Court File and Parties

COURT FILE NO.: CV-18-00599770-0000 DATE: 2019/03/25

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ALDGATE CONSTRUCTION (1988) LIMITED Plaintiff

• and - NOREAST FOODS LTD. and ZI ZHONG WU Defendants

COUNSEL: Stephen Schwartz and Aryan Ziaie for the Plaintiff Jonathan Rosenstein for the Defendant Noreast Foods Ltd. Andrew Ostrom for the Defendant Zi Zhong Wu

HEARD: March 7, 2019

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] The Plaintiff Aldgate Construction (1988) Limited leased premises in a commercial/industrial building to the Defendant Noreast Foods Ltd. The Lease was guaranteed by Zi Zhong Wu. Aldgate alleges that Noreast failed to pay some rent near the end of the five-year tenancy and that Noreast breached its repair covenants under the Lease. Aldgate brings a summary judgment motion, and after deducting a $20,000 credit for pre-paid rent and a security deposit, it claims damages of $105,356.88 from Noreast and from Mr. Wu as guarantor. Aldgate also seeks a dismissal of Noreast’s $1,151,421.99 counterclaim for an alleged unlawful termination of the tenancy.

[2] Noreast does not bring a cross-motion for summary judgment of its counterclaim. Noreast and Mr. Wu resist Aldgates’ summary judgment motion. They submit that there are genuine issues requiring a trial in the main action and in the counterclaim.

[3] For the reasons that follow, I grant the summary judgment motion, in part, and I dismiss it, in part.

[4] I find that this case is appropriate for a summary judgment in the main action. The main action was a more or less straightforward exercise of fact-finding on an adequate record. It does not involve any genuine issues that require a trial. I, therefore, grant Aldgate a judgment of $79,196.52 in the main action to be payable forthwith. Taking into account the nature of the claims in the claim and the counterclaim, the equities between the parties and the evidence proffered by the parties on this summary judgment motion, I decline to exercise the court’s discretion to stay execution of the judgment in the main action or in the third-party claim.

[5] At the first blush of the rose, given its monetary value and the issue of whether Aldgate may have improperly terminated the lease, the counterclaim had the appearance of presenting genuine issues that might require a trial; however, upon analysis, some of the blush of the counterclaim faded, and some of the petals on the rose fell off. What emerged was a counterclaim that had some substantive issues that genuinely did require a trial to fairly resolve.

[6] It would not be just and fair to decide the counterclaim summarily. Rather, the case at bar is an appropriate one to make an order pursuant to rules 20.05 (1) and (3) of the Rules of Civil Procedure. Under these rules where summary judgment is refused or is granted only in part, the court may make an order specifying what material facts are not in dispute and defining the issues to be tried; the facts specified shall be deemed to be established unless the trial judge orders otherwise to prevent injustice.

[7] For the reasons that follow, I, therefore, dismiss Aldgate’s summary judgment motion with respect to the counterclaim. My Reasons for Decision shall be appended as a Schedule to the formal order. These Reasons specify what material facts are not in dispute and define the genuine issues to be tried in the counterclaim.

B. Procedural and Evidentiary Background

[8] On June 14, 2018, Aldgate commenced this action with the issuance of a Statement of Claim.

[9] On August 8, 2018, Noreast delivered a Statement of Defence and Counterclaim.

[10] On August 15, 2018, Aldgate delivered its Reply and Statement of Defence to the Counterclaim.

[11] On September 12, 2018, Mr. Wu delivered his Statement of Defence and Crossclaim.

[12] On September 13, 2018, Mr. Wu commenced a Third Party Claim against Bin Chen, who was the principal shareholder of Noreast.

[13] On October 15, 2018, Mr. Chen, the owner of Noreast, delivered his Defence to the Third Party Claim.

[14] On November 16, 2018, Aldgate brought a motion for a summary judgment. The motion was supported by affidavits from Stephen Goldberger dated November 14, 2018 and January 31, 2019. Mr. Goldberger is a vice-president of Aldgate.

[15] The motion was opposed by Noreast, which proffered an affidavit from Mr. Chen dated January 9, 2019. The motion was also opposed by Mr. Wu who swore an affidavit dated January 3, 2019.

[16] Mr. Goldenberger and Mr. Chen were cross-examined.

C. Jurisdiction to Grant Summary Judgment

[17] Rule 20.04(2)(a) of the Rules of Civil Procedure provides that the 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.” With amendments to Rule 20 introduced in 2010, the powers of the court to grant summary judgment have been enhanced. Rule 20.04 (2.1) states:

20.04 (2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[18] Hryniak v. Mauldin [1] does not alter the principle that the court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial. The court is entitled to assume that the parties have advanced their best case and that the record contains all the evidence that the parties will present at trial. [2] Thus, if the moving party meets the evidentiary burden of producing evidence on which the court could conclude that there is no genuine issue of material fact requiring a trial, the responding party must either refute or counter the moving party’s evidence or risk a summary judgment. [3]

[19] Under rule 20.02(1), the affidavits for a summary judgment motion may be made on information and belief, but on the hearing of the motion, the court may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts. The principles governing the admissibility of evidence are the same as apply at trial save for the limited exception of permitting an affidavit made on information and belief. [4] Where an affidavit relied upon in support of a motion for summary judgment does not state the source of the information and the fact of the deponent’s belief, the court may nevertheless rely upon the substance of the exhibits to the affidavit in evaluating the merits of the case. [5]

[20] In Hryniak v. Mauldin [6] and Bruno Appliance and Furniture, Inc. v. Hryniak [7], the Supreme Court of Canada held that on a motion for summary judgment under Rule 20, the court should first determine if there is a genuine issue requiring trial based only on the evidence in the motion record, without using the fact-finding powers introduced when Rule 20 was amended in 2010. The analysis of whether there is a genuine issue requiring a trial should be done by reviewing the factual record and granting a summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute and a summary judgment would be a timely, affordable and proportionate procedure.

