COURT FILE NO.: CV-18608868
DATE: 20190801
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1927838 Ontario Inc. (COB Astro Cold Storage)
Plaintiff/Applicant
AND:
Sok Chea Taing, Jemmy Taing, TK Kong, Lena Liu, GSI Slough Street Properties Inc. and GI-Ocean Internation Ltee (AKA GI Ocean Trading Ltd.)
Defendant/Respondent
BEFORE: Mr. Justice Peter Bawden
COUNSEL: Mr. George Pakozdi, for the Plaintiff/Applicant
Mr. Andrew Faith and Ms. Madeleine Brown for the Defendant/Respondent
HEARD: May 2and 31, 2019
RULING
justice peter Bawden
[1] A commercial tenancy has gone awry. The landlord, GSI, served notice on its tenant, Astro, that it had breached the terms of its lease. Astro failed to remedy the breach within a reasonable time and GSI took possession of the property. Astro denied that it had breached the lease and broke into the premises. GSI provided Astro with further notice and another chance to remedy the breach. Astro again failed to take the steps that GSI deemed necessary and GSI locked out Astro for a second time. Astro again broke into the unit. GSI called the police and Astro vacated the unit. Astro then brought an ex parte application for relief from forfeiture and an injunction to prevent GSI from taking possession of the unit. Astro was granted an interim injunction on January 9th, 2019. This court must decide if the injunction should become permanent and, if not, whether Astro should nevertheless be granted relief from forfeiture.
[2] The relationship between the parties is set out in my January 30th, 2019 endorsement which is Appendix A to this ruling. The object of that endorsement was to assist the parties in resolving their dispute. The attempt failed, and the parties returned to court on May 2nd to litigate the motions. Both parties filed voluminous materials in support of their positions.
[3] I have reviewed all of those materials and compiled my own chronology of events which is Appendix B to this ruling.
Credibility Findings
[4] Astro primarily relies on two affidavits which were sworn by Ms. Grace Yang, the Executive Vice-President of Astro Cold Storage. Ms. Yang was cross-examined on both affidavits and the transcripts of those cross-examinations have been entered into evidence. Ms. Yang conducted most of the communications with GSI concerning the alleged breach of the lease.
[5] Although affidavits and transcript provide a limited means of assessing the credibility of a witness, I have reluctantly concluded that Ms. Yang is neither a credible nor a reliable witness.
[6] Ms. Yang claims in paragraph 7 of her January 17th, 2019 affidavit that the first time that she ever learned of mould forming on the walls of TRG was in July, 2018. She stated that if she had known of the problem any earlier, she would have worked diligently to solve it. Her evidence in this regard is at odds with several documents which were written in 2016 and 2017.
[7] Mr. Kuen Kong, the property manager for GSI, first received complaints from TRG about the mould in August 2016. In an email sent on August 26th, 2016, TRG commented that Mr. Kong had been to their unit to inspect the mould. On August 31st, Jemmy Taing, (an employee of GSI), wrote to TRG to advise them that Mr. Kong had spoken to the tenant next door, (Astro), and told them to repair the damage. Although there is no correspondence between GSI and Astro to confirm that assertion, one can readily infer that Mr. Kong did speak to Ms. Yang. In paragraphs 7 and 8 of his undated affidavit, Mr. Kong states that he did advise Ms. Yang to fix the problem in the summer of 2016 and 2017.
[8] The mould returned in the summer of 2017. TRG wrote to GSI on August 4th, 2017:
“This is ongoing issues (sic) and someone come in few weeks ago and did the clean to wall and carpet. This was a 2nd time cleaning done.
The mold is building up again and we need a permanent resolution to this before it became a health hazard and getting the health dept. involved.”
[Emphasis Added]
[9] Astro was the only party that ever sent cleaners to TRG’s unit. The fact that cleaners were sent there on two occasions prior to August 4th, 2017 is very clear evidence that Astro was aware of the problem prior to July, 2018.
[10] Mr. Kong wrote two letters to Astro and Ms. Yang which were dated July 20th, 2017 and August 9th, 2017. In those letters, he warned Ms. Yang that GSI considered the failure to repair the freezer to be a default in the lease which could lead to termination if it was not repaired immediately. In his first letter, Mr. Kong provided a five-day notice period to complete the repair. In the second letter, he extended the deadline to August 31st, 2017. He also demanded in the second letter that Astro replace a carpet and repaint two rooms in TRG’s unit. There is no evidence that Astro responded to either letter.
[11] Ms. Yang maintains that she never received Mr. Kong’s letters. I do not believe her. It is simply incredible that Mr. Kong would have written two strongly worded letters which were plainly intended to have significant legal effect and then failed to deliver either of them. I find that he did deliver the letters and that the letters moved Astro to send cleaners to TRG’s unit.
[12] Ms. Yang claims in paragraph 9 of her January 17th, 2019 affidavit that she never agreed to proceed with the recommendations of the October 12th, 2018 OXM report to move a wall within Astro’s unit. She accuses Mr. Kong of attempt to mislead the court by claiming that she did.
[13] Ms. Yang’s affidavit evidence is flatly contracted by her November 1st, 2018 letter to GSI’s counsel, Mr. Garth Low. She advised Mr. Low in that letter that Astro had retained OXM to prepare a report and then said:
“In order to resolve the matter, we contacted the Engineer and asked him to recommend contractors to perform the work according to his Report. In order to complete the required work, it may take more time. Therefore, we request that in the event the work cannot be completed by 16th November 2018, please allow for extra two weeks extension. Afterward, the Engineer will provide another inspection and a Report to confirm the work has been completed in accordance with the Report’s specifications.”
[14] Astro also relies on two affidavits sworn by Mr. R.C. Young, an employee of Astro. I have reservations about Mr. Young’s credibility as well. He states at paragraph 23 of his January 15th, 2019 affidavit that after Astro was locked out of the premises, GSI was only permitted entry to the unit from 10pm until 2pm during week days and that this limited access was crippling to Astro’s business. Ms. Yang conceded in cross-examination that Mr. Kong permitted her to stay in the unit past 2 pm and would unlock the unit whenever she required access. Ms. Yang never requested access outside of ordinary business hours.
[15] Mr. Kong provided two affidavits on behalf of GSI. His evidence in those affidavits and in his subsequent cross-examination was consistently supported by contemporaneous correspondence or electronic messaging. His account of his dealings with Astro and TRG was easily reconciled with the chronology of events. Where there is a conflict in the evidence between Ms. Yang, Mr. Young and Mr. Kong, I prefer the evidence of Mr. Kong.
