Court File and Parties
COURT FILE NO.: CV-14-502699
DATE: 2014-04-28
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Kristen Lee Nesbitt, Applicant
– AND –
RJH Reinsurance Services Inc., Helen Plunkett and Eddy Battiston, Respondents
BEFORE: Justice E.M. Morgan
COUNSEL: Kristen Lee Nesbitt, in person H. Rosenberg, for the Respondents
HEARD: April 28, 2014
ENDORSEMENT
[1] The Applicant owns and operates a restaurant, Ivy’s Kitchen & Bar Inc. (“Ivy’s”), that was evicted by its landlord, the Respondent RJH Reinsurances Services Inc. (the “Landlord’), on April 22, 2014. Although it is unclear why the Applicant has brought this Application under her personal name rather than under the name of Ivy’s, the Application seeks relief from forfeiture so that Ivey’s can re-open for business.
[2] A tenant may apply to the court for relief against forfeiture pursuant to s. 20(1) of the Commercial Tenancies Act, RSO 1990, c. L.7:
- (1) Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture, whether for non-payment of rent or for other cause, the lessee may, in the lessor's action, if any, or if there is no such action pending, then in an action or application in the Superior Court of Justice brought by the lessee, 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.
[3] The law of relief from forfeiture was articulated by the Court of Appeal in 1497777 Ontario Inc. v Leon's Furniture Ltd. (2003), 2003 50106 (ON CA), 67 OR (3d) 206, which adopted the position of the U.K. courts as set out in Shiloh Spinners Ltd. v Harding, [1973] AC 691. At p. 724 of Shiloh, Lord Wilberforce noted that relief from forfeiture amounts to equitable intervention, which “involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.” This has generally been taken as a specific instance of the rule that equitable relief will not be granted to a party who comes to court without clean hands: Kochar v Ruffage Food Corp., 1992 CarswellOnt 570, at para 9.
[4] On the other hand, the fact of a breach by the Tenant does not undermine its claim to relief from forfeiture since, by definition, all applications for relief from forfeiture will be premised on the tenant having defaulted. As the court put it in Greenwin Construction Company Ltd. v Stone & Webster Canada Ltd. (2001), 2001 27993 (ON SC), 55 OR (3d) 345, at para 27 (SCJ), “relief from forfeiture can be granted in a situation where the offending situation can be unraveled and the status quo can be restored, by money or otherwise...”
[5] There are evidently some personal issues between the parties here. The principal of the Landlord is the Applicant’s mother. That said, the dispute has been presented by both parties as a commercial dispute and I take it that way. In any case, as the court observed in Leon’s Furniture, at para 74, “[i]f the law and facts support the landlord’s claim to termination of the lease, the basis of its motivation is irrelevant.”
[6] In my view, despite the personal, family element to this dispute, there does not appear to be a lack of good faith, or “unclean hands”, on the part of either party here. There is, however, both an accounting dispute in terms of how much, if any, rental arrears are owing by Ivy’s, and a more fundamental dispute over the terms of Ivy’s tenancy. A written lease was never agreed upon and signed by the parties. The Applicant submits that there is a 10 year lease in effect, based on one of the unsigned drafts that were exchanged, while Mr. Rosenberg, for the Respondents, submits that Ivy’s is a monthly tenant without any fixed term of lease.
[7] On the current state of the record, I cannot determine the terms of the tenancy, nor can I determine the exact rental arrears to be paid by Ivy’s. The Application was brought on an urgent basis and was set down for today late last week in Motions Scheduling Court, giving the responding parties very little time to put together their own record. As a result, the evidence is not conclusive for either party.
[8] What is clear is that the Applicant concedes that she owes at least $700 in base rent, and that another $3,300 in base rent would have been payable on April 25, 2014 had the Landlord not locked its tenant out. Furthermore, there are realty taxes outstanding for 2012-13 in the amount of $13,113.00, and unpaid water bills for the premises in the amount of $2,594.84. The Applicant agrees that realty taxes and water bills are Ivy’s responsibility as tenant, but submits that it is unclear what percentage of those amounts are attributable to Ivy’s premises and what is attributable to the rest of the building. The Landlord’s affidavit explains that these figures represent 60% of the realty taxes for the building (presumably corresponding to the amount of the building occupied by Ivy’s), and 100% of the water consumed in the building (since Ivy’s is the only tenant and the rest of the building is vacant).
[9] Furthermore, the Landlord states that there are arrears in the amount of $21,321.90 on a demand loan given by the Royal Bank to finance the improvements required by Ivy’s when it first moved into the premises. The draft lease terms that were exchanged between the parties indicate that servicing this loan was to be the tenant’s responsibility, although, as indicated, no final lease was ever agreed upon and signed by the parties. It is unclear to me whether the Royal Bank loan is entirely or only partially Ivy’s responsibility.
[10] Under the circumstances, it is not currently possible to completely unravel the monetary dispute, as stated in the Greenwin Construction case. On the other hand, this is not a matter of bad faith as there appears to be a genuine dispute; I hesitate to put a tenant out of business on the basis of a quickly compiled and potentially incomplete evidentiary record where the monetary dispute may be resolved if the parties were given more time.
[11] The Applicant is therefore granted temporary relief from forfeiture on the following terms:
a) Ivy’s must pay the Landlord the total amount of $18,882.84, composed of the following amounts:
i) $700 (the admitted arrears in base rent); plus
ii) $2,475.00 (three-quarters of the monthly base rent from April 25th, representing the three weeks left in that four week rental period); plus
iii) $2,594.84 (the unpaid water bills).
iv) $13,113.00 (the outstanding realty taxes).
b) Upon payment of the $5,769.84, the Landlord is to return possession of the premises to Ivy’s. In the event that the Landlord does not receive an additional $13,113.00 in respect of Ivy’s tenancy within one week of today, Ivy’s right to relief from forfeiture will be at an end. The Landlord will not thereafter have to return possession of the premises to Ivy’s, and the Respondents will be at liberty to move for dismissal of this Application without notice to the Applicant.
c) Ivy’s must pay the Landlord base rent of $3,300 on the 25th of every month for the duration of this arrangement, commencing May 25, 2014.
d) Ivy’s must pay 60% of the realty taxes and 100% of the water bills for the building on an ongoing basis as presented by the Landlord.
e) The parties are to have 60 days to work out the terms of the tenancy to their mutual satisfaction, including the amount to be paid by Ivy’s on the Royal Bank demand loan. If the parties have not reached an agreement on these matters within 60 days of today, the Landlord will be entitled, on 15 days’ notice to Ivy’s and/or to the Applicant, to terminate Ivy’s tenancy and to re-enter and take possession of the premises. If there is still a live dispute between the parties at that point, the Applicant may re-apply for relief from forfeiture and the Landlord may respond as appropriate to that further application.
[12] The Applicant’s approval as to form and content of the formal Order of today’s ruling is dispensed with. The Respondents are to serve the Order on the Applicant once it has been issued and entered.
[13] There will be no costs of today’s appearance.
Morgan J.
Date: April 28, 2014