SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 12-37332

DATE: 2014-04-10

RE: Arora Commercial Corporation

AND: 975922 Ontario Inc., Susan Dyment and Karen Dyment

BEFORE: Mr Justice Ramsay

COUNSEL:
George Gligoric for the plaintiff

Louis A. Frapporti for the defendants 975922 Ontario Inc. and Susan Dyment

No one for Karen Dyment

HEARD: April 9, 2014

ENDORSEMENT

[1] The plaintiff moves for summary judgment on the claim and the counterclaim against the corporate defendant and Susan Dyment, its guarantor. Karen Dyment, the other co-defendant, has only just now been served with the statement of claim and took no part in the motion. The responding defendants move for an order requiring the plaintiff to produce an affidavit of documents.

[2] Normally a court will not find itself in a position to have a full appreciation of the case before an affidavit of documents has been served. But here as a result of affidavits, cross-examination on affidavits and documents produced pursuant to undertakings given on cross-examination I have all the correspondence relevant to the only genuine issue remaining, which is the effect of the negotiations between the plaintiff and the defendants, and between the defendants and the prospective new tenants, regarding settlement of the outstanding arrears and the assignment of the tenancy. This is even more the case since the plaintiff has indicated a desire to let go any issues that would require a trial, and limit itself to amounts that would inevitably be awarded.

[3] The defendants leased a storefront in 2002 for a 15 year term ending June 30, 2017. The defendants agreed to pay rent of $6,598.55 per month during the relevant period without deduction or setoff. The defendants operated a health club on the premises. They ran up substantial arrears and were obviously in trouble by October 2011. As a result of discussions between the plaintiff and the tenant the rent was reduced to $4,000 a month as of November 1, 2011 pending the defendants’ efforts to find new tenants and subject to certain conditions, some of which were met and some of which were not met. The defendants tried and failed to assign the tenancy. They vacated the premises on June 15, 2012. The plaintiff has not yet re-let the premises.

[4] There is a dispute as to payment of common area maintenance expenses, as to whether the arrears by October 2011 amounted to $40,000 or $100,000, as to whether the defendants’ failure to assign the tenancy entitled the landlord to the original rent of $6598.55 per month, and whether the parties actually arrived at an agreement to amend the lease in writing or otherwise. However, on any view of the evidence the plaintiff will inevitably be found to be entitled at least to the following amounts.

Arrears of rent

$ 40,000

Rent November 1, 2011 to June 30, 2012 @$4,000 / month

$ 32,000

Less rent paid November 2011 – May 2012 ($4,000 times 7)

($28,000)

Less rental deposit

($10,041.28)

Less proceeds of equipment sale

($11,122.49)

Total

$22,836.23

[5] In addition, the plaintiffs would be entitled to rent payments for the term of the contract, to June 30, 2017, less an amount reflecting the landlord’s duty to mitigate. The landlord submits that a period of nine months at $4,000 would be adequate to reflect this amount. That strikes me as quite reasonable for premises suitable for a health club in Orangeville. Accordingly I award a further $36,000 to reflect nine months’ rent. The total then is $58,836.23.

[6] All that would prevent the plaintiffs from recovering on the lease would be the counterclaim, which the defendants say should be set off against the claim, in spite of the clause in the lease that excludes any set off. In the counterclaim, the defendants plead that they would have sold the business successfully and assigned the tenancy, enabling them to pay their debt in full, but the plaintiff’s lawyer told the prospective new tenants that the defendants owed $100,000 in back rent.

[7] The only evidence that such a thing occurred is the deposition of Susan Dyment. She said that she understood from the proposed new tenants that the landlord’s lawyer told them that the arrears of rent were $100,000 and that as a result they decided to back out. She has not put her best foot forward by filing evidence from the new tenants themselves, and the correspondence between her and the prospective new tenants contradicts her. It suggests rather that the prospective purchasers were happy with the landlord’s cooperation, but they were concerned that the business would not take in as much money as they had expected. They asked for further financial information about the business and Ms Dyment declined to give it to them unless they agreed in writing to a $50,000 purchase with a $10,000 deposit.

[8] Furthermore, it would not have been in the plaintiff’s interest to scupper the deal. They already recognized that $40,000 was all they were likely to get out of the defendants. That is why on February 12, 2012 they accepted the proposal to accept $40,000 in satisfaction of arrears if the tenancy were assigned to an acceptable purchaser.

[9] For all these reasons I do not believe Ms Dyment’s allegation. I do not think it contrary to the interests of justice to use the power given my by Rule 20.04(2.1) to come to this conclusion, and I do not think a trial is required.

[10] The plaintiffs are entitled by contract to prejudgement interest at a rate of 7% per annum.

[11] The plaintiffs are entitled by contract to costs on a substantial indemnity basis. Mr Gligoric claims $32,000 for the action. That strikes me as reasonable, considering that the defendants’ bill of costs claims the same amount as partial indemnity for the motion.

[12] In summary, I make the following orders:

a. I give summary judgment to the plaintiff against the two responding defendants in the amount of $90,836.23 including costs. In addition I award prejudgement interest at 7% per annum from February 1, 2013.

b. The counterclaim is dismissed.

c. The defendants’ motion to compel production of an affidavit of documents is dismissed.

d. Post-judgment interest will be calculated according to the provisions of the Courts of Justice Act.

J.A. Ramsay J.

Date: 2014-04-10