COURT FILE NO.: 4724/17
DATE: 2018 05 15
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1521141 ONTARIO LIMITED
T.W. Brown and K.J Scullion, for the plaintiff
- and -
UPPER OAKVILLE SHOPPING CENTRE LIMITED
John A. Campion and Stephanie Clark, for the defendant
HEARD: February 21, 2018, at Milton
REASONS FOR DECISION
Emery J.
[1] The plaintiff 1521141 Ontario Limited has operated the Niblick Pub in a suburban mall owned by the defendant landlord since March, 2003. Pursuant to a written lease dated July 16, 2002, 1521141 Ontario Limited (152) has occupied the premise in north Oakville for the last fifteen years. This time frame spans the initial five year term of the lease commencing March 1, 2003, as extended for five years when 152 exercised its first right of renewal from March 1, 2008 to February 28, 2013, and for a further five years to February 28, 2018 when renewed a second time.
[2] On November 20, 2012, the parties entered a Lease Renewal and Extension Agreement (the "Extension Agreement") that confirmed 152's right to the second renewal had been exercised. The Extension Agreement also provided 152 with the option of renewing the lease for an additional five year term from March 1, 2018 to February 28, 2023 (the third renewal).
[3] The landlord (UOSC) made a decision in January, 2017 that it did not intend to renew the lease under the Extension Agreement.
[4] Although 152 understood that UOSC would not renew the lease under the Extension Agreement, 152 gave notice on July 24, 2017 that it intended to renew the lease to February 28, 2023. 152 commenced an action on December 15, 2017 when UOSC refused to grant that renewal. In the statement of claim, 152 requests declaratory relief that it is entitled to renew the lease, relief from forfeiture, and other remedies.
[5] With time running out, 152 brought a motion within the greater action seeking interlocutory relief one week before the expiry of the lease. 152 asked the court for injunctive orders to restrain UOSC from taking any action to exclude 152 from possession of the premises, or from taking possession of the premises until the trial of the action, provided 152 continued to pay rent to UOSC.
[6] 152 also asked for a declaration in its motion that it had validly exercised the third renewal option. By seeking this declaration, 152 was asking the court to recognize that 152 was entitled to enjoy the benefit of the third renewal from March 1, 2018 to February 28, 2023.
[7] At the hearing of the motion, I gave the parties until Friday February 23, 2018 to discuss matters further before I ruled on 152's motion. After I received a joint letter from counsel that a ruling was required, I released a short endorsement on February 26, 2018 in which I dismissed the motion in its entirety, with reasons to follow. These are those reasons.
Contextual Background
[8] 152 has commenced an action asking the court to find that 152 retains renewal rights under the lease and Extension Agreement. Based on those rights, 152 seeks judgment at trial to enforce those rights that are legal in nature, and to exercise the discretion of the court by awarding equitable relief where 152 may be found in technical breach. 152 asks this court to decide the motion in its favour to effectively preserve the status quo by enjoining UOSC from taking possession of the premises until those claims can be adjudicated at trial.
Lease requires payment of rent
[9] Particular sections of the lease are relevant for the purposes of the motion. Primary among them, as in any commercial lease, is the payment of rent.
[10] In section 2.4 (a) of the lease, 152 as the tenant is required to pay a minimum annual rent to UOSC in monthly installments. There are other expenses the tenant is obliged to pay as additional rent. In particular, 152 also agrees to pay "percentage rent" based on its gross sales each month.
[11] 152 is required to report its gross sales to UOSC by the 15th day of the month following the month for which rent is to be paid for the computation of percentage rent. 152 owes this obligation to report this information under section 2.5 of the lease.
[12] 152 is required to pay rent on a timely basis to UOSC under section 6.1 of the lease.
[13] UOSC has the right to audit the books of 152 in section 3.2. In accordance with section 3.2 of the lease, the landlord retained MNP LLP to complete an audit of the tenant. The audit revealed that a liability for rent of more than 3% in excess of rentals therefore computed and paid by the tenant.
