Court File and Parties

COURT FILE NO.: CV-16-564176 DATE: 20181004

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Re: 466369 Ontario Ltd., Plaintiff And: 2379078 Ontario Inc. and ZYX Inc., Defendant

COUNSEL: Mark A. Klaiman, for the Plaintiff Joseph F. Lo Greco, for the Defendants

HEARD: June 19, 2018

REASONS FOR DECISION

NISHIKAWA J.

Overview

[1] The Plaintiff, 466369 Ontario Limited (the “Landlord”), leased two Units to the Defendant, ZYX Inc. (“ZYX”), pursuant to two lease agreements, which were later assigned to the Defendant, 2379078 Ontario Inc. (the “Tenant”). The Tenant vacated the premises before the lease term ended. The Landlord brings this motion for summary judgment, claiming damages for a shortfall in the rent paid by the Tenant and for damage to the Units that the Landlord had to repair. The Tenant opposes on the basis that the Landlord verbally agreed to decrease the monthly rent, and that it did not cause any damage to the Units.

[2] For the reasons that follow, I dismiss the Plaintiff’s claim for damages for repairs to the Units. I find that summary judgment on the issue of the outstanding rent is not appropriate without oral evidence, and order a one-day mini trial of that issue.

Factual Background

The Parties

[3] The Plaintiff owns a property at 789 Warden Avenue in Toronto, Ontario. The Plaintiff has owned this property since 1981. The shares of 466 were originally owned by Constantine Gicas, John Gicas and the Floros family, who were all family members, each holding one-third of the shares of 466. The Floros family portion was further shared by Harry Floros, who held 40 percent of the portion, and his daughters, Vivi and Elena, who together held 60 percent of the portion. Constantine Gicas passed away in 2007. In March 2016, after a dispute, John Gicas sold his interest in 789 Warden Avenue to the Floros family.

[4] The Defendant, 237, is a corporation incorporated under the laws of the Province of Ontario and operates a taxi business.

[5] The Defendant, ZYX, is a corporation incorporated under the laws of the Province of Ontario. Until February 2014, ZYX did business under the name “Crown Taxi Inc.” (“Crown Taxi”). In 2013, ZYX sold its business to 237.

The Lease Agreements

[6] On July 1, 2008, the Landlord agreed to lease Unit 6 and Unit 7 at 789 Warden Avenue (together, the “Units”) to Crown Taxi. The Landlord and Crown Taxi entered into a lease agreement for each Unit, each of which was for a four year term, until June 30, 2012 (the “Lease Agreements”). Other than the specific descriptions of each Unit, the Lease Agreements for both Units contain identical terms.

[7] In connection with Crown Taxi’s sale of its business to 237, on July 26, 2013, the Landlord, Crown Taxi, and 237 entered into an assignment of each Lease Agreement (the “Assignments”) pursuant to which Crown Taxi assigned its rights under the leases to 237.

[8] In July 2013, the Landlord entered into an agreement with 237, extending the term of the Lease Agreements to June 30, 2015 (the “Amending Agreements”). Although the Amending Agreements were not signed until July 14, 2013, they were made effective as of May 23, 2012. Both parties agreed that the terms and conditions of the Lease Agreements would remain in full force and effect, except as modified by the Amending Agreements.

[9] In May 2015, the Landlord and the Tenant entered into a further extension of the Lease Agreements for a period ending on June 30, 2018 (the “May 2015 Extensions”). In the May 2015 Extensions, both parties agreed that the terms and conditions of the Lease Agreements would remain in full force and effect, except as modified by the May 2015 Extensions.

The Unpaid Rent

Monthly Rent

[10] Pursuant to the Lease Agreements, the rent for each Unit includes a monthly amount or “Minimum Rent” plus HST, and an “Additional Rent” for taxes, maintenance, and insurance (“TMI”) plus HST. The Minimum Rent for Unit 6 for July 1, 2013 to June 30, 2015 was $2,450. For Unit 7, the Minimum Rent for 2013 to 2015 was $1,087 per month. Under the May 2015 Extensions, the Minimum Rent for Unit 6 was $2,501.05 per month and the Minimum Rent for Unit 7 was $1,109.65 per month.

