Court File and Parties

COURT FILE NO.: CV-19-00612878 DATE: 20190130

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jungle Lion Management Inc., Plaintiff AND: London Life Insurance Company and 1213763 Ontario Inc., Defendants

BEFORE: Carole J. Brown, J.

COUNSEL: P. Wardle and E. Rankin, for the Plaintiff W. Kaufmann and D. Peat, for the Defendants

HEARD: January 29, 2019

ENDORSEMENT

[1] The moving party plaintiff, Jungle Lion Management Inc. ("JLM" or "the tenant") seeks a quia timet interim and permanent injunction to prevent the responding party defendants ("the defendant" or "the Landlord") from terminating the lease and re-entering the premises.

[2] The plaintiff is the tenant of premises located at 33 Yonge St., Toronto, pursuant to a lease dated August 4, 2004, originally entered into by the Landlord with another party and subsequently assigned to JLM on April 10, 2017. The lease was for 16 years. The Landlord is in possession of a deposit of $270,000 which secures all of JLM's obligations under the lease. The premises comprise 7700 ft.² and have been used for some time as a restaurant. JLM bought out the previous tenant for $380,000, invested $3 million in renovations to the restaurant, hired and trained staff and opened as Pick 6ix on February 8, 2018. The restaurant is an upscale sports bar with private event spaces. It can seat 307 people and employs an average of 150 people, including temporary and permanent staff.

[3] The restaurant operated successfully from its opening to August 7, 2018, when a drainage pipe in the ceiling of the restaurant burst, resulting in extensive flooding and damage. The burst pipe was not the fault of either party. Due to the damage, extensive restoration work was required, including all of the following, which needed to be replaced: all of the flooring (7700 ft.²), walls, electronic equipment, a portion of the furniture and kitchen equipment, the ceiling needed to be repaired and certain marble installations needed to be replaced. Also due to the extensive damage, and the inability to continue to operate until repairs were completed, all employees had to be terminated.

[4] On August 24, 2018, the Executive Director of the restaurant, Mark Allen, wrote to the landlord to provide an estimated reopen date of early February 2019. By late September, the plaintiff and its insurer had agreed on amounts to be paid out for the damage and restoration work. The insurer returned the premises to the tenant in early October. Mr. Wardle, for the moving party tenant concedes that between October and early December, the tenant was not proceeding with repairs to the premises with alacrity. During that time, there were also discussions regarding bringing in a management company to manage the restaurant.

[5] By December 17, the Landlord had become impatient as regards the tenant's progress toward reopening the restaurant and wrote, on December 17, 2018, that the abatement of rent, which had been accorded to the plaintiff from September would cease on January 7, 2019 and that Base Rent would be due and payable on that date. On January 7, 2019, JLM paid the Landlord the Base Rent. On January 8, 2019, the Landlord wrote to the tenant advising that if JLM failed to repair the premises and reopen the business on or before January 31, 2019, the Landlord would take whatever action it considered appropriate under the terms of the lease or at law, including its right to re-enter the premises and terminate the lease. In that context, the Landlord cited Lease Sections 8.1 (tenant requirement to make all needed repairs and replacements with due diligence and dispatch) and 7.1 (tenant required to use and occupy the premises continuously and actively for the Pick 6ix restaurant. This was the first notice that JLM had received setting a deadline for reopening the restaurant. On January 9, 2019, the Landlord approved a work permit with respect to restoration work commencing on January 8, 2019 through March 8, 2019. The work to be completed included "tiling/flooring works being done to repair floor as a result of the flood"; "touch up/fixing of drywall"; "finish carpentry work". Following completion of the work, which is currently estimated to be done by the end of January, staff is to be trained, and the restaurant marketed and readied to reopen at the outside date of April 1.

[6] On January 11, 2019, JLM wrote to the Landlord, seeking its consent pursuant to the lease, for a change of control of JLM to add three new shareholders, which would have allowed JLM to strengthen the operation of the restaurant and aid in accelerating its opening. On January 14, 2019, the Landlord responded by advising of the information required before it would grant its consent. In that letter, it reiterated the deadline it had imposed of January 31, 2019 for reopening of the restaurant. On January 16, Mr. Wardle, on behalf of JLM, wrote to the Landlord requesting confirmation that it would not take any steps regarding the lease or re-entry while JLM completed its efforts to reopen. On January 17, 2019, Mr. Kaufmann, counsel four the Landlord, wrote refusing to provide such confirmation and stated that the Landlord did not have confidence that JLM was committed to re-opening. Hence, this motion was brought.

