Overview

[1] This was a summary trial between a landlord and tenant, brought under r. 76 of the Rules of Civil Procedure, R.R.O., 1990, Reg. 194. The central dispute between the parties is whether or not they entered into a lease on more than a month-to-month basis. The Plaintiffs, who are the landlord, submit that they had entered into a five-year lease, although it had not been finalized in writing. They submit in the alternative that the lease was renewed on a yearly basis. The Defendant tenant submits that there was no agreement to a five-year lease and, instead, by the time he gave notice of vacating the premises, the lease was month-to-month. The question for me is whether the terms between the parties were sufficiently certain that they constituted an agreement between the parties for either a five-year or annual lease.

[2] In determining that question, it also will be relevant for me to consider the parties to any lease. The Plaintiffs submit that the lease was entered into with the Defendant, Mr. Conte, carrying on business as JC Integrated Solutions Inc. (“JC Integrated”). Mr. Conte submits that any lease was with the corporation JC Integrated and there is no basis for him to be named personally in this action.

[3] The premises in issue is an industrial building that is used as rental property. On January 18, 2008, Mr. Conte and his then-company, JC Colonial Inc. (“JC Colonial”) entered into a written lease agreement to sub-lease approximately 1500 square feet in the building from a company called Allied Reclamation Services Inc. (“Allied"), which was a tenant in the building. This first lease agreement was not overly formal. It was only approximately half a page long, but it did set out the key terms of the lease, including the rent, the term of the lease, and a description of the space. The first provision of the lease described the parties to the lease as Allied, the “Sub-landlord” and JC Colonial, the “Tenant.”

[4] The document was signed for the tenant by “J.C. Colonial Inc. Jules Conte” and for the landlord by “Allied Reclamation Services Inc.”. I will refer to this agreement as the Original Lease Agreement.

[5] After the expiry of the Original Lease Agreement, Mr. Conte’s company continued leasing space from Allied. In or around February 2009, Mr. Conte took on an additional 1,000 square feet of space.

[6] The parties on both sides of the leasing arrangement changed over time. While the original landlord was Allied, in August 2011, Allied was sold to Stericycle Expert Solutions Ltd. (“Stericycle”). At that time, the building was owned by the three Plaintiffs. There was a connection between the Plaintiffs and Allied in that the Chief Financial Officer of Allied, Sam Berkel, was also the President of the Plaintiff 2163869 Ontario Ltd (“216”). Around the time of the sale of Allied to Stericycle, Mr. Berkel advised Mr. Conte that all monthly rental payments should be made to 216.

[7] Meanwhile, in March 2011, Mr. Conte incorporated a new company, JC Integrated Solutions Ltd. Both JC Colonial and JC Integrated are corporations incorporated pursuant to the laws of Ontario. Mr. Conte is the sole officer and director of both JC Colonial and JC Integrated. Starting in or around mid-2011, all rental payments due for the rental of the back-east unit were drawn from JC Integrated’s bank account. Therefore, by 2012, JC Integrated was making rental payments to 216.

[8] A further change to the arrangements between the parties occurred when, in or around 2012, Mr. Berkel advised Mr. Conte that he would have to vacate the back-east unit of the building, as Stericycle would require the space. Mr. Berkel suggested that Mr. Conte could move to a different space in the building, the back central unit. On October 31, 2012 Mr. Berkel sent Mr. Conte an e-mail setting out the proposed terms of that lease.

[9] After moving into the back central unit, Mr. Conte erected a makeshift partition wall and conducted other leasehold improvements, which he says cost approximately $5,000 in materials. Subsequently, in June 2014, the Plaintiffs constructed a more permanent partition wall between Mr. Conte’s unit and the Stericycle space.

[10] By letter dated July 3, 2014, Mr. Conte wrote to the Plaintiff, Mr. Krieser, who was one of the owners of the building, to provide notice that JC Integrated would not be continuing the lease agreement and would be relocating in August 2014. The Plaintiffs were able to lease the space to a new tenant starting in September 2014. They claim damages for two weeks of lost rent and other out-of-pocket expenses that they attribute to what they consider to be Mr. Conte’s breach of the lease agreement with them.

Did the parties enter into an enforceable lease agreement?

[11] The only issue I need to address is whether the parties entered into an enforceable agreement for a long-term lease. In my view, they did not. To be valid, a lease agreement must show (1) the parties, (2) a description of the premises to be demised, (3) the commencement and (4) duration of the term, (5) the rent, and (6) all of the material terms of the contract not being matters incident to the relation of landlord and tenant including covenants, exceptions or reservations: Canada Square Corp. et al. v. VS Services Ltd et al, (1981) O.R. (2d) (C.A.), at para. 21. Further, even if the parties intended to enter into a contract, if the essential terms of the alleged contract lack certainty, either because they are vague or because they are obviously incomplete, the result will not be a binding contract: Canada Square, at para 30.