[14] The lease states in paragraph 3.2 that if it is found that the tenant is liable for rent to the extent of 3% or more in excess of rentals computed and paid by the tenant for the audit period, the landlord, at its option, has the right to terminate the lease upon five days' notice to the tenant.
Rights to renew under the lease
[15] The lease contains the right to renew the lease for two successive five year terms beyond the initial five year term that began to run on March 1, 2003.
[16] On November 20, 2012, the parties entered the Extension Agreement that recognized 152 had renewed the lease for a second time, to February 28, 2018. The Extension Agreement also granted 152 an option to renew the lease for a third term, from March 1, 2018 to February 28, 2023. Although this was a new agreement, the parties referred to the lease and expressly made the right of 152 to renew the lease subject to its terms.
[17] UOSC relies on paragraph 26.1 of the lease that sets out the conditions for 152 to exercise a renewal option. UOSC submits that this paragraph applies to any right 152 intends to exercise for the third renewal under the Extension Agreement.
The parties exercise rights under the lease
[18] On or about July 6, 2017, UOSC gave notice to 152 that it was exercising its rights under paragraph 3.2 of the lease to inspect and audit the books and records of 152. This audit was conducted by the accounting firm MNP LLP. UOSC engaged MNP to perform this audit to determine the proper amount of percentage rent paid or payable by 152, based on gross sales made each year by Niblick Pub.
[19] On July 24, 152 gave notice to UOSC of its intention to renew the lease for a third time pursuant to the Extension Agreement.
[20] After MNP had completed the audit, UOSC notified 152 that MNP had concluded, among other things, that the revenues generated by the pub's business were "likely" higher than those 152 had previously reported. In an email dated November 16, 2017, UOSC advised 152 that:
a) Based on the contents of the audit report, UOSC was exercising its rights to terminate the lease, pursuant to section 3.2 thereof, effective December 31, 2017; and
b) The alleged understatement of revenues has resulted in 152 owing additional percentage rent to UOSC for the audit period in the amount of $28,713.00.
[21] On December 4, 2017, UOSC provided 152 with a copy of the audit report prepared by MNP, along with an updated rent ledger and annual reconciliation report. At that time, UOSC confirmed that the shortfall of rent/percentage rent over the audit period was actually only $12,368.27.
[22] By agreement, UOSC extended the termination date from December 31, 2017 to the end of the lease term on February 28, 2018. This extension was given by UOSC to allow 152 the opportunity to operate its pub and restaurant business over the busy holiday season.
Evidence filed by 152 in support of this motion
[23] James Service has filed two affidavits on behalf of 152. In his first affidavit, James Service describes himself as the sole director, sole officer and sole shareholder of 152. Mr. Service attaches the Tenant Ledger prepared by UOSC as exhibit "S" to his initial affidavit. This ledger sets out a complete rental account history between 152 and UOSC from February 2004 to January 2018, according to UOSC as the landlord.
[24] In his affidavit, Mr. Service acknowledges the Tenant Ledger shows that percentage rent has been assessed by UOSC from time to time, thereby creating the appearance of significant rental arrears. In particular, this ledger shows balances owing on October 11, 2012, October 22, 2012, December 31, 2012, December 31, 2013 and April 7, 2017.
[25] Mr. Service explains that the Tenant Ledger demonstrates a steady reduction of the balance owing by 152 in the months following assessments of percentage rent. He argues that the ledger shows that 152 was frequently in a credit position. Counsel for 152 submits that, if this is the case, 152 may have overpaid UOSC for percentage rent from time to time.
[26] In paragraph 64 of his affidavit, Mr. Service states that the Tenant Ledger shows that 152 was current with its rent as of October 6, 2017. Mr. Service also states that 152 was again in good standing under the lease on January 5, 2018.
[27] 152 relies upon the affidavit of Mr. Service as evidence that if the lease is terminated, or no third renewal is granted, the Niblick Pub will be forced to close. This will cause the plaintiff's business to suffer irreparable harm.