[21] If, however, there appears to be a genuine issue requiring a trial, then the court should determine if the need for a trial can be avoided by using the powers under rules 20.04 (2.1) and (2.2). As a matter of discretion, the motions judge may use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if their use 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. To grant summary judgment, on a review of the record, the motions judge must be of the view that sufficient evidence has been presented on all relevant points to allow him or her to draw the inferences necessary to make dispositive findings and to fairly and justly adjudicate the issues in the case. [8]

[22] If a judge is going to decide a matter summarily, then he or she must have confidence that he or she can reach a fair and just determination without a trial; this will be the case when the summary judgment process: (1) allows the judge to make the necessary findings of fact; (2) allows the judge to apply the law to the facts; and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [9] The motion judge is required to assess whether the attributes of the trial process are necessary to enable him or her to make a fair and just determination. [10] To grant summary judgment, on a review of the record, the motions judge must be of the view that sufficient evidence has been presented on all relevant points to allow him or her to draw the inferences necessary to make dispositive findings and to fairly and justly adjudicate the case.

[23] When the court dismisses a summary judgment motion, it has the jurisdiction to specify what material facts are not in dispute and to define the issues to be tried. Under rule 20.05 (3), any facts specified shall be deemed to be established, unless the trial judge orders otherwise to prevent injustice. Rule 20.05 states:

WHERE TRIAL IS NECESSARY

Powers of Court

20.05 (1) Where summary judgment is refused or is granted only in part, the court may make an order specifying what material facts are not in dispute and defining the issues to be tried, and order that the action proceed to trial expeditiously. O. Reg. 438/08, s. 14.

Directions and Terms

(2) If an action is ordered to proceed to trial under subrule (1), the court may give such directions or impose such terms as are just, including an order,

Specified Facts

(3) At the trial, any facts specified under subrule (1) or clause (2) (c) shall be deemed to be established unless the trial judge orders otherwise to prevent injustice. O. Reg. 438/08, s. 14.

[24] As I noted in the Introduction to these Reasons for Decision, in the immediate case, in the main action, there are no genuine issues requiring a trial. There is a more than adequate evidentiary record, and the counterclaim, which centres on whether approximately one month before the end of the Lease, it was wrongfully terminated, does not affect whether or not Noreast had damaged the premises during its tenancy. Where there are issues of credibility it is not necessary to resolve them in order to decide the main action.

[25] In the counterclaim, there are some issues that are conceded, uncontested, or uncontestable, and although I am dismissing the summary judgment motion to dismiss the counterclaim, it is desirable to specify what material facts are not in dispute. It would be unnecessary, inefficient, and disproportionate not to decide these issues now and to have them relitigated by the trial judge. Thus, in my opinion, it is in the interests of justice to utilize the jurisdiction provided by Rule 20.05 of the Rules of Civil Procedure in the immediate case. Exercising this jurisdiction preserves and does not waste the legal resources expended by the parties in the summary motion procedure and produces a more efficient procedure that respects the proportionality principles of the Rules of Civil Procedure.

[26] For the purposes of a summary judgment motion, the court is required to determine whether there are genuine issues requiring a trial, and when the court does decide that there are genuine issues requiring a trial, then by exercising its jurisdiction under Rule 20.05 of the Rules of Civil Procedure to specify what material facts are not in dispute, the court can direct a procedure that is efficient, proportionate, and fair that also does not interfere with the role of the trial judge who is not bound by the findings of fact if he or she orders otherwise in the interests of justice.

[27] In the next section of my Reasons for Decision, I shall make the findings of material facts in the main action and identify the genuine issues of fact that are required to be determined by the trial judge in the counterclaim. I shall apply settled law to the facts of the main action and leave it to the trial judge to determine the counterclaim.

D. Facts

[28] Aldgate is the owner of a building municipally known as 1220 Markham Road in the City of Toronto. Aldgate is a developer and property manager of commercial and industrial properties. It manages over 650,000 square feet of commercial and industrial space. Mr. Goldenberger has been its vice-president since 1988. He has over forty years’ experience as a property manager.

[29] By a written Lease dated March 1, 2013, Aldgate agreed to rent units 2 and 3 of 1220 Markham Road to Noreast for a five-term commencing March 1, 2013 and ending February 28, 2018.

[30] Mr. Chen and Mr. Wu were the principals of Noreast, which carried on business as a manufacturer of tofu and other soy-based products. Mr. Wu signed the Lease as a guarantor.

[31] In 2013, Mr. Chen and Mr. Wu were the sole shareholders and directors of Noreast. As noted below, Mr. Wu sold his interest in Noreast to Mr. Chen and resigned as director in 2017.

[32] After the Lease was signed, Noreast entered into possession of the premises and commenced its manufacturing operations. Both before and after the signing of the Lease, Mr. Chen was the contact person with the landlord. Mr. Wu does not speak English and dealing with the landlord was left to Mr. Chen.

[33] At the time the Lease was signed, Noreast paid $26,421 on account of: (a) the first month’s rent ($6,050.10); (b) the last month’s rent ($6,790.63); (c) the second-to-last month’s rent ($6,790.63); and (d) a security deposit ($6,790.63). Thus, after deducting payment of the first month’s rent, there was a $20,370.90 credit to Noreast’s rental account with its landlord.

[34] The Lease was for a five-year term ending February 2018. The relevant provisions of the Lease are set out in Schedule “A” to these Reasons for Decision.

[35] During 2016, there was a dispute between Mr. Chen and Mr. Wu, and on September 12, 2016, Mr. Wu commenced an action against Mr. Chen. In December 2016, the Court ordered a forced sale of Noreast, and on January 30, 2017, Mr. Wu resigned from Noreast and sold his interest to Mr. Chen. Pursuant to the sale, Mr. Chen agreed to indemnify Mr. Wu with respect to any personal guarantees that Mr. Wu had incurred for Noreast’s obligations.

[36] In the case at bar, Mr. Chen has conceded that he is liable to indemnify Mr. Wu for any amounts founding owing to Aldgate.

[37] Not surprisingly given the nature of Noreast’s manufacturing processes, which involved the release of moisture in an environment of food products, during the currency of the Lease, there were problems with odors and with the formation of mold at Noreast’s premises. In 2016, there was a water leakage problem. Neighbouring tenants complained about the odors coming from the premises. The City of Toronto issued a Work Order in 2014. Aldgate wrote complaining letters about mold damage to the walls and asked Noreast to remediate. The problems persisted throughout the term of the lease. I find as a fact that substantial mold was present on the walls of the leased premises when the Lease came to an end.

