brings a motion for summary judgment against the defendants for unpaid rent in the amount of $17,601.72 and for an additional amount of $18,008.58 being composed of lost rent, bailiff’s fees and clean-up costs. The plaintiff also seeks an order dismissing the defendants’ counterclaim.

[7] The defendants deny that any rent was owed to the plaintiff when the lease was terminated and have counterclaimed for damages flowing from the wrongful termination of its lease. The tenant argues that the motion for summary judgment brought by the landlord must fail because it cannot be established, based on the evidence before the Court, that the tenant was in arrears of rent when the plaintiff terminated its lease. The defendant also submits that the plaintiff breached a contractual duty of good faith owed to the tenant throughout the course of their dealings and accordingly the plaintiff ought to be denied judgment for that reason as well.

[8] The defendants also bring a motion in which they seek summary judgment against the plaintiff for a declaration that the plaintiff wrongfully terminated the tenancy of Standard and further, a declaration that the plaintiff is liable to Standard for losses it sustained as a result of the wrongful termination. The defendants also seek judgment dismissing the plaintiff’s action .

The Evidence of the Plaintiff Landlord

[9] The evidence submitted in support of the plaintiff’s summary judgment motion is contained in affidavits sworn by Debbie Ledinek, the manager of collections and tenant administration for Smart Centres Management Inc., the property manager for the plaintiff Lissard. The plaintiff states that Standard was in breach of the covenant to pay rent under the lease and, as a result, on January 15, 2008 the landlord terminated the lease.

[10] According to the landlord, the parties entered into a lease agreement dated April 4, 2005. The plaintiff asserts that soon after the execution of the initial lease, rental arrears began to mount and Lissard provided Standard with a Notice of Rent Default on or about June 6, 2006. According to the plaintiff, these differences were resolved and, after discussions between the parties, a new lease dated November 17, 2006 was executed. According to the plaintiff, the lease dated November 17, 2006 was a three-year lease which ran from April 27, 2005 to April 26, 2008.

[11] Ledinek deposes that rent fell into arrears again and in September of 2007 Lissard served a Notice of Rent Default advising Standard that rental arrears amounted to $31,645.48. In fact, the amount demanded by the plaintiff in the September 2007 Notice of Rent Default is admitted by the plaintiff to be overstated. The plaintiff asserts that actual arrears in September 2007, at the time the Notice was served on Standard, were $21,382.16. According to the plaintiff, Standard continued to be in breach of its obligations to pay rent and on January 13, 2008, the plaintiff terminated the lease. On January 7, 2008, the landlord calculated rental arrears as $17,601.27. In her affidavit, Ledinek also outlines the basis for the plaintiff’s claim for an additional amount of $18,008.58 being composed of lost rent, bailiff’s fees and clean-up costs.

The Evidence of the Defendants

[12] The evidence of the defendant is contained in an affidavit of Phat Tran, the principal of the defendant Standard and the indemnifier of Standard’s obligations under the lease. Tran deposes that Standard carried on business as an automotive dealership operating from the leased premises on Caledonia Road. Tran deposes that when Standard moved into the Caledonia Road premises, Standard performed significant renovations to the property. These costs are not particularized. From the outset, Tran deposes that there were disputes about the proper monthly rent charges. According to Tran, disputes arose in 2006 over an administration fee imposed by the landlord but were resolved in November of 2006. After the resolution of this dispute, a new lease, dated November 17, 2006, was signed.

[13] According to Tran, Standard continued to pay the correct rent as required under the lease and was completely surprised when on September 11, 2007, he received a Notice of Rent Default notifying him that Standard was in arrears of rent in the amount of $31,645.48. Immediately, Tran disputed the amount owed. Tran heard nothing until October 18, 2007, at which time Ms. Ledinek, on behalf of the landlord, advised that the arrears were $21,560.25 and not $31,645.48 as previously indicated to Tran in the Notice of September of 2007. The accuracy of this calculation of arrears in the amount of $21,560.25 is vigorously disputed by Tran. His evidence is: that no arrears of rent were owed by Standard in September 2007; that the calculation was further flawed because it did not reflect credits for payments made by Standard to the landlord to resolve earlier disputes; and, that adjustments for previous overpayments of realty tax which ought to have been applied as a credit against Standard’s obligations under the lease were not applied. In sum, Tran says that the calculation of rent arrears made by the plaintiff in September of 2007 was not only wrong because no arrears of rent were owing, but also the magnitude of the arrears claimed was inflated by the failure of the plaintiff to credit Standard with monies paid by Lissard to Standard and the failure to credit Standard for overpayments for common expenses, maintenance and real property taxes. In addition, Tran deposes that certain repair bills, maintenance charges and site supervision expenses were not properly included in calculating arrears that the landlord claimed were owing. Matters were not resolved and Standard was locked out of the premises on January 13, 2008.

[14] With respect to the plaintiff’s claim for the additional amount of $18,008.58, being composed of lost rent, bailiff’s fees and clean-up costs, Tran disputes any claim for clean-up costs claimed by the landlord. Some of these costs relate to hazardous wastes which Tran denies Standard had on the property. Tran asserts that other charges are inappropriate and reflect changes to the leased premises of defects which pre-existed Standard’s tenancy. Tran asserts that all vehicles related to his business were removed from the premises in January of 2008 contrary to Lissard’s assertion that vehicles remained on the premises until March of 2008 impairing the landlord's ability to re-lease the premises. In short, Tran disputes the calculation of and entitlement to the additional damages claimed by the plaintiff.