[28] Mr. Service also gives evidence that because of the unique aspects of the property, the plaintiff's clientele and the over-inflated real estate market, it is unlikely that 152 could find another suitable location to reopen the Niblick Pub. This would destroy 152's business entirely.
[29] The material filed in support of the motion indicates that 152 is currently indebted to two private lenders for an aggregate amount exceeding $410,000. If the lease is terminated, or if UOSC will not renew the lease for a further five years, 152 will not be able to repay this debt. This inability to repay will cause damage and loss to the two private lenders.
[30] Mr. Service expresses his belief that there are other reasons behind the Landlord's decision against renewing the lease. He firmly believes that Terrance Tyers, president of UOSC, has intended to find a reason to terminate the lease since 2012, or to deny the exercise of any right to a further renewal. Mr. Service explains in his affidavit that he has reason to believe that his former wife informed Ken Stocksdale, the property manager, that Niblick Pub has been known to run "two tapes" or has otherwise falsified sales records. He is convinced that Mr. Tyers has been determined to get rid of him ever since.
Analysis
[31] The motion requires this court to decide two issues. The first decision is whether 152 as the moving party is entitled to the injunctive relief it requests in the notice of motion. The second issue is whether either 152, or UOSC as the responding party, is entitled to the declaratory relief 152 has requested on the motion.
1. Injunctive Relief
[32] 152 brings this motion under section 101 the Courts of Justice Act. Section 101 provides the court with the discretion to grant an interlocutory injunction or mandatory order where it appears to a judge of the court to be just or convenient. 152 relies upon the well-known test for injunctive relief established by the Supreme Court of Canada's decision in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 SCC, [1994] 1 SCR 311. 152 urges the court to find that the evidence meets the following test:
a) There is a serious question to be tried,
b) Irreparable harm will result if the relief is not granted, and
c) The balance of convenience favours the granting of the relief requested.
[33] UOSC submits that 152 is actually seeking a mandatory order to compel it to take a positive step or to perform the act of renewing the lease as the landlord. It argues that 152 is not seeking an injunction that is pre-emptive or prohibitive in nature on this motion. The order 152 is requesting is not just to stop or restrain UOSC from taking possession of the premises after the current term of the lease comes to an end. It argues that the nature of the relief 152 seeks is clear from the declaration 152 asks the court to make, and that is to recognize the right of 152 to a grant of the third renewal option from UOSC. This is the remedy 152 seeks in the litigation. It is on this basis that 152 requests an order maintaining the status quo until the rights of each party have been determined at trial.
The applicable threshold
[34] UOSC takes the position that the motion must fail if 152 cannot satisfy the court on the evidence that it has a strong prima facie case. Building on its submissions of remedy requested in the action and the true nature of the relief 152 is seeking on the motion, UOSC submits that the threshold question for the court to determine is not whether there is a serious issue to be tried, but whether 152 has satisfied the court it has a strong prima facie case. This is a higher test to meet.
[35] The court in Gordon, Traube v. T.E.C. Lease Holds Ltd., 1992 Carswell Ont. 614 held that the threshold for obtaining interlocutory relief is higher where a party is seeking a mandatory order. The moving party must make an extra effort to satisfy the court on the evidence that it is entitled to relief that compels the responding party to take a positive action or a specific step.
[36] UOSC also relies on Patrick Chadwick Inc. v. Brimley Business Centre Inc., 1998 Carswell Ont. 385 as authority to argue that where an interlocutory injunction or order would effectively bring the action to an end, the party seeking the order must prove that there is a strong prima facie case. UOSC relies on this principle because the effect of the relief requested on this motion would essentially deliver possession of the premises to 152 until trial. This would have the practical effect of granting the remedy 152 is seeking in the action at the interlocutory stage.
[37] 152 could not assist me on the question of whether it must meet a higher threshold on its motion because of the nature of the relief requested.
[38] I agree with UOSC that the threshold issue on this motion is higher than just requiring 152 to show there is a serious issue to be tried. Whether that higher threshold can be characterized as a strong prima facie case need not be determined at this time. It is sufficient to say that the onus is on 152 as the moving party to put forward evidence to show there is more than a serious issue in this action for the court to make an order to preserve interests pending trial. The difference between showing a serious issue to be tried and this higher threshold is the difference between showing through evidence that the issue for trial is not frivolous, and showing that the moving party has a reasonable prospect of success at trial on that issue.