[38] On October 24, 2018, Aldgate serviced a Notice to Vacate on Noreast as set out below:

Dear Sirs,

Your lease for the above premises will expire and terminate on the 28th day of February 2018 (the "Expiry Date"). Please be advised that we will not be extending or renewing the Lease agreement and you must vacate the premises no later than the Expiry Date. Further to the Lease we will require that the following be done prior to vacating:

CONDITION OF PREMISES AT EXPIRATION: Subject to the provisions of this Lease, upon expiration or earlier termination of the Term hereby granted, the Tenant will peaceably surrender, quit and deliver up the Demised Premises to the Landlord in a good state of repair and maintenance, excepting only reasonable wear and tear not inconsistent with the maintenance of the building on the Demised Premises suitable as a first-class industrial building. and hazards covered by the usual extended form of fire insurance policy.

Tenant shall at its own expense remove any or all alterations, improvements or fixtures made or placed by the Tenant, or by the Landlord on behalf of the Tenant, upon the Leased Premises during the Term. In removing such alterations, improvements and fixtures, the Tenant shall restore the Leased Premises to similar condition as they were before such alterations, improvements and other fixtures were made or placed or to "Base Building" standard.

The Tenant shall be fully responsible for any and all damage to the Demised Premises not excepted under this provision, the Landlord at its option may rectify such damage at the cost of the Tenant and the Tenant shall pay to the Landlord forthwith upon demand such cost, which cost shall also include an eighteen percent (18%) administration fee, with the minimum charge being Two Hundred Dollars ($200.00).

In addition,

• All keys be delivered to our office no later than 5 AM March 1, 2018;
• All ceilings and walls to be left in good condition with any holes patched and ceiling tiles replaced as needed, and the floors left in good clean condition.

Prior to January 15th, 2018 we will require a certificate from a certified environmental engineer stating that any and all mould has been removed and appropriate abatement measures have been taken to remove all mould from the entire premises. Should you fail to provide such certificate, we take immediate action to inspect and remedy any environmental issues and hold you entirely responsible for all costs and liabilities involved in such remediation. All of the above work. must be completed prior to the Expiry Date.

Please keep the writer informed of your move-out and clean-up schedule as soon as possible. Yours truly, S. Goldenberger.

[39] By this notice, Aldgate was indicating that it would not allow Noreast to renew its lease. However, Aldgate might have saved its breadth because Mr. Chen had already planned to move Noreast’s operations to a new manufacturing site.

[40] In the fall of 2017, six-months before the termination of the lease, Mr. Chen decided not to renew the tenancy. He had located a much larger facility and planned to move operations to the new location.

[41] In the fall of 2017, there was a dispute between the parties about the HVAC system, which heated the office of the leased premises. The HVAC system had stopped working, and a repair technician hired by Noreast had advised Noreast that it would cost more to repair than to replace. The parties disagreed about whom should pay for the replacement.

[42] I find as fact that any replacement should have been done by Noreast because during the currency of the tenancy, it had failed to maintain the unit as required under articles 1.07 and 1.16 of the Lease, and it was the lack of maintenance that lead to the need for replacement of the HVAC system. I find that, in any event, Noreast could not abate or withhold rent payments because of the alleged problems with respect to the HVAC system. Under article 1.01 of the Lease, rent was due without deduction, abatement, or set off.

[43] Later, after Noreast had left the premises, Aldgate’s in-house HVAC technician said that the HVAC could have been repaired, but I do not rely on this hearsay evidence. In any event, the point to note is whether by repair or by replacement, under the Lease, the responsibility to maintain, what had been a new HVAC system, rested with Noreast and I find as a fact that it breached its responsibilities to maintain the system and this caused the need for the HVAC system to be replaced as a repair cost of the tenant not a capital cost of the landlord.

[44] Returning to the narrative, on November 28, 2017, Aldgate inspected the leased premises. Photographs were taken.

[45] On November 28, 2017, Mr. Goldberger and Mr. Chen spoke by phone, and they discussed Noreast’s plans to vacate the premises at the end of its lease in February 2018. After the conversation, Mr. Goldberger sent the following letter to Mr. Chen:

Dear Ben, further to our conversation today, we inspected your premises and found it to be in unsatisfactory condition and in contravention of the Lease, as previously discussed. You have confirmed the following:

• You will be vacating the premises no later than the expiry date Feb. 28, 2018;
• You will be removing your equipment by the end of 2017 so that clean up can be done Jan/Feb/18 prior to expiry date;
• Premises will be left clean and free of any mold or other environmental concerns. Please note, that in order to do so, we will require that you demolish the office space and all other interior partitions and remove and properly dispose of all drywall, ceiling tiles, etc. All concrete walls and roof decking must be properly remediated and free of mold. All ductwork that you have installed must also be removed and any roof openings must be closed off using our approved roofing contractor.

Trusting you will fulfill your leasehold obligation accordingly, and I am requesting your confirmation of the above in writing or by return email no later than 9:30 am, tomorrow, Wed. Nov. 29th, 2017. Failing which, we will be forced to take other action as we may deem necessary. Sincerely, Steve Goldberger

[46] Mr. Chen responded by email of the same day, as follows:

Hi Steve, we will vacate before the end of Feb 2018. It is best effort to move all my equipment by Dec 31, 2017, with holiday schedule, but it will certainly be done by January 2018. The premise will be cleaned and be mold free before we move out. We can demolish the office space, however, we are not able to reconstruct any partition wall and space. Else, we will remove any mold if any in the office after our equipment are gone. When it comes time to seal roof, I will send you the roofer's info for approval. Thanks, Ben.

[47] In paras. 31-33 of his affidavit, Mr. Chen deposed that Mr. Goldenberger made an extortive threat to expose Noreast to Health Canada or to the Canadian Food Inspection Agency unless Noreast agreed to clean-up of the premises.