[11] TMI varied according to the actual amounts incurred for taxes, maintenance, and insurance. Under the Lease Agreements, the Tenant was to pay a portion of the Landlord’s TMI expenses, in proportion to its share of the premises’ total square footage. In order to estimate and forecast TMI, the Plaintiff appears to have applied a rate of $6.15 per square foot.

[12] The Landlord alleges that after the May 2015 Extensions, the Tenant began paying less than the agreed upon monthly rent. The Landlord claims that the monthly rent for both Units, including Additional Rent and HST was $5,407.33, but the Tenant was paying only $4,532.10, including Additional Rent and HST.

[13] The Tenant does not dispute that it was paying $4,532.10 per month in rent, but claims that the Landlord lowered the rent. The Tenant claims that in May 2015, its principal, Ahsan Mirza, had a discussion with John Gicas, and Mr. Gicas agreed to lower the monthly rent to $4,532.10. As noted above, the May 2015 Extensions state the amount of Minimum Rent for each Unit, but not the Additional Rent.

[14] The Landlord disputes this. Harry Floros states that Mr. Gicas would not have agreed to lower the monthly rent without consulting him. Although Mr. Gicas was more involved in the Property on a daily basis than Mr. Floros, Mr. Floros attended the property on average four times a week between 2007 and March 2016.

[15] Elena Floros deposes that from July 2013 to June 2015 the total monthly rent, including Additional Rent and HST, was $5,600.14. Before the May 2015 Extension, the Landlord and Tenant had discussions about the rent for the extended term. According to Ms. Floros, while the Landlord wanted to increase the rent, the Tenant sought a decrease. Mr. Floros’ affidavit states that “we ultimately agreed upon a number of $4,785.25 plus HST ($5,407.33)”. However, the affidavit does not specify who “we” refers to.

[16] The Landlord calculates the total amount of rent owing by the Tenant, including TMI and HST as $135,969.12. The Defendants have paid a total of $45,321.00, leaving a $90,648.12 shortfall.

The Alleged Breach

[17] In February 2016, the Tenant gave notice that it would be terminating the Lease Agreements and vacating the premises effective April 30, 2016, more than two years ahead of the end of the term under the leases. The Landlord responded, through its lawyer, that the Landlord would consider this a breach of the Lease Agreements and would enforce its rights.

[18] The Tenant assisted in finding another tenant, and the Units were eventually leased to Diamond Taxi, commencing in March 2017.

[19] The Landlord claims that when the Tenant vacated the premises, it left the Units in a state of disrepair. The Landlord claims that it was required to repair the Units to be able to rent them to other tenants. The Landlord seeks to recover $22,559.88 in repair costs.

[20] The Landlord further claims that in order to secure a new tenant, it was required to give one-half month’s free rent, $3,231.39, to the new tenant.

[21] The Landlord thus seeks a total of $116,439.39 in damages, including the unpaid rent, repair costs, and a half-month of rent to the subsequent tenant.

Issues

[22] The issues to be determined in this motion for summary judgment are as follows:

(i) Were the Lease Agreements amended verbally? (ii) What was the agreed upon monthly rent? (iii) Did the Tenant breach the Lease Agreements? (iv) If the Tenant breached the Lease Agreements, how much rent does the Tenant owe? (v) Is the Landlord entitled to damages for repairs to the Units after the Tenant’s departure?

Analysis

A. Principles on a Summary Judgment Motion

[23] Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states that a 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.

[24] The Supreme Court of Canada has held that “summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims.” Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 5. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact, (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious, and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.

[25] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before him or her, without using the fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under rr. 20.04(2.1) and (2.2): Hryniak, at para. 66.

[26] On a motion for summary judgment, the court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 26-27, aff’d 2014 ONCA 878, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97. Each party must “put their best foot forward” with respect to the existence or non-existence of material issues to be tried: Sweda, at para. 26.