Findings of Fact
[16] Based on my review of all the materials and my conclusions regarding the credibility of the affiants, I make the following factual findings:
a. Astro was verbally advised in August 2016 that its freezer was causing mould to form on the walls of TRG.
b. GSI advised Astro twice in writing during the summer of 2017 that its freezer was causing mould to form on TRG’s walls. Both written notices warned Astro that GSI viewed this to be a breach of the lease which was capable of leading to termination.
c. GSI provided Astro with numerous opportunities to remedy the mould problem. GSI provided reasonable timelines for the completion of the work and was generous in providing extensions when Astro requested them.
d. GSI was faced with insistent demands from TRG to resolve the mould issues. Those demands were based on legitimate concerns that the mould constituted a health hazard to occupants of TRG’s unit. GSI would have been negligent in its duties as a landlord if it had not attempted to enforce the provisions of the lease to protect the occupants of TRG.
Motion for Injunction
(a) Is there a serious issue to be tried?
[17] The threshold to establish that there is a serious issue to be tried is a low one. If the court is satisfied that the underlying action is neither vexatious nor frivolous, the serious issue test is met. It is not necessary or advisable to undertake a prolonged examination of the merits of the plaintiff’s claim since this threshold would be met even if the court were to find that the claim is unlikely to succeed at trial.
[18] Astro asserts that the following arguments demonstrates that there is a serious issue to be tried:
Astro is not in default of the lease.
i. Causing mold to form on the walls of TRG is a mere annoyance, not an actionable nuisance. It did not substantially interfere with GSI’s enjoyment of the property or give rise to any monetary damages. Such annoyances must be tolerated given the industrial nature of the property.
ii. GSI has not proven that there has been any physical damage to TRG’s unit or adverse health effects on TRG’s employees.
iii. Astro did install ventilation fans in 2018 which may have resolved the issue.
iv. The lease provides that Astro is entitled to a reasonable notice period to remedy any alleged default if it acts diligently, continuously and in good faith to repair the fault. Astro has acted diligently and therefore GSI’s has no right to terminate.
(i) Nuisance
[19] Article 9.7 of Astro’s lease agreement with GSI defines “nuisance” as follows:
…anything on or about the Premises… which results in undue noise, odour or vibration or which Landlord may reasonably deem a nuisance or annoyance… to any other tenants
[20] It is very clear that TRG viewed the mould as a nuisance. TRG sent emails to GSI in August 2016 identifying the mould as a health hazard and requesting immediate action. Mr. Kong quickly alerted Ms. Yang to the fact that TRG’s walls had to be cleaned and Ms. Yang arranged for cleaners to attend. All parties proceeded on the common-sense basis that persistent mould is potentially hazardous and immediate steps had to be taken to remove it. GSI reasonably viewed the mould problem to be a nuisance within the meaning of the lease.
[21] TRG complained to GSI on September 4th, 2018 that the mould was giving rise to a strong odour in their unit. Odour is expressly identified as a form of nuisance under article 9.7.
(ii) No Evidence of Illness
[22] Astro observes that GSI has not called any evidence to demonstrate that the mould has given risen to adverse health effects on any employee of TRG. There is nothing in article 9.7 of the lease or at common law which requires the landlord to prove that a nuisance has caused physical injury or quantifiable damages in order that it may constitute a default of the lease. There are obvious public policy considerations which discourage such a requirement.
(iii) Maybe the Problem Is Already Fixed
[23] Astro submits that it is possible that the fans which were installed on September 28th, 2018 have already solved the problem. The effect of the fans can only be tested by observation through the summer of 2019.
[24] All of the reports prepared by Engineers indicate that more extensive repairs will be required to eliminate the mould. The latest report prepared by Coldbox suggests that the improper installation of Astro’s freezer may be causing an “ice lens” to form under Astro’s unit which may eventually cause damage to the structural framing of the building.
[25] Astro’s submission effectively invites the court to continue the interim injunction until the fans have been proven to be ineffective. That submission is answered by the following portion of my January 30th endorsement:
The evidence on this application indicates that the mould and condensation problems arise only during warm, humid weather. Astro would ideally like to await the warm summer months to determine if their efforts to date have solved the problem. Unfortunately, the time for such a wait-and-see approach has passed. GSI has an obligation to enforce the terms of the lease to ensure the health and safety of all of its tenants. It would be delinquent as a landlord if it did not do so.
[26] Nobody knows what will solve this problem. There may well be inexpensive solutions which would eliminate the mould. Astro would have been well within their rights to experiment with such remedies when the problem first became apparent in 2016. But TRG has now been exposed to the mould for three years and GSI is entitled to enforce the provisions of the lease. The opportunity to explore cut-rate solutions has passed.
(iv) Astro Has Been Diligent
[27] Article 11.2(a) of the lease provides that the opinion of the landlord’s expert shall be binding on both Landlord and Tenant respecting all matters of dispute regarding alterations to the property. Alterations include repairs, changes, additions and improvements.
[28] GSI did approve the implementation of the OXM report. They did so in Mr. Low’s November 27th, 2018 letter to Ms. Yang and they did so again in open court on January 30th, 2019. Astro was given 90 days to implement the OXM plan by Mr. Low and they were given another 90 days by this Court. None of the OXM recommendations were implemented on either occasion.
[29] In her January 17th, 2019 affidavit, Ms. Yang indicated that taking down and rebuilding the freezer wall would be a very expensive, disruptive and time-consuming process for Astro’s business. Astro made a calculated decision not to implement the recommendations of their own engineer and instead risked the continuation of the nuisance. Astro decided to favour its own business interests over the right of TRG to a mould-free environment. The failure to implement the OXM recommendations lies solely at the feet of Astro.
[30] In my view, it is no answer to the alleged default to say that the nuisance may have been remedied by half measures taken at the close of the summer in 2018. The default is established by the conduct exhibited by Astro over a three-year period.
[31] I do not find that Astro has attempted to resolve the problem diligently, continuously and in good faith. On the contrary, Astro has attempted to ignore the problem and minimized its significance. That approach persists to this day. In its factum, the plaintiff relies on the fact that Mr. Kong could not provide “the exact mechanism” by which condensation and mould formed on TRG’s walls. The factum also emphasizes the absence of proof that the mould has caused illness. The plaintiff even argues that people operating businesses in a commercial area such as Middlefield Road should be required to put up with “a considerably greater intrusion on their sensibilities than do people living in a (residential) locality”. This, presumably, should include tolerating mould to grow on their walls.
[32] In short, the plaintiff has consistently argued both in its oral and written submissions that the mould is not a significant intrusion on TRG’s employment of the property and does not constitute a nuisance within the mean of the lease. Mould is simply not that big a deal.
[33] GSI submits that the mould is a very significant problem and relies on its documented efforts over the course of three years to compel the plaintiff to remedy the situation. I agree with the respondent. No one should be required to tolerate mould persistently growing in his or her workplace. I have no hesitation in saying that Astro was in default of article 9.7 of the lease, that they were given reasonable notice of the default and they failed to address the problem diligently, continuously or in good faith.
