Court File and Parties

COURT FILE NO.: 15-66025 DATE: 20190226 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 6056628 Canada Inc. and 1443900 Ontario Inc., Plaintiffs AND 2350894 Ontario Inc., Defendant

BEFORE: Madam Justice Heather J. Williams

COUNSEL: Christopher Spiteri, Counsel for the Plaintiffs James D. Wilson and James F. Leal, Counsel for the Defendant

HEARD: November 29, December 12 and December 20, 2018

Endorsement

Introduction

[1] The plaintiffs, collectively, are a commercial tenant [1] and the defendant is its landlord.

[2] The tenant operates a restaurant in a building in Ottawa’s ByWard Market.

[3] On October 5, 2015, the tenant obtained an interim interlocutory injunction, without notice.

[4] The injunction prohibited the landlord from taking any actions of forfeiture against the tenant, from locking the tenant out of the leased property and from taking steps to lease the property to a new tenant.

[5] On October 16, 2015, the injunction was extended on consent, pending a further court order. The October 16, 2015 order provided that the tenant’s motion could be set down by either party on ten days’ notice for a hearing on all of the issues.

[6] In July, 2018, after the parties had lived with the injunction for more than two and one half years, the landlord, seeking to set aside the injunction, set down the tenant’s motion for a hearing on all of the issues.

[7] The motion was heard over three days, November 29, 2018, December 12, 2018 and December 20, 2018, for a total of four hours.

[8] The parties have strikingly different perspectives on the situation that brought them to court. In its factum, the tenant says that the motion relates to the landlord’s refusal to recognize validly executed minutes of settlement that amend the parties’ lease. The landlord says that at the heart of the dispute is whether the court should provide equitable relief to a tenant which is in habitual default of the terms of its lease and does not come to court with clean hands.

The Facts

[9] The tenant has leased the property where it operates its restaurant since February of 2001.

[10] The landlord purchased the building in which the leased property is located in December, 2012.

[11] As part of the purchase, the landlord insisted that the vendor obtain estoppel certificates from the building’s tenants.

[12] The tenant signed two estoppel certificates, one in September, 2012, when the purchase was initially expected to close and then, when the closing date was postponed to December, 2012, another in November, 2012.

[13] Both estoppel certificates signed by the tenant listed a series of documents, including the 2001 lease and various licence and lease amending agreements and defined these documents collectively as the “lease.”

[14] The list of documents in the estoppel certificates collectively referred to as the “lease” did not include any minutes of settlement.

[15] The estoppel certificates signed by the tenant stated that the term of the tenant’s lease ended on February 14, 2016. The certificates also stated that the tenant had a renewal option to 2021 under a lease amending agreement dated January 28, 2008 (which was included in the list of documents collectively referred to as the “lease”) and a further renewal option to 2026 under minutes of settlement dated October 1 (sic), 2009 (which were not included in the list of documents collectively referred to as the “lease.”)

[16] Three months after the landlord purchased the building in which the leased property is located, the tenant sent an email to the landlord that said that the tenant was not sure if the vendor had given the landlord a copy of the tenant’s most recent lease amendments. A copy of minutes of settlement signed October 2, 2009 was attached to the tenant’s email.

[17] Under the minutes of settlement, contrary to the estoppel certificate the tenant had signed, the term of the tenant’s lease had been extended to 2021, with an option to renew to 2026. The extension to 2021 was at a fixed rate of base rent. The minutes also eliminated the tenant’s obligation to pay some of the building’s operating costs.

[18] The tenant’s position in respect of the minutes of settlement is the following:

• The minutes of settlement amend the lease; and
• The landlord was on notice that the minutes of settlement existed because of the reference in the estoppel certificate to the renewal option in the “October 1, 2009” minutes of settlement.

[19] The tenant also argues that the landlord cannot now take issue with the estoppel certificate because the agreement of purchase and sale between the vendor and the landlord provided the landlord with one year to seek recourse against the vendor in the event of any misrepresentations, including misrepresentations in respect of leases, and the landlord failed to pursue this remedy.

[20] The landlord’s position in respect to the minutes of settlement is the following:

• The tenant cannot rely on the minutes of settlement because they were not included on the list of documents in the estoppel certificate collectively defined as the lease.
• The tenant had clearly turned its mind to the list of documents collectively defined as the lease because it had amended the September version of the estoppel certificate in handwriting to indicate that one of the many documents on the list had been terminated.
• The reference in the estoppel certificate to minutes of settlement dated October 1, 2009 did not prompt any further inquiries by the landlord because, although it turned out to be incorrect, it was only to an option to renew the lease to 2021, which caused the landlord no concern.