31. After demanding that we do the things listed in his email, including that we do all of the repairs, he told me that if Noreast did not agree, he would use the photographs he had taken in the Aldgate Unit, and send them to Health Canada or to the Canadian Food Inspection Agency ("CIFA"), and report Noreast for health code violations.

32. I understood that to be a threat, that he would press Health Canada or CIFA to conclude that the products Noreast had produced in the Aldgate Unit were contaminated and that as a result, Health Canada or to the Canadian Food Inspection Agency would either shut us down, or at least prohibit Noreast from selling the product it had produced there. That was a significant concern for me, because we had stockpiled that product for sale during the period when we expected to have no production capacity.

33. To be clear, I knew that all of the food which Noreast had prepared was in compliance with all Health Canada and CIFA regulations, and that all were pure and healthy. My concern was that Aldgate would selectively show pictures that would case Noreast in the worst possible light so as to raise concerns artificially.

[48] Mr. Goldenberger categorically denies making any threats or of mentioning Health Canada. For his part, Mr. Chen believed his company was being threatened, and this belief explains in part the growing animosity and tension between the parties as the end of the lease approached. But, in my opinion, nothing in the main action turns on this alleged threat and I need not make any finding one way or the other on this matter. No report was made to Health Canada or to the Canadian Food Inspection Agency, and the rights of the parties are governed by the terms of the Lease, and both before and after the conversations on November 28, 2017, Noreast was planning to leave the premises in good repair, and threat or no threat, Mr. Chen volunteered to make best efforts to have the equipment removed by end of the year and had promised that the equipment would certainly be removed by the end of January.

[49] Noreast had new expanded space leased for its operations. It was going to leave its premises at 1220 Markham Road and was willing to agree to move its equipment and clean up the premises in the remaining months of its tenancy at 1220 Markham Road. In November, Noreast’s attention were focused on creating a stockpile of completed food products and setting up food production lines at its new premises.

[50] In December 2017, Noreast did not pay rent. Mr. Chen said it was not prepared to pay rent unless Aldgate fixed the HVAC system in the office space of the premises. As I have already found this was a breach of Noreast’s obligations to pay rent under the lease, which were payable without abatement. It was also an unnecessary provocation given that the end of the lease was approaching.

[51] On January 15, 2018, another Aldgate vice-president, Larry Goldberger, (Mr. Goldberger’s brother) spoke to Mr. Chen. He asked Mr. Chen for the keys to the premises so that Aldgate could inspect them. Aldgate was, in particular, concerned about whether the premises were being adequately heated and about preventing water damage due to winter freezing of plumbing pipes. The heating of the premises had not been a problem while Noreast was engaged in manufacturing because the heat generated by the equipment was sufficient to heat everything except the office. But now there was no production and nothing to heat the premises.

[52] Mr. Chen agreed to provide the keys, but he eventually did not do so. In his affidavit, he stated that he was not keen to provide access because he was concerned that Aldgate would stage photographs to sent to Health Canada or the CIFA.

[53] On January 17, 2018, Mr. Goldberger inquired as to the status of the clean-up, which he had observed did not seem to be proceeding beyond the removal of the equipment. He sent the following email to Mr. Chen:

Hi Ben, you were speaking to my brother on Monday and were going to get us the key to the unit so we can inspect and make sure the heat is on. So far nothing. Also, according to our conversation last year, you were going to be doing the clean-up, demolition of the offices, etc. in January and we don't see anyone there. Please advise as to the status of this. Also, you are in arrears in the amount of $10.437.99 and further to our previous notices, we require your immediate payment today. If we do not hear back from you and receive payment and the keys today, we will be taking action. Yours truly, Steve Goldberger

[54] With no immediate response from Mr. Chen, Aldgate took matters into its own hands and undertook to repair the premises. It hired a locksmith and re-entered the premises sometime between January 18, 2018 and January 28, 2018. It did so because: (a) it was concerned about the plumbing freezing and causing water damage; (b) Noreast had apparently reneged on the parties’ arrangements about Noreast’s departure from the premises; (c) Mr. Chen was withholding December’s rent; and (d) there was arrears of rent that Aldgate calculated as $10,437.99 as of in January 2018.

[55] Noreast submits that it did not owe $10,437.99 because it had prepaid January’s (the second last month’s rent, when it gave its initial deposit. However, Noreast admits that it did owe $3,647.36 for $1,534 on unpaid rent for prior months and for a new unpaid charge of $1,680 for water, added on December 27, 2017.

[56] For the purposes of the main action, I need not determine whether Noreast was entitled to re-enter the premises, but I can and do conclude that its conduct in doing so was no act of bad faith. A landlord may re-enter and terminate a lease for failure to pay rent. There was an apparent failure to pay rent. The landlord’s concern about water damage was genuine, and it did appear that the tenant was not complying with the arrangements for its departure. However, the re-entry to the premises may have been an unlawful re-entry and that is a genuine issue for the trial judge.

[57] There are genuine issues requiring a trial as to whether the re-entry was lawful and as to whether if the re-entry was unlawful, whether Noreast suffered consequential damages.

[58] Noreast submits that the re-entry was unlawful because article 3.04 of the Lease, a re-entry requires seven days prior notice. Aldgate counters that in the circumstances of this case, given the arrangements agreed to by the parties, no notice was required, but that if notice was required, it was given in the prior exchanges of correspondence. Aldgate submits that the Notice to Vacate it gave on October 24, 2018 required Noreast to produce by January 15, 2018, a certificate from a certified environmental engineer, which Noreast had failed to provide, thereby, entitling Aldgate to take immediate action to inspect and remedy any environmental issues and to hold Noreast liable for all costs and liabilities from such remediation. Further, Aldgate submits that in any event, notice was not required, because article 3.04 of the Lease was permissive and did not retract from the landlord’s rights to re-enter without notice for failure to pay rent pursuant to s.19 of the Commercial Tenancies Act [11] or the landlord’s rights to re-enter and inspect because of the potential harm to the premises if a water pipe burst or because of environmental harm.

[59] These are all genuine issues in the counterclaim that require a trial and that cannot be decided summarily. If there was a wrongful re-entry, the quantification of Noreast’s damages, if any, is another genuine issue requiring a trial.