The Reply Affidavit of Debbie Ledinek

[15] In reply to Tran's affidavit, contrary to the evidence of Tran, Ledinek asserts that Mr. Tran knowingly and intentionally continued to pay less than its monthly rental obligation from November 2006 and thereafter. Ledinek further asserts that she has no knowledge as to why certain tax credits did not appear on earlier invoices, but that all credits were applied in the final statement of account provided to Standard at the time of termination of the lease. Ledinek asserts that there was an oral agreement between the parties that common expenses would be capped on certain conditions, one of which was that arrears would be brought up-to-date in December of 2007, but that such agreement was never implemented because arrears were never brought up-to-date. Ledinek asserts that other expenses, including snow removal services and costs relating to site supervision, were necessary expenses incurred and paid for by the landlord and that Standard Auto was responsible for its proportionate share of these payments pursuant to the lease. In her reply affidavit, Ledinek asserts that the premises was listed for lease on February 9, 2008. She asserts that efforts to mitigate were made.

Analysis

[16] It is agreed by the parties that the negotiations for the second lease were completed in November 2006 for a term to commence in January 2007. It is also not disputed that during the course of the negotiations it was agreed that if Standard also made a payment of $4,065.51, then the remainder of the accumulated rental arrears would be forgiven. This forgiveness was not recognized in the calculations of the landlord's arrears until January 7, 2008 shortly before the landlord terminated the tenancy. It is not contested that until that date, the landlord consistently failed to credit the amount forgiven when the tenant paid the $4,065.51.

[17] In the September 2007 Notice of Rent Default to the tenant, the landlord alleged arrears of rent in the amount of $31,645.48, an amount which the landlord ultimately conceded ought to have been $21,382.16. The concession was made in October of 2007 after the tenant protested the amount claimed owing by the landlord. That amount is still disputed by the tenant.

[18] There is a dispute between the parties as to whether there was an agreement between the landlord and Standard to reduce and cap additional rent charges for common expenses, maintenance and realty taxes. Lissard says no; Tran says yes.

[19] Finally, on January 7, 2008, the landlord demanded $17,601.27 for arrears and terminated the lease on January 13, 2008. The amount demanded on January 7, 2008 included an amount for January's rent which, pursuant to the contract, was to be paid between the 1st and 14th day of every month. It is not disputed that since the beginning of the tenancy, the landlord had accepted monthly rent cheques from the tenant dated on the 15th of the month. The landlord had in his possession a post-dated cheque dated January 15, 2008, which was for the rent payment for that month. Based on their traditional dealings, it is difficult to conclude that this rent was due and owing when the landlord terminated the tenancy.

[20] There had been a number of disputes between the parties over the course of years relating to the charges billed by the landlord to the tenant for maintenance charges, realty taxes and other matters. These disputes had been resolved on some occasions and not resolved on others. Credits which had been agreed to were not applied in a timely fashion by the landlord to reduce the alleged outstanding obligations of the tenant. The propriety of these additional rent claims and whether they were appropriately charged pursuant to the terms of the lease remain disputed by the tenant.

[21] In Combined Air Mechanical Services Inc. v. Flesch,108 O.R. (3d) 1, 2011 ONCA 764 the Court of Appeal established the appropriate test to apply on a summary judgment motion at paras. 50 - 51 as follows:

The motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?

We think this "full appreciation test" provides a useful benchmark for deciding whether or not a trial is required in the interest of justice. In cases that call for multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record, a summary judgment motion cannot serve as an adequate substitute for the trial process. Generally speaking, in those cases, the motion judge simply cannot achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Accordingly, the full appreciation test is not met and the "interest of justice" requires a trial.

[22] There are significant unresolved issues which relate to the calculation of amounts allegedly owed by Standard at the time the lease was terminated. It is not clear from the material filed that the landlord had the right to terminate the lease or that the amounts claimed were in fact owed by the tenant to the landlord. There is competing evidence on numerous disputes between the parties, including whether the landlord made sufficient attempts to mitigate its losses after termination of the lease with Standard.

[23] These issues cannot be resolved by competing affidavits or on the cross-examinations which have taken place. The Court is not capable of a full appreciation of the evidence and the issues that are required to make dispositive findings. In the words of Combined Air, the record in this case cannot serve as an adequate substitute for the trial process and in the interests of justice requires a trial.

Conclusion

[24] The plaintiff's motion for summary judgment must therefore be dismissed.

[25] With respect to the plaintiff's motion to dismiss the counterclaim, this also is dismissed. It is not plain and obvious that the pleadings in the counterclaim disclose no cause of action. See: Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959.

[26] The defendants’ motion in which they seek summary judgment against the plaintiff for a declaration that the plaintiff wrongfully terminated the tenancy of Standard is dismissed. For the reasons given above, this Court does not have a full appreciation of the evidence necessary to make the relief requested. For the same reason, the defendants are not entitled to a declaration that the plaintiff is liable to Standard for losses it sustained as a result of the wrongful termination.

[27] Neither are the defendants entitled to judgment dismissing the plaintiff’s action. As is evident from what has been said above, based on the record before me, I am able to conclude that the plaintiff cannot establish that Standard was in arrears of rent at the time the lease was terminated. Neither am I prepared to conclude, on the basis of the record before me, that the termination of the lease was unlawful or that the landlord breached a duty of good faith throughout the course of their dealings and as a result should be denied judgment.

Conclusion

[28] Both parties’ motions for summary judgment are dismissed.

[29] In light of the divided outcome, no costs are awarded.

MURRAY J.

Date: March 27, 2013