CITATION: Penretail v. 2380462 Ontario Inc., et al, 2016 ONSC 600
COURT FILE NO.: CV-14-518762
DATE: 20160126
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PENRETAIL MANAGEMENT LTD.
Plaintiff
– and –
2380462 ONTARIO INC. t/a BOLTON HEALTH CENTRE, 2380460 ONTARIO INC., ERIN MILLS MEDICAL CENTRE INC. and GARY CARDOSO
Defendants
Alexandra Lev-Farrell, for the Plaintiff
Patrick Di Monte, for the Defendant Gary Cardoso
No one appearing for the Defendants 2380462 Ontario Inc. t/a Bolton Health Centre, 2380460 Ontario Inc. and Erin Mills Medical Centre Inc.
HEARD: January 14, 2016
ENDORSEMENT
DIAMOND J.:
Overview
[1] The plaintiff is the registered owner of a property known as the Bolton Lands Shopping Centre located at 1270-12788 Highway #50, Bolton, Ontario. By written Lease Agreement dated January 6, 2014 (the “Lease”), the plaintiff as landlord leased premises to the defendant 2380416 Ontario Inc. t/a Bolton Health Centre (“462”). The premises consisted of approximately 5,356 square feet (the “Unit”). 462 intended to operate a medical clinic for the Unit. The Lease was for a ten year term commencing October 14, 2014.
[2] The defendants 2380560 Ontario Inc. (“560”) Erin Mills Medical Centre Inc. (“Erin Mills”) and Gary Cardoso (“Cardoso”) all signed an Indemnity Agreement dated January 6, 2014 in favour of the plaintiff. The indemnity Agreement was attached as Appendix “A” to the Lease.
[3] The Lease provided for a 90 day fixturing period during which time 462 was to carry out certain construction work in the Unit. At the conclusion of the fixturing period, 462 was to commence business operations and begin paying rent.
[4] 462 failed to take any steps to start or complete the construction work during the fixturing period. 462 did not commence any business operations. 462 never paid any rent to the plaintiff. There is no dispute that 462 breached its obligations under the Lease. The plaintiff has now brought this motion for summary judgment against all defendants for damages it claims are due and owing under the Lease.
[5] The defendants were originally all represented by the same lawyer, and filed both a joint statement of defence, and one joint responding motion record. By the time the plaintiff’s motion for summary judgment was argued before me, Cardoso had retained separate counsel and was the only defendant opposing the motion as no one appeared for the other defendants.
[6] In opposing the plaintiff’s motion for summary judgment, Cardoso argued that there were genuine issues requiring a trial. I must thus address the following issues:
Was there consideration for Cardoso executing the Indemnity Agreement?
Did the plaintiff provide proper notice to permit it to terminate the Lease and seek damages for the balance of the term?
Is the Indemnity Agreement not enforceable by reason of a lack of independent legal advice or non est factum?
If there are no genuine issues requiring a trial, what is the plaintiff’s measure of damages?
Summary Judgment
[7] Rule 20.04(2)(a) of the Rules of Civil Procedure now provides that the Court shall grant summary judgment if the Court is satisfied that “there is no genuine issue requiring a trial with respect to a claim or defence”. As a result of the amendments to Rule 20 introduced in 2010, the powers of the Court to grant summary judgment have been enhanced to include, inter alia, weighing the evidence, evaluating the credibility of a deponent and drawing any reasonable inference from the evidence.
[8] In Hryniak v. Mauldin 2014 SCC 7, the Supreme Court of Canada established a road map outlining how a motions judge should approach a motion for summary judgment. The Court must first determine whether there is a genuine issue requiring a trial based only upon the evidence filed with the Court and without using the new fact finding powers set out in the 2010 amendments. Summary judgment will thus be available if there is sufficient evidence to justly and fairly adjudicate the dispute, with the motion being an affordable, timely and proportionate procedure.
[9] If the Court finds the presence of a genuine issue requiring a trial, the motions judge must then determine if the need for a trial can be avoided by using the new, enhanced powers under Rules 20.04(2.1) and (2.2).
