COURT FILE NO.: CV-18-00602027-0000

DATE: 20191030

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: TARGET PARK (NO. 10) INC., Applicant

AND:

1164757 ONTARIO INC., Respondent

APPLICATION UNDER Rules 14.05(3)(d) and (g) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended and sections 19 and 20 of the Commercial Tenancies Act, R.S.O. 1990 c.L. 7, as amended

BEFORE: Cavanagh J.

COUNSEL: Allan Sternberg and Farhad Shekib, for the Applicant

Ian Perry and Chris Randall, for the Respondent

HEARD: October 28, 2019

ENDORSEMENT

Introduction

[1] The applicant Target Park (No. 10) Inc. (“Target Park”), as tenant, entered into a lease with 1164757 Ontario Inc. (“116”), as landlord, for certain premises located near the Pearson airport at 217 Carlingview Road, Toronto (the “Lease”). The premises were to be used for parking.

[2] In circumstances described more fully in my endorsement, on July 17, 2018, 116 placed chains across the entrance to the leased premises and posted a Notice of Termination by which it notified Target Park that 116 terminates Target Park’s tenancy at the leased premises.

[3] Target Park brings this application for an order (i) declaring that 116 unlawfully terminated the Lease, and (ii) restraining 116 from interfering with its possession and quiet enjoyment of the leased premises. In the alternative, Target Park seeks an order granting relief from forfeiture of the Lease.

[4] 116 opposes the application. It submits that the Lease was lawfully and validly terminated and, in the circumstances, relief from forfeiture should not be granted.

[5] This application came on for hearing before M. J. Brown J. on August 13, 2018 who granted a request by 116 for an adjournment so that it could move to compel answers to undertakings and questions objected to on the cross-examination of the deponent who swore an affidavit in support of Target Park’s application. As a term of the adjournment, M. J. Brown J. made an interim order that Target Park be entitled to re-enter the leased premises and continue to pay monthly rent until the hearing of the application and, should 116 be successful, that Target Park shall vacate the leased premises within 10 business days. This interim order was made without prejudice to any rights 116 may have in regard to any issues relating to this matter (subject to any adjustment of rent for the period of time Target Park was locked out of the leased premises).

[6] Subsection 19(2) of the Commercial Tenancies Act, R.S.O. 1990, c. L. 7 (“CTA”) provides that a right of re-entry or forfeiture for breach of any covenant or condition in a lease, other than a proviso in respect of rent, is not enforceable unless the lessor serves on the tenant a notice that complies with the requirements of this subsection.

[7] The issues on this application are:

a. On July 17, 2018, when 116 posted the Notice of Termination, had Target Park breached Article 13.1(h) of the Lease by allowing the leased premises to become substantially unoccupied for a period of ten consecutive days or more without the consent of 116?

b. If so, did 116’s Notice of Termination comply with s. 19(2) of the CTA such that the Lease was validly terminated?

c. If so, is Target Park entitled to relief from forfeiture under s. 20 of the CTA or s. 98 of the Courts of Justice Act?

[8] With respect to the second issue, I conclude that 116’s Notice of Termination did not comply with s. 19(2) of the CTA and, as a result, the Lease was not validly terminated. Because of the decision I have reached on this issue, it is not necessary for me to decide the other two issues raised on this application.

Evidentiary Background

[9] I set out below the evidentiary background to this application. The evidence in relation to whether Target Park breached the Lease (on the ground that the leased premises had been substantially unoccupied for over ten consecutive days and Target Park had indicated that its place of business had moved) is somewhat contentious, and I need not make findings with respect to contentious facts in dispute. I have not referred to some of the evidence which relates only to whether Target Park would be entitled to relief from forfeiture.

[10] On or about March 16, 2017, 116 and Target Park entered into the Lease. The leased premises comprise an area of approximately 2.3 acres of land adjacent to the Toronto Pearson International Airport. When the tenancy began, Target Park commenced operations as a “park and fly” business using the name PARK2JET shuttling passengers to and from the airport and providing short and long-term parking for their vehicles.

