COURT FILE NO.: CV-18-602205-00CL DATE: 20190314 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ROYAL BANK OF CANADA Plaintiff – and – OXFORD MEDICAL IMAGING INC., JAE K. KIM aka JAE KOUL KIM aka DR. JAE KIM and JAE K. KIM MEDICINE PROFESSIONAL CORPORATION Defendants

Counsel: Rachel Moses, for the Plaintiff Robert A. Klotz, lawyer for Dr. Jae Kim and Oxford Medical Imaging Inc. Bevan Brooksbank, lawyer for Deloitte Restructuring Inc. in its capacity as Court-Appointed Sales Officer Edward L. D’Agostino, lawyer for The INCC Corp.

HEARD: January 29, 2019

Reasons for Decision

McEwen J.

[1] This matter involves a dispute in which the landlord The INCC Corp. (“INCC”) primarily seeks a declaration terminating the lease (the “Lease”) with its tenant Oxford Medical Imaging Inc. (“OMI”). OMI seeks a declaration to restrain such termination as well as a further declaration allowing it to assign its Lease to 2617949 Ontario Limited (“261 Ont”) pursuant to an asset purchase agreement (the “APA”) entered into between OMI and 261 Ont on December 5, 2018.

[2] The dispute arises out of the following facts.

Background Facts

[3] OMI is owned and operated by Dr. Jae Kim (“Dr. Kim”). OMI operates five medical imaging clinics in and around the Regional Municipality of Waterloo.

[4] Specifically, OMI leases premises from INCC at a commercial building located at 430 The Boardwalk in Waterloo (the “Leased Premises”). The building is four stories in size and contains dozens of tenants who are involved in the health care industry.

[5] OMI borrowed funds from the Royal Bank of Canada (“RBC”).

[6] RBC became concerned about its loans with OMI, given litigation involving other related companies in which Dr. Kim was involved as a shareholder. Fellow shareholders had commenced litigation against him. When RBC became aware of the dispute it advised Dr. Kim that it no longer wanted OMI’s business and it called the OMI loans. Dr. Kim attempted to sell OMI but was unable to do so within the timeline provided by RBC.

[7] OMI, Dr. Kim and the RBC agreed to a consent judgment concerning the outstanding loans in the amount of approximately $2.6 million.

[8] Thereafter, again on consent, RBC brought a motion to have Deloitte Restructuring Inc. (“Deloitte”) appointed as a Sales Officer to sell OMI’s assets. Conway J. by way of order dated August 31, 2018 appointed Deloitte as the Sales Officer. This Appointment Order provided a sales process involving all five of OMI’s businesses including the clinic occupying the Leased Premises.

[9] Deloitte retained Mr. John Gilmour of THiiNC Health Inc., a recognized specialist in the area, to assist with the sale. Mr. Paul Casey and Mr. Stephano Damiani handled on the matter on behalf of Deloitte.

[10] Mr. Gilmour had previous business dealing with Ms. Cynthia Voisin, who is the manager of the building owned by INCC, which includes the Leased Premises.

[11] On October 13, 2018, Mr. Gilmour emailed Ms. Voisin to advise that he was working with Deloitte, which had been appointed to sell the assets of OMI. Shortly thereafter he provided her with a copy of the Appointment Order. He advised Ms. Voisin that his task was to make sure that all the stakeholders were kept “in the loop” about the process so that there would be no “late surprises”.

[12] Between late October and mid-November 2018, Mr. Gilmour conducted site visits at the Leased Premises with potential purchasers. Ms. Voisin made herself available for these tours. Mr. Gilmour and Ms. Voisin continued to speak about whether the potential purchasers might be acceptable to INCC.

[13] On November 13, 2018, Mr. Gilmour toured the principals of 261 Ont through the Leased Premises. There is some dispute as to whether Ms. Voisin was available or not. She did not, however, attend on this occasion.