GSI Has Breached the Lease and Acted in Bad Faith
i. Having unlawfully locked out Astro in October 2018, GSI attempted to extort a rent increase of 50% in order to return to the property.
ii. GSI unlawfully restricted Astro’s access to the property as a further means of pressuring Astro to enter into a new lease.
iii. GSI refused to consider Astro’s good faith efforts to repair the problem.
iv. GSI demonstrated bad faith by unilaterally terminating the lease and taking possession of the property rather than bringing a motion to obtain a writ of possession.
v. GSI further demonstrated bad faith by demanding that Astro pay its legal fees when those legal services were devoted to enforcing a false allegation of default.
(i) Unlawful Lockout and Overholding Rent
[34] For the reasons set out above, I am satisfied that the failure of Astro to remedy the mould problem constituted a default on the lease. Astro did not act diligently to correct the default and GSI was accordingly entitled to terminate the lease pursuant to Article 17.1(b)(ii). GSI served a valid Notice of Termination and took possession of the unit as it was entitled to do under Article 17.1(b)(ii)(2).
[35] Counsel for Astro argued in his oral submissions that the Notice of Termination provided by Ms. Brown on December 7th, 2018 failed to comply with section 19(2) of the Commercial Tenancies Act. Astro acknowledges that the Notice set out the basis for the alleged breach but claims that it was deficient in failing to advise the tenant precisely how the fault was to be remedied. Counsel did not provide any authority for this proposition.
[36] There is nothing in section 19(2) of the CTA which imposes such a burden on the landlord. More importantly, the tenant in this case knew exactly what remedy would be satisfactory to the landlord. Mr. Low’s letter of November 27th, 2018 had committed GSI to accepting the repairs recommended in the OXM report. Astro resisted the recommendations of its own expert because it deemed the repair to be too costly. That decision cannot be attributed to any lack of clarity on the part of GSI.
[37] Having lawfully terminated the lease, GSI viewed Astro’s continuing occupancy of the unit to be “overholding with permission” as outlined in Article 12.4(a)(i) of the lease and increased the rent by 50%. It is debatable whether this was a proper interpretation of the lease. I do not find, however, that it demonstrates any bad faith on the part of GSI. GSI did not persist in demanding the higher rent. In Mr. Low’s letter of November 27th, 2018, GSI offered to continue the lease on precisely the same terms and at the same rent if only Astro would finally fix the mould problem. That letter dispels any suggestion that GSI was acting in bad faith.
(ii) Limiting Access to Pressure Astro
[38] I do not find that GSI limited Astro’s access to the Unit as a means of pressuring Astro. I accept Mr. Kong’s evidence that between October 3rd and December 7th, he would unlock the door for Ms. Yang each morning and then lock it upon her request or at the end of the day. He was never contacted by any employee of Astro seeking additional access.
(iii) The Failure to Seek a Writ of Possession
[39] Astro argues that GSI showed bad faith by twice entering the premises rather than seeking a writ of possession from the court. As set out above, the lease provided for a right of re-entry upon default. Astro defaulted, GSI gave notice of the default and then provided successive opportunities to Astro to cure the default. Astro never did.
[40] Astro is in a poor position to complain about GSI’s failure to seek a court order. Astro twice broke the locks to enter the unit and did not advance an application for injunctive relief until police evicted them from the premises.
(iv) Unreasonable Efforts by GSI to Recoup Legal Fees
[41] Based on my finding that Astro did default on the terms of the lease, it follows that GSI’s efforts to recover its legal expenses to enforce the lease were also legitimate. Article 17.2(b) of the lease provides that the tenant is responsible for any legal expense to the landlord which was occasioned by a default by the tenant. Astro was provided with invoices for the legal services provided to GSI by Mr. Low and has not challenged their legitimacy.
GSI Has Waived Any Default
i. GSI continued to accept Astro’s rental payments including the rent for January 2019 despite having served a Notice of Breach on December 7th, 2018 which provided a 15 day period to remedy the mould problem. By accepting the rent cheques, GSI recognized the relationship of landlord and tenant to be continuing and thereby waived its right to act upon the alleged default.
[42] Nothing in the facts would permit a finding that GSI waived Astro’s default under the lease. The evidence is clear that GSI consistently viewed the formation of mould in TRG’s unit to be a serious problem which had to be fixed. TRG threatened to call in health inspectors and sought an abatement of rent because of the nuisance. GSI understandably made persistent efforts to compel Astro to abide by the terms of the lease. I do not find that accepting rental payments from Astro after service of the Notice of Breach constituted any waiver by GSI of its contractual right to compel Astro to remedy the nuisance.
[43] Moreover, the lease agreement includes a no-waiver clause under Article 17.5(a). That article provides that the landlord’s rights under the agreement can only be waived through an express statement in writing. No such waiver was provided in this case.
[44] Astro relies on Fitkid (York) Inc. v. 1277633 Ontario Ltd., 2002 CanLII 9520 for the proposition that actions on the part of the landlord which demonstrate a clear intention to continue the landlord-tenant relationship may constitute a waiver of forfeiture despite the existence of a no-waiver provision. In Fitkid, there was a wide range of conduct by the landlord which persuaded the trial judge that the landlord intended to continue the landlord-tenant relationship notwithstanding a default committed by the tenant. A similar review of the entirety of the evidence in this case leads to the opposite conclusion.
[45] The evidence in this case demonstrates that the landlord took reasonable steps to encourage the tenant to rectify the default for over two years. In the fall of 2018, the landlord was finally compelled to serve formal notice due to the tenant’s lengthy failure to act. The tenant still failed to act despite further generous extensions of time. By January 2019, the landlord sought to terminate the lease and take possession of the property. There was no waiver of the default.
Conclusion Regarding Serious Issue Test
[46] Although I am mindful of the very low threshold which is necessary to establish that there is a serious issue to be tried, I struggle to see any prospect of success in Astro’s action. I am prepared to find that Astro barely scrapes over the line, but the strength of the applicant’s case is certainly not a factor in favour of injunctive relief.
(b) Irreparable Harm
[47] An applicant for injunctive relief must provide convincing evidence that it will suffer irreparable harm if the injunction is not granted. The evidence must demonstrate a real probability that unavoidable, irreparable harm will result. Assumptions and speculation are of no evidentiary value. (International Relief Fund v. CIBC 2013 ONSC 4612 at paragraph 37.)
[48] Irreparable harm refers to the nature of the harm suffered rather than the magnitude of the harm. It is a harm which either cannot be quantified in monetary terms or cannot be cured through the collection of damages.
[49] Astro’s written submissions concerning irreparable harm are as follows:
- There is no question that Astro would suffer irreparable harm if the relief sought on this motion is not granted. As set out above, the consequences of eviction would be ruinous to Astro. It would lose its customers and would likely be unable to continue operating.
[50] The absence of any citation to the evidence in support of that submission is telling.
[51] R.C. Young’s January 15th, 2019 affidavit states at paragraph 46 that Astro suffered a significant loss of business because of locks outs by GSI. He estimates that Astro lost approximately $1 million in revenue, (including projected loss of revenue), prior to the commencement of the temporary injunction on January 8th, 2019.