[39] I am not setting the bar for the threshold 152 must meet at this level because the relief on this motion is essentially the remedy 152 it seeks on a final basis. If that were the case, the threshold in most motions brought by a tenant for injunctive relief in the context of a commercial lease dispute, including cases where relief of forfeiture is requested, would be higher than the requirement to show there is a serious issue to be tried. To set the bar higher for this reason would, in my view, come dangerously close to conflicting with the first part of the test set out in RJR MacDonald.
[40] After hearing the submissions of counsel and reading the evidentiary record, I have concluded that this motion for injunctive relief shall be determined on the basis of whether 152 has met the required threshold.
Relief requested on the motion
[41] It is trite to say that the court can only grant relief to a moving party that is specified in the notice of motion for which notice has been given. The motion must specify the relief requested to comply with Rule 37.06(a).
[42] The purpose for this requirement is fundamental fairness. It gives notice to the court of what the presiding justice will be asked to decide. It informs the responding party about the nature of the motion and the issues to agree upon or contest. It also informs the court and the other parties that the relief is relevant to the action, and falls within the perimeters of the facts given in evidence on the issues. This is particularly important in a contractual relationship, where the rights and obligations of each party are dependent on the contract documents between them.
[43] In the notice of motion, 152 seeks an interim injunction to restrain UOSC from terminating the lease as the first order of substance requested in the notice of motion.
[44] Second, 152 seeks the declaratory relief that it has validly exercised the third renewal option. It is not surprising that 152 has requested this declaratory relief to provide it with the benefit of that renewal in order to exercise possession of the premises starting on March 1, 2018. 152 seeks this order in order to have rights to protect, including relief from forfeiture.
[45] 152 seeks a third order to restrain UOSC from taking any action to exclude it from possession of the premises, or from taking possession of the premises until the trial of the action. 152 makes this request conditional on its obligation to pay rent on a monthly basis until that time.
[46] The fourth order of a substantive nature that 152 seeks is an order that 152 shall be entitled to continue in possession of the premises until further order or the trial of the action.
[47] All of these orders seek substantive relief pending trial of the action, except for the declaration that 152 has validly exercised the third renewal option. Since the orders requested are intended to preserve 152's rights pending trial of the claims it has advanced in the action, it is necessary to look at the remedies requested in the statement of claim to determine what remedies 152 is asking the court to grant.
Remedies requested in the action
[48] In paragraph 1 of the statement of claim, 152 sets out remedies it is seeking against UOSC. The remedies described in paragraphs 1A, B, and C resemble the temporary relief 152 is seeking on this motion.
[49] In paragraph 1D, 152 seeks a declaration at trial that it did not understate its revenues for the period September 1, 2014 to April 30, 2017. 152 asks the court to find that UOSC's right and entitlement to terminate the lease pursuant to section 3.2 is therefore null and void.
[50] If it is found that 152 has understated its revenues, it seeks a declaration in subparagraph 1E that it is entitled to relief from forfeiture of the lease and to enjoy the benefit of the third renewal term. 152 acknowledges that this relief is subject to any condition that 152 pay to UOSC any amount that may be found due and payable for rent, plus costs and interest chargeable under the lease.
Requirements in the lease documents
[51] The lease and the Extension Agreement are the documents that govern the contractual relationship between 152 as the commercial tenant, and UOSC as its commercial landlord. The lease is separate and distinct from the Extension Agreement, except to the extent that the Extension Agreement makes itself subject to the lease terms.
[52] Although the Extension Agreement confirmed the grant and operation of the second renewal under the lease, it was a separate contract with respect to the grant of a third renewal term. This third renewal period was granted "in accordance with the same terms and conditional (sic) as the first renewal term with the exception of minimum rent and percentage rent."