[14] Shortly thereafter on November 16, 2018, Mr. Gilmour advised Ms. Voisin, via text message, that they were reviewing potential bids for the sale of OMI. There was no communication between them after that until December 12, 2018. It was during this time, and thereafter, that INCC takes great issue with the fashion in which Mr. Gilmour and Deloitte carried on with the sales process. INCC feels it was essentially kept in the dark about what was transpiring with the sales process which, necessarily, would involve a situation where OMI would be seeking the permission of INCC to assign its lease of the Leased Premises.

[15] Ultimately, Deloitte determined the offer from 261 Ont was the most desirable bid. The APA was entered into between OMI (by way of Deloitte) and 261 Ont on December 5, 2018. The closing of the APA was conditional, amongst other things, on securing the consent of the relevant landlords to the assignment of OMI’s leases to 261 Ont.

[16] On December 12, 2018, Ms. Voisin sent an email to Mr. Gilmour seeking an update. On December 13, 2018, Deloitte prepared a motion record returnable on December 21, 2018 seeking court approval of its activities, which included approving the APA. As noted, the Lease provided that INCC’s approval was required if OMI wished to assign the Lease. INCC however was not served with the motion record and had no notice of the motion.

[17] In the interim, Mr. Gilmour and Ms. Voisin continued to speak. Mr. Gilmour advised that Deloitte had selected a group to purchase OMI’s assets and Mr. Gilmour introduced Ms. Voisin to Mr. Casey and Mr. Damiani of Deloitte. During this timeframe, Ms. Voisin also learned from an unnamed employee that 261 Ont had met with OMI’s current employees and this employee had some concerns. Mr. Casey and Mr. Damiani also followed up with Ms. Voisin to set up a meeting to discuss the proposed assignment of the Lease, but INCC was still not told about the pending motion.

[18] In what appears to be a coincidence, INCC served OMI with a Notice to Tenant on December 21, 2018 (the same day as the return of the motion for court approval) seeking to terminate the Lease, alleging a number of events of default. Deloitte obtained the Approval and Vesting Order on December 21, 2018. According to counsel for OMI, Hainey J., who heard the motion, was advised that there were difficulties with INCC, but it was hoped that they could be worked out. Nonetheless, INCC was unaware that the motion was being heard.

[19] Matters further deteriorated after December 21, 2018. Mr. Casey expressed great surprise that Ms. Voisin had served the Notice to Tenant given his earlier dealings with her. Ms. Voisin was displeased about not receiving notice of the motion.

[20] Thereafter, discussions continued. On January 17, 2019, INCC met with the principals of 261 Ont. As a result of that meeting INCC advised Deloitte that 261 Ont was not a suitable tenant and refused to provide its consent to assign the Lease to 261 Ont.

Issues

[21] As noted, both INCC and OMI bring motions before the court.

[22] INCC seeks declarations that there have been one or more events that constitute an Event of Default under the Lease; a declaration that INCC is entitled to and has properly terminated the Lease with OMI; and an order that OMI vacate the Leased Premises.

[23] OMI seeks declarations restraining INCC from terminating the Lease pending the determination as to whether INCC has unreasonably withheld its consent; that the Lease is in good standing and not in default; and an order dispensing with the consent of INCC to assignment pursuant to s. 23(2) of the Commercial Tenancies Act, R.S.O. 1990, c. L.7.

[24] The disputes between the parties, and the declarations and order sought, raise the following three issues:

1. Is OMI insolvent?
2. Were steps taken or proceedings commenced for the dissolution, winding-up, or termination of OMI’s existence or the liquidation of OMI’s assets?
3. Has INCC unreasonably withheld its consent to assign the Lease?

[25] The parties agree that if INCC succeeds on either question one or two the issue of whether the consent was unreasonably withheld becomes moot.

[26] The parties further agree that INCC bears the burden of proof with respect to questions one and two while OMI bears the burden of proof with respect to question three.

[27] I will now deal with each question in turn and, as will be seen, I have determined all of the issues in OMI’s favour.

OMI is Not Insolvent

[28] Section 12.01 of the Lease generally stipulates that if OMI becomes insolvent, or steps are taken or a proceeding is commenced for the liquidation of OMI’s assets, an event of default would occur and INCC would have the right to re-enter into the premises.