[11] In January 2018, 116 did not receive payment for rent. Beginning on or around May 1, 2018, Frank Bosso, the owner and operator of 116, noticed that the leased premises were becoming substantially unoccupied. Mr. Bosso operates a restaurant immediately to the south of the leased premises. Mr. Bosso’s evidence is that beginning on or around May 1, 2018 he observed that the parking lot was becoming increasingly vacant and no new cars were being brought in. On or about June 1, 2018, Mr. Bosso observed that employees of PARK2JET were restricting access to the parking lot for all incoming vehicles and during the weeks leading up to July 17, 2018, the parking lot was depleted of vehicles and reduced to no more than 13 vehicles in the days leading up to the termination of the Lease. His evidence is that by the end of June 2018, it was apparent to him that Target Park had ceased operations at the leased premises. Mr. Bosso gave evidence that on or about June 19, 2018, he instructed one of his employees to attend at the parking lot to see if he would be permitted to park and he was told that the lot had closed, and they were not accepting new customers. According to Mr. Bosso’s evidence, the employee was offered a coupon from a “park and fly” business that competed with PARK2JET.

[12] In addition to the outstanding rent for January 2018, 116 did not receive rent for the month of July. On July 3, 2018, 116 arrange for its counsel to prepare a notice of termination letter providing Target Park with five days to pay past due rent, three months of accelerated rent and its legal costs. In total, the notice letter demanded payment of $95,628. 116 attempted to arrange for delivery of the letter at the head office of Target Park. When the courier attended at this address, he could not locate a person to whom he could leave the notice letter.

[13] Hercules Modopoulos, Target Park’s C.E.O., provided affidavit evidence in support of this application.

[14] Mr. Modopoulos’ evidence is that in or about the latter part of June, Target Park closed its PARK2JET operations and it was no longer taking on new customers and was waiting to clear the lot in order to transition the leased premises into a traditional parking lot operation. His evidence is that on June 27, 2018 he assured Mr. Bosso that Target Park was not leaving, and the leased premises would continue to be operated as a parking lot. This evidence is contentious. In Mr. Bosso’s affidavit, he states that in the weeks leading up to the termination of the Lease, Target Park did not offer any explanation at all as to why the parking lot was being depleted of vehicles, or why customers were being turned away.

[15] On July 10, 2018, a representative of Target Park delivered a cheque to Mr. Bosso in payment of the July rent. Mr. Bosso asked the representative of Target Park to contact his lawyer.

[16] Mr. Modopoulos provided evidence based on information from Target Park’s in-house lawyer, Lyle Block-Collins, that on July 10, 2018 Mr. Block-Collins spoke by telephone with 116’s lawyer, Ian Perry, and assured him that Target Park was not leaving the leased premises and that the leased premises would continue to be operating as a parking lot. Mr. Modopoulos’ evidence, based on information from Mr. Block-Collins, is that Mr. Block-Collins telephoned Mr. Perry the next day and again assured him that Target Park was not abandoning the leased premises and simply changing its business operations, and it would continue to operate the leased premises as a parking lot. Mr. Bosso’s evidence, based on information provided by Mr. Perry, is that he spoke with Mr. Block-Collins who denied that Target Park was giving coupons to a competing business and who denied that Target Park was moving operations.

[17] Mr. Modopoulos’ evidence is that following these discussions, on or about July 11, 2018, Target Park provided a cheque in payment of the rent for January.

[18] Mr. Basso’s evidence is that on or about July 12, 2018 at 9:00 p.m. he observed the leased premises to be completely unoccupied and there were no employees of Target Park or PARK2JET on the premises. He instructed an employee of 116 to attend at the parking lot and take photographs. These were appended to Mr. Bosso’s affidavit as exhibits. No representative of Target Park was present, and a sign was posted on the office trailer which read “Sorry for the inconvenience, we are moving to a new location, due to that reason we are not accepting any new customers. Thanks.”

[19] Article 13 of the Lease provides that it is an event of default under the Lease where “the Tenant abandons or attempts to abandon the Premises, or the Premises become vacant or substantially unoccupied for a period of ten (10) consecutive days or more without the consent of the Landlord”.