[10] It is important to remember that the applicable evidentiary principles developed under the previous incarnation of Rule 20.04 continue to apply. The motions judge must still take a “hard look” at the evidence to determine whether it raises a genuine issue requiring a trial, and as a result each party must still put its “best foot forward” and submit cogent and compelling evidence to support or oppose the relief sought. A moving party has both a legal and evidentiary onus to satisfy the Court that there is no genuine issue requiring a trial. It is the moving party’s obligation to present a record that can enable the Court to avail itself of the enhanced powers under Rule 20.04 if the record warrants the exercise of such discretion.
[11] In my view, summary judgment is a just and proportionate outcome for the parties. On the record before me, I am confident that I can find the necessary facts and apply the relevant law to the evidence, and that it is in the interests of expedient, affordable and proportionate justice to proceed as such.
[12] I now address each of the issues in turn:
Issue #1 Was there consideration for Cardoso executing the Indemnity Agreement?
[13] The statement of defence filed on behalf of all defendants has never been amended. It does not raise a lack of consideration as a defence to the plaintiff’s claim. In fact, it does not raise any of the purported genuine issues requiring a trial at all.
[14] The plaintiff insisted upon an Indemnity Agreement as a term of the Lease. There does not appear to be any issue that both the Lease and attached Indemnity Agreement were executed in order to obtain a tenancy and possession of the Unit, which 462 did obtain. The preamble to the Indemnity Agreement states as follows:
“In order to induce the Landlord to enter into the Lease (the “Lease”) dated January 6, 2014 and make between the Landlord and 2380462 Ontario Inc., as Tenant and for other good and valuable consideration, the receipt and sufficiency or of is hereby acknowledged, the Indemnifier hereby makes the following Indemnity and Agreement (the “Indemnity”) with and in favour of the Landlord.”
[15] The Indemnity Agreement obliges all indemnifiers, including Cardoso, to perform all of the terms of the Lease on the part of 462, including making due and punctual payment of all rent, and indemnifying and saving the plaintiff harmless from any damages arising out of the failure of the defendants to satisfy their obligations under the Lease.
[16] Clause 13 of the Indemnity Agreement is a representation and warranty from all indemnifiers, including Cardoso, that the Indemnity Agreement is valid, binding and enforceable against them in accordance with its terms.
[17] A review of the evidence filed by Cardoso is necessary.
[18] Cardoso gave evidence that he met Omar Quereshi (“Quereshi”, an officer and director of both 462 and 460) at a Tim Horton’s restaurant, and executed the Indemnity Agreement “as a favour” to Quereshi. Cardoso signed the Indemnity Agreement in front of Quereshi and claims not to have read either the Lease or the Indemnity Agreement.
[19] On cross-examination, Cardoso testified that he did not read either document because he trusted Quereshi and was told by him that Cardoso would be “risk free”.
[20] Quereshi was cross-examined upon his affidavit, and testified that Cardoso was his longtime friend and was interested in real estate investment opportunities. When the plaintiff insisted upon indemnifiers for the Lease, Quereshi brought the opportunity to Cardoso to invest in the Bolton Lands medical clinic, and potentially other medical clinics as well.
[21] It is clear that to the extent Cardoso claims he was misled, at no time did Cardoso rely at all upon the plaintiff. Any misrepresentations as to Lease, Indemnity Agreement or the nature of the medical clinic operations (if any such misrepresentations exist), were conveyed to Cardoso by Quereshi and not the plaintiff.
[22] In Toronto Dominion Bank vs. Cordi [1997] O.J. No. 1280 (Gen. Div.), Justice Sheard relied upon the Supreme Court of Canada’s decision in J.D.F. Builders Ltd. v. Albert Pearl (Management) Ltd. 1974 CanLII 25 (SCC), [1975] 2 S.C.R. 846 (S.C.C.) and quoted this passage with approval:
“It does not matter whether the party making the promise receives any apparent benefit; it is sufficient that the promisee undertakes some burden or gives up something which in contemplation of law may be of value, and that the promisor accepts what the promisee undertakes or gives up as the inducement or price for the promise. The consideration must move from the promisee, that is, the promisee must suffer some detriment; but the consideration need not move to the promisor, that is, the apparent benefit, if any, need not be enjoyed by the promisor, and may consist in forbearance or credit given by the promisee to a third person as is usually so in the case of the guarantee.”