[7] On December 26, 2018, Debbie Goncalves was hired by the plaintiff to oversee construction, ensure that the contractors act with diligence and ultimately ensure a smooth opening process for the restaurant. Ms. Goncalves provided an affidavit dated January 21, 2019 in support of this motion in which she stated the following:

(1) When she arrived, the construction had commenced and was progressing;

(2) There have been some delays to the repairs due to difficulty obtaining some supplies, including stainless steel and marble;

(3) Renovation of the patio space has been completed; flooring has been installed; the bathrooms have been retiled and grouted;

(4) During the week of January 21, the following work was to be done: plumbing connected; gas lines connected; washroom vanities installed; baseboards installed;

(5) Hiring of new servers, bartenders and service personnel was being done and, once hired, will be trained.

[8] It is estimated that the restaurant will reopen to the public on April 1, 2019.

The Lease

[9] The relevant provisions of the lease as regards this motion and the circumstances involved are as follows:

Article 8, Section 8.2 – Tenant's Repairs

(a) The tenant shall, at all times during the term, at its sole cost, keep and maintain in good order, first class condition and repair… and shall make all needed repairs and replacements with due diligence and dispatch…

Article 8, section 8.4 – Abatement and Termination

If there is any damage to the leased premises…

(i) unless the damage was caused by the intentional act or negligence of the tenant or an assignee, subtenant, concessionaire, licensee or other person conducting business on or from the leased premises or any person for whom the tenant is responsible at law, from the date of the occurrence of the damage until the leased premises are again reasonably capable of use and occupancy as aforesaid, the basic rent payable under section 4.1 shall abate until at least a substantial part of the leased premises is again reasonably capable of use and occupancy for the purpose aforesaid…

(ii) … Any abatement of rent to which the tenant is otherwise entitled hereunder shall not extend later than the time by which, in the reasonable opinion of the landlord, repairs by the tenant ought to have been completed with reasonable diligence;…

Article 12 – Limitation of Liabilities

Section 12.1 – Application of Unavoidable Delay

Except as herein otherwise expressly provided, if and whenever and to the extent that either the landlord or the tenant shall be prevented, delayed or restricted in the fulfilment of any obligation hereunder in respect of the supply or provision of any service or utility, the making of any repair, the doing of any work or any other thing (other than the payment of rent or other monies due) by reason of unavoidable delay, the time for such fulfilment shall be extended during the period in which such circumstance operates to delay the fulfilment and the other party to this lease shall not be entitled to compensation for any inconvenience, nuisance or discomfort thereby occasioned.

Section 12.2 – Waiver

If the landlord shall overlook, excuse, condone or suffer any default, breach or non-observance by the tenant of any obligation hereunder, this shall not operate as a waiver of such obligation in respect of any continuing or subsequent default, breach or non-observance, and no such waiver shall be implied but shall only be effective if expressed in writing. The subsequent acceptance of rent by the landlord will not be considered to be a waiver of the preceding breach by the tenant of a term, covenant or condition of this lease regardless of the knowledge of the landlord of the preceding breach at the time of acceptance of the rent.

Article 14 – Remedies of Landlord on Tenant's Default

Section 14.2 – Right to Re-Enter

If the tenant fails to pay rent on the date it is due, or to observe or perform any of the other terms, conditions or covenants of the lease to be observed or performed by the tenant, the landlord in addition to any other right or remedy it may have, may re-enter the leased premises and may remove all persons and property from the leased premises and the property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of the tenant, all without service of notice or resort to legal process and without being considered guilty of trespass or becoming liable for loss or damage occasioned thereby provided that otherwise than in the case of default in the payment of rent, notice has been given by or on behalf of the landlord to the tenant specifying the default entitling it to such re-entry and the date which is the latter of: ten (10) days from the giving of such notice; or, if the tenant has begun with diligence and dispatch to cure such default, the date upon which the tenant fails to continue to prosecute and complete the same with diligence, has passed.

