Court File and Parties

Court File No.: CV-19-1622 Date: 2019-05-31 Superior Court of Justice – Ontario

Re: Can Dec Kitchen Inc. v. 2009377 Ontario Inc.

Before: Daley RSJ.

Counsel: E. Mazinani, for Plaintiff E. Bisceglia and B. Frino, for Defendant

Heard: May 17, 2019

Reasons for Decision on Injunction Motion

[1] The plaintiff commercial tenant moves for a mandatory interlocutory injunction compelling the defendant landlord to allow it to regain possession of the commercial business premises located at 2410 Dunwin Road, Mississauga.

[2] Further, the plaintiff moves for a mandatory interlocutory injunction requiring the defendant landlord to return to the plaintiff certain equipment that was allegedly seized from the premises during the plaintiff’s eviction.

[3] A short endorsement was released on May 22, 2019, dismissing the plaintiff’s application, with detailed reasons to follow. These are my reasons.

Evidentiary Record

[4] The plaintiff and the defendant entered into a lease on January 16, 2008. The lease was for a two-year term.

[5] Section 18 of the lease provides for overholding by the plaintiff tenant as follows:

Monthly Tenancy

If the Tenant shall continue to occupy the Premises after the expiration of the Term with the consent of the Landlord and without any further written agreement, the Tenant shall be a monthly tenant at one hundred and twenty-five percent (125 %) of the monthly Rent provided for herein during the last year of the Term and such monthly tenancy shall otherwise be on the same terms and conditions and subject to the charges and amounts payable hereunder.

[6] It was common ground on the argument of this motion that in accordance with its terms, upon the passage of the second year under the lease, the lease was then a month-to-month lease that could be terminated on 30 days’ notice.

[7] The lease provided that in addition to rent the tenant was obligated to pay all taxes, maintenance and insurance.

[8] As is common in commercial leases, the lease provided in Section 17 (c) a right to the landlord to re-enter and take possession of the premises in the event the tenant failed to comply with all work necessitated by statutes, orders and requirements resulting from the tenant’s use of the premises.

[9] Further, under Section 15 of the lease, the tenant was obligated to place insurance on the leased business premises. The tenant covenanted that it would neither do, nor permit, any act regarding the premises which might result in an increase of insurance premiums or an actual or threatened reduction or cancellation of any insurance coverage.

[10] The lease further provided that the tenant’s insurance must name the landlord as an additional named insured in the policy and declarations.

[11] Subsections 17 (a) and (b) address the landlord’s rights in the event of the tenant’s non-payment of rent or non-performance of covenants as follows:

a) Provisions for re-entry by the Landlord on nonpayment of rent or non-performance of covenants subject to the terms hereof.

b) If the tenant shall fail to make any payment or payments or any part thereof of Rent or fail to pay any sum or sums which are to be paid under this Lease to the Landlord or otherwise and such default shall continue for five (5) days after such payment was due, whether or not notice of such default has been given to the Tenant, or if the Tenant shall fail to perform any other covenants, conditions or agreements contained herein and shall allow such default to continue for fifteen (15) days after written notice thereof, then the term hereby granted may, at the option of the Landlord expressed in writing, be terminated subject to any other rights or remedies available to the Landlord and the term and estate hereby vested in the Tenant and any and all other rights of the Tenant hereunder shall thereupon immediately cease and expire as fully and with like effect as if the entire Term herein provided had elapsed and Rent and all other payments for which the Tenant is liable under this Lease shall be apportioned and paid in full to the date of such termination together with reasonable expenses of the Landlord, including, but not restricted to, reasonable legal costs, reasonable expenses of keeping the Premises in good order and of preparing the Premises for reletting, and the Tenant shall immediately deliver up possession of the Premises to the Landlord.

[12] The parties agreed that the tenant was obligated to pay rent in the sum of $4,842 per month through a portion of 2017 and into the latter part of 2018. The landlord gave evidence that the rent was increased to $5,700 per month commencing November 1, 2018. The plaintiff disputes that the rent was increased to that amount and states that it negotiated with the landlord that it would pay $5,000 per month until May 1, 2019. However, in an email from the principal of the landlord to the principal of the tenant dated December 19, 2018, it was stated: “As per your request, the total payment for the rent is $5,700 per month”. At no time did the tenant email or communicate with the landlord to express disagreement with the landlord’s statement as to the new monthly rent amount.

[13] Regardless of the exact amount of the rent paid at any time, both parties agree that the monthly rental amount included HST, taxes, maintenance and insurance.

[14] The lease provided that the monthly rent amount including HST, taxes, maintenance and insurance were to be paid on the first day of each month.

[15] The defendant asserts that the plaintiff tenant has regularly been in arrears in payment of its monthly rent obligation. There is conflicting evidence as to exactly how much rent was owing when the landlord terminated the tenancy on March 19, 2019, for nonpayment of rent.