[29] The relevant provisions of s. 12.01 are as follows:

ARTICLE 12 – DEFAULT 12.01 Default and Right to Re-Enter (c) the Tenant or any Indemnifier becomes bankrupt or insolvent or takes the benefit of any statue for bankrupt or insolvent debtors or makes any proposal, an assignment or arrangement with its creditors, or any steps are taken or proceedings commenced by any Person for the dissolution, winding-up or other termination of the Tenant’s existence or the liquidation of its assets; (d) a trustee, receiver, receiver/manager, or a Person acting in a similar capacity is appointed with respect to the business or assets of the Tenant or any Indemnifier; (e) the Tenant or any Indemnifier makes a sale in bulk of all or a substantial portion of its assets other than conjunction with an assignment or sublease approved by the Landlord.

[30] INCC relies heavily upon the steps taken in RBC’s Application against OMI and Dr. Kim as well as OMI’s financial situation.

[31] In this regard, INCC relies on the fact that RBC served a Notice of Intention to Enforce Security pursuant to s. 244 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) on OMI in March 2018 alleging OMI was insolvent. INCC also relies upon the fact that OMI defaulted under a Forbearance Agreement with RBC and that thereafter RBC agreed to extend the Forbearance Agreement to July 2018, which included a condition where it required OMI to execute a consent to appoint a Sales Officer to sell its assets. This resulted in the consent judgment and sales process.

[32] INCC also points to the fact that OMI was incurring substantial yearly losses for the fiscal years of 2016, 2017, and 2018 in which it was losing between $500,000 and $700,000 per year. It points to the fact that Dr. Kim injected money into the company to keep it afloat and OMI’s liabilities of approximately $7.2 million far exceed its assets of approximately $3.5 million.

[33] Relying primarily upon the aforementioned facts INCC submits that OMI was clearly insolvent which led to the Appointment Order being granted that provided for the sales process.

[34] I do not agree with this submission.

[35] I prefer the submissions of OMI, Deloitte, and RBC that OMI was not insolvent. They submit the following:

• OMI did not commit any act of bankruptcy or take any statutory benefit in this regard.
• There was no judicial order that declared OMI to be insolvent, including the Appointment Order.
• Dr. Kim has deposed that OMI has always remained solvent notwithstanding the fact that it encountered financial difficulties. He further deposes that he has always supported OMI financially and that it remains current with its financial obligations. He has continued to cover all operating losses and, as OMI’s largest creditor, has a shareholder loan of approximately $3.6 million. He has every intention of continuing to support the business. RBC supports this submission. RBC submits that its Notice of Intention to Enforce Security is not proof of insolvency. RBC also submits that INCC, in any event, cannot reasonably rely upon a stale demand of the bank as proof of insolvency, since Notices of Intention greater than six months old cannot be relied upon by a creditor such as RBC. Further, RBC points to the fact that INCC never referred to RBC’s Notice of Intention when it served its default notice to OMI in December 2018.
• RBC further submits that particular attention was paid to OMI’s financial status when the Appointment Order was taken out since if OMI became insolvent it would lose its licences with the Ontario Ministry of Health and Long-Term Care. As a result, the Appointment Order specifically states in paragraph 2 that Deloitte is not and shall not be deemed to be a receiver as defined in the BIA.
• RBC’s debt will be fully satisfied if the sale with 261 Ont is approved.
• RBC did not call the loan with OMI due to insolvency but rather to the lawsuits that were swirling between Dr. Kim and his partners with respect to the related companies.
• The simple fact that a company has greater liabilities than assets does not, by definition, render it insolvent.

[36] I agree with the aforementioned submissions. OMI did not commit an act of bankruptcy or take any statutory benefit in this regard, nor are there any judicial orders declaring OMI to be insolvent.

[37] Dr. Kim’s evidence that OMI has always remained solvent was not meaningfully challenged by INCC. INCC filed no contrary evidence nor did it cross-examine Dr. Kim.