"Unavoidable Delay" is defined as "any cause beyond the control of the party invoking any right or privilege conferred by unavoidable delay which prevents the performance by such party of any obligation hereunder, and not caused by its default or act of commission or omission and not avoidable by the exercise of reasonable effort or foresight by such party.

[10] The definition includes, as examples of Unavoidable Delay, flood. It also includes shortage of materials and supplies.

The Positions of the Parties

The Position of the Moving Party

[11] It is the position of the moving party, JLM, that all steps of the tripartite test set forth in RJR-Macdonald, infra, have been met, such that the injunction should be granted.

[12] It is the position of the moving party that there has been no breach of the lease on the part of the tenant. The flood was recognized, in the lease, as resulting in "unavoidable delay", at least until the premises were returned by the insurer to the tenant in early October. After that, two months passed in which the tenant was contemplating reconfiguring the restaurant to a sushi bar and seeking more investors or shareholders for the business. During this time, the moving party conceded that it may not have been moving with sufficient due diligence. However, as soon as the letter was received from the Landlord on December 17, JLM took immediate steps to proceed to renovations, by hiring Debbie Goncalves to oversee the renovations, which she continues to do.

[13] It is the position of the moving party that the Landlord did not provide proper notice of default to the tenant pursuant to the terms of the lease. It is further the position of the tenant that any default was waived by the Landlord by virtue of its accepting payment of the Base Rent by the tenant the day before it sent the purported "Notice" and by virtue of the Landlord’s giving its consent and approval to the work permit form on the day after "notice" was given.

[14] It is the position of the moving party that JLM will experience irreparable harm if the injunction is not granted, and will lose its business.

[15] It is further the position of the moving party that the balance of convenience favours the tenant.

The Position of the Responding Party

[16] It is the position of the responding party, Landlord, that the three steps of the tripartite test set forth in RJR-McDonald, infra, have not been met.

[17] It is the position of the Landlord that there was a fundamental obligation pursuant to the lease to effect any repairs with due diligence, which was not done in the circumstances of this case. Mr. Kaufmann accepts that there was unavoidable delay, due to the flood, until early October, when the insurer handed the rented premises back to the tenant. Mr. Kaufmann, for the Landlord, submits that the breach is not trivial, but is fundamental to the lease and that said breach will not be rectified by the imposed deadline of January 31, 2019. It is the position of the Landlord that as at January 7, the tenant was in default, as the restaurant should have been operating by that time. Mr. Kaufmann, for the Landlord, maintains that the breach continues and will continue until the restaurant reopens and relies on 1383421 Ontario Inc. v Ole Miss Place Inc., 2003 CanLII 57436 (ON CA), 67 O.R. (3d) 161 and Attorney General for Newfoundland et al v Jardine et al, 1932 CanLII 421 (UK JCPC), 1932 CarswellNfld 1, [1932] 1 W.W.R. 548. It is the position of the Landlord that there was no waiver of the tenant's breaches, either by virtue of accepting the Base Rent or by approving the work permit on January 9, which work was to extend through March 8. It is the position of the Landlord that it had to agree to the work permit, as work had to continue through the deadline it had imposed on the tenant, namely January 31.

[18] As regards irreparable harm, it is the position of the responding party that there will be no harm experienced by the plaintiff as the restaurant is not operating, there was no business and no employees. Alternatively, if there was harm, damages are an adequate remedy as there is currently no ongoing business. The issue, at that juncture, would be the value of a closed business if termination were improperly affected.

[19] It is the position of the Landlord that the tenant did not demonstrate an interest in continuing operation of the restaurant and was only trying to preserve the lease. The Landlord's concern is that the tenant was doing the minimum to preserve the lease. It is the concern of the Landlord that the tenant will continue to delay opening the restaurant.

The Law

[20] A quia timet injunction is awarded where there is imminent harm. It has been described as "an illustration of the rule that prevention is better than cure": see Sharpe RJ Injunctions and Specific Performance, Loose leaf Edition, Thomson Reuters, November 2017 s 1.680. Granting of a quia timet injunction requires a high degree of probability that the harm will in fact occur: Operation Dismantle v Canada, 1985 CanLII 74 (SCC), [1985] 1 SCR 441.