[60] Returning to the narrative, on January 29, 2018, Aldgate sent Mr. Chen the following email message:

Dear Ben, … we have been trying to reach you and you are not responding. You have so far moved most of your equipment but left a big mess. You have not done the following as required: demolish the offices, clean the mold from all remaining surfaces, removed the redundant ducting, remove all trenches and restore the floors to smooth condition remove all garbage and waste, paid the January rent and arrears $10,438.00. You were also going to get us a set of keys, which you did not, so we had to get a locksmith to give us access, and we also found that the heat was shut off in these extreme temperatures. Please be advised that should we not hear from you within 24 hours we will be commencing legal proceedings against you, your company, and against Mr. Zi Zhong Wu, the personal guarantor of the lease. Trusting we can settle this in a gentlemanly and honorable manner. Sincerely, Steve Goldberger

[61] On February 6, 2018, Aldgate sent Mr. Chen another email message, which began the email chain below:

[Mr. Goldberger to Mr. Chen] Dear Sir, Further to our previous correspondence. We are confirming that you have not responded at all. Please be advised that we are commencing clean up and demolition of the premises. All costs will be billed to your account and upon finalization of the work, we will be commencing action against you, Noreast Foods and the Personal Guarantor of the Lease, Steve Goldberger

[Mr. Chen to Mr. Goldberger] I suggest you should not take any action before the expiration of the lease, as we are still legally occupying the place. We will not pay for any demolition and cleanup cost due to our inability to enter the premise while under lease. Please also note that any missing equipment in the premise will be reimbursed to us at full cost. If you would be able to leave the new keys in our mailbox, our guys can continue to the cleanup process and finish before the end of the lease.

[Mr. Goldberger to Mr. Chen] Ben, Thanks for finally responding. I do not accept any of your statements …

1. You are not "legally occupying the place" and are in default of your lease for non-payment of Rents.
2. You have turned off all the hydro and heat in this extreme cold and virtually abandoned the premises and were to drop off keys to us weeks ago.
3. We needed access to make sure the heat was on and were forced to change the lock to do so.
4. You have not responded to our previous correspondence and phone calls forcing us to take action to secure the premises and mitigate our damages.
5. You have left the premises in a complete mess with possible environmental issues.
6. You promised to have your equipment out by the end of Dec/17 and use Jan. Feb. to demolish and restore the unit. We would be happy to let you do the cleanup, demolition and restoration of the floors and walls, however we will require that you first provide us with payment in the amount of $17,581.82 to cover the current arrears. Your deposit will be returned to you upon satisfaction that the premises have been left in a reasonable state. Please respond and let us know if you will be doing the honourable thing, by end of day today, so we know how to proceed.

[62] On February 12, 2018, Mr. Goldberger sent Mr. Chen the following email message:

Sir, further to our previous correspondence, since you have abandoned the premises and left them in unacceptable condition, we have commenced the clean-up and repair of the Premises. You are herewith advised that all related costs will be billed to your account plus supervision fees, interest & fees. If you do not pay our invoices and the overdue rents, then upon completion of all the work we will be having our collection team take legal action against you, Noreast Foods Ltd., and the Guarantor of the Lease. Yours truly, Steve Goldberger

[63] Recalling that by its own schedule set out in Mr. Chen’s email of November 28, 2017, Noreast had said its equipment would will certainly be removed by January 2018, I find as a fact that by January 29, 2018, Noreast had indeed removed most of its equipment from the premises. Mr. Chen admitted that what equipment that remained was not required for Noreast to begin manufacturing and that it had stockpiled inventory prior to its anticipated move.

[64] Under Article 3.01 of the Lease, Noreast was to remove its machinery and equipment, failing which Aldgate was entitled to remove it and charge Noreast. There is a genuine issue requiring a trial as to what equipment, if any, remained on the premises and what value it might have had to Noreast.

[65] There is no genuine issue requiring a trial that Noreast did not accept Aldgate’s invitation to return to the premises and that it did not undertake any repairs to the premises. Mr. Chen testified that although Noreast was invited to re-enter, it would not do so on the terms demanded by Mr. Goldenberger, including the precondition that rent arrears be paid as first demanded at $10,438.00 and then growing to $17,581.82 in the second demand. Further, in his affidavit for the summary judgment motion, Mr. Chen deposed that the matter of the clean-up was not worth fighting about at the time. He deposed:

40. I recall attending at the Aldgate Unit in mid-January, only to discover that the locks had been changed. I had received no prior warning that Aldgate was planning to or had locked us out.

41. This was obviously going to make it impossible for us to clean the Aldgate Unit or to retrieve our equipment, but by that time, we were focussed on getting our New Premises set up and ready to being ready to begin production. We had planned to incorporate the equipment at the Aldgate Unit into our production lines at the New Premises, but that was not necessary for us to begin production.

42. In any event, by this time our tenancy at the Aldgate Unit was nearing its end. I reasoned that if Aldgate wanted to prevent us from the Aldgate Unit, they could hardly complain about our failure to do so.

43. I also knew that Aldgate was holding a $20,000 deposit which we had paid to them at the outset of the Lease. I reasoned that if Aldgate was insisting that it do the cleanup, then it would simply apply the deposit to those costs. Indeed, I believed that the Lease provided for that.

44. As a result, it was not worth fighting about, so I did not.

[66] Based on Mr. Goldberger’s evidence and the photographs, I find as a fact that the premises were in a state of disrepair. There was significant mold. There was litter and garbage. The floor was damaged. The walls were damaged. Two doors were damaged. The air conditioning system had not been maintained, could not be repaired, and had to be replaced. The office walls had not been removed. There was redundant ducting.

[67] Aldgate using its own resources and some trades repaired the premises. The remediation work took four months to complete. Aldgate eventually leased the premises to a new tenant.

[68] Aldgate alleges that it lost rental revenue for March and April 2018 because the premises were unsuitable for occupancy. In this action, it claims a loss of $14,130.00 for the lost two months of rental income.

[69] By letter dated May 2, 2018, Aldgate demanded Noreast to pay rental arrears and the restoration costs. Noreast did not pay as demanded or at all.