[38] While OMI has clearly experienced financial difficulties, it is current with all of its suppliers and leases. Notwithstanding the RBC judgment, OMI had worked out an arrangement with RBC in which it could repay the monies owed upon the sale of the business.

[39] The case law also generally supports OMI’s position. For the purposes of determining whether a company is insolvent, it is inappropriate to include every debt payable at some future date for the purposes of determining insolvency. This would render numerous corporations insolvent. Rather, debt obligations ought to be measured against the fair valuation of the company’s property and limited to obligations currently payable or properly chargeable: Enterprise Capital Inc. v. Semi-Tech Corp. (1999), 1999 15003 (ON SC), 10 C.B.R. (4th) 133 (Ont. S.C.), at paras. 17-19; Les Oblats de Marie Immaculee du Manitoba, Re, 2004 MBQB 71, 182 Man. R. (2d) 201, at paras. 37-38; Industries Cover Inc. (Syndic des), 2015 QCCS 136, 21 C.B.R. (6th) 1, at paras. 412-426.

[40] For the aforementioned reasons I find that OMI is not, and has not, been insolvent.

No Steps or Proceedings Have Been Commenced for the Dissolution, Winding Up, Termination of OMI, or the Liquidation of OMI’s Assets

[41] INCC submits that a proceeding has been commenced to liquidate OMI’s assets; therefore, as per s. 12.01(c) of the Lease (as set out in paragraph 29 above) this constitutes a default. In this regard INCC points to the Appointment Order which appointed Deloitte to carry out the sales process.

[42] Specifically, INCC relies upon the following paragraphs of the Appointment Order:

SALES OFFICER’S POWERS

3. THIS COURT ORDERS that the Sales Officer is hereby empowered and authorized, but not obligated, to act at once in respect of the sale of the Property and, without in any way limiting the generality of the foregoing, the Sales Officer is hereby expressly empowered and authorized to do any of the following where the Sales Officer considers it necessary or desirable: a) to review and monitor the cash receipts and disbursements of OMI; b) to market any or all of the Property including soliciting offers in respect of the Property or any part or parts thereof and negotiating such terms and conditions of sale as the Sales Officer in its sole discretion may deem appropriate; c) to enter into one or more sales agreements on behalf of OMI for all or any part of the Property, subject to Court approval; d) to engage consultants, appraisers, agents, brokers, experts, auditors, accountants, managers, counsel, tax advisors, and such other persons from time to time and one whatever basis, including on a temporary basis… [Emphasis added.]

[43] INCC argues that the powers provided to Deloitte are “receiver-like” and that Deloitte has free rein to sell any or all of OMI’s property in its sole discretion. This, INCC submits, is a liquidation.

[44] I do not agree.

[45] Paragraph 2 of the Appointment Order makes it clear that Deloitte was appointed solely as a sales officer and not a receiver. Paragraph 2, in totality, reads as follows:

APPOINTMENT OF SALES OFFICER

2. THIS COURT ORDERS that the Sales Officer is not and shall not be deemed to be a receiver as defined in the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”) and shall not be required to provide notice of its appointment or any statement or reports in accordance with sections 245 and 246 of the BIA. [Emphasis added.]

[46] The Appointment Order also clearly sets out that the first step, and the primary goal, of the Appointment Order is to market and thereafter sell the entirety of OMI’s business. This is envisioned in Schedule “A” to the Appointment Order. I agree with the submissions of OMI that what is contemplated in the order is a sales process for the entire business failing which the company could be sold piece-meal. That, however, was a secondary option that did not take place since the sale of the business as a going concern was achieved. Further, Deloitte never managed, directed, or controlled the operations of OMI.

[47] OMI’s position, in my view, is supported by the case law that supports the contention that the sale of a business as a going concern does not amount to a liquidation of assets, or for that matter a dissolution, winding-up, or termination of OMI’s existence. The case law has drawn a clear distinction between the sale of a business and a liquidation by stating that the sale of a business, in fact, avoids a liquidation: see GMAC Commercial Credit Corporation – Canada v. T.C.T Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123, at paras. 93-94; Clothing for Modern Times Ltd., (Re), 2011 ONSC 7522, 88 C.B.R. (5th) 329, at paras. 4 and 11; Proposition de 2964-3277 Quebec Inc., 2019 QCCS 115, at para. 17.