[53] It is clear from the documents in evidence, and in particular the Extension Agreement, that mutuality of intention and the performance of both parties is required to give effect to a renewal of the lease. The Extension Agreement recites how the UOSC and 152 renewed the lease for a further five years commencing on March 1, 2008 in an agreement dated June 7, 2011. The Extension Agreement itself is evidence of the contractual basis on which the second renewal was granted upon the agreement of both UOSC and 152 to that renewal.
[54] This mutuality is consistent with the contractual intent of the parties expressed in the lease documents. There must be a willingness evidenced by advance notice given by the tenant to renew, and to abide by the terms of the lease. There is an element required on the part of the landlord to agree that all preconditions have been met. On the language found in section 26.1 of the lease incorporated by reference in the Extension Agreement, it is up to the landlord to grant a renewal of the lease upon the satisfaction of the pre-conditions by 152 as the tenant. This power is given to UOSC by the words in section 26.1 that "the Landlord shall.... grant to the tenant a renewal of the lease..." Any obligation of UOSC to grant a renewal of the lease is therefore evidence that a positive act by UOSC is required to give legal effect to any further renewal.
Relief from forfeiture under the lease
[55] It was under the lease that 152 rented and enjoyed possession of the premises for the initial five year term and the two successive renewal terms. It is an undisputed fact that UOSC agreed to extend the date for the termination of the lease to February 28, 2018. The termination date therefore merged with the end of the second renewal term. The lease, as extended, consequently came to an end under its own terms on February 28, 2018.
[56] I cannot find where in the statement of claim 152 is requesting an order that UOSC specifically perform a contractual obligation it may owe under the Extension Agreement, or the lease itself. Nor can I find any requirement in the allegations of material fact pleaded by 152 that UOSC ever granted the five year term to extend its possession of the premises to 2023. All that 152 seeks in the action are findings that it has an entitlement to the additional five years. This finding could enable 152 to assert its contractual rights as the tenant. That relief would not compel UOSC to perform its corresponding obligations as the landlord.
[57] 152 has failed to request a remedy in the action that would provide an adequate basis to seek the interlocutory relief in the motion with respect to the lease. Furthermore, there are no rights under the lease to preserve until trial. Where no rights to forfeiture exist, there are no rights to preserve for trial as there is nothing to relieve from forfeiture. See Roxville Investments Limited v. Manahree Inc., 2017 ONSC 5306 and Kozel v. The Personal Insurance Company, 2014 ONCA 130. It is for these reasons I conclude that 152 is not entitled to relief under the lease that it seeks pending trial.
Preservation of rights under the Extension Agreement
[58] 152 also seeks to preserve its rights to possession relating to the exercise of its renewal rights under the Extension Agreement until trial.
[59] I received no submissions about what rights it may have at law as an overholding tenant. Consequently, I find that 152 has not shown a serious issue to be tried, let alone a case on which it has a reasonable prospect of success based on the evidence.
Rent not paid promptly
[60] Even if I had found that 152 had shown it has a strong claim for renewal of the lease under the Extension Agreement, I conclude that 152 is not entitled to the orders it seeks on equitable grounds. It is clear from the language of the Extension Agreement that 152 "will have one additional five year term in accordance with the same terms and conditions as the first renewal term." This provision makes section 26.1 of the lease the operative clause as a pre-condition to renewal. Section 26.1 makes the right of 152 to seek a renewal term conditional upon the payment of rent by stating, "if the tenant duly and regularly pays the minimum rent, the percentage rent, all additional rent and all other amounts required to be paid pursuant to this lease..."
[61] The words "duly and regularly pays the rent" are often found in a commercial lease. This term has been considered by the courts where it has arisen in the context of assessing whether a tenant has performed all conditions precedent for the renewal of a lease.
[62] In Sparkhall v. Watson, [1954] 2 DLR 23, Justice Judson, then of the High Court, held that the burden is upon the lessee, to show that he has performed the terms upon which his right depends. Justice Judson further held that it was well settled law that for the lessee to show due performance, the commercial tenant did not necessarily have to show punctual performance. It was enough for the tenant to show that the covenants had been performed at the time when the landlord was required to observe or perform its part of the bargain.