[21] RJR MacDonald sets forth the test for whether an injunction should be granted. It must be established (i) that there is a serious issue to be tried, (ii) that the plaintiff will suffer irreparable harm if the injunction is not granted; and (iii) that the balance of convenience favours the granting of the injunctive relief sought: RJR MacDonald Inc. v Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 SCR 311. Where the result of a motion for an interlocutory injunction would likely amount to a final decision in the case, the courts have held that a party seeking injunctive relief must show that it has a strong prima facie case: GDL Solutions Inc. v Walker et al 2012 ONSC 4378 at paragraph 27; MTY Tiki Ming Enterprises v Boundris, 2016 ONSC 3290 at paras 24-31. In the circumstances of this case, the parties agree that the strong prima facie test is applicable.

Is There a Strong Prima Facie Case

[22] I am satisfied that the plaintiff/moving party has a strong prima facie case.

[23] There are numerous provisions of the lease which have been referenced and would require determination as to whether they have been breached or not. Due to the flood, there was clearly unavoidable delay until the first week of October. While the plaintiff concedes that the tenant did not resume restoration of the restaurant with due diligence initially, as soon as it received the first letter from the Landlord in December 2018, it took steps, with dispatch and due diligence, to restore the restaurant. Indeed, the restoration work is nearing completion. I do not accept the defendant's expressed concerns that the defendant is doing only the minimum to preserve the lease and will continue to delay opening. The evidence suggests otherwise; that JLM is working with due diligence and dispatch to complete the work. 'There is considerable question as to whether the "Notice" provided by the Landlord complies with the notice provisions of the lease. In this regard, the tenant relies on 780046 Ontario Inc. v Columbus Medical Arts Building Inc., 1994 CanLII 1188 (ON CA), 1994 CarswellOnt 739. The Notice would appear questionable as regards compliance with the lease. Further, in this regard, it would appear that the Landlord’s stipulated deadline for reopening is not reasonable, given the history of estimates for reopening from August 2018, and the work which is ongoing. I do note that JLM has moved with due diligence and has taken significant steps to repair and renovate since the January 8 letter. Further, there is an issue as regards whether there was waiver on the part of the Landlord, considering his contradictory actions before and after the January 8 letter regarding termination of the lease. 1328773 Ontario Inc. o/a Angling Outfitters v 2047152 Ontario Limited, 2013 ONSC 4953. The post-notice approval appears problematic as regards waiver.

[24] I am of the view that the first step of the tripartite test has been met. In any event, I do not find the tenants conduct to be of sufficient gravity to entitle the Landlord to terminate the lease: see Clublink Corporation v Pro-Hedge Funds Inc., 2009 Carswell Ont 3719.

Will the Plaintiff Suffer Irreparable Harm If the Injunction Is Not Granted?

[25] Under the second part of the tripartite test, it must be determined whether the litigant who seeks the interlocutory injunction would, unless the injunction is granted, suffer irreparable harm. As indicated in RJR-Macdonald, supra, the only issue to be decided is whether refusal to grant relief could so adversely affect the applicants' own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application. Irreparable refers to the nature of the harm suffered rather than its magnitude and is harm which cannot be quantified in monetary terms or which cannot be cured usually because one party cannot collect damages from the other. Examples of the former, as set forth in the case of RJR-Macdonald, at paragraphs 63 and 64, include where one party would be put out of business by the court's decision or would suffer permanent market loss or irrevocable damage to its business reputation.

[26] In the event that an injunction is not granted, it appears likely that the Landlord will terminate the lease and re-enter the premises. This would result in the plaintiff's loss of its restaurant business. It has expended well over $3 million to purchase the restaurant business, renovate the premises initially and to restore the premises following the flood. At this juncture, based on the evidence established in the affidavit of Ms. Goncalves, the renovations are almost completed, the employees are being hired, and final work prior to training of the employees and staff is almost finished. Based on the initial estimates of time for renovations, the restaurant will open April 1, at the latest, two months later than the January 31 deadline stipulated by the Landlord, but approximately six weeks after the estimate of the plaintiff.