[20] On July 17, 2018, 116 placed chains across the entrance of the leased premises and posted a Notice of Termination which, in the material parts, reads:

TO: TARGET PARK (NO. 10) INC. (“Tenant”)

TAKE NOTICE that the Landlord, 1164757 ONTARIO INC., (“Landlord”) hereby terminates your tenancy of the Leased Premises (“Premises”) located at 217 CARLINGVIEW ROAD, TORONTO, ONTARIO, pursuant to Events of Default under the Lease, namely Article 13.1(h) and 13.1(i), whereby the Premises have been substantially unoccupied for over ten (10) consecutive days and the Tenant has indicated that its place of business has moved.

AND FURTHER TAKE NOTICE that you have five (5) days from this date to remove assets from the Premises or be subject to storage and cost thereafter. The Landlord may elect to dispose of the assets any time after the five (5) days without any further notice to you, and without any benefit to you.

AND FURTHER TAKE NOTICE that the Landlord expressly preserves its rights under your Lease to look to you for all rent and other charges owing at the present time and throughout the balance of the Term of your Lease, and intends to seek recovery of damages incurred by reason of the Landlord losing the benefit of the balance of the Term of your Lease, including, without limitation, the costs of recovering the Premises, solicitor fees, arrears and all future rental payments or deficiency thereof, due under your Lease for the balance of the Term.

[21] Soon after the Notice of Termination was posted, Target Park brought the within application.

Analysis

[22] I first address whether 116 complied with s. 19(2) of the CTA by posting the Notice of Termination. In my analysis, I assume that Target Park breached article 13.1(h) of the Lease, although it is not necessary for me to reach a conclusion on this issue.

[23] Subsection 19(2) of the CTA provides:

A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease, other than a proviso in respect of the payment of rent, is not enforceable by action, entry or otherwise, unless the lessor serves on the tenant a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the tenant to remedy the breach and, in any case, requiring the tenant to make compensation in money for the breach, and the tenant fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.

[24] Target Parks submits that the Notice of Termination does not comply with the requirements of s. 19(2) of the CTA and, as a result, 116’s termination of the Lease and re-entry to the leased premises were invalid.

[25] 116 submits that the breach of the Lease specified in the Notice of Termination crystallized by the passage of time because the leased premises had become vacant or substantially occupied for a period of ten consecutive days or more without the consent of 116. 116 submits that this breach was not capable of remedy. 116 submits, citing Dasham Carriers Inc. v. Gerlach, 2012 ONSC 4797 at para. 31, that the purpose of the notice required by s. 19(2) is to ensure that the recipient has sufficient notice of the claim being made by the landlord to enable it to respond in the way the law requires. 116 submits that a landlord is only required to provide the tenant with reasonable time to remedy a breach of the lease if the breach is capable of remedy.

[26] 116 accepts that notice under s. 19(2) was required in order for the termination of the Lease to be valid. 116 submits that the Notice of Termination complied in all respects with s. 19(2) of the CTA because it (i) specified the breaches complained of, (ii) provided Target Park with five days to remove its property from the premises, and (iii) required Target Park to make compensation in money for the breach. 116 submits, therefore, that Target Park had sufficient notice of the claim being made by 116 to enable it to respond in the way the law requires.

[27] Target Park disputes that the leased premises were left substantially unoccupied for more than ten days, but even if they were, Target Park submits that it could have remedied any ongoing breach of the Lease by taking steps to substantially re-occupy the leased premises.

[28] In Dasham, Price J. held at para. 34, citing Novacrete Construction Ltd. v. Profile Building Supplies Inc., 2000 CarswellOnt 2553 (S.C.J.) and 997484 Ontario Inc. v. 2007479 Ontario Inc. 2008 CarswellOnt 9383; aff’d 2009 ONCA 368 (C.A.), that s. 19(2) requires a landlord to give the tenant a reasonable opportunity to remedy the breach even where the breach is fundamental and constitutes an abandonment of the premises.

[29] I do not accept 116’s submission that the breach upon which it relies was not “capable of remedy” within the meaning of this term as it is found in s. 19(2). I regard a breach of a term of a lease prohibiting a tenant from abandoning the leased premises to be the same, for purposes of the requirement for notice under s. 19(2) of the CTA, as the alleged breach of the Lease upon which 116 relies. A breach of the Lease resulting from the fact that the leased premises were left substantially unoccupied for a period of ten or more consecutive days is not materially different than a breach of a lease that occurs because a tenant has abandoned the leased premises (where the lease prohibits the tenant from doing so). On the authority of Dasham and the cases cited by Price J., a tenant is entitled under s. 19(2) to a reasonable opportunity to remedy a breach based upon abandonment. It follows that Target Park was entitled to a reasonable opportunity to remedy the default alleged by 116 by taking steps to substantially re-occupy the leased premises. The Notice of Termination did not provide Target Park with this opportunity.