[63] The court ultimately held in Sparkhall v. Watson that the tenant is required to show that it has "duly and regularly" paid the rent. This phrase means that the word "regularly" compels the tenant to show that it has paid rent at fixed intervals or periods according to the rule that the parties themselves had established when they signed the lease. As Justice Judson explained, it means rent paid punctually, or at the due date.
[64] In 1043545 Ontario Inc. v. 2748355 Canada Inc., 1998 Carswell Ont. 2705 Justice MacDonald reviewed the law with respect to what power the court has to excuse the non-performance of a condition precedent. Those authorities are set out in paragraph 45 of the decision as follows:
45 In Pacella v. Giuliana (1977), 1 R.P.R. 301 (Ont. C.A.), Dubin, J.A. (as he then was) held that the court does not have power to excuse non-performance of conditions precedent even though it has power to relive against forfeiture. However, in Ross v. T. Eaton Co. (1992), 1992 ONCA, 11 O.R. (3rd) 115 (Ont. C.A.), Morden, A.C.J.O. (Doherty, J.A. concurring) held at pp. 124-125 that there is a narrow jurisdiction in equity to grant relief. One condition necessary to the exercise of this jurisdiction is that the tenant has made diligent efforts to comply with the terms of the lease, but has been unsuccessful through no fault of its own. This circumstance does not exist her, on the evidence. The plaintiff paid no attention to rent payment obligations or to its obligation to keep insurance in effect until Beutel Goodman on behalf of the present owner sought to enforce the lease terms.
[65] Justice MacDonald considered the meaning of the words "duly and regularly performed all of the covenants" in a commercial lease where the tenant was seeking a right to renew its lease. The condition in the amendment to lease agreement that "provided that the tenant has duly and regularly performed all of the covenants on its part to be performed in the lease..."
[66] Following Sparkhall v. Watson, Justice MacDonald found that the option was subject to the proviso applied in the manner set out in Sparkhall v. Watson. He further held that "due performance of the lessee's covenant is a condition precedent to exercising an option: Fingold v. Hunter, 1944 ONCA, [1944] O.W.N. 287 (Ont. C.A.).
[67] It is apparent from the affidavits filed by each of the parties that the payment of percentage rent was an ongoing issue between 152 and UOSC during the life of the lease. Mr. Service does not even dispute this fact. In paragraph 54 of his affidavit sworn on February 12, 2018, he states that:
- The plaintiff does not deny that it has, from time to time, been in arrears of rent, however, this is not necessary (sic) the product of being delinquent, but rather, from time to time significant arrears would be accrued as a result of the defendant assessing percentage rent, without advance notice to the plaintiff."
[68] Mr. Service does not accept the entries in the Tenant Ledger between 2004 and January 2018 as accurate or conclusive. However, it is the best evidence of the accounting before the court as 152 did not file a similar ledger to show its own record of the accounting. The Tenant Ledger documents the different types of rent charged against the account of 152 since the initial deposit of $15,000 was paid in September 2002. More often than not, the account shows a deficit rather than in surplus during the intervening years.
It also appears from the evidence given by Mr. Service that the net sales made by the Niblick Pub (excluding HST), for the years 2012 to 2017 have declined, before adjustments, in the following manner:
2012: $2,205,278.00
2013: $2,032,420.00
2014: $1,909,587.00
2015: $1,548,024.00
2016: $1,455,074.00
2017: $1,564,960.00
[69] It is evident that, with net sales declining, 152 has encountered an increasingly difficult time meeting its rent going forward.
[70] Mr. Service has deposed that, if 152 did understate its revenues, which he does not admit, then:
a) such understatement was purely accidental;
b) the plaintiff is more than willing to pay any resulting shortage or percentage rent;
c) any understatement of revenues was minor; and
d) the alleged resulting shortage of percentage rent paid, claimed by UOSC in the amount of $12,368.27 over the entire audit period of almost four years, is relatively minor when compared to the amount of minimum rent and percentage rent actually paid by 152 during the audit period.
