ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-473605
DATE: 20150805
BETWEEN:
90 Nolan Court Inc.
Plaintiff
– and –
6592503 Canada Inc. carrying on business as RMDS (Regal Metal Door & Supplies) and Unimac Construction Inc.
Defendants
Aleksander Jovanovic and Rebecca Ying, for the Plaintiff
Newton Wong and Jesmond Wong, for the Defendants
HEARD: May 25, 26 and 27, 2015
REASONS FOR JUDGMENT
Carole J. Brown, J.
Overview
[1] The plaintiff brings this action for collection of rents owing pursuant to an industrial lease agreement dated June 17, 2008 after the defendant abandoned the leased premises without notice and prior to the end of the fixed term five year lease. The plaintiff seeks damages in the total amount of $103,846.68, plus consequential losses for a total of $106,147.61, taking into account monies received in mitigation.
[2] The defendants defend this action on the ground that there was a fundamental breach of the plaintiff's duties as landlord, most importantly a failure to properly maintain the premises and to provide necessary security for the premises. The defendants claim that they sustained three break-ins of their property during their tenancy and, following the third break-in had no alternative but to leave the premises. They counterclaim against the plaintiff in the amount of $200,000 for losses sustained as a result of the break-ins. Further, they maintain that there is no evidence of an assignment of lease from the original owner, Canadian Property Holdings (Ontario) Inc. to 90 Nolan Court Inc. and, therefore, the plaintiff has no standing to bring this action.
[3] The relevant lease, an Industrial Lease Agreement – Gross Rent, dated June 17, 2008 was entered into between Canadian Property Holdings (Ontario) Inc. as landlord, 6592503 Canada Inc. as tenant and Unimac Construction Inc. as indemnifier for the rent of premises known as Units 30, 31 and 32, 90 Nolan Court in Markham.
[4] On October 1, 2009, Canadian Property Holdings (Ontario) Inc. sold 90 Nolan Court to 90 Nolan Court Inc. All leases at 90 Nolan Court, which numbered 48 properties, were assigned to 90 Nolan Court Inc. Pursuant to an Assignment and Assumption of Leases dated October 1, 2009, in evidence in this action, Canadian Property Holdings (Ontario) Inc. assigned all leases at 90 Nolan Court to 90 Nolan Court Inc. It further provided notice to its tenants of the sale of the property to 90 Nolan Court Inc. pursuant to a Notice and Direction to Tenants, Subtenants and Occupants dated October 1, 2009, also in evidence in this trial. In the context of the sale of 90 Nolan Court Inc., Keith Ly, director of the defendant, RMDS Regal Metal Doors and Supplies (“RMDS” or “Regal Metals”), executed a Status Certificate as regards the status of lease on September 28, 2009, which was also in evidence.
[5] It was the position of the defendant that none of this documentation, including the Notice and Direction to Tenants, Subtenants and Occupants was ever received by them and that they had no knowledge of the new owner. It was their position that they dealt with Realspace Management, the management company and paid all cheques to Realspace Management, and never dealt with the new owner.
[6] It is of note that the evidence contained correspondence from Realspace Management Group Inc. to the defendant dated October 6, 2009 stating as follows:
As you are aware, 90 Nolan Court was sold by Canadian Property Holdings (Ontario) Inc. to 90 Nolan Court Inc. on October 1, 2009.
The previous property management company, CREIT, knowing that the sale of the property was scheduled for October, did not process the preauthorized rental payments for October 2009 rent.
Accordingly, we request that you pay October 2009 rent by way of a cheque made payable to Realspace Management Group Inc., in trust for 90 Nolan Court Inc.
[7] Further correspondence from Realspace to the defendant dated December 1, 2009 again requested that cheques be made payable to Realspace Management Group Inc., in trust for 90 Nolan Court Inc.