[30] Even if 116 is correct that the breach of the Lease upon which it relies was not capable of remedy by Target Park, the Notice of Termination still did not comply with the requirements of s. 19(2).

[31] In 780046 Ontario Inc. v. Columbus Medical Arts Building Inc. (1994), 1994 CanLII 1188 (ON CA), 20 O.R. (3d) 457, the landlord terminated a lease for breach of a covenant to provide financial records without giving notice under s. 19(2) of the Landlord and Tenant Act. The tenant commenced an application for a declaration that the lease was binding and for relief from forfeiture. The Court of Appeal for Ontario described the purpose of s. 19(2) [which was then in the Landlord and Tenant Act and which has the same language as s. 19(2) of the CTA]:

Notice is a protection to the tenant. Its purpose is to warn the tenant that its leasehold interest is at risk and to give the tenant an opportunity to preserve that interest by remedying the breaches complained of and, where necessary by compensating the landlord. Because courts have not looked favourably upon the remedies of re-entry, forfeiture, and termination they have insisted that landlord strictly comply with the notice requirements in s. 19(2) of the Act [citations omitted].

[32] In that case, the landlord had submitted that the breach could not be remedied and that the tenant could not provide adequate compensation for the breach. The Court of Appeal took the landlord’s submission to be that notice was unnecessary. The Court of Appeal held that even if the breach was not capable of remedy, this does not do away with the notice requirement. In support of this conclusion, the Court of Appeal cited the following passage from the decision of Estey C.J.H.C. (as he then was) in Mount Citadel Ltd. v. Ibar Developments Ltd. (1976), 1976 CanLII 770 (ON SC), 14 O.R. (2d) 318 at p. 327:

The notice requirement would seem to apply whether or not the breach is capable of remedy but is not free from doubt. However, this section goes on to state, ... and, in any case requiring the lessee to make compensation in money for the breach ...”, which indicates a legislative intent to make the subsection applicable to all breaches whether capable of remedy or otherwise.

In Mount Citadel, Estey C.J.H.C. held that “[t]he statutory prerequisites to the exercise of right of re-entry apply in my view whether or not the breach is capable of being remedied and thus the plaintiff is required by the statute to give notice in the case of any breach”.

[33] 116 submits that the decision in 780046 v. Columbus is distinguishable because in that case there was no notice given and the breach of the lease was capable of remedy. 116 submits that where the breach is not capable of remedy, a notice under s. 19(2) is still required in order to enable the tenant to respond in the way the law requires, but “prior” notice is not required. As I have noted, 116 submits that the Notice of Termination by which it notified Target Park that it had elected to terminate the Lease complies with the requirements of s. 19(2). I disagree.

[34] Subsection 19(2) clearly provides that the notice must be given before the lease is terminated. Under this provision, forfeiture of a lease for breach of any covenant or condition (other than a proviso in respect of the payment of rent) is not enforceable unless the tenant “fails within a reasonable time thereafter” - that is, after service of the notice - “to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach”.

[35] In 780046 v. Columbus, the Court of Appeal, as part of its analysis of whether giving an invalid notice was fatal to the landlord’s termination of the lease, addressed whether the notice under s. 19(2) could be given by a notice that the landlord elects to terminate the lease. The Court of Appeal cited with approval the following passage from the decision of Masten J.A. in Lucas v. Cut Rate Shoe (1932), 41 O.W.N. 252:

The landlord had not given the notice to the lessee specifying the breach complained of as required by sec. 18(2) of the Landlord and Tenant Act, R.S.O. 1927, ch. 190. The giving of this statutory notice is a condition precedent to re-entry without action and to the right to recover possession of the premises by action. The notice is not an election to exercise the right of forfeiture but is a preliminary statutory requirement for its exercise. Since in this case no notice has been given the lease could not be declared forfeited. [Emphasis added]

The Court of Appeal in 780046 v. Columbus held that the statutory notice must be given before the landlord terminates the lease:

The express language of s. 19(2) indicates that if a landlord proposes to exercise a contractual right of re-entry for breach of a covenant other than a covenant to pay rent, prior notice is mandatory. Judicial authority both in England and in Ontario confirms that a re-entry effected without notice is invalid. [Emphasis added]

The absence of prior notice was a complete answer to the landlord’s position.