B. Were the Lease Agreements Amended Verbally?

[27] Clause 33(c) of the Lease Agreement for both Unit 6 and 7 (the “Entire Agreement Clause”) states as follows:

(c) Entire Agreement

This Lease and Schedules and Riders, if any, attached hereto and forming part hereof, together with the rules and regulations promulgated by the Landlord from time to time set forth all the covenants, promises, agreements, conditions or understandings either oral or written, between them other than as herein set forth. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon the Landlord or the Tenant unless in writing and signed by each of them.

[28] Parties may validly contract that oral modifications of their contract will be ineffective and that amendments must be written: Gainers Inc. v. Pocklington Holdings Inc., 2000 ABCA 151, 255 A.R. 373, at para. 17. Where an agreement requires that all amendments be made in writing, a discussion or verbal agreement cannot normally amend the terms of the agreement: Xu v. 2412367 Ontario Ltd., 2017 ONSC 4445, 89 R.P.R. (5th) 57, at paras. 52-53. If the wording of a written contract is clear and unambiguous, the contract should be all that is required to determine the parties’ intentions: KPMG Inc. v. Canadian Imperial Bank of Commerce, 1998 CarswellOnt 4422 (C.A.).

[29] However, the court has also held that parties can, by their conduct, demonstrate that they do not intend to be bound to an entire agreement clause precluding verbal amendments. In these situations, courts have enforced the terms of the parties’ subsequent verbal agreement: Shelanu Inc. v. Print Three Franchising Corp. (2003), 64 O.R. (3d) 533 (C.A.), at paras. 2, 50-60; Colautti Construction Ltd. v. Ottawa (City) (1984), 46 O.R. (2d) 236 (C.A.), at pp. 242-243.

[30] The Entire Agreement Clause in the Lease Agreement is clear and unambiguous that no amendment is binding on either party unless it is in writing and signed by both parties. The Tenant does not dispute that Crown Taxi assigned the Lease Agreements to 237, or that the extensions that 237 entered into were valid. The May 2015 Extensions expressly state that all of the terms and conditions of the Lease Agreements remain in effect. This includes the Entire Agreement Clause.

[31] The fact that the Amending Agreements and May 2015 Extensions were executed in writing and signed by both parties supports their intent to be bound to the terms of the Lease Agreements.

[32] Nonetheless, despite the Landlord’s reliance on the Entire Agreement Clause, the Landlord appears to have decreased the rent by verbal agreement. The Landlord relies upon handwritten notations on the Tenant’s rent cheque for July 2015 to support its position that the parties agreed to a $5,407.33 monthly rent. The notations state: “*NEW INVOICE WITH SIGNED LEASE EXTENSION” and “*REVISED AMOUNT WAS 5,407.33 AS AGREED BY JOHN & HARRY”. The notations further state: “THEY WERE INVOICED (6,734.55) AND REDUCED TO 5,407.33” and “THEY ARE PAYING ONLY” with an arrow pointing to the $4,532.10 cheque amount. The Landlord states that the handwritten notations were made by John Gicas, in order to explain to Harry Floros why the Tenant was paying less than the agreed monthly rent.

[33] The Landlord states that when the May 2015 Extension was entered into, the rent was to be raised to $5,474.55 or $6,494.73, including HST. There is no documentation reflecting this amount, and this is different from the handwritten notation on the cheque that states that the Tenant was invoiced $6,734.55. No invoice reflecting this amount was provided as evidence. The Landlord invoiced the Tenant for $5,407.33. In any event, according to the Landlord’s own evidence, the original monthly rent was lowered to $5,407.33. There is no written amendment to the Lease Agreement reflecting this. Similarly, the Tenant did not seek to have the reduced rent put into writing. The parties’ willingness to amend the Lease Agreements shows that they did not intend to be bound by the Entire Agreement Clause.

[34] In this case, some ambiguity arises because the total monthly rent includes a variable amount, Additional Rent, that is determined by actual TMI expenses. Nonetheless, the Landlord’s evidence of the expenses incurred for TMI does not show that the Tenant’s lower monthly rent was created due to a decrease in TMI. In fact, the Landlord’s documentation on the TMI expenses shows that the Additional Rent being paid by the Tenant, whether at the lower or higher amount, would not have covered the Tenant’s proportionate share. As a result, I find that the Landlord verbally agreed to decrease the monthly rent, despite the Entire Agreement Clause.