[52] At paragraph 47 of the same affidavit, Mr. Young states that if the lease is terminated, Astro will likely lose many or all of its customers to competitors. He estimates that it would cost $100 per square foot to set up a similar freezer in another location. If another 10,000 square foot location could be found, this would give rise to an additional cost of $1,000,000 to relocate the business.
[53] The figures cited by Mr. Young are not substantiated by any documentation and they appear to be somewhat inflated. The evidence demonstrates that Astro was given satisfactory access to the premises throughout the period of the lock out, yet Mr. Young alleges that the company lost as much as $1,000,000 in revenue during that brief period. If that assertion is true, it begs the question why Astro would not have immediately implemented the OXM recommendations at the cost of $85,000 after the January 30th, 2019 court appearance to guarantee the continuation of such a lucrative enterprise.
[54] Astro has not produced any evidence to satisfy the court that it could not re-establish its business elsewhere. Although it would certainly be costly to install a freezer in a new location, that cost could be recovered from GSI as damages if Astro ultimately succeeds in the action.
[55] Mr. Young’s statement that Astro would lose all its customers if the Middlefield site is closed down amounts to speculation. There is no evidence that Astro could not continue its business in a new location within a short period of time.
[56] Astro has not demonstrated that it would suffer irreparable harm if injunctive relief is refused. The evidence suggests that any potential harm suffered by Astro could be remedied through damages.
(c) Balance of Convenience
[57] The balance of convenience test is a determination of which of the two parties will suffer the greater harm from the granting or refusal of the injunction. The test may take into account many different factors which will have differing weights depending on the circumstances of the case. The balance of convenience is closely linked to the determination of irreparable harm although, in determining the balance of convenience, the court may consider the possible impact of the requested injunction on the public interest or on the rights of parties who are not before the court. (Rogers Communications Inc. v. Shaw Communications Inc., 2009 CarswellOnt 5489 at paragraphs 75-76).
[58] Astro argues that the impact of granting the injunction on GSI would be minimal. GSI would continue to receive Astro’s rental payments and would be spared the effort of having to find a new tenant for the property. GSI fears that it may suffer far greater inconvenience.
The Prospect of Structural Damage to 815 Middlefield Road
[59] In its initial factum filed on January 28th, 2019, GSI argued that the granting of the injunction would result in three harms to GSI: (1) the possible loss of TRG as a tenant; (2) damage to its building caused by the mould; and (3) damage to its reputation as a landlord arising from its inability to maintain a safe environment at its property.
[60] There is no evidence that TRG intends to terminate its lease because of the nuisance caused by Astro. There was also no evidence as of January 2019 that Astro’s freezer was causing permanent damage to GSI’s building. The argument that GSI must evict Astro to maintain its reputation as a landlord was highly speculative. If Astro succeeds in this application, GSI could fairly say that it had taken every possible step to protect the interests of its tenant and had been disappointed by the ruling of the court. It seems unlikely that GSI’s reputation as a landlord would be significantly diminished by its conduct in this case.
[61] The prospect of structural damage to the building, however, has changed since January 30th. My endorsement on that date permitted Astro to pursue an alternative plan to remedy the mould which was less expensive than the OXM plan. GSI was not obliged to accept a new proposal but indicated that they would consider any plan which was submitted within a defined period. Astro commissioned AXON to prepare a report. GSI retained Coldbox, a firm which specializes in refrigeration installment, to review the AXON Report. Coldbox concluded that all of the outstanding proposals, (including the October OXM plan which GSI had agreed to accept on January 30th), were inadequate. The Coldbox Report suggested for the first time that Astro’s freezer was causing an “ice lens” to form underneath the unit which could result in widespread structural damage to the building. The Coldbox report states:
This means the original slab, the demising walls and the building columns have the potential to be displaced. This in turn will result in damage to the building’s structural framing and could impact anything attached or supported by its roof membrane, mechanical equipment etc. Floor surfaces will crack and deform.
[62] Astro is strenuously opposed to any consideration of the Coldbox Report. The report has not been filed as an expert report and, Astro argues, it may not be introduced without leave of the court under Rule 39.02. GSI submits that Astro is bound to accept the authenticity of the report under Article 11.2(i) of the Lease which states that the opinion in writing of the landlord’s expert shall be binding on both landlord and tenant respecting all matters of dispute regarding any alterations.
[63] Astro had the option of settling this matter by implementing the October OXM plan immediately after January 30th, 2019. It chose not to do so and instead proposed an alternative plan. GSI was not obliged to accept the alternative plan but they did undertake to review it and they did so, notwithstanding that the report was delivered beyond a court ordered deadline. The Coldbox review concluded that neither the AXON nor the October OXM plans would remedy the problem. At that point, the opportunity to implement the October OXM repair had long since passed and GSI was no longer obliged to abide by their January 30th agreement to accept the October OXM repair. GSI’s position going forward is that nothing short of the Coldbox plan will suffice. That is GSI’s rights as contemplated by Article 11 of the lease.
[64] The Coldbox Report is admissible at least to explain the narrative of events since January 30th, 2019. It is ultimately not necessary to formally introduce it as an Expert Report because it is not the function of this court to decide between the various engineering proposals to solve this problem. The Coldbox Report has some tangential value in determining the balance of convenience because it alerts the court to a potential harm which could be suffered by GSI if the injunction is granted. It is not determinative or even highly persuasive that the harm would be suffered but it merits consideration.
Other Prospective Harms to GSI
[65] GSI has also raised concerns arising from Astro’s violations of the fire code. GSI’s Notice of Breach dated December 7th, 2018 did not include any reference to Astro’s failure to maintain the sprinkler system in its unit. GSI does not rely on the breach of the fire code as a basis to re-enter the unit but does cite Astro’s failure to observe the code as evidence that Astro has not fulfilled its responsibilities under the lease in the past and is unlikely to do so in the future if a permanent injunction is granted.
[66] The January 30th, 2019 endorsement required Astro to determine if its sprinkler system met applicable fire regulations and if not, to take steps to ensure that it did. On April 2nd, 2019, E.P.I. Fire Protection Inc. conducted its annual inspection of 815 Middlefield Road. E.P.I. concluded that the fire protection in Astro’s unit was “heavily lacking”. Astro has not taken any steps to remedy this problem.
Potential Effects on Other Parties
[67] The effects of the mould, are not confined to GSI. They extend to TRG, the employees of TRG and possibly other tenants at 815 Middlefield Road. The employees of TRG are helpless in this situation. They have no contractual relationship with Astro and have no means of compelling Astro to eliminate the mould.
[68] Although Astro submits that the mould has never been tested and there is no evidence that it represents a danger to human health, there is no dispute that the occupants of TRG perceive it to be a serious hazard to their health. I find that their apprehension is reasonable.
Conclusion on Balance of Convenience
[69] There can be no doubt that it would be highly inconvenient for Astro to have to find a new location if the request for an injunction is denied. This would be an immediate and certain inconvenience.
[70] GSI’s inconvenience is not as immediate or as certain. If Astro is permitted to continue to ignore safety standards, however, the consequences to GSI and others could be catastrophic.