[27] I am satisfied that the plaintiff will experience irreparable harm if the injunction is not granted, as it will lose its business. I am satisfied that the second part of the tripartite test has been met.

Balance of Convenience

[28] In my view, the balance of convenience favours the plaintiff. The plaintiff will lose its business if the injunction is not granted. The defendant continues to be paid its rent. The defendant has not pointed to, nor quantified any monetary damage that would result to it from the injunction. The restaurant is slated to open by April 1, 2019, i.e. at most a 60 day delay.

[29] I accept that the Landlord wanted a visible, upscale restaurant in that location, and that repairs have taken longer than anticipated and longer than they probably should have, such that the space is still dark and not operating. However, while the tenant had originally contemplated a re-opening date of early February and had notified the Landlord of that in August, and the Landlord has now given a deadline of January 31, 2019, the estimated time for reopening is now April 1, latest. I do not find this short delay of sufficient gravity to entitle the Landlord to terminate the lease: see Clublink, supra.

[30] I am satisfied that, in all of the circumstances of this case, the status quo should be preserved.

[31] I grant the interlocutory injunction through the end of business April 2, 2019.

Forfeiture

[32] The moving party submits that if JLM did breach the lease, it should be relieved from forfeiture pursuant to the Commercial Tenancies Act, RSO 1990, c L 7 s 20. The respondent argues that if relief from forfeiture is considered, the tenant should be put on strict terms, as the landlord does not want another date to be missed.

[33] While I have granted the interim injunction through the end of business April 2, 2019, if I am wrong as regards the alleged breaches, I am satisfied that the tenant should be relieved from forfeiture. The courts have recognized that forfeiture is a very serious remedy that should be avoided where appropriate, unless the tenant's behaviour has been "persistent, substantial or reprehensible": Beaver Fuels Management Ltd. V Baker's Dozen Holdings Corp., 2006 CarswellOnt 3302; 1328773 Ontario Inc. v 204-7152 Ontario Ltd., 2013 ONSC 4953.

[34] Before granting relief from forfeiture, the court must consider three criteria, as follows:

(a) the conduct of the applicant and gravity of the breaches;

(b) whether the object of the right of forfeiture in the lease was essentially to secure the payment of money; and

(c) the disparity or disproportion between the value of the property forfeited and the damage caused by the breach.

Greenwin Construction Co. v Stone & Webster Canada Ltd. (2001), 50 OR (3d) 345.

[35] In the event that JLM did breach the lease, said breach is not substantial. The court is entitled to consider the length of time the breach subsisted, which in this case is not greater than one or two months delay, regardless of which lease provision is found to have been breached: Koumoudouros v Marathon Realty Co. 1978 CarswellOnt 1252. In the case of North York Family Physicians Holding Inc. v 1482241 Ontario Ltd., 2011 ONSC 1773, var'd 2012 ONCA 36, it was held that where, inter alia, (i) the tenant had continued to pay the rent owing on a lease, and (ii) the lease was only in the second year of a 10 year term, relief from forfeiture was warranted. I am satisfied that those factors are also present in this case as JLM continues to pay rent on a lease which has barely begun and has over 14 years remaining.

[36] Given all of the above, I agree with the submissions of Mr. Wardle for JLM that the forfeiture of the premises to the Landlord, after JLM has invested over three million dollars, is a significantly disproportionate response to JLM's alleged breaches.

[37] I would grant the release from forfeiture through the end of business, April 2, 2019.

Costs

[38] Both parties have provided their bills of costs. Costs are generally awarded to the successful party, and I find no reason to deviate from that principle in this case.

[39] Significant legal issues were raised in this injunctive motion. The issues were significant to the moving party, which risked losing its business absent the granting of an injunction. The materials of both parties were of great assistance.

[40] I am satisfied that the successful moving party, JLM, should have its costs on a partial indemnity basis. Its costs plus HST amount to $23,548.64, with disbursements of $1,522.45, for a total of $25,071.12, which is to be paid forthwith by the defendants. I am satisfied that this amount is reasonable.

C. J. Brown J.

Date: January 30, 2019