ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-15-539929
DATE: 20151113

BETWEEN:

NATIONAL SQUASH ACADEMY INC.
Plaintiff

– and –

PARC DOWNSVIEW PARK INC.
Defendant

Glenn A. Smith and Robert Trenker, for the Plaintiff

Jonathan F. Lancaster and Sarah J. Turney, for the Defendant

HEARD: November 12, 2015

ENDORSEMENT

diamond j.:

Overview

[1] The defendant is an arms-length corporation of the federal Crown and incorporated pursuant to the Canada Business Corporations Act. It carries on business as the operator, manager and developer of the former Canadian Forces Base Toronto (Downsview), also known as “Downsview Park”.

[2] The plaintiff is a company incorporated pursuant to the Ontario Business Corporations Act, and carries on business as a multiple-faceted squash organization. Its business includes overseeing a squash program catered specifically to disadvantaged youth in Toronto.

[3] As landlord of Downsview Park, commencing in 2010 the defendant rented the premises municipally known as 75 Carl Hall Road, Unit 15, Toronto to the plaintiff. Pursuant to two separate leases (the first lease dated August 1, 2010 and the current lease dated July 9, 2012), the plaintiff has occupied the premises as a tenant for the last five years.

[4] Significant arrears of both basic rent and additional rent under the lease have accumulated. By formal Notice dated October 5, 2015, the defendant terminated the plaintiff’s lease and has now re-entered the premises.

[5] The plaintiff commenced this action on November 5, 2015, and claims, inter alia, damages for breach of contract and negligent misrepresentation in the sum of $500,000.00. Although originally cast as a motion seeking injunctive relief, the plaintiff now brings this motion on an urgent basis seeking relief from forfeiture and re-entry into the premises.

[6] The defendant opposes the plaintiff’s motion and takes the position that due to the plaintiff’s breaches of the lease, delay and other actions, the plaintiff should not be entitled to the equitable relief it seeks.

[7] I note that the plaintiff seeks relief from forfeiture on an interim basis, as cross-examinations have yet to occur given the urgent scheduling and argument of this motion.

Relief from forfeiture

[8] The plaintiff relies on both section 20 of the Commercial Tenancies Act R.S.O. 1990 c. L7 and section 98 of the Courts of Justice Act R.S.O. 1990 c. C.43 in support of its motion. When dealing with commercial tenancies, the jurisprudence is well developed and not in dispute. As held by Justice Fragomeni in Grand River Conservation Authority v. Hargreaves 2004 (S.C.J.), the power to grant relief from forfeiture is an equitable, discretionary remedy. In exercising its discretion, the court is to consider the moving party’s conduct, the gravity of the breach(es) and the disparity between the value of the property forfeited and the damage caused by the breach(es).

[9] In a situation where the default is based upon non-payment of rent, the court must consider the following criteria:

(a) whether the moving party comes to court with clean hands,

(b) whether there has been an outright refusal by the moving party to pay rent,

(c) whether the rent has been in arrears for a short or long time, and

(d) whether the landlord has suffered a serious loss by reason of the moving party’s delay in paying rent.

Summary of relevant facts

[10] A review of the preamble of the lease dated July 9, 2012 (the “current lease”) discloses that the defendant has encountered significant difficulty in collecting rent from the plaintiff for many years. In the preamble to current lease, the parties acknowledged that as of July 15, 2012, the plaintiff owed the defendants outstanding rent under the original August 1, 2010 lease in the amount of $148,295.99.

[11] The current lease provides for the plaintiff to remit payment monthly of both basic rent and additional rent. Basic rent is explicitly defined and set out under the current lease. Additional rent is a less static amount as it is based upon other sums of money or charges required to be paid by the plaintiff under the lease (which is essentially a “triple net” lease). Additional rent includes such expenses as operating costs and taxes.

[12] There are several clauses in the current lease which provide that the plaintiff’s obligation to remit payment of basic rent and additional rent is independent of and without regard to any right of set-off, deduction, abatement, demand or other compensation. There appears to be little doubt that, on its face, the current lease does not permit the plaintiff to offset any amounts whatsoever against its obligations to remit payment of basic rent and additional rent.

[13] The plaintiff has displayed a persistent pattern of defaulting in its obligations to remit payment of basic rent and additional rent. On occasion, the plaintiff has delivered intermittent, short payments in amounts which it unilaterally and arbitrarily chose. The amounts of those intermittent payments bear no relation to the actual amounts due and owing under the current lease.

[14] The plaintiff has not made any rental payments (basic or additional rent) since January 27, 2015. The defendant claims that as at October 1, 2015, the plaintiff owed basic rent of $214,240.53, and additional rent of $304,076.66.

[15] The plaintiff does not appear to dispute the amount of outstanding basic rent. While the plaintiff seems to dispute the amount of outstanding additional rent (over and above any damages the plaintiff claims are owing to it in this proceeding), I do not find any evidence in the record before me to explain how or why the plaintiff takes issue with the amount of additional rent claimed by the defendant.

[16] The plaintiff does claim that the premises have declined into disrepair since 2010. According to the plaintiff, the premises have suffered from a series of serious deficiencies including problems with the building envelope, integrity of the walls, flooding and leaking, rodent infestation and HVAC issues. Ironically, some of these alleged issues are actually addressed by the provisions of the current lease, and arguably preclude the plaintiff from advancing any claims for damages arising therefrom. In any event, the plaintiff claims that these alleged deficiencies have impeded its ability to operate the business, and as a result the plaintiff has been unable to satisfy its payment obligations under the current lease.