[12] In addition, pursuant to the Statute of Frauds, R.S.O. 1990, c. S. 19, a lease agreement that is not in writing generally will not be enforceable. Section 2 of the Statute of Frauds provides:

Subject to section 9 of the Conveyancing and Law of Property Act, no lease, estate or interest, either freehold or term of years, or any uncertain interest of, in, to or out of any messuages, lands, tenements or hereditaments shall be assigned, granted or surrendered unless it be by deed or note in writing signed by the party so assigning, granting or surrendering the same, or the party’s agent thereunto lawfully authorized by writing or by act or operation of law.

A. No Certainty of Terms

[13] I conclude that in this case the parties did not have certainty of terms with respect to most of the key terms of the lease. Although some terms or proposed terms of the lease were set out in the e-mail from Mr. Berkel to Mr. Conte dated October 31, 2012, I do not consider the email to provide certainty on the key terms. Indeed, Mr. Berkel described that email in his testimony as an “email of understanding.” In his testimony, Mr. Krieser acknowledged that when Mr. Conte moved into the back central unit, a lease was “being prepared,” but first they needed to know how much space the major tenant, Stericycle, needed.

[14] The October 31, 2012 e-mail reads as follows:

Hi Jules

We need to finalize on the space in the back. We discussed you taking half of it. Rent would be $5.00 plus $2.30 taxes plus approx. $0.70 TIM. Which brings it to $8.00 per foot. We would pay you an agreed upon price per month for 12 months for cutting the grass and plowing the snow. We could get rates from similar companies and pay you the same as someone would normally charge.

If you use 3000 sq ft the cost would be $8.00 x 3000 sq ft + $24,000 per year or $2,000 per month less the grass cutting and snow removal. Let me know so we can finalize, before December.

[15] This e-mail does not provide any certainty with respect to the space to be leased by Mr. Conte’s company. While the e-mail makes reference to rent in the amount of $2,000 per month for 3,000 square feet, JC Integrated only ended up occupying approximately 1400 square feet and making rental payments in the significantly lesser amount of $933.00 plus HST per month. Further, although around this time the parties verbally agreed that Mr. Conte would occupy what was described as the “back central unit,” Mr. Krieser and Mr. Berkel both testified that they did not put up a wall at the time Mr. Conte moved to the back central unit because they first needed to know how much space the major tenant, Stericycle, needed. The Plaintiffs did not erect the more permanent wall delineating Mr. Conte’s space until June 2014, after Stericycle had finalized its space needs.

[16] Second, the term of the lease was not certain. Both of the Plaintiffs’ witnesses, Mr. Krieser and Mr. Berkel, testified that at the time the parties agreed for Mr. Conte to move into the back central unit, they agreed to a five-year lease. They testified that Mr. Conte requested a five-year lease at that time, and that a month-to-month lease would not make any business sense. Meanwhile, Mr. Conte’s evidence was that the lease at the time he moved was on a month-to-month basis. He acknowledged that he had requested a five-year lease but understood that no five-year lease had been finalized.

[17] I note that the e-mail Mr. Berkel sent to Mr. Conte on October 31, 2012 did not establish a term. It could be read to suggest that the lease would be on an annual basis, as it made reference to yearly rent of $24,000 and to a price “for 12 months” for cutting the grass and plowing the snow. In addition, the Plaintiffs point out that Mr. Conte provided them with post-dated cheques, suggesting that he did not understand the lease to be on a month-to-month basis. The problem with this interpretation of the e-mail is that none of the witnesses testified that they understood the lease to have been entered into on a yearly basis. In addition, while it appears that Mr. Conte provided some post-dated cheques, the cheques for 2014 do not appear to be post-dated.

[18] If the parties had agreed on a five-year lease, as submitted by the Plaintiffs, it also is unclear when the five-years started. If it was as of the time JC Integrated moved into the back central unit, I return to the problem that the space was not finalized at that point (until Stericycle established its needs). In addition, in June 2014, when the space was finalized and the partition wall erected, the Plaintiffs asked their lawyer to prepare a lease with Mr. Conte. The draft lease, which was dated June 17, 2014, was never provided to Mr. Conte, but was produced by the Plaintiffs in this action. That draft provides for a term of five years and two months, with a commencement date of July 1, 2014. The proposed term of this draft lease, combined with its having been drafted after Stericycle’s space was finalized, confirms my view that the October 31, 2012 e-mail represented an intention to enter into a five-year lease at a later date, but was not itself a five-year lease.

[19] The Plaintiffs submit that Mr. Conte’s leasehold improvements to the space, as well as their own investment in a partition wall, are evidence that a longer-term lease was in place. The problem with the Plaintiffs’ reliance on the partition wall is that the lease it entered into with Stericycle also required it to install the partition wall. Mr. Conte suggests that, without the partition wall, he was required to enter into his own space through Stericycle’s space, which raised security concerns for Stericycle. The Plaintiffs’ evidence is that Mr. Conte had requested a wall for his own security. I accept that Mr. Conte did request that the Plaintiffs erect a wall. However, I also accept that the wall was at least partially for the benefit of Stericycle, given that it was a requirement in their lease. Overall, the evidence related to the wall and other leasehold improvements does not outweigh my view that, although the parties intended to enter into a five-year lease, they had not yet done so.