[48] Additionally, it bears noting that INCC never took the position that OMI was insolvent or was engaged in the proceedings seeking to liquidate its assets when it first became aware of the Appointment Order in September 2018. INCC first took the position that OMI was insolvent or engaged in liquidation proceedings after its relationship with Deloitte deteriorated. I accept OMI’s submission that INCC did not take the position that OMI had breached the Lease until it became unhappy with the way it was being treated. Certainly, the record supports this submission and I find that INCC used the alleged insolvency and liquidation proceedings as a tactic to control which tenant will replace OMI and to keep 261 Ont out of the leased premises. INCC is a sophisticated landlord. It would have known immediately of its rights to terminate under the Lease when it first became aware of the Appointment Order. It chose to do nothing at that time but instead raised the issues concerning OMI’s alleged insolvency once its relationship with Deloitte and Mr. Gilmour began to break down.

INCC Has Unreasonably Withheld Its Consent

[49] The leading case on the principles applicable to a landlord withholding consent to assignment is 1455202 Ontario Inc. v. Welbow Holdings Ltd. (2003), 2003 10572 (ON SC), 33 B.L.R. (3d) 163 (Ont. S.C.), in which Cullity J. set out the following guidelines at para. 9:

In determining whether the Landlord has unreasonably withheld consent, I believe the following propositions are supported by the authorities cited by counsel and are of assistance:

1. The burden is on the Tenant to satisfy the court that the refusal to consent was unreasonable. In deciding whether the burden has been discharged, the question is not whether the court would have reached the same conclusion as the Landlord or even whether a reasonable person might have given consent; it is whether a reasonable person could have withheld consent.
2. In determining the reasonableness of a refusal to consent, it is the information available to – and the reasons given by - the Landlord at the time of the refusal - and not any additional, or different, facts or reasons provided subsequently to the court - that is material. Further, it is not necessary for the Landlord to prove that the conclusions which led it to refuse consent were justified, if they were conclusions that might have been reached by a reasonable person in the circumstances.
3. The question must be considered in the light of the existing provisions of the lease that define and delimit the subject matter of the assignment as well as the right of the Tenant to assign and that of the Landlord to withhold consent. The Landlord is not entitled to require amendments to the terms of lease that will provide it with more advantageous terms - but, as a general rule, it may reasonably withhold consent if the assignment will diminish the value of its rights under it, or of its reversion. A refusal will, however, be unreasonable if it was designed to achieve a collateral purpose, or benefit to the Landlord, that was wholly unconnected with the bargain between the Landlord and the Tenant reflected in the terms of the lease.
4. A probability that the proposed assignee will default in its obligations under the lease may, depending upon the circumstances, be a reasonable ground for withholding consent. A refusal to consent will not necessarily be unreasonable simply because the Landlord will have the same legal rights in the event of default by the assignee as it has against the assignor.
5. The financial position of the assignee may be a relevant consideration. This was encompassed by the references to the "personality" of an assignee in the older cases.
6. The question of reasonableness is essentially one of fact that must be determined on the circumstances of the particular case, including the commercial realities of the market place and the economic impact of an assignment on the Landlord. Decisions in other cases that consent was reasonably, or unreasonably, withheld are not precedents that will dictate the result in the case before the court.

[50] Additionally, there is an obligation on a landlord to consider requests for a proposed assignment particularly where the landlord has no particular reason to believe that the proposed assignee is undesirable: St. Jane Plaza Ltd. v. Sunoco Inc. (1992), 24 R.P.R. (2d) 161 (Ont. C.J. (Gen. Div.)), at para. 11.

[51] I appreciate INCC’s frustration at the slow pace at which it was receiving information in the latter part of November and early December 2018. I am also of the view that INCC ought to have been served with a copy of the motion record returnable December 21, 2018 to approve the APA. Even though the APA is conditional upon INCC’s approval of 261 Ont, INCC was affected by the Approval and Vesting Order and should have been served. Further, it would have made good business sense for Deloitte to ensure that INCC was kept abreast of developments so that it could react in an informed fashion.