[71] The balance is tipped, in my view, by the real and continuing inconvenience suffered by the occupants of TRG. The effect of continuing the injunction would be to leave those employees at the mercy of Astro’s desultory efforts to repair the mould.
[72] Astro has failed to satisfy me that the balance of convenience favours its position.
Conclusion Regarding Injunctive Relief
[73] Astro has barely established that there is a serious issue to be tried. It has not established that it would suffer irreparable harm if the injunction is refused and the balance of convenience favours GSI. Based on these findings, I must dismiss the application for injunctive relief.
Relief Against Forfeiture
[74] If the application for injunctive relief should fail, Astro alternatively submits that the Court should grant relief from forfeiture. The applicant argues in its factum that it has acted in good faith and diligently to resolve “the condensation issue”.
[75] The power to grant relief against forfeiture is an equitable remedy. In deciding whether this purely discretionary remedy will be granted, the court should consider:
a. The conduct of the Applicant;
b. The gravity of the breaches; and
c. The disparity between the value of the property forfeited and the damage caused by the breach.
The Conduct of the Applicant
[76] Astro has not conducted itself in a manner which favours equitable relief.
[77] GSI locked Astro out of the premise on two occasions. On both occasions, Astro broke back in. On the second occasion, they only vacated when they were ordered to do so by police. Justice Goldstein considered similar conduct in Lixo Investments 2012 ONSC 5439 at paragraph 16:
Importantly, the Applicant also admits to re-entering the premises even after being locked out. Indeed, the Applicant went so far as to change the locks even after being faced with a Notice of Termination posted by a bailiff. I accept that there is a dispute about whether the Respondent actually has the Applicant’s bank draft for July, but this conduct was unacceptable. The proper route for a tenant when faced with a Notice of Termination and a change of locks is an application for relief from forfeiture, or at the very least a phone call to the landlord, not a break-and-enter.
[78] GSI provided Astro with an opportunity to resolve the dispute on very generous terms in November 2018. GSI offered to enter a new lease on identical terms if Astro would remedy the mould problem and cover GSI’s expenses arising from the dispute. The existing lease required Astro to cover those expenses. Astro summarily dismissed this offer.
[79] GSI was provided with a second opportunity to resolve the matter after the January 30th, 2019 adjournment of this application. If Astro implemented the October OXM plan, GSI agreed to withdraw the allegation of default and continue the lease to its expiration date. Astro failed to act again.
[80] Astro’s actions have not been malicious or callous, but they were certainly ineffectual. Ms. Yang was prepared to undertake half measures to alleviate the symptoms of the problem, but she declined to undertake significant repairs that would be costly and inconvenient for her business.
[81] Astro has minimized the seriousness of the problem from its outset and continues to do so to this day. The applicant submits the following at paragraph 94 of its factum:
…Astro has conducted itself in good faith and has worked diligently and reasonably to resolve the condensation issue. The condensation itself, if it even rises to the level of a breach of the Lease, is a minimal one.
[82] The problem is not condensation – it is mould. Reasonable people may disagree about the degree of hazard that mould presents but few people would tolerate prolonged exposure to mould in their workplace. Astro has allowed the problem to persist for three years and there is no reason to believe that they would now take steps if they were granted a permanent injunction. Their past conduct does not merit equitable relief.
The Gravity of the Breaches
[83] No one anticipated problems with the freezer when it was installed. The work was done by a qualified contractor and it passed Mr. Kong’s inexpert inspection. When the mould first developed in 2016, neither GSI nor Astro appreciated the seriousness of the problem. There was no suggestion at that time that formation of mould on the walls of TRG was a nuisance that could constitute a default on the lease.
[84] The gravity of the breach became more apparent over the ensuing two years. GSI repeatedly assured TRG that Astro was working to solve the problem and TRG relied on those assurances. The mould returned annually despite cleaning, moving items away from the demising wall and the installation of fans.
[85] It is at least unsettling to have to work in a mouldy workspace. TRG has now been exposed to that environment for three years. The gravity of the breach has grown with each successive year of inattention and can now fairly be described as a serious breach of the lease.
The disparity between the value of the property forfeited and the damage caused by the breach.
[86] There is very little evidence GSI has suffered damages because of the breach. If the concerns raised in the Coldbox report are ultimately found to be valid, GSI may suffer substantial damages in the future. The same would be true if a worker at TRG suffers a serious illness which can be attributed to mould exposure. These damages have not been realized and for present purposes, I am prepared to proceed on the basis that GSI’s damage from the breach are minimal.
[87] Astro, however, will lose a very substantial investment in the property if they are not granted relief. Although Astro may recoup some of its losses by recovering its freezer, the cost of doing so would undoubtedly be great. Astro would also suffer significant losses from the interruption of their business including the prospective loss of customers who would have to find other locations to preserve their frozen foods.
[88] Losing the property would have a devastating effect on Astro whereas the damages to GSI, at least at this point, are negligible.
Conclusion Regarding Relief from Forfeiture
[89] Only one of the three criteria for relief from forfeiture favour Astro’s application. Astro will suffer substantial losses because of losing its tenancy and this does seem harsh in comparison to GSI’s negligible damages. If the evidence satisfied me that Astro acknowledged the seriousness of the problem and had taken diligent steps to repair it, I am quite sure that the balance regarding relief would tip in Astro’s favour.
[90] On the contrary, however, I find that Astro has improbably denied that they were aware of the problem, continually minimized its significance and has squandered repeated opportunities to escape their predicament. If Astro had only undertaken repairs which they were obliged to make under the terms of their lease, GSI was prepared to continue the tenancy.
[91] Those who seek equitable remedies must come before the court with clean hands. Astro has not. The application for relief from forfeiture is therefore also denied.
Astro’s Arguments Relating to the Condominiumization Process
[92] Astro alleges in its Statement of Claim that GSI has conspired to defeat its right to purchase Units 5 and 6 of 815 Middlefield Road at the completion of the lease. Astro maintains that GSI has deliberately dragged its feet in pursuing municipal authorization for the sale and has now seized on an inconsequential issue to terminate the agreement and thereby avoid its eventual obligation to sell the property to Astro.
[93] My endorsement of January 30th was also intended to quiet this concern. I wrote at that time:
[7] In the materials that were filed on this application, Astro expressed a concern that GSI was seizing on an inconsequential problem in order to nullify the lease and thereby defeat Astro’s intention to buy the property at the completion of the lease. If this were true, it would understandably be very concerning to Astro.
[8] As a result of discussions which have taken place on the record this morning, Astro can be assured that GSI has no such intention. By virtue of the position taken by Ms. Brown today, Astro can be confident that the landlord intends that the lease – including Schedule C to the lease - will continue in force to its completion date in April, 2020. If Astro wishes to buy the property at that time and all of the provisions of Schedule C permit that purchase, GSI will happily fulfill its contractual obligation. Astro will be returned to the position that they were in prior to any of the alleged breaches of the lease. In the meantime, GSI is simply trying to ensure that all of its tenants are able to enjoy their respective properties without fear of the toxic effects of mould.