[20] Finally, I consider the terms of the alleged lease to be uncertain because the parties to the lease are not clear. The Plaintiffs submit that the lease was between them, as the owners of the building, and both Mr. Conte and his company, JC Integrated. They point out that the name of Mr. Conte’s business changed from JC Colonial to JC Integrated, but at all times they understood that they also were dealing with Mr. Conte personally. Mr. Conte submits that his dealings with the landlords were always on behalf of first JC Colonial and then JC Integrated. He points out that the commercial space was for his companies, that the cheques were drawn on their accounts, and that he did not personally guarantee any obligation on behalf of one of his companies under a lease agreement.

[21] In my view, the party the Plaintiffs were dealing with was uncertain. Although in the Original Lease Agreement Jules Conte’s name appeared at the bottom beside JC Colonial, the “Tenant” was defined in the agreement as JC Colonial only. Moreover, that lease was with a different landlord altogether (Allied). In addition, from the outset, the cheques on behalf of the tenant were always drawn from a corporate account, though that corporation changed over time. Still, by the time of Mr. Conte’s move into the back central unit, his rent payments were all on behalf of JC Integrated. In my view, it is not clear that the parties understood the tenant to include Mr. Conte personally.

B. Any Agreement Unenforceable under the Statute of Frauds

[22] In light of the above, I conclude that the parties intended to agree, but had not entered into a five-year lease agreement. I also am of the view that any longer-term lease between the parties would not be enforceable in any event pursuant to s. 2 of the Statute of Frauds. It is clear that any agreement between the parties was not in writing, particularly given that the October 31, 2012 e-mail does not contain the key terms of an agreement. The Plaintiffs submit, however, that acts of “part performance” of an agreement may save it from the operation of s. 2.

[23] To establish part performance, four requirements must be met. They are set out in Sigrist et al. v. Keri McLean et al., 2011 ONSC 7114, at para. 81 as follows:

a. The performance must be referable to the contract;

b. The acts of performance must be acts of the Plaintiff;

c. The contract must be one for which the law would grant specific performance if it had been properly evidenced in writing; and

d. There must be clear and proper evidence of the existence of the contract.

[24] With respect to the second requirement, I note that the Court of Appeal has clarified that the acts of both parties may be considered in determining whether sufficient acts of part performance take an alleged agreement outside the operation of the Statute of Frauds: Erie Sand and Gravel Ltd. v. Seres’ Farms Ltd, 2009 ONCA 709, at para. 75.

[25] With respect to the requirement that the performance be referable to the contract, the acts must be unequivocal. They must have been in relation only to the agreement relied upon: Erie Sands, at paras. 86-88; Lako v. Whiting Roll-Up Door Manufacturing Ltd., [1991] O.J. No. 1546 (Gen Div.), at p. 4.

[26] Here, the requirements of part performance are not met. The issue of specific performance was not argued before me in any detail, but the Plaintiffs are not seeking specific performance, and I do not see how it would be appropriate in this case. Regardless, as already discussed above, there is no clear and proper evidence of the existence of the contract in this case. Also as discussed above, I do not consider the performance to be unequivocally referable to the contract. The erection of the wall was at least partly for the benefit of Stericycle. The other alleged acts of partial performance may have been connected to an intention to agree but they are not unequivocally connected to a five-year lease.

Disposition

[27] Given that the parties had not entered into a long-term lease agreement, their arrangement at the time Mr. Conte gave notice of vacating the premises was on a month-to-month basis. Mr. Conte provided the Plaintiffs with notice a month before vacating and therefore met any notice obligation. He was not in breach of the agreement between the parties. Therefore, the action is dismissed.

Costs

[28] If the parties are not able to reach agreement with respect to costs, they may provide me with written submissions on costs of not more than three pages (not including attachments). The Defendant’s submissions shall be provided within 14 days of the date of this decision. The Plaintiffs will then have a further 7 days to provide their submissions. The submissions should be sent by e-mail to my judicial assistant Anna Maria Tiberio at annamaria.tiberio@ontario.ca.

O’Brien, J.

Released: October 8, 2019

COURT FILE NO.: CV-14-518069

DATE: 20191008

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

1205031 Ontario Inc., 2163869 Ontario Ltd., and George Krieser

Plaintiffs

– and –

Jules Conte c.o.b. JC Integrated Solutions Ltd.

Defendant

REASONS FOR JUDGMENT

O’Brien, J.

Released: October 8, 2019

1205031 Ontario Inc. v. Conte, 2019 ONSC 7443

Case Summary

Overview

Did the parties enter into an enforceable lease agreement?

A. No Certainty of Terms

B. Any Agreement Unenforceable under the Statute of Frauds

Disposition

Costs

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 2

Legal Tests 2

Legislation 2