[21] The landlord says that if the minutes of settlement do not amend the lease, the tenant’s tenancy ended on February 14, 2016, because the tenant had not renewed the tenancy as required by August 16, 2015.

[22] The landlord argues that the tenant has been in constant default of the terms of its lease since April, 2013 and cites six notices of default.

The Issue

[23] The issue is whether the injunction granted on October 5, 2016 and extended on consent on October 16, 2016 should be continued.

[24] While the landlord seeks an order setting aside the injunction, the tenant is asking that the injunction be continued until the question of whether the minutes are binding on the landlord has been decided.

[25] Shortly before the first return date of this motion on November 29, 2018, the tenant informed the landlord that it intended to schedule a summary judgment motion to determine the issue of the enforceability of the minutes of settlement. My understanding as of the last date of argument on the motion, December 20, 2018, was that the summary judgment motion is to be heard on June 25, 2019.

Analysis

[26] There is no issue that, although the injunction has been in place for three years, I am to consider the facts as they exist as of the date of the hearing of this motion and whether the tenant is entitled to an injunction based on the record that is now available.

The RJR-MacDonald Factors

[27] The parties agree that the test to be applied is the test from RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311:

a. Is there a serious issue to be tried? b. Will the party seeking the injunction suffer irreparable harm if the injunction is not granted? and c. Does the balance of convenience favour an injunction?

[28] The three RJR-MacDonald factors must be considered in context. The judge must not become a prisoner of formula. The fundamental question in each case is whether the granting of an injunction is just and equitable in all the circumstances of the case. (1960529 Ontario Inc. v. 2077570 Ontario Inc., 296 Brunswick LP Corp. and CMLS Financial Ltd., 2017 ONSC 5254 at para. 23 citing B.C. (A.G.) v. Wade, [1987] 2 W.W.R. 331 at p. 345 per McLachlin J.A., aff’d , [1991] 1 S.C.R. 62.)

Factor #1: Serious Issue to be Tried

[29] A low threshold is to be applied when considering the first RJR-MacDonald factor, whether there is a serious issue to be tried. No specific requirements must be met in order to satisfy the test, although the judge must be satisfied that the moving party’s case is not frivolous or vexatious. A prolonged examination of the merits is typically not necessary or desirable. (RJR-MacDonald, paras. 54-55.)

[30] The tenant, while urging me to conclude that the question of whether the October 2, 2009 minutes of settlements are binding on the landlord is a serious issue to be tried also cautioned me not to decide the issue on this motion. The landlord agreed that other than determining whether it has merit, the issue of whether the minutes are binding is not before me. Both parties, obviously, will have more to say about the issue at the hearing of the tenant’s summary judgment motion.

[31] Although there was a great deal of material filed which dealt with the circumstances surrounding the signing of the estoppel certificate and the parties’ respective interpretations of the estoppel certificate, in accordance with my mandate on this motion, I will not engage in a “prolonged examination” of the merits of the parties’ respective positions.

[32] I will say that estoppel certificates are intended to prevent the tenants who sign them from subsequently arguing that the facts set out in an estoppel certificate are incorrect. They are to be strictly enforced. In this case, however, the tenant argues that because of the reference to minutes of settlement of October 1, 2009 in the estoppel certificate, the landlord knew or should have known that minutes of settlement amended the lease.

[33] I find that the tenant has shown that there is a serious issue to be tried in respect of whether the landlord was or should have been on notice of the October 2, 2009 minutes of settlement and whether the minutes are binding.

[34] The landlord argued even if the minutes of settlement are binding, the landlord would still be entitled to terminate the lease because the tenant would still be in default. The tenant argues that amounts the landlord claims are owed by the tenant are inflated and that other defaults alleged by the landlord are invalid. Once again, I will not engage in any detailed analysis. I will only note that the parties appear to agree that if the minutes of settlement ultimately are found to be enforceable, serious issues to be tried will remain.

[35] I do not accept the landlord’s argument that, in the circumstances of this case, the tenant must show not only that there is a serious issue to be tried but that it has a strong prima facie case; I do not agree that the case relied upon by the landlord (Cana International Distributing Inc. v. Standard Innovation Corp., 2010 ONSC 6273) applies to the facts before me.

Factor # 2: Irreparable Harm

[36] The landlord denies that, contrary to the tenant’s assertions, it has ever attempted to lock out the tenant or that it has shown the premises to other prospective tenants. However, the landlord takes the position that if the minutes of settlement are not binding, the tenant has no lease and is over-holding, because it did not renew the lease in August, 2015, as it would have been required to do under the terms of a lease that was not amended by the minutes of settlement.