[71] Paragraph 3.2 of the lease states that upon an audit disclosing a liability for rent of 3% or more, the tenant will promptly pay to the landlord as additional rent the cost of the audit in addition to the deficiency of rent and interest provided under section 2.8 of the lease. There was no evidence on the motion that 152 has ever paid $12,368.27 for this percentage rent.
[72] Mr. Service submits that 152 should have a full opportunity to present evidence that refutes the findings of MNP set out in the audit report before UOSC is permitted to take any action or to terminate the lease. Mr. Service does not provide the basis on which 152 would have the right to challenge the conclusions reached by MNP. He does not address the language in section 3.2 of the lease that states, "a report in respect of the audit made by the landlords auditor from time to time will be final and binding upon all the parties here to" [emphasis added].
Waiver
[73] I find as a fact that 152 was habitually late in paying at least the percentage rent it regularly owed under the lease. The affidavits do not conflict to this extent, and that fact is therefore uncontested. The conflicting evidence arises on the reasons given for the delay when 152 would pay that rent, and the arrangements made to accommodate that lack of punctuality.
[74] 152 relies on Roxville Investments Limited v. Manahree Inc. as authority to urge the court to examine the reasonableness of its conduct as the moving party. 152 argues that the court must assess the reasonableness of this conduct as it relates to all aspects of the contractual relationship with UOSC, including the event of the breach and its "aftermath".
[75] The question of whether 152 is entitled to equitable relief would have turned on whether it could show that UOSC had waived strict compliance with the terms of the lease to duly and regularly pay the rent. This would have been evidence on which the court would carry out the contextual analysis discussed in Roxville Investments.
[76] I granted leave at the outset of the motion for 152 to file further material in the form of a supplementary affidavit from Mr. Service. This further material related to the apparent accommodation that UOSC often extended to 152 for late payment of rent. That affidavit was not relied upon by 152 to any great extent, if at all, to raise the issue of any waiver by UOSC of obligations owing by 152 under the lease. It is noteworthy that 152 relied on Delphi Management Corporation v. Dawson Properties, 2014 ONSC 354 in reply, and in particular paragraph 21:
[21] Did the landlord, by its conduct, waive its rights? Is it estopped from asserting its right to require complete compliance with the terms and conditions on which the option is to be exercised?
[77] The Court of Appeal recently considered the law of waiver in North Elgin Centre Inc. v. MacDonald's Restaurants of Canada Limited., 2018 ONCA 71. In that decision, the court summarized the essential elements of waiver to be:
a) If one party leaves another party to believe that its legal rights under a contract will not be insisted upon;
b) That the first party intends that the other party will act upon that belief;
c) That the other does so;
d) Then the first party may not afterwards insist on its strict legal rights when it would be inequitable to do so: see also Petridis v. Shabinsky, 1982 ONSC, at para. 20.
[78] UOSC made the submission that a tenant who brings a motion that relies upon the waiver by the landlord of strict compliance with the conditions regarding the exercise of a renewal option has the onus to provide plausible evidence that the landlord waived strict compliance with those conditions. If the tenant cannot show that waiver, the option to renew has not been exercised properly: Zone Bowling Centre (2002) LTD v. 14100 Entertainment Boulevard Investments LTD., 2015 BCSC 524 (B.C.S.C.).
[79] This onus should not surprise 152. The question of who bears the burden of showing whether a condition of exercising an option to renew was examined in Ontario by the Court of Appeal in Mapleview- Veterans Drive Investments Inc. v. Papa Kerollus VI Inc., at 2016 ONCA 93. Justice Blair confirmed that this onus is on the tenant in such circumstances at paragraph 50:
50 A tenant must comply with the terms of a renewal option as a condition of exercising that option. Gillese J.A. summarized the law with respect to this principle and the onus issue in Ole Miss Place Inc. At para. 54, she stated:
- Where ... performance of the lease covenants is a precondition to renewal, the onus rests on the tenant to show due performance. That is, the Tenant has the burden of proof to show that it was not in default. See Fingold v. Hunter, 1944 ONCA, [1944] 3 D.L.R. 43, [1944] O.W.N. 287 (Ont. C.A.), at p. 46 D.L.R., in which this court held that where "[d]ue performance of the lessee's covenants is a condition precedent ... The burden is upon the lessee in such a case to show that he had performed the terms upon which his right depends."