[70] On June 14, 2018, Aldgate commenced its action against Noreast and Mr. Wu.

[71] In this action, it was admitted that Noreast’s manufacturing operations caused odors and mold. I find as a fact that the extent of mold damage was substantial. In this action, it was admitted that by the end of the term, Noreast was going to need to remove its manufacturing equipment, remove any food inventory and supplies, repair the floors and the vent holes, and do a general clean-up. Noreast admitted that it was required to maintain and repair the premises during the tenancy and to leave them in a state of repair at the conclusion of the Lease. It was admitted that most of the equipment was removed. It was admitted that Noreast did not undertake the repair work.

[72] I find as a fact that Noreast defaulted under the Lease by: (a) failing to pay all rent due; (b) failing to maintain the Premises; (c) failing to keep the Premises clean and free from environmental defects such as mold; and (d) failing to restore the Premises by the Expiry Date to its condition as of the date on which Noreast commenced its tenancy to the standard required by the Lease.

[73] To be more precise, Noreast defaulted on its obligation to repair, replace and maintain the Premises pursuant to Article 1.07 of the Lease. Noreast failed to deliver the Premises in a good state of repair pursuant to Article 1.09 of the Lease. Noreast was obliged to indemnify Aldgate for the costs of remediating environmental problems pursuant to Article 1.33 among other provisions about environmental hazards. Noreast breached its obligation to comply with applicable environmental laws and to abate the discharge and remove any contaminants at the premises.

[74] I find as a fact that at the end of the term of the Lease, Noreast owed $23,301.18 to Aldgate for rent, common area maintenance, water charges, and late fees. Against this sum, there is a credit of $20,370.90, leaving an outstanding balance of $2,930.28 for rent.

[75] Aldgate claims damages of $73,064.40 for the cost of repairing the premises as follows:

a. $22,035, including tax, for washing ceilings and walls, blowing off loose paint from the ceiling, applying stain killer where required, applying top coat to all walls and ceiling, and painting floors; b. $707.85 for installing service an Ipex line with isolation valve, excavating concrete floor around the Clay drains, and installing a cast iron body floor drain with bronze strainer; c. $5,989 for repairing concrete floors; d. $1,471.26 for repairing two overhead doors; e. $135 for copper distribution line in ceiling; f. $2,011.40 for removing 19 sprinkler heads and installing 16 replacements; g. $15,829.04 for removal and disposal of all drywall partitions, drywall ceilings, t-bar ceilings, floor tiles and carpets, and removal and disposal of all garbage and debris in unit; h. $2,613.31 for garbage removal and disposal; i. $8,742.37 for cost of materials; j. $13,529.57 Aldgate work force labour costs for electrical work, demolition work, repair work, and remediation work.

[76] Pursuant to the terms of the Lease, Aldgate claimed an 18% administration fee on the $73,064.40. The administration fee was $13,151.59 plus HST of $1,709.71 for a claim of $14,861.30.

[77] I find as a fact that Aldgate incurred damages in repairing the premises and for delay in reletting the space. The claim for repair damages and delay damages is doctrinally sound in accordance with landlord and tenant case law, [12] and I find that but for Noreast’s breaches of the Lease, Aldgate incurred at least a two-month delay in preparing the premises for re-letting.

[78] Subject to the following deductions, I find as a fact that Aldgate has proven its damages claim for the repairs to the premises and for its administrative charge. The net claim is $52,377.84. The deductions, which total $20,686.56, are:

a. Deduct $1,795.96 and 233.47 (H.S.T.); i.e., deduct $2,029.43 for double charging for an administrative fee on Aldgate work force labour costs. b. Deduct $160.66 for invoice rebates. c. Deduct $15,000 for betterment or landlord’s work or for normal wear and tear that was not the responsibility of Noreast. d. Deduct $3,496.47 for recalculation of administrative charge and H.S.T.

[79] I, therefore, quantify Aldgate’s damages claim as $79,196.52 as follows:

a. $2,930.28, balance of rental account; b. $52,377.84 for repair costs and administrative charge; c. $14,130.00 for the lost two months of rental income; d. $9758.40 for pre-judgment interest on $69,438.12 (items a, b, and c) at the rate of 18% per annum ($34.24 per diem) from June 14, 2018 to the release of these Reasons for Decision, March 20, 2019, (285 days).

[80] I find as a fact that Mr. Wu is jointly and severally liable to pay Aldgate its damages claim and that Mr. Chen is liable to indemnify Mr. Wu.

E. Conclusion

[81] I grant Aldgate’s motion to amend its Statement of Claim, which was unopposed.

[82] For the above reasons, I grant Aldgate’s summary judgment motion in part and I dismiss it in part. I grant Aldgate judgment for $79,196.52 in the main action against Noreast and Mr. Wu, and I order that the counterclaim proceed to trial as aforesaid. I grant Mr. Wu judgment in the third-party proceedings, which was unopposed. I decline to stay execution of the judgment in the main action or in the crossclaim or third party claim of Mr. Wu.

[83] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the submissions of Aldgate within twenty days of the release of these Reasons for Decision followed by Noreast’s and Mr. Wu’s submissions within a further twenty days.

