CITATION: Anighoro v. 2180628 Ontario Inc., 2017 ONSC 4812
COURT FILE NO.: 16-59685 DATE: 2017-08-22
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
PATIENCE ANIGHORO, CARRYING ON BUSINESS AS SOUTHERN COMFORT BBQ Applicant
- and -
2180628 ONTARIO INC. AND TONY JOHAL Respondents
COUNSEL: M. Tubie, for the Applicant A. Powell, for the Respondents
HEARD: July 7 and 19, 2017
REASONS FOR JUDGMENT
A. J. Goodman J.:
[1] This applicant, Patience Anighoro (“Anighoro”) seeks a declaration that the lease agreement between the parties signed on September 1, 2016 was terminated by the respondents' action of denying her access to the basement unit under lease (“the premises”), located at 163 Main Street West in Hamilton.
[2] The applicant further requests that due to the termination of the lease, she be granted an order allowing access to the premises to remove all of her equipment and tools along with a reimbursement of her rent deposits.
[3] The respondent says that the applicant had no intention of pursuing the business and wanted to unilaterally terminate the lease. She had full and unfettered access to the premises. It was the applicant’s conduct and her actions that frustrated the performance and her obligations under the rental agreement.[^1]
FACTS:
[4] Anighoro and Keith Kwaramba ("Kwaramba") registered a business called Southern Comfort Barbeque as partners of the business. Anighoro and Kwaramba searched and found the respondents' basement unit suitable to start their restaurant business. On September 1, 2016, the parties signed a lease agreement with Tony Johal, the principal of 2180628 Ontario Inc., with the understanding that October and November 2016 would be rent-free to enable the co-tenants to set up their operation. The next rent payment was due on December 1, 2016.
[5] Upon signing the lease, Anighoro made a payment of $5,650.00 to the respondents which represented first and last month's rent. Anighoro purchased the restaurant equipment and supplies required to start the business.
[6] On September 11, 2016, Kwaramba was arrested. Anighoro did not become aware of Kwaramba's incarceration until September 17, and she had no knowledge of Kwaramba's release date. On September 22, 2016, Anighoro went to the premises but found a padlock on the gate leading to the unit. She sought answers from the respondents’ representative, Mark Johal (“Johal”) about this new development. Anighoro was informed that access would not be granted and Johal requested confirmation or information from the co-tenant, Kwaramba, before Anighoro would be allowed access to the unit.
[7] On September 29, 2016 the applicant attempted to access the premises, but again the respondents maintained that access would not be granted.
[8] On January 16, 2017 through counsel’s efforts, access to the premises was granted to allow Anighoro and her lawyer to view the unit in order to assess the state of the equipment located therein. The respondents maintained that they would not allow Anighoro access to the premises for a myriad of reasons.
Positions of the Parties:
[9] The applicant submits that despite her efforts, no access was provided to the premises after mid-September 2016. The applicant says that the respondents' actions effectively terminated the lease. Further, the respondents' unilateral actions of placing a new padlock and not providing the appropriate keys effectively denied access to the applicant thereby breaching the lease.
[10] The applicant says that the premises was never put in use and her access was continually denied by Johal. No lights were turned on or any equipment used. The allegation of expenses incurred for utility bills is denied. The applicant submits that she showed a willingness to commence or continue the restaurant business after Kwaramba’s incarceration but access was continually thwarted by the respondents.
[11] The applicant submits that denial of access to the premises unit was an act of retaking possession and it is a fundamental breach of the lease agreement since without access to the basement unit, the applicant could not run her business.
[12] The respondents submit that Kwaramba and Anighoro were provided with possession of the premises and keys upon execution of the lease with keys to access the unit. For the months of September, October and November, 2016, the applicant was obliged to pay for the utilities consumed during this period.
[13] The respondents say that Kwaramba and Anighoro had a falling out sometime in October. Anighoro specifically advised Johal that, given her partner’s incarceration, she did not want to do any more business and wanted deposit monies refunded and her equipment back.