[12] By virtue of GSI’s very reasonable approach today, Astro will preserve the opportunity as it is set out in Schedule C to the lease to purchase a valuable property at less than market value and preserve its $800,000 investment to date. Although the renovation may be costly, the money is far better spent on increasing the value of the property than it would be on legal fees.
[94] Astro returns to this argument in its Supplementary Fact dated April 25th, 2019. In the Overview portion of the factum, counsel writes:
...GSI refuses to advise when it intends to complete the process and register the condominium plan. There is a real concern that due to the unexplained delay on the part of GSI, Astro will be deprived of its right to exercise an option to purchase its unit prior to the end of the term of Astro's lease.
[95] Astro submits that by failing to complete the condominiumization process, GSI has breached its obligation to use commercially reasonable efforts to complete the process prior to April 30th, 2020.
[96] I have found that Astro defaulted on the lease. It was not an insignificant breach and it occurred over a prolonged period. Whatever GSI's motives may have been in acting on the default, the fact is that Astro created a nuisance and it was obliged to fix it or suffer the consequences. If those consequences include losing the right to purchase the property at the completion of the lease, Astro has only itself to blame.
[97] If Astro's suspicions of GSI are ultimately proven true, it will find its remedy in damages. At the moment, Astro has lost nothing. The right to purchase does not arise until April 2020 and it is entirely possible that GSI will have completed the process by that date. They have not yet failed to do anything which they were contractually obliged to do.
[98] The fact that GSI has not yet obtained the authorization that Astro seeks is no basis to bar GSI from exercising its contractual right to re-enter the premises upon proper notice of a default by the tenant.
Costs
[99] The parties will have 60 days following the release of this judgment to provide written submissions concerning costs in this matter.
Justice Peter Bawden
Date: August 1st, 2019
Appendix “A”
Final Endorsement Released on January 30th, 2019
COURT FILE NO.: CV-18608868
DATE: 20190130
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 192-7838 Ontario Inc.
AND:
Taing
BEFORE: Mr. Justice Peter Bawden
COUNSEL: Mr. George Pakozdi, for the Plaintiff/Applicant
Ms. Madeleine Brown for the Defendant/Respondent
HEARD: January 30th, 2019
ENDORSEMENT
Judge Bawden
[1] This injunction application came before me on January 30th, 2019. At the outset of the proceedings, I indicated to the parties that based on my review of the materials, I could foresee a resolution of the litigation which would minimize legal fees and satisfy the interests of both parties. To their great credit, both counsel willingly entered into resolution discussion which appear to have been successful.
[2] This endorsement includes a very brief summary of facts and some preliminary observations concerning the positions of the parties. It is not, and should not be taken as, a final determination of any of these facts nor any legal conclusion to be drawn from the facts. The principle purpose of the endorsement is to capture the intentions of the party to resolve the issues and should not be relied upon for any other purpose.
[3] Stated very simply, GSI is the landlord of a commercial property which contains a number of rental units. Astro Cold Storage rents one of the units.
[4] GSI and Astro signed a five year lease which commenced in May, 2015. The lease contemplates that at the completion of the five year tenancy, Astro will be able to purchase the space which it currently leases. Since taking possession, Astro has invested $800,000 in order to install a freezer in the unit. Ms. Grace Yang has filed an affidavit in support of this application indicating that Astro does intend to buy the property.
[5] The freezer was evidently installed in the vicinity of a wall. The tenant who occupies the adjacent unit, TRG Repair, has discovered condensation and mould on the wall. TRG complained to the landlord GSI as early as 2016 about the mould and it might be inferred that GSI notified Astro of the need to correct the problem but there is no written or electronic communication to resolve the point. Astro did take some steps to fix the problem and repeatedly had the wall of TRG cleaned but did not take serious steps to deal with the problem until the fall of 2018.
[6] In the fall of 2018, Astro obtained advice from a professional engineer concerning the steps which might reasonably address any concern, (the OXM report). The landlord, GSI, was provided with the OXM Report and approved that proposal. Astro unfortunately did not move immediately to commence the repair and instead attempted to alleviate the problem through less costly means. GSI was not content with those efforts and ultimately concluded that Astro was in default of the lease agreement. GSI locked Astro out of the premises.
[7] In the materials that were filed on this application, Astro expressed a concern that GSI was seizing on an inconsequential problem in order to nullify the lease and thereby defeat Astro’s intention to buy the property at the completion of the lease. If this were true, it would understandably be very concerning to Astro.
[8] As a result of discussions which have taken place on the record this morning, Astro can be assured that GSI has no such intention. By virtue of the position taken by Ms. Brown today, Astro can be confident that the landlord intends that the lease – including Schedule C to the lease - will continue in force to its completion date in April, 2020. If Astro wishes to buy the property at that time and all of the provisions of Schedule C permit that purchase, GSI will happily fulfill its contractual obligation. Astro will be returned to the position that they were in prior to any of the alleged breaches of the lease. In the meantime, GSI is simply trying to ensure that all of its tenants are able to enjoy their respective properties without fear of the toxic effects of mould.
[9] As a result of the discussions which have taken place today, the parties have agreed to the following:
a. This application will be adjourned to May 2nd, 2019;
b. I will seize myself with this application while also acting (if necessary) as a Case Conference Judge;
c. The interim injunction granted by Justice Archibald will remain in effect until May 2nd, 2019. Astro will have the same unlimited access to the premises as it had prior to the first lockout by GSI until May 2nd.
d. GSI will provide copies of applications submitted and correspondence exchanged to date with the City of Toronto or any other government agency concerning the “condominiumization” of the property. GSI is not undertaking to provide ongoing disclosure of that application and it is not a part of this endorsement that they should do so. In the event that future correspondence between GSI and any government agency becomes relevant, it may be obtained by the applicant through the ordinary rules of disclosure.
e. In the time between today and May 2nd, 2019, Astro must:
i. Take steps to implement a plan based on the recommendations in the OXM Engineering Report or an alternative plan prepared by an Engineer certified to practice in the Province of Ontario and agreeable to GSI.
ii. If Astro seeks to rely on an engineering plan other than the OXM plan, that plan must be submitted to GSI for approval by February 20th, 2019;
iii. Absent unforeseeable circumstances, all repairs anticipated by the plan are to be completed by May 2nd, 2019.
iv. Astro will also investigate concerns relating to the fire sprinkler system in their unit to determine if it meets applicable fire code regulations and takes steps, if necessary, to ensure that it does.
[10] GSI has also raised concerns about mould forming on the wall of Unit #4 of the premise. Astro will be required to advise the engineer(s) who are retained on the project of the concerns regarding Unit #4 and to explore reasonable avenues to protect that unit from the potential effects of Astro’s freezer.