The Lease
[8] Pursuant to the lease, the defendant leased Units 30, 31 and 32 at 90 Nolan Court, which comprised a total of 4881 ft.², for a term of five years commencing September 1, 2008 and terminating September 1, 2013. The gross annual and monthly rents were set forth at clause 1.08 of the lease. A deposit of $4,911.51 plus GST, as well as a security deposit of $5,526.50 plus GST were required.
[9] Pursuant to clause 1.13 of the lease, any notice required by the lease was to be given in writing, addressed, in the case of the landlord, tenant or indemnifier at the addresses shown in Article 1 and sent by registered mail or delivered in person or by courier.
[10] Pursuant to clause 2.02, “the Tenant acknowledges that the existing leasehold improvements, if any, are acceptable and that the Tenant is taking possession of the Leased Premises "as is", subject to the completion of any Landlord's work.” Pursuant to the evidence, this defendant inspected the premises prior to entering into the lease.
[11] The lease required the tenant to keep, maintain and repair the leased premises in good order and repair (clause 5.01). It further required the tenant, at its own expense and in compliance with all applicable laws, bylaws, codes and regulations, to install any fittings, fixtures and improvements that may be necessary for the operation of the tenant's business, after first obtaining the landlord's written consent. It was the responsibility of the landlord to repair common facilities and the structural components of the building. Common facilities were defined at Schedule B of the lease as "those areas, fixtures, improvements and facilities which serve or benefit the Lands or the Building including, without limitation, all portions of the Lands and Building which are designated from time to time by the Landlord for the common use or enjoyment of the tenants in the Building users of adjacent properties and their agents, invitees, servants, employees and licensees, or for use by the public, and which are not for the exclusive use of the tenant of any rentable premises."
[12] The clause providing for indemnification of the landlord by the tenant for any loss arising out of this lease was also set forth at Schedule D.
[13] The tenant was required to maintain policies of insurance including, inter alia, all-risk insurance in an amount equal to full replacement value; business interruption insurance; and comprehensive general liability insurance. The all-risk insurance was for property owned by the tenant or for which the tenant was liable or installed by or on behalf of the tenant, including leasehold improvements, entrance doors, exterior windows, tenant fixtures, the tenant's stock in trade, furniture, equipment and all other personal property (Schedule D, section 1).
[14] The lease provided that rent payment was due on the first of every month; late payments were subject to a charge equal to 5% of the overdue amount; arrears of rent were subject to interest at a rate of 18% per annum, calculated on a daily basis from the time any rent became due until paid by the tenant, the tenant was to pay monthly rent by preauthorized payment and that the tenant would be considered in default of the lease if, inter alia, the tenant failed to pay an instalment of gross rent or any other sum on the date payment became due, or abandoned or attempted to abandon the premises.
[15] Also pursuant to the lease, where the landlord terminates the lease for any breach, in addition to other remedies it may have, it may recover from the tenant all damages incurred by reason of such breach, including the cost of recovering the leased premises, legal fees on a solicitor and its own client full indemnity basis and including the worth, at the time of such termination, of the amount of rent required to be paid pursuant to this lease for the remainder of the stated term, together with all other damages incurred by the landlord by reason of any other default or breach of the lease prior to such termination (clause 8.02). The lease further provided that if legal action is brought for recovery of possession of the leased premises, for the recovery of rent, or because of the breach of any other terms, covenants or conditions herein contained on the part of the tenant to be kept or performed, including damages sustained by the landlord because of such breach, and such breach is established, the tenant shall pay to the landlord all expenses incurred therefore, including legal fees on a solicitor and its own client full indemnity basis (clause 8.04). As well, pursuant to clause 8.07, “Remedies Generally”: "Mention in this Lease of any particular remedy of the Landlord in respect of the default by the Tenant does not preclude the landlord from any other remedy in respect thereof, whether available at law or in equity or by statute or expressly provided in this Lease. No remedy shall be exclusive or dependent upon any other remedy, but the Landlord may from time to time exercise any one or more of such remedies generally or in combination, such remedies being cumulative and not alternative. In the event of a breach or threatened breach by the Tenant of any of the covenants, provisions or terms hereof, the Landlord shall have the right to invoke any remedy allowed at law or in equity.” Finally, pursuant to clause 8.09, the failure of the Landlord to insist upon a strict performance of any of the covenants and provisions herein contained shall not be deemed a waiver of any rights or remedies that the Landlord may have and shall not be deemed a waiver of any subsequent breach or default in the covenants and provisos herein contained.” The Lease also contained an entire agreement clause (11.03).