C. What Was the Agreed Upon Monthly Rent?

[35] The issue that remains to be determined is whether the rent was decreased to $4,532.10 per month, as alleged by the Tenant, or $5,407.33 per month as alleged by the Landlord. Neither party provided any particulars or detail regarding the discussion that would support their alleged amount. Each party’s affidavit is brief and conclusory, and no cross-examinations were conducted. Neither party obtained John Gicas’ evidence. Each party produced an invoice reflecting the amount they claim was the monthly rent. Both cannot be correct, but neither party provided any explanation or any particulars about their invoice, such as when, how or by whom it was sent or received.

[36] While the record before me allows me to find that the parties verbally agreed to amend the Lease Agreements, the dearth of evidence produced by both parties prevents me from determining the agreed upon monthly rent. I find there is a genuine issue requiring a trial as to the monthly rent.

[37] Given my finding, I must determine whether the need for a trial can be avoided by using the additional fact-finding powers under rr. 20.04(2.1) and (2.2). Pursuant to r. 20.04(2.1), where there is a genuine issue requiring a trial, the judge may exercise any of the following powers, unless it is in the interest of justice for such powers to be exercised only at a trial: (i) weighing the evidence; (ii) evaluating the credibility of a deponent; and (iii) drawing any reasonable inference from the evidence.

[38] As noted by the Supreme Court in Hryniak, the use of the fact-finding powers under r. 20.04(2.1) and (2.2) are “not against the interest of justice…if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.” (at para. 66). In Bank of Nova Scotia v. Russell, 2016 ONSC 1829, at para. 20, the Divisional Court stated, in respect of this court’s use of the fact-finding powers: “Hryniak is fundamentally a direction from the Supreme Court of Canada mandating judges hearing summary judgment motions to resolve the motion and, where possible, the litigation, in a way that is proportional to the problems presented by the specific case.”

[39] The evidence adduced by both parties is less than complete. It is difficult to draw any reasonable inferences. Moreover, it would not be in the interests of justice to evaluate credibility without oral evidence, where material facts are disputed and no cross-examinations were conducted. It is not possible to determine the monthly rent without oral evidence, most obviously from Mr. Gicas. While the Defendants request that I draw an adverse inference from the Plaintiff’s failure to obtain evidence from Mr. Gicas, it was open to either party to examine him. In my view, the need for a trial can be avoided by ordering oral evidence through a one-day mini-trial pursuant to r. 20.04(2.2) on the issue of the monthly rent. This is the appropriate course in this case because the issue is narrow and discrete, oral evidence can be obtained from a limited number of witnesses, and because the issue on which oral evidence is required is will have a significant impact on whether summary judgment is granted: Hryniak at para. 62.

D. Did the Tenant Breach the Lease Agreements?

[40] The Tenant breached the Lease Agreements when it vacated the Units on April 30, 2016, before the end of the lease term on June 30, 2018. The further issue of whether the Tenant breached the Lease Agreements by paying $4,532.10 rent per month can only be decided once the monthly rent is determined.

E. If the Tenant Breached the Lease Agreements, How Much Rent is Owing?

[41] The Landlord seeks damages for $90,648.12 in unpaid rent. A calculation attached to Elena Floros’ Affidavit appears to contain some discrepancies, and does not fully explain how the amount was calculated. In any event, this issue can only be resolved once the monthly rent is determined.

F. Is the Landlord Entitled to Damages for Repairs to the Units?

[42] Under the Lease Agreements, the Tenant was required to keep the leased premises “in good order and first class condition” and to “keep the Leased Premises well painted, clean and in a tidy condition, all as a careful owner would do.” Upon termination of the Lease Agreements, the Tenant was required to surrender the premises in “as good condition and repair as the Tenant is required to maintain the Leased Premises throughout the Term…” The Landlord seeks $22,000 in damages for repairs that were made to the Units after the Defendants vacated the premises.