[14] The respondent poses this question. What possible motive would they have in preventing or denying the applicant access to and carrying on the business at the premises? On the other hand, the respondent submits that the applicant had an obvious motive to seek the termination of the lease in light of the difficulties she was experiencing with her co-tenant.
[15] Johal's evidence was clear that once the restaurant was open for business, the padlock, which secured premises other than the leased premises, which would otherwise be open to the street, would be unlocked during business hours which was explained to the tenants at the time they signed the lease.
[16] The respondent submits that at no time has Anighoro or Kwaramba been excluded from the premises, nor have they returned the keys to the premises. Currently the sum of $19,775.00 remains outstanding for rent arrears together with outstanding utility bills to date of approximately $5,000.00, (or perhaps more – according to the materials filed) for which the applicant is liable.
[17] Where the applicant's evidence differs from that of Johal, the respondents submit the evidence of Johal should be accepted, which would lead to a finding there was no denial of access to the leased premises, let alone a fundamental breach of the lease. This application ought to be dismissed.
Discussion:
[18] This matter was commenced by way of an application under Rule 14.05(3) of the Rules of Civil Procedure. The issue here for declaratory relief is whether the respondents’ actions amounted to a fundamental breach terminating the lease with corollary remedies being sought.
[19] There are some material facts in issue. However, I agree with applicant’s counsel that even if there were material facts in issue, the jurisprudence permits the bringing of this type of matter by way of an application.
[20] I will first briefly address and dispose of the issue of whether the applicant and Kwaramba are partners. It is clear that a formal partnership can only arise by contract, written or oral and not by actions or representation. The case law in this area of the law oft-cited historical decision of the Supreme Court of Canada’s case in Porter v. Armstrong, 1926 23 (SCC), 1926 SCR, 328:
Partnership, it is needless to say, does not arise from ownership in common, or from joint ownership. Partnership arises from contract, evidenced either by express declaration or by conduct signifying the same thing. It is not sufficient there should be community of interest; there must be contract.
[21] In Wyszatko v. Wyszatko, 2011 ONSC 2901, at para. 20 found that the relevant section of the Partnership Act are simply badges of partnership but are not determinative of a partnership. The court stated:
The Applicant argues that the factors set out in section 3 of The Partnership Act are badges of partnership but none determinative. I agree. It is a matter of contract formation which is determined by an examination of whether there was agreement on the essential terms.
[22] The applicant submits that there was, at best, an evolving partnership agreement which was effectively put on hold when Kwaramba was arrested and incarcerated. There was no issue of partnership, per se, in the circumstances of this case to thwart the continuation of the business as a going concern.
[23] It is undisputed that the applicant and her co-tenant, Kwaramba registered the business as a general partnership. During her cross-examination on February 6, 2017, Anighoro affirmed that she and Kwaramba were partners:
Q. "This was when you formed a partnership with Kwaramba?" A. "Yes" Q. "So you formed a partnership with Kwaramba; correct?" A. "Yes"
[24] The respondent submits that Kwaramba clearly has an interest in the lease as a co-tenant and although the applicant tried to deny Kwaramba was her partner, she admitted that Kwaramba claimed an interest in the equipment.
[25] The respondent argues that to declare the lease terminated would affect the contractual and property rights of her co-tenant, Kwaramba, whether he was a partner or not. Kwaramba was not before the court, and there was no evidence that he was even aware of these proceedings. This alone should be sufficient to deny the applicant the order she seeks, as Kwaramba should have been able to protect his interests as a partner or co-tenant to the lease; and in the equipment which could constitute partnership property.
[26] I am not satisfied that this argument addresses the fundamental question before me and is nothing more than mere conjecture. Whether or not there was a defacto relationship that could fall under a legal definition of partnership is not the real issue here. The live issue here is the rights of co-tenants under the commercial lease agreement. In my view, the characterization of the “partnership” does not necessarily mean that there was a relationship that inhibited Anighoro’s legal rights under the lease.