Perell, J. Released: March 25, 2019

Footnotes

[1] Hryniak v. Mauldin, 2014 SCC 7. [2] Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372 at para. 11; Dawson v. Rexcraft Storage & Warehouse Inc., 1998 ONCA 4831, [1998] O.J. No. 3240 (C.A.); Bluestone v. Enroute Restaurants Inc. (1994), 1994 ONCA 814, 18 O.R. (3d) 481 (C.A.). [3] Toronto-Dominion Bank v. 466888 Ontario Ltd., 2010 ONSC 3798. [4] Sanzone v. Schecter, 2016 ONCA 566 at para. 15; Caithesan v. Amjad, 2016 ONSC 5720 at para. 24. [5] Carevest Capital Inc. v. North Tech Electronics Ltd., 2010 ONSC 1290 at para. 16 (Div. Ct.). [6] Hryniak v. Mauldin, 2014 SCC 7. [7] Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8. [8] Campana v. The City of Mississauga, 2016 ONSC 3421; Ghaeinizadeh (Litigation guardian of) v. Garfinkle Biderman LLP, 2014 ONSC 4994, leave to appeal to Div. Ct. refused, 2015 ONSC 1953 (Div. Ct.); Lavergne v. Dominion Citrus Ltd., 2014 ONSC 1836 at para. 38; George Weston Ltd. v. Domtar Inc., 2012 ONSC 5001. [9] Hryniak v. Mauldin, 2014 SCC 7 at paras. 49 and 50. [10] Hryniak v. Mauldin, 2014 SCC 7 at paras. 51-55; Wise v. Abbott Laboratories, Ltd., 2016 ONSC 7275 at paras. 320-336; Drywall Acoustic Lathing and Insulation Local 675 Pension Fund (Trustees of) v. SNC-Lavalin Group Inc., 2016 ONSC 5784 at paras. 122-131. [11] Commercial Tenancies Act, R.S.O. 1990, c. L.7. [12] Stellarbridge Management Inc. v. Magna International (Canada) Inc., 2004 ONCA 9852, 71 O.R. (3d) 263 (C.A.), var’g [2002] O.J. No. 1008 (S.C.J.); Statti Investments Limited v. Custom Granite & Marble Ltd., 2011 ONSC 3274.

SCHEDULE “A”

THIS INDENTURE made March 4, 2013 (in pursuance of The Short Forms of Leases Act).

ARTICLE I

TENANT'S COVENANTS

The Tenant covenants with the Landlord as follows:

1.01 RENT: During the Term hereof to pay to the Landlord the Rent hereby reserved arid all Additional Rent in the manner and at the times herein provided, without deduction, abatement-or set off, all Rent in arrears to bear interest at the rate of eighteen percent (18%) per annum.

1.07(a) MAINTENANCE: To repair, replace and maintain the Demised Premises or any part thereof, excepting only reasonable wear and tear not inconsistent with the maintenance of the building on the Demised Premises suitable as a first class industrial building and hazards covered by the usual extended form of fire insurance policy and, without limiting the generality of the foregoing, the Tenant shall keep the Demised Premises, in such condition as a careful and prudent owner would do, including the replacement of electrical light bulbs, tubes and starters and ballasts. Provided further the Tenant shall maintain all equipment and systems of any nature supplying services to the Demised Premises at such time or times when the Landlord shall advise and shall perform such a programme of maintenance as the Landlord may require in its sole discretion. Provided further that the Tenant shall perform such maintenance programmes not later than two (2) months after notice has been given by the Landlord to the Tenant, failing which, the Landlord at its sole option and in its sole discretion may perform the required maintenance programme at the cost of the Tenant. In such event, the cost shall be paid forthwith upon demand by the Tenant to the Landlord as Additional Rental. Provided further that upon the expiration or earlier termination of this Lease, the Landlord may inspect the said equipment and systems and if the equipment and systems require maintenance then the Landlord shall be entitled to perform such maintenance at the cost of the Tenant and upon demand, the Tenant shall pay the entire cost to the Landlord forthwith.

Provided further that if any repairs, replacements or maintenance which are required to be performed by the Tenant under the terms of this Lease and are not performed when required, then the Landlord in its sole discretion shall be entitled to perform such repairs, replacements or maintenance entirely at the cost of the Tenant and the cost of same shall be paid forthwith by the Tenant to the Landlord upon demand. The cost of same shall be considered to be Additional Rental under this Lease.

1.07(b) HEATING AND IF APPLICABLE AIR·CONDITIONING UNITS: The Landlord warrants that any heating and air-conditioning units located in the Demised·Premises (the "Units") will be in good working order at the commencement of the Term. The Tenant covenants and agrees that 30 days prior to the expiration of the Term of the Lease it will provide the Landlord with a certificate from a heating and air conditioning·contractor acceptable to the Landlord that the Units are in good working order, reasonable wear and tear excepted. In the event such certificate is not provided, the Tenant acknowledges that the Landlord may use those sums held by it as a security deposit towards payment for any repairs necessary to put the Units in good working order. Throughout the entire Term of the Lease the Tenant shall keep in force a maintenance contract for the Unit with a heating and air-conditioning contractor, acceptable to the Landlord and the Tenant shall produce a copy of such contract to the Landlord within 30 days of the earlier of the Possession Date or the Commencement Date.

1.08 INSPECTION BY LANDLORD: It shall be lawful for the Landlord and its agents, at all reasonable times during the said Term and during normal business hours, to enter the Demised Premises to inspect the condition thereof and to comply with all reasonable requirements of the Landlord with respect to the care, maintenance and repair thereof, excepting only reasonable wear and tear not inconsistent with the maintenance of the building on the Demised Premises suitable as a first-class industrial building and hazards covered by the usual extended form of fire insurance policy. Where an Inspection reveals repairs are necessary, the Landlord shall give to the Tenant notice in writing and thereupon the Tenant may, within thirty (30) days from the date of delivery of the notice, make the necessary repairs in a good and workmanlike manner: ·

1.09 CONDITION OF PREMISES AT EXPIRATION: Subject to the provisions of this Lease, upon expiration or earlier termination of the Term hereby granted, the Tenant will peaceably surrender, quit and deliver up the Demised Premises to the Landlord in a good state of repair and maintenance, excepting only reasonable wear and tear not inconsistent with the maintenance of the building on the Demised Premises suitable as a first-class industrial building, and hazards covered by the usual extended form of fire insurance policy. If so required by the Landlord, the Tenant shall at its own expense remove any or all alterations, improvements or fixtures made or placed by the Tenant, or by the Landlord on behalf of the Tenant, upon the Leased Premises during the Term. In removing such alterations, improvements and fixtures, the Tenant shall restore the Leased Premises to similar condition as they were before such alterations, improvements and other fixtures were made or placed or to "Base Building” standard as defined by the Architect Save as to the foregoing, all alterations, improvements and other fixtures made or placed at any time during the Term upon or in any manner affixed to the Leased Premises shall, upon termination of this Lease, become the property of the Landlord without compensation therefor to the Tenant. The Tenant shall be fully responsible for any damage to the Demised Premises not excepted under this provision. The Landlord at its option may rectify such damage at the cost of the Tenant and the Tenant shall pay to the Landlord forthwith upon demand such cost, which cost shall also include an eighteen percent (18%) administration fee, with the minimum charge being Two Hundred Dollars ($200.00).