[11] The evidence on this application indicates that the mould and condensation problems arise only during warm, humid weather. Astro would ideally like to await the warm summer months to determine if their efforts to date have solved the problem. Unfortunately, the time for such a wait-and-see approach has passed. GSI has an obligation to enforce the terms of the lease to ensure the health and safety of all of its tenants. It would be delinquent as a landlord if it did not do so.
[12] By virtue of GSI’s very reasonable approach today, Astro will preserve the opportunity as it is set out in Schedule C to the lease to purchase a valuable property at less than market value and preserve its $800,000 investment to date. Although the renovation may be costly, the money is far better spent on increasing the value of the property than it would be on legal fees.
[13] The application is adjourned until May 2nd, 2019 without prejudice to either side. I will be make myself available for a telephone case conference with counsel if new issues arise.
[14] The determination of costs will be adjourned until the return date of May 2nd, 2019. At that time, the court will have additional information concerning the costs that were involved in effecting repairs, the degree of cooperation demonstrated by the parties and perhaps even the likelihood that the terms of Schedule C to the lease can be fulfilled.
Judge Bawden
Date: January 30th, 2019
Appendix “B” – Chronology of Relevant Events
May 1, 2015 Astro commenced a five year lease with GSI for units 5 & 6 of a building located at 815 Middlefield Road. The building is leased to industrial and commercial tenants. It was anticipated from the outset of the lease that Astro would construct a freezer in the unit to store frozen goods. The terms for the construction and maintenance of the freezer were provided for in Articles 11 and 12 of the lease.
Summer, 2016 TK Kong, the property manager for the landlord GSI, received a complaint from one of the other tenants at 815 Middlefield Road, TRG Repair Canada (TRG). TRG complained that condensation and mould were forming along the wall that it shared wall with Astro. According to the affidavit of Mr. Kong, he verbally advised Grace Yang, the Executive Vice President of Astro, of the complaint. Ms. Yang agreed to repair the freezer.
Ms. Yang swore in her affidavit of January 19th, 2019 that she has no recall of being advised of any concern in the summer of 2016. She indicates that if she had been advised of a problem, she would have worked diligently to solve it.
July, 2017 TRG again complained to Mr. Kong about condensation and mould which was forming on the wall that it shared with Astro.
July 20, 2017 Mr. Kong wrote to Ms. Yang to warn her that the Astro freezer was causing mold to form on the walls of TRG. The letter indicated that if Astro failed to repair the freezer “diligently”, GSI would consider Astro to be in default of the lease and would consider termination. Mr. Kong indicates that he delivered the letter by hand. Astro did not respond.
In her January 19th, 2019 affidavit, Ms. Yang swore that she has no recall of ever receiving the letter.
August 4, 2017 The manager of TRG sent an email to GSI to report that the mould was building up again. The e-mail notes that someone had come in to clean the mould off the wall on two prior occasions but it had returned again and the manager was concerned about the health hazard which it presented.
August 9, 2017 Mr. Kong wrote a second letter to Ms. Yang again demanding that she repair the freezer. In this letter, Mr. Kong states that the freezer repair must be completed by August 31, 2017. He further demanded that Astro replace the carpet and repaint two rooms of the unit occupied by TRG. The letter again warns that failure to conduct the necessary repairs would lead to termination of Astro’s lease. Astro did not respond and no repairs were undertaken.
Ms. Yang states in her January 19th, 2019 affidavit that she has no recall of ever receiving this letter.
Sept. 21, 2017 TRG’s office manager emailed Mr. Kong to advise him that mould was continuing to form on the wall.
July 3, 2018 TRG again emailed GSI to complain that mould and moisture had returned to the shared wall. Mr. Kong contacted Ms. Yang and they inspected the mould together. According to Mr. Kong, Ms. Yang undertook to move the freezer wall in order to create space for air flow. Mr. Kong wrote to TRG advising them of Ms. Yang’s undertaking and her plan to begin the work within three weeks.
Ms. Yang acknowledges that she was advised of the mould problem in July, 2018 but denies that she undertook to move the freezer wall. According to her affidavit, she only agreed to contact the contractor who had installed the freezer to request his recommendation. She reports that the contractor, Mr. Li, was very busy throughout the summer and unavailable to provide any meaningful assistance.
July 25, 2018 TRG wrote to Mr. Kong that the mould and moisture had gotten worse and threatened to report the matter to the Ministry of Health and Safety. Mr. Kong and Ms. Yang once again toured through TRG’s unit to inspect the mould. Ms. Yang acknowledged that Astro had not yet commenced any repairs but promised to do so within two weeks. Mr. Kong sent an email to TRG relaying this promise.
Ms. Yang acknowledges that she did attend TRG with Mr. Kong and took photos of condensation and mould during the visit. She sent a text message to Mr. Li on that day seeking his advice. According to Ms. Yang, Mr. Li suggested that they wait for the weather to cool to see if the problem persisted. He also recommended installing ventilation fans.
August 10, 2018 GSI sent an email to Ms. Yang inquiring whether a date had been set to rebuild the freezer wall and reminding Ms. Yang of her responsibility to clean the mould which had formed on the walls of TRG.
August 24, 2018 TRG sent an email to Mr. Kong asking when Astro would be starting its repairs. TRG advised that the walls had been cleaned two weeks earlier but that the mould was back. Mr. Kong called Ms. Yang and told her that she needed to repair the freezer immediately.
Ms. Yang wrote back that Astro would “arrange the reconstruction as soon as possible” and undertook to begin moving some customers out of the unit to prepare for the reconstruction.
August 30, 2018 TRG sent an email to GSI indicating that they had scheduled a Ministry of Health inspector to come to the premises on September 28, 2018. The email included nine attached photos of the mould which had formed on their wall.
September 4, 2018 TRG sent an email to GSI advising that a strong odour had developed in their unit. Mr. Kong called Ms. Yang again and told her that someone needed to clean the unit.
GSI sent an email to Ms. Yang advising that the deadline for completing the necessary work would be September 30th, 2018.
September 6, 2018 Counsel Garth Low sent a letter on behalf of GSI formally advising Astro that GSI considered the failure to repair the freezer to be a breach of the lease which could lead to termination. Mr. Lowe’s letter reiterates the earlier demand that repairs be completed by September 30th, 2018. Under article 17.1(b)(ii) of the lease, only 15 days notice was required. There was no response to this letter.
September 26, 2018 Ms. Yang wrote to Mr. Low that Astro was working “very hard” on the problem.
September 27, 2018 Mr. Kong attended Astro’s unit to investigate the state of repairs. Ms. Yang told him that she was working on an exhaust system. Mr. Kong reminded her that she could not make any alterations to the roof unless she first obtained the landlord’s permission. These discussions were confirmed through subsequent correspondence with counsel for GSI, Mr. Lowe.
September 28, 2018 Astro installed ventilation fans in the roof of the Unit.
October 2, 2018 GSI posted a Notice of Termination of the Lease and locked Astro out of the premises.