[52] That being said, I am also of the view that INCC has reacted emotively to these failures. Further, the failures were immaterial since the Lease provided that INCC’s permission to sublet had to be obtained (not to be unreasonably withheld). Also, the court was advised of the fact that INCC’s consent was required and that it was an on-going issue.

[53] The question to be answered, therefore, is whether INCC’s consent was unreasonably withheld.

[54] In this regard INCC emphasizes that it has decided “to give back to the region by establishing a reputable location in the region of Waterloo where excellent medical care would be available for residence”. It submits that INCC offers outstanding, one-stop and accessible services to residents and has to ensure consistent and excellent medical services are provided.

[55] Ms. Voisin and the founder Dr. John Sehl personally interview potential tenants to determine suitability. Ms. Voisin deposes that they consider, amongst other things, the potential tenant’s ties to the region, familiarity with the region, commitment to enhancing health care for residents in the region, relationships with existing tenants, proper licensing, the nature of the business plan being presented, and their general impression of the potential tenant. INCC claims that it does not even look at the financial suitability of the potential tenant until it determines that it is the type of tenant that meets the overall suitability with respect to ties with the region and medical excellence.

[56] INCC submits that 261 Ont failed to meet its criteria.

[57] The three primary objections raised by INCC are: i. 261 Ont is not an imaging clinic owned by a radiologist but rather by an investor. ii. 261 Ont only has one licensed radiologist. iii. 261 Ont has no connection to the community.

[58] INCC also raises lesser concerns which include the following: iv. INCC did a Google Street View of 261 Ont’s other clinics and did not find them attractive. v. The directors of 261 Ont have no relationships with the Waterloo medical community. vi. During the interview with the 261 Ont principals, Dr. Sharma, indicated that he owned two clinics when in fact INCC later allegedly discovered he owns one clinic. vii. 261 Ont provided an insufficiently developed business plan. viii. 261 Ont did not have any “brand equity”, and had yet to decide on an operating name.

[59] In my view, OMI has established that INCC’s refusal to provide consent was unreasonable. I have come to this conclusion for the following reasons (which are listed in the same numerical order as the aforementioned complaints of INCC):

i. The argument of INCC that 261 Ont is owned by an investor as opposed to a radiologist has little if any merit. I have difficulty finding any real relevance to this objection. Notwithstanding INCC’s stated, laudable goals to create an excellent health care environment, it too is a for-profit corporation. There is nothing inherently wrong with an investor owning a medical laboratory. INCC adduced no independent or credible evidence to suggest that this should be of any concern. ii. INCC’s submission that 261 Ont only has one radiologist is of very limited or no significance. INCC argues that OMI had used 18 radiologists but that was for all five of its clinics, not just the Leased Premises. Further, 261 Ont has other operations and access to radiologists. Also, OMI has been brought as a going concern and 261 Ont plans to invite personnel, including radiologists, to remain on-staff. Last, no cross-examinations were conducted by INCC to support its contention that there would be a problem with the staffing of radiologists at the Leased Premises. In these circumstances I find this purported concern to be entirely speculative, [1] particularly in a situation where the principals of 261 Ont are successfully operating other clinics. iii. Similarly, the fact that 261 Ont has no connection to the community, nor do its directors, should not form the basis for withholding permission to assign the Lease in this case. Dr. Kim, the principal of OMI, never resided in the Waterloo region. Additionally, INCC previously approved another tenant to take over the Leased Premises (which later fell through). The principal of that business also had no connection to Waterloo. Of further note is that the principal also had a history of disciplinary proceedings with the Ontario College of Pharmacists, which resulted in a suspension. Last, INCC preferred another bidder – True North. Its principal also has no connection to Waterloo. iv. The argument concerning the Google Street View results fails on the basis that INCC did not produce any of these documents to the court in support of this contention. v. The complaint that the directors of 261 Ont have no relationships within the Waterloo medical community is similar to complaint (iii) - that they have no connection to the community at large. Once again, I do not see the merit in this submission. 261 Ont would be operating a professional medical facility. Whether or not there are existing relationships with the current medical community, I see as being of little significance. Professional relationships will obviously be developed. There is nothing to suggest that 261 Ont lacks the professional capabilities to create those relationships or that the medical needs of the community will not assist in forging those relationships. vi. The objection concerning Dr. Sharma’s statement that he owned two clinics when in fact he may own one is of little or no concern. He was not asked about the alleged contradiction by INCC and allowed an opportunity to explain. There is no real evidence to support INCC’s contention of any sort of falsehood or exaggeration and there is nothing to suggest anything other than a simple misunderstanding or mistake. Ms. Voisin never asked for an explanation. vii. Insofar as the complaint of the underdeveloped business plan is concerned, I have difficulty accepting the legitimacy of this complaint. Deloitte provided INCC information of 261 Ont’s and its principals’ financial and operational capabilities on December 21, 2018 without response. INCC admittedly refused to review 261 Ont’s financials on the basis that it already determined that 261 Ont was an unsuitable tenant. Deloitte also forwarded a detailed business plan to INCC. viii. Once again, I cannot see how “brand equity” can be of any real significance. This, after all, is a medical facility that will offer needed services to the community. Undoubtedly, as 261 Ont has submitted at the motion, an operating name will be decided upon in the usual way.