[27] Nonetheless, even if I am wrong in this regard, it does not form the fundamental basis for my decision. Moreover, this entire line of argument fails to satisfy me as to it merits in dealing with this lease.
[28] It is clear to me that the lease agreement was signed by both Anighoro and Kwaramba and both of them had equal rights of access to the premises.
[29] Johal claimed that Kwaramba told him that he (Kwaramba) was having problems with the applicant and that he wanted out of the business. This was suggested as an expressed intention of Kwaramba to frustrate the business from taking off even after his incarceration. The respondent also submits that it is clear from the evidence, that following the signing of the lease, Anighoro and Kwaramba had a falling out. So what?
[30] In the case at bar, it is evident to me that the respondents denied the applicant access to the basement unit that she and her business partner leased in September 2016. The respondents claim that sometime in October 2016, the applicant advised the respondents that she did not want to do any more business and wanted her deposit and equipment back. Based on the evidence, I am not persuaded that this was the case.
[31] That being said, on this point, I am not persuaded that there was any form of collusion or cooperation between the respondents and Kwaramba to frustrate the applicant to abandon the business and leave her equipment behind.
[32] Nevertheless, I do not accept Johal’s explanation about not denying Anighoro’s access to the premises, whether by the lock, the gate or the padlock as the case may be. As indicated by the applicant, the rear door can only be accessed through the front door because it is locked from inside the unit. So, the applicant would need to go through the front door, open the back door before she can start using the back door. I accept Anighoro’s evidence that the padlock was not present when the lease was signed or during the initial part of the tenancy.
[33] Johal testified that no tenant was allowed to have the padlock key but the premises could be accessed at any time through the Indian restaurant upstairs. Frankly, his evidence on this entire issue was equivocal and evasive. Johal varied his story when he said that he had once asked Kwaramba to have a copy of the padlock key but Kwaramba said that he did not need it. Why would Johal rely on Kwaramba not requiring the padlock key if Kwaramba already expressed his willingness to back out of the business deal with the applicant? It appears Johal did not make a similar offer to the applicant to have the padlock key. There was also a discussion about the alarm system and other doors to the building. Indeed, much time was spent on this issue. Access and egress to the premises seemed to be a convoluted and incongruent exercise or excuse when hearing Johal’s testimony along with the physical layout of the premises. Why not just simply provide the appropriate keys to Anighoro as long as the rent is paid?
[34] Johal also stated that upon receipt of the applicant's lawyer's letter requesting access, he believed that he could not do anything about it, thus he chose not to respond. He was asked that if he really did not deny access, why not reply and take the opportunity to set the record straight at that time. The witness’ responses were perplexing and self-serving. There is some evidence to suggest that Johal did not respond because he did not want the applicant to access the unit, notwithstanding that she had engaged the services of a lawyer.
[35] In totality, Johal’s evidence demonstrated an unacceptable resistance and unwarranted hindrance towards Anighoro. I reject the respondents’ argument that the relief sought here that could adversely affect any of the co-tenant’s rights and therefore, the applicant has not established that the respondents have committed a fundamental breach of the lease.
[36] In my view, the applicant's evidence on the other hand, validated efforts on her part to get the keys to the premises, albeit she still could not enter the basement unit. Anighoro co-signed the lease. She paid the first and last months’ rent and purchased all of the equipment out of her own funds.
[37] A fundamental breach is one that deprives the innocent party of substantially the whole benefit of the contract. A breach which has "material" consequences does not necessarily rise to the level of one that has deprived the innocent party of substantially the whole benefit of the contract: Guarantee Co. of North America v. Gordon Capital, 1999 664 (SCC), [1999] 3 S.C.R. 423. The consequences of repudiation depend on the election made by the non-repudiating or innocent party.
[38] A fundamental breach goes to the root of the agreement, for example, when it deprives the tenant of substantially the whole benefit of the lease: 1723718 Ontario Corp. v. Macleod, 2010 ONSC 6665.