[16] In cross-examination on his affidavit evidence the plaintiff’s representative acknowledged that the rent owing for the month of March 2019 remained outstanding as of termination. The landlord’s representative asserts that the total rent in the sum of $18,500 was due and owing as of the date of termination.

[17] On January 26, 2019, of the landlord received notice from its insurance broker advising that in order for insurance coverage to continue on the premises, the tenant must comply with certain insurance requirements and this notice was in turn provided to the tenant.

[18] Although the tenant’s representative denied in cross-examination that it had received notice of the insurance requirements, in his affidavit evidence he acknowledged having received an email dated February 4, 2019, from the landlord requiring the insurance requirements to be met by February 20, 2019.

[19] The tenant has acknowledged that as of March 19, 2019, when the landlord effected the termination of the tenancy, the tenant had not yet complied with all of the insurance requirements as set out in the notice delivered to it.

[20] In accordance with r. 40.03 of the Rules of Civil Procedure, the tenant filed an undertaking with respect to damages, as a term of seeking injunctive relief. The deponent who filed affidavits on behalf of the plaintiff, in cross-examination, acknowledged that the plaintiff corporation has no assets.

Analysis

[21] The plaintiff seeks interlocutory mandatory injunctive relief on this motion. The plaintiff must demonstrate: (I) that there is a serious question to be tried; (II) that the plaintiff will suffer irreparable harm if the injunction is not granted; and (III) that the balance of convenience favours granting the injunction: RJR -- MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, at p. 348. Further, there must be a meaningful undertaking as to damages.

[22] In my view the evidence is clear that there is a hollow undertaking as to damages and as such compliance with r. 40.03 has not been satisfied. Notably, no personal guarantee or security was offered by an officer or director of the corporation.

[23] In view of the more intrusive nature of an interlocutory mandatory injunction, a moving party “must show a strong and clear case demonstrating a high degree of assurance that an injunction would be rightly granted”: Benjamin v. Toronto-Dominion Bank (2006), 80 O.R. (3d) 424 at para. 27.

[24] Plaintiff’s counsel submitted that the eviction carried out on March 19, 2019, was unlawful because no notice was given to the plaintiff. It was further urged that the parties and the tenancy were governed by s. 28 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7, which reads as follows:

A week’s notice to quit and a month’s notice to quit, respectively, ending with the week or the month, is sufficient notice to determine, respectively, a weekly or monthly tenancy.

[25] The defendant submitted that this section did not govern the tenancy in this case. It was further submitted that s. 18 results in the lease becoming a monthly tenancy still governed by the “terms and conditions and subject to the charges in amounts payable thereunder” in reference to the lease.

[26] The legal effect of an overholding tenant remaining in possession after the stated term of the lease has expired was thoroughly considered by the Court of Appeal for Ontario in its decision in AIM Health Group Inc. v. 40 Finchgate Limited Partnership, 2012 ONCA 795. Unfortunately, counsel did not bring this decision to the attention of the court.

[27] In AIM, Feldman and Epstein JJ.A. (Gillese J.A. dissenting) reviewed in detail the legal consequences where a tenant remains in possession following the expiry of the term of the lease. The court stated at para. 92:

At common law, if a tenant remains in possession following the expiry of the term of the lease, there are four possible legal relationships that can then be created between the tenant and the landlord: (1) a tenancy at sufferance; (2) a tenancy at will; (3) a deemed new periodic tenancy, referred to as a holdover tenancy; and (4) a trespass.

[28] The court went on to discuss the third category of legal relationships, namely a deemed new periodic tenancy, referred to as a holdover tenancy and stated as follows at paras. 95-96:

Where a tenant remains in possession following the termination of a lease, or holds over, and where the landlord accepts rent from the tenant or otherwise consents, a new periodic tenancy arises at common law by implication on the same terms as the expired lease, subject to any evidence that the parties reached a different arrangement or understanding. If the original lease term was less than one year, the new tenancy is deemed to be month to month, whereas if the original lease term was for more than one year, the new tenancy is deemed to be year to year. The payment and acceptance of rent is considered evidence of the parties' intent to enter into a new tenancy arrangement. Without agreeing on other terms, it would be on the same terms as the old lease.

In order to avoid the deemed creation of a yearly tenancy when the tenant holds over and the landlord accepts rent, the overholding clause is frequently inserted into commercial leases, providing that the tenancy that is created is a month-to-month tenancy. Such clauses often provide for higher rent than was paid during the original term of the lease.

[Citations omitted. Emphasis added.]

[29] Given the language of Section 18 of the lease, I have concluded that this provision was clearly intended as a holdover term to avoid the continuing tenancy being deemed to be yearly.