October 3, 2018 Mr. Low wrote an email to Ms. Yang confirming that the lease was terminated but that the landlord would continue to provide supervised access to the premises so that Astro could temporarily continue to operate. The email invited Astro to submit an engineer’s report setting out the remedial work which Astro was prepared to undertake to address the mould problem. The email concluded with a statement that if Astro was able to produce a satisfactory report on a timely basis and would commit to completing the work, “the landlord is prepared to negotiate in good faith a new lease with you.”
Having concluded that the lease had been terminated, Mr. Kong commenced to charge rent for Units 5 & 6 on the basis of Article 12.4 of the lease – an overholding with permission - which increased the rent by half.
Mr. Kong began to unlock the unit for Astro every morning and lock it again at the end of the day.
October 5, 2018 Ms. Yang wrong to GSI stating “we will start construction to rebuilt (sic) the freezer wall asap”.
October 9, 2018 TRG notified GSI in writing that it considered the ongoing mould issues to be grounds to terminate TRG’s lease and/or to seek an abatement of rent.
October 19, 2018 Ms. Yang delivered an opinion provided by “OXM Engineering” to GSI. The report recommended moving the freezer wall away from the shared wall, installing insulation and a circulation fan. GSI approved the proposed repairs in a letter sent by their counsel on October 31st, 2018. The deadline set for the completion of the repairs was November 16th.
November 1, 2018 Ms. Yang wrote to Mr. Low that she had contacted the author of the OXM report and sought his recommendation for contractors to undertake the work. She sought a two week extension of the November 16th deadline in order to complete the OXM recommended repair. She promised that the premises would be inspected by an engineer who would confirm that the work had been completed according to specification. GSI granted the extension.
November 7, 2018 Counsel for GSI wrote to Ms. Yang confirming that GSI had terminated the initial lease but was prepared to enter into a new lease provided that Astro made engineer-approved repairs to the premises and paid various fees incurred by GSI arising from the breach.
November 9, 2018 Counsel for GSI wrote to Astro commenting that there had been no response to his letter of November 7. He indicated that unless Astro entered into a new lease, GSI would not permit any further access to the premise beyond November 16.
November 14, 2018 Astro filed a Statement of Claim against GSI seeking damages of $10,000,000 for civil conspiracy, breach of lease, fraudulent conversion and other grounds. The plaintiffs sought injunctive relief to permit Astro to continue to occupy the premise and carry on its ordinary business.
November 27, 2018 Counsel for GSI invited Astro to enter into a new lease for the premises on the very same terms and at the same rent as the terminated lease provided that Astro would (1) replace the vents which had been installed without authorization; (2) resolve the mould issues within three month; and (3) reimburse GSI for its costs incurred in enforcing the terms of the lease.
Ms. Yang responded immediately denying any default on the part of Astro. She refused to compensate GSI for any of its costs arising from the alleged breach of the agreement and demanded instead compensation from GSI.
Counsel responded to the email by inquiring if Astro would apply to the court for relief from forfeiture and, if not, he advised Astro to remove all inventory and trade fixtures before the close of business on December 7th.
December 3, 2018 Mr. Kong attended the premises of TRG and confirmed that mould continued to form on the walls.
December 7, 2018 Astro broke into the unit and unilaterally changed the locks.
December 7, 2018 New counsel for GSI, Ms. Madeleine Brown, sent a letter to Astro titled “Notice of breach”. The letter provided further notice to Astro that the landlord considered the formation of mould in TRG’s unit to be a nuisance within the meaning of article 9.7 of the Lease. If the nuisance was not rectified within 15 business days, the landlord would view this as an “Event of Default” which entitled the landlord to exercise its rights under article 17.1(b) of the lease which could include termination. The letter was accompanied by a formal Notice to Tenant under section 19(2) of the Commercial Tenancies Act.
December 12, 2018 Ms. Yang sent a response to Ms. Brown’s letter in which she denied that there was a condensation problem and indicated that any such problem had been “fixed” on September 29th, 2018. Ms. Yang maintained that the alleged condensation problem had been fabricated as part of a conspiracy to deprive Astro of its contractual right to purchase Units 5 & 6 at the completion of the lease.
January 2, 2019 Ms. Brown wrote to advise Astro that GSI would re-enter the premise without further notice in light of the failure of Astro to take any steps to remedy the breach.
January 5, 2019 GSI changed the locks on the unit and posted a termination notice on the door.
January 7, 2019 Astro again broke into the unit and changed the locks. The bailiff attended and called police. Police attended and warned Astro and its employees that they could not return to the unit without the permission of the bailiff or the landlord.
Ms. Brown wrote to Astro to advise them that the lease was terminated and that they should contact the bailiff to arrange for the removal of Astro’s property within 15 days.
January 8, 2019 Astro brought an ex parte application before Justice Archibald seeking a stay of the Notice to Terminate.
January 9, 2019 Mr. Justice Archibald granted an interim stay of the January termination notice and Astro was given access to the Premises.
January 30, 2019 Both parties appeared for an application by the plaintiff to enjoin GSI from terminating the Lease or, alternatively, for relief from forfeiture. The application was adjourned to May 2nd, 2019 with the interim injunction remaining in effect. The endorsement included the following paragraphs:
In the time between today and May 2nd, 2019, Astro must:
i. Take steps to implement a plan based on the recommendations in the OXM Engineering Report or an alternative plan prepared by an Engineer certified to practice in the Province of Ontario and agreeable to GSI.
ii. If Astro seeks to rely on an engineering plan other than the OXM plan, that plan must be submitted to GSI for approval by February 20th, 2019;
iii. Absent unforeseeable circumstances, all repairs anticipated by the plan are to be completed by May 2nd, 2019.
iv. Astro will also investigate concerns relating to the fire sprinkler system in their unit to determine if it meets applicable fire code regulations and takes steps, if necessary, to ensure that it does.
The evidence on this application indicates that the mould and condensation problems arise only during warm, humid weather. Astro would ideally like to await the warm summer months to determine if their efforts to date have solved the problem. Unfortunately, the time for such a wait-and-see approach has passed. GSI has an obligation to enforce the terms of the lease to ensure the health and safety of all of its tenants. It would be delinquent as a landlord if it did not do so.
February 20, 2019 The deadline for Astro to present any alternative to the OXM plan passed. Astro subsequently sought an extension of the deadline and GSI agreed to consider any engineering report provided by March 1st, 2019. That deadline also passed.
March 4th, 2019 Astro provided the Axon Report at 10:25pm.
March 29, 2019 GSI advised Astro that the engineers retained by GSI (Coldbox) had reviewed the Axon Report and concluded that its recommendations would not remedy the mould issues.
April 4th, 2019 GSI provided “The Coldbox Report” to Astro which recommended extensive repairs which went beyond those suggested in the OXM report. The Coldbox Report raised for the first time the prospect that the floor of the unit could be freezing which could endanger the structural integrity of the building.
May 2nd, 2019 The parties appeared before the court to report that no repairs had been undertaken. Submissions began concerning the applications for an injunction and relief from forfeiture.
Bawden, J.