1.13 NUISANCES: The Tenant shall not do or suffer any waste, damage, disfiguration or injury to the Demised Premises or the Building or the fixtures and equipment thereof and shall not use or permit to be used any part of the Demised Premises for any dangerous, noxious or offensive trade or business and shall not cause, maintain, permit or omit upon or about the Demised Premises any act which the Landlord, in its sole but reasonable opinion, deems to be a nuisance, annoyance, grievance, damage or disturbance to the Landlord, other Tenants of the Landlord, the occupiers or owners of adjacent lands or the public at large, as the case may be, and the Tenant shall take every reasonable precaution to protect the Demised Premises and the Building from danger of fire, water damage or the elements.

1.14 USE OF PREMISES: The Demised Premises shall be used only for the purposes of soya mild factory and no other assignee or sub-lessee shall use the Demised Premises for any other reason whatsoever, without the consent of the Landlord, however, such consent may be unreasonably withheld.

1.16 HEATING: To assume the sole responsibility for the condition, operational maintenance and management of the Demised Premises and to heat the same with the heating equipment supplied by the Landlord at its own expense. Any manufacturers' warranties with respect thereto are to be assigned to the Tenant.

1.33 REPRESENTATIONS AND WARRANTIES ON ENVIRONMENTAL MATTERS: The Tenant and the Guarantor(s) represent and warrant that:

(i) the Premises and the activities and operations of the Tenant at the Premises, and those of any employee lessee, licensee or other occupant, comply in all material respects with Environmental Law and are not subject to any existing judicial governmental, regulatory or further investigations, proceedings, inquiries or notices, and neither the Tenant nor any lessee, employee, owner, occupant or licensee of the Premises or any part thereof, or any person having the charge, management or control thereof, has filed any notice or report pursuant to any Environmental Law in connection with the Premises;

(ii) neither the Tenant nor the Guarantor(s) have any knowledge of any Environmental Activity in respect of the Release of any Contaminant at, upon, under, over, within or with respect to the Premises to ·or from which the Release of a Contaminant could reasonably be anticipated;

3.04 RE-ENTRY BY LANDLORD: In the event that the Tenant shall be in default of any of its covenants hereunder, in addition to any other right which the Landlord may have hereunder, the Landlord may give to the Tenant notice in writing stating that said default with reasonably sufficient particulars, and requiring that the said default be remedied and that if such default is not remedied by the Tenant within seven (7) days after the receipt of such notice or such longer period as may be reasonably necessary in view of the nature of the default, the Landlord may at its option either enter into and upon the Demised Premises or any part thereof in the name of the whole and have again, re-possess, and enjoy the same as of its former estate and the said Lease shall thereupon terminate, or itself take steps and to do or cause to be done such things as may be necessary to remedy and correct such defaults. Provided further that in the event that the Landlord shall be entitled to, and shall elect to make a re-entry as hereinbefore provided for, any re-entry or other action so taken shall not be deemed to relieve the Tenant of its obligation to pay Rent and other monies Payable as Rent hereunder and such Rent and other monies payable as Rent in accordance with the provisions hereof shall continue to accrue and be payable until such time as the Landlord is able to re-let the Premises, or otherwise deal with the same in such manner that it did not sustain any loss should the Tenant thereafter fall to pay the Rent and other monies payable as Rent or otherwise under this Lease.

9.02 NET LEASE: It is the intention of the parties that the Rent herein provided to be paid shall be net to the Landlord and clear of all taxes (except Landlords income taxes), costs and charges arising from or relating to the Premises and that the Tenant shall pay all charges, impositions, and expenses of every nature and kind relating to the Premises, including legal fees incurred by the Landlord to deal with any default of the Tenant, and the Tenant hereby covenants with the Landlord accordingly.

9.26 GUARANTEE BY INDIVIDUAL(S): To induce the Landlord to execute and deliver the annexed Lease (the "Lease") and in consideration of the execution and delivery thereof by the Landlord, the undersigned (the "Guarantor(s)"), jointly and severally, as principal and not as surety hereby covenants with and guarantees to the Landlord that:

1. The Tenant named in the Lease shall duly perform and observe each and every covenant, obligation and agreement in the Lease on the part of the Tenant to be performed and observed, including the payment of Rent and all other payments agreed to be paid or payable under the Lease at the times and in the manner therein specified, and that if for any reason including the insolvency or bankruptcy of the Tenant, the Tenant shall fail to pay the Rent or other sums provided to be paid by the Tenant under the Lease as and when they are provided to be due and payable or makes default in the performance or observance of any of the covenants, obligations or agreements which under the terms of the Lease are to be performed or observed by the Tenant, the Guarantor(s) shall forthwith pay to the Landlord on demand such Rent and other sums in respect of which such default shall have occurred and all damages that may arise inconsequence of the non-observance or non-performance of any of the said covenants, obligations or agreements.
2. The Guarantor(s) is/are jointly and severally bound with the Tenant for the fulfilment of all covenants, obligations and agreements of the Tenant under the Lease. In the enforcement of its rights hereunder the Landlord may proceed against the Guarantor(s) as if the Guarantor(s) were named as Tenant under the Lease.
3. The Landlord shall not be required to proceed against the Tenant or to proceed against or to exhaust any security held from the Tenant or to pursue any other remedy whatsoever which may be available to the Landlord before proceeding against the Guarantor(s), and the Guarantor(s) hereby waive) any right to require the Landlord to do so.
4. No neglect or forbearance of the Landlord in endeavouring to obtain payment of the Rent reserved in the Lease or other payments required to be made under the provisions of the Lease as and when they become due, no delay of the Landlord in taking any steps to enforce performance or observance of the several covenants, obligations or agreements contained in the Lease to be performed, or observed by the Tenant, no extension of time which may be given by the Landlord from time to time to the Tenant, and no other act or failure to act of or by the Landlord shall release, discharge or in any way reduce the obligations of the Guarantor(s) under the covenants herein contained.