[17] The plaintiff submits that the parties have been in discussions for nearly two years, all the while attempting to renegotiate key clauses in the release to “reflect the actual condition of the premises”. There is evidence in the record before me that offers to achieve this goal were prepared and exchanged between the parties. Some of those offers were made on a with prejudice basis, while others were merely referenced in the parties’ materials.

[18] In any event, on October 5, 2015, the defendant delivered a formal Notice of Termination to the plaintiff, claiming default in under the lease of the plaintiff’s obligation to remit payment of the arrears of basic rent totaling $214,240.53. I note that the current lease was not terminated on the grounds of the plaintiff defaulting upon its obligations to remit payment of additional rent. That said, the Notice of Termination does state in the final paragraph that “the landlord reserves its legal rights and remedies in respect of all amounts due and owing to it under the Lease, including interest on the outstanding arrears of Basic Rent and all amounts due on account of Additional Rent.”

[19] After delivering its Notice of Termination, the defendant waited an additional 10 days (over and above the 10 days it provided the plaintiff to cure its default) before taking active steps to re-enter the premises and evict the plaintiff.

[20] After unsuccessful, post-termination attempts by the parties to resolve this dispute, this action was commenced and this motion was brought.

Decision

[21] There can be no more fundamental term in a commercial lease than the payment of rent. Relief from forfeiture is an equitable remedy, and the plaintiff’s decision to cease making rental payments since January 2015 no doubt dirties its hands. That said, both parties appear to have been participating in ongoing negotiations, albeit intermittently, during the last two years. In my view, the plaintiff was attempting to renegotiate the terms of the current lease to allow it to stay in the premises, rather than simply “give up” and be forced to either close down or relocate.

[22] There is no current third party prospective tenant interested in occupying the premises post-termination of the plaintiff’s current lease. I take from the plaintiff’s materials that it intends to “finish what it started” and continue to cultivate and promote its squash business. Given the terms of the current lease, and in particular those clauses which provide that payment of rent is not subject to any set-off or other deduction, the plaintiff may experience difficulty in proving its claim for damages. However, that is a matter left for trial, as I am only entertaining an interim request for relief from forfeiture at this early stage.

[23] I am prepared to grant the plaintiff relief from forfeiture, albeit on strict terms. The main “bone of contention” between the parties is whether I should order the plaintiff to pay any of the arrears of additional rent as a term of relief from forfeiture.

[24] It was the plaintiff’s submission that it be required to pay all of the arrears of basic rent, but leave the issue of the arrears of additional rent for when the motion is rescheduled to be heard on a full evidentiary record.

[25] For its part, the defendant submitted that as a term of relief from forfeiture, in addition to payment of the outstanding arrears of basic rent, the plaintiff ought to be required to remit payment of a minimum of $200,000.00 towards the outstanding additional rent. While there was no “scientific formula” for arriving at the $200,000.00 figure, it was the defendant’s position that given the plaintiff’s extensive history of non-payment and delay in responding to the various notices issued (and chances afforded) by the defendant, the plaintiff ought to be required to “pony up” a significant sum as a term of re-entry.

[26] I have carefully considered the submissions of the parties, and have reviewed the evidentiary record. I make the following Order:

1. The plaintiff is granted relief from forfeiture and is permitted re-entry into the premises upon the completion and satisfaction of the following terms:

(a) the plaintiff shall remit payment to the landlord of the sum of $214,240.53 representing the outstanding basic rent due under the current lease;

(b) the plaintiff shall remit payment to the landlord of the sum of $125,000.00 on account of the outstanding arrears of additional rent claimed to be owing by the defendant under the current lease;

(c) the plaintiff shall remit payment to the landlord of basic rent and additional rent owing for the months of November 2015, December 2015 (to be delivered on time) and each and every subsequent month during the term of the current lease as those amounts become due and owing;

(d) the plaintiff shall not remove any of the leasehold improvements to the premises, whether those leasehold improvements were made or carried out by the plaintiff or the defendant.

2. The balance of this motion shall be adjourned to be heard by me on December 15, 2015 for a one day hearing. Until further Court order or agreement between the parties, the terms of this Endorsement are without prejudice to the rights, claims and interests of both the plaintiff and the defendant, including the parties’ respective claims for any damages, costs or expenses from each other.

3. The balance of the plaintiff’s motion shall proceed on the issue of whether the interim relief from forfeiture granted herein shall continue on an interlocutory basis until the trial of this action, and if so upon what terms. As requests for relief from forfeiture are typically brought by way of application, thus resulting in a final order, I am provisionally of the view, subject to counsel persuading me otherwise, that the issue of potentially extending the order for relief of forfeiture should be argued akin to a request by the parties for summary judgment on that issue.

4. The parties shall agree upon a timetable for the remaining steps leading up to the December 15, 2015 attendance, and the timetable shall confirm whether a full day attendance is still required on December 15, 2015. I hereby appoint myself as the case management judge for this action. A copy of the timetable shall be filed with my assistant Olga Misko by the end of Monday, November 16, 2015.

Diamond J.

Released: November 13, 2015

COURT FILE NO.: CV-15-539929
DATE: 20151113

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

NATIONAL SQUASH ACADEMY INC.
Plaintiff

– and –

PARC DOWNSVIEW PARK INC.
Defendant

ENDORSEMENT

Diamond J.

Released: November 13, 2015