[23] I do not agree with Cardoso. He gave evidence that he understood that by signing the Indemnity Agreement, he was “guaranteeing a default by the Tenant to the date of termination”, but nothing further. Regardless of his understanding of the consequence of signing the Indemnity Agreement (and I will address that issue hereinafter), Cardoso’s own evidence confirms a general understanding that he was guaranteeing 462’s obligations under the Lease.
[24] There was sufficient consideration for the Indemnity Agreement, which formed part and parcel of the Lease itself. I therefore find that lack of consideration does not amount to a genuine issue requiring a trial.
Issue #2 Did the plaintiff provide proper notice to permit it to terminate the Lease and seek damages for the balance of the term?
[25] Cardoso’s argument on this issue was rather confusing. As I understood his position, Cardoso argued that the notice(s) delivered by the plaintiff did not comply with its legal obligations, thus precluding the plaintiff from seeking damages for anything owing under the Lease other than rental arrears up to the date of termination.
[26] Cardoso relies upon the Supreme Court of Canada’s seminal decision in Highway Properties Ltd. v. Kelly Douglas & Co. 1971 CanLII 123 (SCC), [1971] S.C.R. 562 (S.C.C.). In Highway Property, the Court held that a landlord may elect to terminate a lease with notice to the defaulting tenant that “damages will be claimed on the footing of a present recovery of damages for losing the benefit of the lease over its unexpired terms.” Up to the release of that decision, the jurisprudence permitted three alternative, mutually exclusive options for a landlord.
a) do nothing and insist upon performance of the terms of the lease by suing for rent on the footing that the lease remains in full force and effect;
b) terminate the lease retaining the right to sue for rent accrued and any other prior breaches of the lease; or,
c) advise the tenant of an intention to re-let the property on the tenant’s account and enter into possession on that basis.
[27] After 462 failed to carry out the construction work and pay any rent due under the lease, the plaintiff delivered a Notice of Default on or about October 27, 2014. The Notice was delivered to all the defendants, and gave them notice of the nature of the defaults. The Notice further provided as follows:
“Notice of this default is also hereby given to Indemnifiers without prejudice to or eliminating the Landlord’s rights and remedies against such Indemnifiers, all of which are hereby expressly reserved. For greater certainty and without limiting the generality of the foregoing, the Landlord shall not be bound to exercise its remedies against the Tenants or any other persons or security before first exercising its rights against the Indemnifiers.”
[28] The defendants did not cure any of their defaults. Accordingly, on or about December 6, 2014, the plaintiffs delivered a Notice of Termination upon all the defendants. It is this Notice of Termination with which Cardoso takes issue.
[29] The Notice of Termination advised the defendants that the Lease was terminated effective December 6, 2014 and the landlord had taken possession of the Unit. The Notice further provided that the termination of the Lease was without prejudice to any and all of the plaintiff’s rights as landlord including, without limitation, the right to pursue damages for:
a) all rental arrears up to the date of termination;
b) all losses and deficiencies sustained by the plaintiff as a result of the default, including future damages as a result of the plaintiff losing the benefit of the Lease over its unexpired term (i.e. the exact wording set out in the Highway Properties decision); and
c) all costs, charges and expenses incurred as a result of any and all breaches of the Lease including professional and legal fees on a solicitor and client basis.
[30] Less than three weeks later, the plaintiff commenced this proceeding.
[31] Once again, this “defective notice” position is not raised in the joint statement of defence.
[32] The Notice of Termination is notice to Cardoso that the Lease is terminated. It advises Cardoso that he may be responsible for all future damages until the end of the term of the Lease (subject to mitigation efforts) should the plaintiff pursue that course of action. To the extent that Cardoso did not understand the Notice of Termination to advise him of that substantive risk, he certainly must have appreciated such an understanding upon being served with the plaintiff’s statement of claim only weeks later.