[36] In Dasham, a tenant sued its landlord for damages arising from termination of a lease. The tenant contended that the landlord had failed to comply with s. 19(2) of the CTA. The landlord had issued two separate notices of termination of the lease, each of which specified that the lease was terminated immediately. After the first notice, the tenant continued to occupy the leased premises and the landlord accepted payments of rent. The landlord argued that the passage of time from the first notice of termination to the second notice provided the tenant with a reasonable opportunity to remedy its breaches and the notices complied with the CTA. Price J. disagreed that a notice that the lease is terminated complies with s. 19(2) and, at paras. 36 and 38, he gave his reasons:

Informing the tenant that its lease is terminated immediately does not communicate that the tenant may continue to remain in the property with the rights accorded to it by the lease, provided that it remedies the breaches or compensates the landlord for them. Rather, it notifies the tenant that its rights are at an end, and that any steps it takes to remedy the breaches will be regarded only as steps taken to reduce the damages claimed by the landlord.

The notice dated March 3, 2011, does not comply with section 19 (2) of the Act for the following reasons:

(a) It did not require the tenant to remedy the breaches, or to compensate the landlord for the breaches if they could not be remedied. Instead, it set out amounts that the landlord claimed as damages.

(b) It did not provide a reasonable opportunity for the tenant to remedy the breaches. Instead, it provided that the tenancy was terminated effective immediately.

Price J. held that the lease had not been lawfully terminated and he awarded damages to the tenant.

[37] In Chick ‘N Treats Inc. v. Woodside Square Ltd. et al. (1990), 38 O.A.C. 138 (C.A.) the Court of Appeal addressed the question of whether a notice under s. 19(2) always requires the landlord to give notice to the tenant to make reasonable compensation money to the satisfaction of the landlord for the breach. Finlayson J.A. held at para. 6 that this requirement is not mandatory because it would not make sense in a case where the breach is not quantifiable. Finlayson J.A. held that this is a requirement of the notice if the landlord requires compensation in addition to remedying the breach, but it is one that can be waived.

[38] I do not regard the decision in Chick ‘N Treats to apply to this application because in Chick ‘N Treats the landlord did not include in the notice a requirement that the tenant make reasonable compensation in money for the breach. On the application before me, in contrast, 116 relies on the fact that the Notice of Termination required Target Park to make compensation in money for the breach of the Lease to show that 116 complied with the requirements of s. 19(2). The difficulty with 116’s position is that it did not give Target Park reasonable time to make reasonable compensation in money for the breach. This is required by s. 19(2). I also note that Chick ‘N Treats was decided several years before the decision in 780046 v. Columbus where the Court of Appeal held that “prior notice [under s. 19(2)] is mandatory”.

[39] Under s. 19(2) of the CTA, 116 was required to give Target Park prior notice that it proposes to exercise a right to terminate the Lease and re-enter the leased premises. Pursuant to the Notice of Termination, 116 did not give Target Park a reasonable opportunity to remedy the alleged default and, even if this default was not capable of remedy, 116 did not give Target Park a reasonable period of time to make reasonable compensation in money to 116’s satisfaction for the breach. The Notice of Termination was notice of 116’s election to terminate the Lease. It was not a notice which complies with s. 19(2) of the CTA.

[40] Since no notice was given in compliance with s. 19(2) of the CTA, the Lease was not validly terminated.

[41] Given my decision with respect to this issue, it is not necessary for me to decide the other two issues which are raised on this application.

Disposition

[42] For the foregoing reasons, the application is granted, and a declaration shall issue that 116’s purported termination of the Lease on July 17, 2018 is invalid.

[43] The parties agreed that the successful party would be awarded costs fixed in the amount of $30,000. I fix costs to be paid by 116 to Target Park in the amount of $30,000.

Cavanagh J.

Date: October 30, 2019