[30] Thus, in my view, all of the other terms and conditions of the written lease continued after the end of the initial term of the lease, including the terms with respect to termination of the tenancy for non-payment of rent or non-compliance with the terms and conditions of the lease. As a result, the lease and the termination provisions continued such that Section 28 of the Commercial Tenancies Act has no application to the landlord and tenant relationship between these parties.

[31] Turning to the first branch of the test for granting injunctive relief (a serious issue to be tried), I have concluded that no such serious issue is present in this case.

[32] The parties agreed that the lease is a month-to-month lease. Further, although the calculation of the rent owing to the landlord is somewhat unclear, the plaintiff’s representative acknowledged that prior to the termination of the tenancy on March 19, 2019, the rent for March remained unpaid for more than five days from March 1, 2019 and I so find on the record that the defendant lawfully terminated the tenancy and took possession of the rented premises effective March 19, 2019, in accordance with subsection 17(b) of the lease. Further, the plaintiff acknowledges it had not made the rented premises fully compliant with the insurance requirements prior to the February 20, 2019, date nor by the date when the tenancy was terminated for nonpayment of rent.

[33] The plaintiff operates a custom carpentry business within the leased premises and it has placed machinery and equipment in the premises in order to undertake that business operation. The plaintiff asserts that as a result of it being excluded from the premises since March 19, 2019, it is losing business and contracts.

[34] Although it has been held that the threshold for determining whether or not there is a serious issue to be tried is low, and recognizing that this branch of the test should not involve a detailed analysis of the issue at stake, given my conclusions reached above I have further concluded that the plaintiff has failed to demonstrate “a strong and clear case with a high degree of assurance that an injunction would be rightly granted”: Benjamin, at para. 27. It has further been held that the party seeking the injunction must demonstrate a “high probability” or “greater likelihood of success” at trial: Jazz Air LP v. Toronto Port Authority, at para. 1; Parker v. Canadian Tire Corp., at para. 3.

[35] Although the evidence with respect to the financial magnitude of the plaintiff’s business is somewhat unclear from the affidavit evidence submitted, as is the operational magnitude in terms of the number of employees actively involved in its business, I have concluded that given the rental space as described in the lease, this is a modest business enterprise.

[36] Plaintiff’s counsel relies upon the decision of Belobaba J. in Quality Pallets v. Canadian Pacific Railway Co. with respect to the second branch of the test, namely whether irreparable harm will be caused. In that case the court carefully reviewed irreparable harm within the context of a lease and a tenant eviction.

[37] Quality Pallets notes at paras. 22-23 that harms or injuries that are asserted as flowing from a wrongful eviction, standing alone, may not constitute evidence of irreparable harm and may in fact be quantifiable and compensable damages. If, however, the eviction ultimately results in the tenant being put out of business, irreparable harm may follow if the injunction is not granted.

[38] The evidence offered by the plaintiff’s deponent is that the plaintiff corporation had seven ongoing contracts with a value of $60,000. The deponent further states that one customer’s $5,900 credit card transaction was canceled due to the plaintiff’s inability to deliver cabinetry. Similarly, another client who paid $14,000 contacted the plaintiff on April 23, 2019, demanding delivery of the cabinetry within 10 days otherwise action would be taken against the plaintiff.

[39] While there is evidence of business interruption and inconvenience, I cannot conclude that the nature of the harm related to the eviction constitutes irreparable harm, recognizing that the magnitude of the harm need not necessarily be large having regard to the nature and size of the business activities being interrupted.

[40] It is also notable that the plaintiff’s deponent acknowledged that the plaintiff corporation has no assets.

[41] With respect to the third branch of the test, namely the balance of convenience, I have concluded that on weighing the available evidence, this branch favours the defendant landlord.

[42] The defendant landlord owns the building complex occupied by the plaintiff, which is made up of nine business units. The evidence is clear that the plaintiff tenant failed to comply with its obligations under the lease to have in place business and property insurance coverage naming the landlord jointly as an insured under that policy. Further, although the plaintiff placed insurance in April 2019 on its business premises, it failed to have the defendant named as a co-insured as required by the lease.

[43] As to the undertaking with respect to damages, as I have concluded that this undertaking is entirely shallow and unsupported by any assets, this factor also weighs in favour of the defendant landlord: Equitas Investment Corp. v. Goodman, [1987] 57 O.R. (2d) 795 (Supreme Ct.), at para. 14.

Conclusion

[44] For the reasons expressed, I have concluded that plaintiff’s motion for a mandatory injunction requiring the defendant to allow the plaintiff back into the rented premises must be dismissed.

[45] Counsel for the defendant stated in submissions that the defendant would allow the plaintiff access to the rented premises in order to remove its machinery, equipment and stock and materials. Hopefully those arrangements may be put in place without the court’s supervision.

[46] Both counsel shall file submissions with respect to costs of no longer than three pages along with costs outlines within 15 days if they cannot come to an agreement on costs.

Released: May 31, 2019 Daley RSJ.