[43] The sole paragraph in Elena Floros’ Affidavit that relates to the alleged damage and repairs states:

When the Defendants vacated the premises, they left the premises in a state of disrepair. Attached hereto and marked as Exhibit “L” to this my Affidavit are true copies of the photographs taken following the Defendants departure from the premises. As a result, the Plaintiff effected repairs to the premises to make it rentable. Attached hereto and marked as Exhibit “M” to this my affidavit are true copies of the bills that have been incurred to effect repairs [to] the premises to date totalling $22,559.88.

[44] In the Mirza Affidavit, the Tenant denies having damaged the Units in any way and claims both that they were already in a damaged state when it moved in, and that the Landlord renovated the Units in order to attract a new tenant.

[45] In its Statement of Claim, the Landlord made no claim for damages for repairs to the Units. The Landlord pleaded only damages for unpaid rent. The Statement of Claim contains no particulars as to the damage cause by the Tenant. Based on the failure to plead a claim for damages for repairs to the Units and the underlying facts, the Landlord is precluded from seeking recovery of these amounts: SIPGP No. 1 Inc. v. Eastern Construction Co., 2010 ONSC 2168, at paras. 102-105; Bleichman v. Bleichman, 2009 CarswellOnt 5279 (S.C.), at paras. 63-65, 71; Lloyd v. Kaye, 2008 CarswellOnt 746 (S.C.), at paras. 9-10.

[46] If I am mistaken regarding the effect of the Landlord’s failure to plead damages for the repairs, I find that the evidence in relation to the damage to the Units and the repairs necessary to fix the damage lacks specificity. The Landlord has included photocopies of photographs, without any reference to what the photographs represent, which Unit they depict, or when they were taken. The photographs show broken or missing ceiling tiles, damage to a floor, wiring issues, and items left behind. Some are blurry, and it is unclear what they are supposed to show. The Landlord has also included receipts and invoices for the repair work, without any explanation as to the nature of the repairs that were necessitated. Some of the work described in the invoices appears to go beyond what would be considered repairs. For example, “cutting wall area around front entrance window in order to extend opening for a bigger one to be installed” does not sound like a repair. This appears on the general contractor’s invoice, along with items that could be considered repairs, if made to the Units.

[47] In addition, no evidence, whether photographs or otherwise, was provided as to the condition of the Units when they were rented to the Tenant.

[48] I am not satisfied that the Landlord has demonstrated that the Tenant caused damage to the Units, in breach of the Lease Agreements, and that the repairs were necessitated by the Tenant’s breach. As noted above, a party must put its best foot forward on a motion for summary judgment. The Landlord’s evidence, which consists of a blanket statement, photographs, receipts, and invoices, without any description or narrative connecting them to the repairs or to the Units at issue, are insufficient to meet the Landlord’s burden of proving damages. As there is no genuine issue requiring a trial on the Landlord’s entitlement to damages for repairs to the Units, I dismiss the claim.

Conclusion

[49] Based on the record before me, I am able to make the necessary findings of fact, apply the law to the facts, and achieve a fair and just adjudication of the dispute on the merits as follows: (i) the parties verbally amended the Lease Agreements; (ii) the Defendants breached the Lease Agreements by vacating the Units before the lease term ended; and (iii) the Plaintiff is not entitled to damages for repairs to the Units.

[50] However, I am not able to determine the agreed upon monthly rent, and whether the Defendants breached the Lease Agreements by paying a lower amount. I therefore exercise my power under r. 20.04(2.2) to order that oral evidence be presented through a one-day mini-trial before me on the issue of the monthly rent, as this would allow a “fair and just adjudication on the merits and it is the proportionate course of action.” Hryniak, at para. 63. The parties’ affidavits will serve as their evidence in chief. Cross-examination of the affiants will be conducted at the mini-trial. Other than John Gicas, it does not appear that the testimony of any other witness will be required.

[51] Counsel may contact my assistant, Roxanne Johnson, at roxanne.johnson@ontario.ca to arrange a telephone case conference to schedule the mini-trial and any interim steps leading up to the mini-trial.

[52] Costs of this motion are reserved until the conclusion of the mini-trial.

Nishikawa J.

Released: October 4, 2018