[37] The tenant says that it has devoted 17 years to the growth and development of its restaurant business and that if the lease is terminated, its business will be destroyed.

[38] The landlord argues that the tenant has not submitted clear evidence that it would suffer irreparable harm and that any harm would be quantifiable in damages. The landlord also argues that any harm suffered by the tenant was self-inflicted.

[39] The modifier “irreparable” refers to the nature of the harm and not its magnitude. It is harm that cannot be quantified in monetary terms or cannot be cured, usually because one party cannot collect damages from the other. A party that would be put out of business or suffer permanent market loss or irrevocable damage to its business reputation may be found to suffer harm of an irreparable nature. (RJR – MacDonald, para. 64.)

[40] While injunctions will only be granted for breach of contract in cases in which damages are an inadequate remedy, the situation is different in cases involving allegations of wrongful interference with proprietary interests, including leases. In such cases, injunctive relief is strongly favoured. (1465152 Ontario Limited v. Amexon Development Inc., 2015 ONCA 86 at paras. 22 and 23.)

[41] I accept the evidence of the tenant that if the landlord were to enforce its remedies under the lease before the issue of the enforceability of the minutes of settlement is determined, the tenant’s restaurant would close and the tenant would suffer irreparable harm.

[42] I will address later in this endorsement the landlord’s argument about the self-inflicted nature of any harm the tenant would suffer.

Factor #3: The Balance of Convenience

[43] In considering the balance of convenience, I must weigh the relative harm to the parties if the injunction is granted or refused. (RJR-MacDonald, para. 67.)

[44] I have already found that the tenant will suffer irreparable harm if the injunction is not granted.

[45] The landlord argues that the harm it would suffer if the injunction is granted could be quantified in damages because an injunction would force the landlord to continue a tense relationship with a tenant it no longer trusts, delay the landlord’s ability to locate and secure a new tenant and incur significant legal fees.

[46] I find that the balance of convenience favours the granting of the injunction, particularly as the tenant’s summary judgment motion is scheduled to be heard four months from now.

What is fair and equitable in the circumstances?

[47] Although I have found that the three RJR-MacDonald factors weigh in favour of granting the injunction, I remind myself that the factors must be considered in context and that I am not to be a slave to formula but must decide what result would be just and equitable in the circumstances.

[48] I must consider the landlord’s concern that the injunction is allowing the tenant to continue in default of the lease and is creating a debt that may simply cause the tenant to become insolvent.

[49] I will also address the landlord’s argument that any harm that would be suffered by the tenant if the injunction is not granted would be “self-inflicted.” This argument corresponds with another argument of the landlord, which is that the tenant is not entitled to an injunction because it does not have “clean hands” and is not, therefore, entitled to an equitable remedy.

[50] The landlord argues that the tenant: (a) signed inaccurate and/or misleading estoppel certificates and then, after being informed in April, 2013 that the landlord did not accept that the minutes of settlement amended the lease, failed to renew the lease prior to the August 15, 2015 deadline provided in the lease; and (b) would be in default of the lease even if the October 2, 2009 minutes of settlement are found to be binding. The landlord argues that the tenant has used the injunction to insulate itself from the consequences of its own conduct, as described in (a) and (b).

[51] The landlord argues that the tenant is the author of its own misfortune and should not be permitted to benefit from its own wrongdoing.

[52] The tenant’s witness, Zadek Ramowski, a director and officer of one of the plaintiff corporations, admitted that the estoppel certificates contain errors. Mr. Ramowski said that he is not a realtor or a lawyer and that he had never signed an estoppel certificate before. He said that he thought that he was obliged to sign whatever estoppel certificates the vendor put in front of him. He admitted that the vendor had signed a document in August, 2012, in which she had undertaken to pay him and his wife $5,000.00 in respect of a fire that had damaged the tenant’s restaurant in July, 2012. He also admitted that the document stated that the agreement was “in consideration of the execution and delivery of the Estoppel Certificate to me.” Mr. Ramowski said that the $5,000.00 related only to the fire loss and denied that he was being paid for signing the estoppel certificate.

[53] I have already noted that there was a reference in the estoppel certificates to minutes of settlement dated October 1 (sic), 2009 and I have already concluded that there is a serious issue to be tried with respect to whether the landlord had or should have had notice of the minutes of settlement and whether minutes of settlement are binding. Even so, there can be no doubt that if the estoppel certificates signed by the tenant had clearly included the October 2, 2009 minutes of settlement in the list of documents collectively defined as the lease as well as accurate statements about the lease termination date and renewal options, the parties would not now be locked in this contentious litigation. As the landlord’s lawyer, Mr. Leal, put it in an April 19, 2013 letter to the tenant, the “sole and express purpose of the Estoppel Certificate provided by you and the other Tenants was to avoid this type of situation.”

