CF/Realty Holdings Inc. v. Midtowns Tiny Tots Inc., 2017 ONSC 7647

CITATION: CF/Realty Holdings Inc. v. Midtowns Tiny Tots Inc., 2017 ONSC 7647

COURT FILE NO.: CV-17-575170

DATE: 20171220

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: CF/REALTY HOLDINGS INC. Plaintiff

AND:

MIDTOWNS TINY TOTS INC. AND DWAYNE PERSAD Defendants

BEFORE: JUSTICE FAVREAU

COUNSEL: Dina Peat for the plaintiff (moving party) No one appearing for the defendants (responding parties)

HEARD: December 19, 2017

ENDORSEMENT

[1] The plaintiff, CF/Realty Holdings Inc. ("CF/Realty"), seeks default judgment against the defendant, Midtowns Tiny Tots Inc. ("Midtowns"). For the reasons set out below, default judgment is granted.

[2] The claim arises from a commercial lease entered into on March 17, 2015, between CF/Realty as the lessor and Midtowns as the tenant (the "Lease"). As part of the Lease, the defendant Dwayne Persad provided an indemnity to CF/Realty. The term of the lease was for ten years, from October 15, 2015, to October 31, 2025. Midtowns intended to operate a daycare in the leased premises.

[3] As Midtowns was encountering difficulties in obtaining business insurance, the term of the lease was amended to provide for a new commencement date of August 1, 2016, running to July 31, 2026.

[4] Midtowns did not pay any rent due on the commencement date of August 1, 2016. On August 5, 2016, CF/Realty gave notice to Midtowns that it was in default under the lease and that it had until August 10, 2016, to cure the default. Midtowns did not cure the default, and on August 15, 2016, CF/Realty re-entered the premises and terminated the Lease.

[5] Despite ongoing efforts that are detailed in the record on the motion, CF/Realty has not been able to re-lease the premises. In particular, the plaintiff's evidence is that the rental unit faces away from the shopping centre in which it is located, which has a negative impact on the desirability of the unit.

[6] The statement of claim was issued on May 15, 2017, and served on Midtowns on May 16, 2017.

[7] Midtowns did not defend the action and was noted in default on September 15, 2017.

[8] The plaintiff served the motion record for default judgment on Midtowns on December 7, 2017.

[9] The plaintiff only seeks default judgment against Midtowns. At the hearing of the motion, counsel for the plaintiff advised me that Mr. Persad has filed for bankruptcy and the action against him is therefore stayed.

[10] While the Rule 19.02(3) of the Rules of Civil Procedure do not require that defendants noted in default be given notice of a motion for default judgment, the case law makes clear that it is a best practice to give notice: Elekta Ltd. v. Rodkin, 2012 ONSC 2062 (Sup. Ct.), at para.10.

[11] In this case, as noted above, Midtowns was served with the motion record, and I am therefore satisfied that it was given notice of the motion for default judgment and chose not to respond.

[12] I am also satisfied that default judgment should be granted against Midtowns.

[13] When a defendant is noted in default under Rule 19.01 of the Rules of Civil Procedure, Rule 19.02(1) provides that the party "is deemed to admit the truth of all allegations of fact made in the statement of claim". Under Rule 19.05(1), where the claim is for unliquidated damages and the motion for default judgment is brought before a judge, the motion is to be supported by an affidavit. Rule 19.06 requires the judge to inquire into whether the deemed factual admissions resulting from the default support a judgment on liability as well as damages. As held by Himel J. in Fuda v. Conn, 2009 CanLII 1140 (ON SC), [2009] OJ 188 (Sup. Ct.) at para 16:

[A]lthough the Rules provide the consequences for noting in default, the court has the jurisdiction and the duty to be satisfied on the civil standard of proof that the plaintiff is able to provide the claim and damages. If the court finds the evidence to be lacking in credibility or lacking "an air of reality", the court can refuse to grant judgment or grant partial judgment regardless of fault.

[14] In this case, the statement of claim and the affidavit filed on the motion establish that Midtowns defaulted on the Lease, and that it had an obligation to pay all amounts payable under the Lease. I am also satisfied that the plaintiff has taken reasonable steps to mitigate its losses through efforts to find a new tenant for the premises.

[15] The evidence demonstrates that the plaintiff's losses are $1,311,672.05 calculated as follows:

Rent arrears: $11,700.58

Lost rent from date of termination to end of the lease: $1,299,971.47

Total: $1,311,672.05

[16] The Lease provides that the tenant is to pay all costs of enforcement. The plaintiff seeks costs in the amount of $11,711.43, inclusive of HST and disbursements, on a substantial indemnity scale. I have reviewed the plaintiff's costs outline, and am satisfied that the costs sought are reasonable.

[17] Accordingly, default judgment is granted against Midtowns in the amount of $1,311,672.05 in accordance with the judgment signed today, which includes pre-judgment and post judgment interest at the rate provided for in the Lease and costs in the amount of $11,711.43. The judgment also provides that CF/Realty recognizes its ongoing obligations to mitigate its damages and that it is to apply all rent monies received during the term of the lease to the judgment debt.

FAVREAU J.

Date: December 20, 2017