[33] I do not find anything defective about the plaintiff’s Notice of Termination. Cardoso claims that had he been provided with “proper notice” (which I find that he was), he could have redeemed the premises as he was entitled to do under the provisions of the Commercial Tenancies Act R.S.O. 1990 c. L.7. There is absolutely no evidence that Cardoso intended to take any such steps. Cardoso was served with the Notice of Default, and did nothing. Once he was served with the Notice of Termination, his purported understanding of only being “on the hook for the existing arrears” was no longer sustainable.
[34] I therefore find that “defective notice” does not amount to a genuine issue requiring a trial.
Issue #3 Is the Indemnity Agreement not enforceable by reason of a lack of independent legal advice or non est factum?
[35] Cardoso did not strenuously pursue argument on this issue. When he met with Quereshi, he obviously understood the nature of the document which was being presented to him for signature, especially given that he questioned Quereshi about whether there were any risks associated with him signing it. There is no evidence to support a defence of non est factum. The lack of independent legal advice does not present any arguable defence on the merits.
[36] As previously stated, Cardoso never relied upon any representations made by the plaintiff. He could have consulted a lawyer but chose not to do so. At no time did the plaintiff ever advise Cardoso not to retain or seek advice from a lawyer. In fact, there was never any communication between the plaintiff and Cardoso.
[37] I therefore find that non est factum and lack of independent legal advice do not amount to genuine issues requiring a trial.
Issue #4 If there are no genuine issues requiring a trial, what is the plaintiff’s measure of damages?
[38] While the plaintiff requested damages in the total sum of $1,076,413.57 (being all damages owing until the end of the term of the Lease), I am not prepared to award that figure at this stage. While I accept that the plaintiff has taken steps to re-let the Unit and mitigate its damages, much can happen between now and the end of the term of the Lease.
[39] Quereshi and Cardoso testified that they believed it would not take the plaintiff three years to successfully re-let the premises. Unfortunately, there is no expert evidence before me which could offer an opinion as to the likelihood in this real estate market for the Unit being re-let to a third party tenant.
[40] The plaintiff provided me with an alternative damages calculation for rental arrears plus future losses up to December 2016. This date is reasonable given the fact that even if the plaintiff is able to re-let the premises over the next several months, there will very likely be another fixturing period to accommodate the needs of a new third party tenant.
[41] The breakdown of this alternative damages calculations is as follows:
● $48,726.00 for rental arrears up to and including December 2014;
● $54,243.00 for accelerated rent for the period of January - March 2015;
● $181,783.00 for rent from April 2015 - January 2016;
● $197,059.00 for future rent from February - December 2016;
● $41,696.00 on account of the plaintiff’s construction work and leasing fee;
● $1,011.00 on account of bailiff fees;
● a reduction of $28,761.00 (on account of the security deposit);
● HST totaling $64,513.41; and
● Interest in the total sum of $6,840.19.
TOTAL: $567,610.60
[42] I accept these calculations. I therefore grant the plaintiff partial summary judgment in the amount of $567,610.60 as against all defendants. This award is without prejudice to:
a) the plaintiff re-attending on a date after December 31, 2016, on notice to all defendants, to seek additional damages due under the Lease; and
b) Cardoso (or any of the defendants) re-attending between now and December 2016, on notice to the plaintiff, to seek a reduction, if applicable, in the event the plaintiff successfully re-lets the Unit and begins collecting rent prior to December 31, 2016.
Costs
[43] At the conclusion of the hearing, both the plaintiff and Cardoso submitted their respective Bills of Costs. I have reviewed those Bills of Costs. I see no reason why costs should not follow the event, and I award the plaintiff its costs of this action (including the motion for summary judgment) on a partial indemnity basis in the all-inclusive amount of $20,000.00 payable by all defendants on a joint and several basis.
Diamond J.
Released: January 26, 2016
CITATION: Penretail v. 2380462 Ontario Inc., et al, 2016 ONSC 600
COURT FILE NO.: CV-14-518762
DATE: 20160126
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PENRETAIL MANAGEMENT LTD.
Plaintiff
– and –
2380462 ONTARIO INC. t/a/ BOLTON HEALTH CENTRE, 2380460 ONTARIO INC., ERIN MILLS MEDICAL CENTRE INC. and GARY CARDOSO
Defendants
ENDORSEMENT
Diamond J.
Released: January 26, 2016