[80] In the Mapleview-Veterans case, the court allowed the appeal and set aside the order of the application judge on the finding that the tenant had defaulted on paying admitted arrears in the amount of $251.92. The tenant was not entitled to the benefit of equitable intervention for lack of compliance under the lease. Accordingly, the purported exercise by the tenant to renew the lease was invalid and unenforceable. As the time for exercising the renewal option under the lease had expired, the court found that the term of the lease had come to an end.
[81] I am not satisfied on the evidence that 152 has shown that the conduct of UOSC led it to believe that the landlord would not insist on its strict legal rights under the lease. In any event, there is no evidence that UOSC intended that 152 would act upon that belief. 152 has instead led evidence suggesting how UOSC and its auditors were wrong in the audit report, or giving reasons why UOSC was wrong for requiring the audit report to put those matters at issue in the first place.
[82] I also observe that section 27.5 of the Lease requires that any amendment to the lease be in writing. No written agreement to waive or to amend a provision of the lease was given in the evidence before the court.
[83] I therefore find that 152 has not satisfied the court on this motion that UOSC waived strict compliance for 152 to pay its rent duly and regularly under the lease. 152 has not satisfied the onus of showing it has a reasonable prospect of success to satisfy the court that it has met the conditions to have the lease renewed for five additional years pursuant to the Extension Agreement. No basis has been shown by 152 for the court to exercise the discretion under section 101 of the Courts of Justice Act to grant the order requested. I reach this conclusion on the facts in evidence having regard to the remedies that are currently pleaded in the action.
[84] It is for these reasons that the motion for the relief requested by 152 is dismissed.
2. Entitlement to Judgment
[85] Mr. Campion argues that 152's motion is essentially a motion for summary judgment. He makes this argument because 152 asked the court for a declaration that it had validly exercised its right of renewal of the lease for an addition of five years, and that it was entitled to remain in possession of the premises to February 28, 2023. This is relief that is final and dispositive of the issues in the action, and it is relief he submits is available for the court to grant in a manner favourable to either party.
[86] The court has the power to grant judgment to a responding party when a motion for summary judgment has been brought by only one party. It was held by this court in Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008 and on appeal in King Lofts Toronto 1 Ltd. v. Emmons, [2014] ONCA 215 that summary judgment may be awarded to a responding party where it would be proportionate and sensible to grant summary judgment. That is not the case here.
[87] The request made on behalf of UOSC for declaratory relief in its favour is denied. This motion was not framed as a motion for summary judgement. 152 as the plaintiff and moving party had the greater burden of proof to meet the threshold issue. However, that burden is not so high that 152 was required to put its best foot forward, as though it were responding to a motion for summary judgment.
[88] It would be unjust at this early stage of the proceedings to expect that 152 should have all its evidence it would expect to call at trial to meet a much higher burden.
Conclusion
[89] The motion of 152 is therefore dismissed in its entirety.
[90] If either party seeks costs, then I direct:
a) that party to serve and file written submissions by May 25, 2018;
b) the other party may then serve and file written submissions in response by June 1, 2018;
c) no written submissions in reply are permitted without leave; and
d) any written submission shall consist of no more than three typewritten double spaced pages, not including any offer to settle or time dockets.
[91] All written submissions may be filed by faxing them to my judicial assistant, Ms. Melanie Powers at 905-456-4834 in Brampton.
Emery J.
Released: May 15, 2018
COURT FILE NO.: 4724/17
DATE: 2018 05 15
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1521141 ONTARIO LIMITED
- and -
UPPER OAKVILLED SHOPPING CENTRE LIMITED
REASONS FOR DECISION
Emery J.
Released: May 15, 2018