[60] In addition to the above, which directly deal with INCC’s objections noted above the remaining factors are also germane to my determination:

• After the relationship between INCC and Deloitte began to deteriorate, Ms. Voisin refused to engage with Deloitte in order to discuss 261 Ont’s suitability. Ms. Voisin testified at her discovery that she felt she had no duty to consult. Of significance is the fact that Mr. Brad Stoneburgh, of Para-Med Realty, the property manager for INCC, emailed Deloitte on December 18, 2018 (before INCC even knew the identity of 261 Ont) stating “to be clear if any request is made to assign the Lease it will be rigorously denied”. Ms. Voisin, at her examination, denied delegating this authority to Mr. Stoneburgh. While she may not have delegated the authority one would be naive to believe that Mr. Stoneburgh was acting in his own capacity without having reviewed the issue with Ms. Voisin. I accept that he was expressing INCC’s views. In fact, earlier Mr. Stoneburgh had confirmed that he was corresponding on behalf of INCC. This refusal, as per the decision in St. Jane Plaza, was unreasonable. The identity of 261 Ont was unknown and therefore INCC had no particular reason to believe 261 Ont was unsuitable, or for that matter, any other proposed tenant was unsuitable. INCC closed its mind to any proposals made by Deloitte on behalf of OMI.
• Further, as noted in the materials filed by Deloitte concerning the 261 Ont management team, Dr. Sharma is a foreign-trained radiologist and practised radiology for 15 years prior to immigrating to Canada. For the past 16 years, he has been the owner and operator for imaging and radiology clinics in the Greater Toronto Area (GTA). Another member of the team, Dr. Datta, is a Canadian-trained doctor who is a qualified radiologist. [2] Another principal, Mr. Houja, owns and operates an imaging and radiology clinic in the GTA. Another principal, Mr. Gosian, is a senior financial accounting professional with experience in medical clinics. They were specifically approved for Deloitte by its consultant Mr. Gilmour, who is the only industry expert involved in the transaction. Through Deloitte, the principals of 261 Ont provided a suitable schedule of personal wealth. A deposit has been paid for the purchase of OMI. All this information has been provided to INCC. As noted, INCC did not review the financial information of 261 Ont, having confirmed that they were not suitable prior to even reviewing financial information. In my view, this further evidences the cursory nature of the review undertaken by INCC, which occurred after they had already indicated that no tenant proposed by Deloitte would be suitable. There is no reasoned basis to suggest that 261 Ont is not qualified to operate the proposed facility.
• As noted, INCC preferred the assignment of the Lease to another prospective purchaser during the sales process – True North. This occurred in October 2018. At that time, INCC did not raise any complaints of default against OMI. It was only later when True North was not selected by Deloitte that INCC delivered its Notice to Terminate.
• None of the four other landlords in the other locations have denied consent to the assignment.
• The rigorous sales process conducted by Deloitte with the assistance of the industry expert, Mr. Gilmour, has been approved by this court.
• None of INCC’s subjective criteria regarding residency and ownership are contained in its Lease with OMI.
• If INCC is successful in opposing the termination, OMI will cease operations and largely face the destruction of its business since the Leased Premises are its largest location. There will be resulting unemployment of staff and lack of services to patients. All of these factors must be considered. INCC has produced no evidence to suggest that the consequences will not be significant.
• There is no credible evidence to suggest that 261 Ont cannot live up to the financial obligations imposed by the Lease or that an assignment would have a negative financial impact on INCC.
• The meeting between INCC, Deloitte, and 261 Ont was finally held on January 17, 2019. Further financial details of the personal and business assets of 261 Ont and its principals were produced to INCC. Several other topics were reviewed, including the experience of 261 Ont’s principals and its outreach plans. INCC was also offered further financial details of the principals’ personal and business assets if they would execute a non-disclosure agreement (“NDA”). It was at this meeting that it also confirmed that 261 Ont’s deposit and documentation evidencing that the balance of funds required to close that transaction was available. INCC did not execute the NDA. Shortly thereafter, INCC refused permission without explanation. INCC’s position was only meaningfully set out for the first time in this motion materials.