[16] At the end of the term or earlier termination of the lease, the tenant is required, pursuant to the lease to surrender the leased premises to the landlord in as good condition as the tenant is required to maintain the leased premises throughout the term (clause 5.05).
[17] The tenant took possession of the premises on or about September 1, 2008.
[18] During the tenancy of the defendant, Regal Metal Doors, it experienced three break-ins, the first on September 10, 2010; the second on October 14, 2011; and the third on December 31, 2011. In each instance, computer equipment was stolen. Proof of claim forms were submitted to the tenant's insurer for all three break-ins. However, pursuant to the evidence adduced, only a portion of the first proof of loss form was paid by the insurer due to the lack of supporting documentation regarding the losses.
[19] In November, 2011, CREIT, the property manager for the original owner, provided to the defendant, at Units 30 -32, 90 Nolan Court, a cheque in the amount of $11,300 representing the $10,000 tenant inducement for entering the lease plus HST. While the representative of the defendant, Keith Ly, testified he had not received this cheque, he conceded that by the last year that they were in possession of the subject premises, he was rarely there as he was much less engaged in the business at that time.
[20] The defendant failed to pay its monthly rent on December 1, 2011 and January 1, 2012, as required pursuant to the lease. On January 20, a bailiff attended at the premises of the defendant to collect the overdue rent for December, which was paid at that time. The defendant failed to pay the rent for January and February. However, the security deposit held by the plaintiff was applied to the January rent, leaving only a balance of $251 owing. The plaintiff was able to process the preauthorized payment in February to pay for that month's rent. No rent was paid thereafter.
[21] The defendant left the property sometime in January. Pursuant to the evidence, the bailiff had attended at the premises on several occasions to obtain a certified cheque for the outstanding arrears. On January 19, according to the invoice of the bailiff dated February 24, 2012, a cheque for $5,777.62 was received and another payment in the same amount was promised for January 26. The bailiff thereafter attended on several occasions but the cheque was never ready. The bailiff again attended at the Unit on January 30, 2012 to collect the balance of arrears owing and found the premises abandoned.
[22] While the property manager, on behalf of 90 Nolan Court Inc., initially prepared an authorization to distrain to the bailiff for arrears of rent owing, when the bailiff attended the property on January 30, he found the property abandoned and no assets to distrain.
[23] The defendant had left the premises, taking all of its possessions and inventory, leaving only debris and used furniture. The invoice of the bailiff states, in this regard, as follows: "Tenant had abandoned the premises leaving behind a disgusting mess–some well used desks and chairs, and some unfinished doors to be disposed of."
[24] A Notice of Default was sent to the defendant, 6592503 Canada Inc., and the indemnifier, Unimac, on February 1, 2012, indicating that "the landlord intends to take all remedies available to it in law and pursuant to the lease dated June 17, 2008."
[25] A Notice of Termination of lease dated August 30, 2012 was hand-delivered to the defendant at the leased premises and sent by registered mail to the defendant at the leased premises and at their then-current new address.
[26] The premises were cleaned up, restored to marketable condition and listed for rent on March 6, 2012. The premises were thereafter rented to a new tenant pursuant to an Industrial Net Lease Agreement dated November 15, 2012, for a lesser rental amount.
(Decision continues with the Evidence, Issues, Analysis, and concluding sections exactly as in the original judgment.)
Carole J. Brown, J.
Released: August 5, 2015