[54] The injunction has, however, been allowed to stay in place for three years. In these circumstances, and given that the tenant’s lawyer has said that if the injunction is not continued, the tenant will have no option but to return to court with a motion for relief from forfeiture, I am satisfied that an extension of the injunction is the most practical available solution. Only four months remain before the tenant’s summary judgment motion is scheduled to be heard. An extension of the injunction will maintain the status quo until the minutes of settlement issue has been decided and will save both parties the time and legal fees associated with the further motion the tenant says a dissolution of the injunction would precipitate.

[55] I will, therefore, order that the injunction shall continue until June 25, 2019, the date of the tenant’s summary judgment motion, or to a later date on consent or by a further order of the court.

[56] Relying on rule 1.05 of the Rules of Civil Procedure, I will attempt, below, to make orders which address the landlord’s concern about the debt to the landlord the tenant will be accumulating as a result of the injunction, if the tenant ultimately is found to be in default of the lease.

Conclusion

[57] I make the following orders:

1. The landlord’s motion is dismissed, except to the extent that the October 16, 2015 order of Ellies J. shall be varied to add certain terms;
2. The terms of paragraphs 1, 2 and 3 of the October 16, 2015 order of Ellies J. shall be extended to June 25, 2019, [2] or to a later date on consent or by a further order of the court;
3. The June 25, 2019 hearing date for the tenant’s summary judgment motion shall be peremptory to the tenant. For clarity, the tenant shall not be entitled to postpone the date;
4. If the landlord requires an adjournment of the June 25, 2019 hearing date, the parties shall consent to an extension of the injunction to the return date of the motion. If the parties disagree or encounter any obstacles in this regard, they may arrange a 30-minute 9 a.m. appointment with me through the trial coordinator; and
5. In accordance with rule 40.03, the plaintiff corporations shall provide undertakings to the court concerning damages. The undertakings shall state:
   • that the plaintiff corporations “undertake to abide by any order concerning damages that the court may make if it ultimately appears that the granting of the injunction orders of October 5, 2015, October 16, 2015 and/or February 26, 2019 have caused damage to the defendant for which the plaintiff corporations ought to compensate the defendant”; and
   • that the plaintiff corporations have sufficient assets to fulfill the undertakings and that if they do not, the principals of the plaintiff corporations identified in the November 20, 2018 affidavit of Zadek Ramowski shall be personally liable for the undertaking. [3]

The undertakings of the plaintiff corporations shall be served on the landlord’s lawyer and filed with the court within 14 days of the date of this order, failing which the injunction orders of October 5, 2015, October 16, 2015 and February 26, 2019 shall be dissolved.

6. The issue of costs shall be reserved until the parties have delivered written costs submissions. The tenant was substantially successful on this motion. However, in their submissions, in addition to the issues of the scale and quantum of costs, the parties shall address rule 57.01(2) and whether this is an appropriate case for costs to be awarded against a successful party. The landlord may deliver written submissions of no more than five pages in length within 14 days of the date of this decision. The tenant may then deliver written submissions in response of no more than five pages in length within 14 days of the date of receipt of the landlord’s submissions. The landlord may deliver any reply submissions of no more than three pages in length within seven days of the date of receipt of the tenant’s submissions. The costs submissions may be filed by sending them to me, through the trial coordinator.

Madam Justice Heather J. Williams Date: February 26, 2019

COURT FILE NO.: 15-66025 DATE: 20190226 ONTARIO SUPERIOR COURT OF JUSTICE RE: 6056628 Canada Inc. and 1443900 Ontario Inc., Plaintiffs AND 2350894 Ontario Inc., Defendant BEFORE: Madam Justice Heather J. Williams COUNSEL: Christopher Spiteri, Counsel for the Plaintiffs James D. Wilson and James F. Leal, Counsel for the Defendant ENDORSEMENT Madam Justice Heather J. Williams

Released: February 26, 2019

[1] It appears from the evidence that both numbered companies leased space on behalf of the restaurant but at different times.

[2] If, following the parties’ last appearance before me in December, 2018, the June 25, 2019 hearing date for the tenant’s summary judgment motion was not confirmed by the parties or was no longer available, the parties shall inform me immediately, through the trial coordinator, of the status of the motion, as this order is premised upon the tenant’s motion shall be heard that day and will require amendment.

[3] 642947 Ontario Ltd. v. Fleischer (2001), 56 O.R. (3d) 417; 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., [1972] 2 O.R. 280