[39] In order to find that the lease is terminated, and even if the applicant was unable to access the premises, (which is disputed), the respondents argue that in these circumstances, it was not so significant that it amounted to a deprivation of substantially the whole benefit of the lease. Thus, the applicant was not entitled to terminate the lease or treat it as at an end. It is submitted that it was the applicant who had repudiated the lease by taking the position that the lease was at an end and she is not bound by it. With respect, I disagree.
[40] Overall, I prefer Anighoro’s testimony over that of Johal. I accept that the applicant was willing, able and ready to start her restaurant business by engaging a new chef and at no time acted in a manner to repudiate the lease. The applicant's evidence further demonstrated legitimate efforts to continue the restaurant business in spite of Kwaramba's incarceration.
[41] I also observe that during the limited cross-examination of Johal at this hearing, he testified that it did not matter who signed the lease agreement. Not only is this wrong in law, but in my view, this testimony provided a valuable insight into Johal’s – and for that matter, the respondents’ - true intentions and subsequent questionable conduct towards Anighoro. Johal also claimed that he was always trying to help the applicant with her business and did not impede her business venture. Nothing can be further from the truth.
[42] In sum, the respondents’ actions towards Anighoro can be gleaned from Johal’s own evidence as it relates to the entire series of events, including but not limited to the issue about the gate with padlock, with the keys, access through the Indian restaurant, the alarm, the doors and his responses once confronted with a request for keys. I find that, for whatever reason, Johal improperly refused to provide access to the premises to Anighoro, on the unjustified premises that there was a requirement for some authorization or consent from the co-tenant. In my opinion, this established a pattern of conduct behaviour that materially affected Anighoro’s rights to her use and enjoyment of the premises.
[43] I also reject any claim that the respondents’ were out money for renovations, furnishing a separate hot water tank, utilities, unpaid rent or other expenses. Apart from the fact that neither invoices nor supporting documents were filed with the Court, I accept that no renovations were requested by the applicant. I reject any argument that somehow the rights of the co-tenant enabled or justified the respondents’ actions in relation to these expenses.
[44] I find that, in the circumstances of this case, the respondents denied Anighoro access to the premises in contravention of the lease agreement. By their conduct and actions, the respondents materially deprived the applicant of substantially the whole benefit of the lease agreement.
Conclusion:
[45] The application is granted.
Order to go declaring that the respondents’ action of denying the applicant access to the premises amounted to a fundamental breach of the lease agreement entitling the applicant to treat the lease as terminated;
As a result of the termination of the lease agreement, the applicant was entitled to access the premises and remove all her equipment and supplies from the basement unit, and shall be granted immediate access to the premises to effect same.
The respondent shall pay $2,825.00 to the applicant on account of a reimbursement of the last months’ rent payment.
No further rents or monies are due and owing to the respondents.
[46] If the parties cannot agree on the issue of costs, I will consider brief written submissions. These cost memoranda shall not exceed three pages in length, (not including any bill of costs or offers to settle). The applicant shall file her costs submissions within 15 days of the date of this judgment. The respondents may file their costs submissions within 15 days of the receipt of the respondent’s materials. The applicant may file a reply within five days thereafter.
A.J. Goodman J.
Released: August 22, 2017
CITATION: Anighoro v. 2180628 Ontario Inc., 2017 ONSC 4812 COURT FILE NO.: 16-59685 DATE: 2017-08-22
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
PATIENCE ANIGHORO, CARRYING ON BUSINESS AS SOUTHERN COMFORT BBQ Applicant
- and -
2180628 ONTARIO INC. AND TONY JOHAL Respondents
REASONS FOR JUDGMENT
A.J. Goodman J.
Released: August 22, 2017
[^1]: The principal of the corporate respondent, Tony Johal neither attended the hearing nor chose to provide evidence; rather his father Mark Johal was presented as a witness.