[61] I agree with the reasoning in Welbow Holdings that a court should be slow to substitute its judgment for the business judgment of a landlord. I also accept that the test is whether a reasonable person could have withheld consent in the circumstances of this case.

[62] Based on the foregoing, however, it is my view that it is appropriate to substitute my judgment for that of INCC on the basis that its decision could not have been reached by a reasonable person.

[63] First, it purported to refuse any assignment without even knowing the identity of 261 Ont. Thereafter, the reasons provided by INCC, in my view, were not commercially reasonable and seemed to expand based on emotive reasons, stemming from the fact that INCC (in particular, Ms. Voisin) was not kept abreast of developments for a period of time and was not served with a copy of the motion record.

[64] In this circumstances of this particular case, INCC has acted unreasonably. While Deloitte and Mr. Gilmour could have done a better job of keeping INCC abreast of developments, they did work meaningfully with INCC early in the process. Later, when they learned of INCC’s unhappiness they attempted to mend the relationship and provide cogent, useful information concerning 261 Ont to INCC. I accept the submissions of RBC, OMI, and Deloitte that once INCC became unhappy with the process it formed a view that it would not accept a tenant proposed by Deloitte and this is evidenced by Mr. Stoneburgh’s email. Even if I am in error and INCC had not predetermined the issue, it acted unreasonably in refusing to consent to an assignment of the Lease to 261 Ont, who is a suitable tenant for all the reasons noted above.

Disposition

[65] INCC’s motion is dismissed.

[66] OMI and Dr. Kim are entitled to a declaration that the Lease is in good standing and not in default, and a further declaration that INCC’s refusal to consent to an assignment to 261 Ont has been unreasonably withheld. It is therefore further entitled to an order that the assignment may be made, notwithstanding INCC’s refusal to consent, as per s. 23(2) of the Commercial Tenancies Act.

[67] With respect to the issue of costs, RBC is not seeking costs. Having been successful, OMI/Dr. Kim and Deloitte are entitled to costs payable by INCC.

[68] I have reviewed the bill of costs. Costs are to be paid on a partial indemnity basis. The bills of costs of the parties were fairly similar. It is fair and reasonable to award OMI/Dr. Kim the partial indemnity costs sought in the amount of $32,050.79, inclusive, and Deloitte in the amount of $36,751.05, inclusive.

McEwen J. Released: March 14, 2019

Footnotes

[1] Or alternatively, tactical, based on my comments below in paragraph 60. [2] INCC also submitted that Dr. Datta “may have” restrictions as a radiologist, but introduced no evidence in this regard. OMI disputes this contention.