COURT FILE NO.: CV-20-641129
DATE: 20200611
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE SECOND CUP LTD. and 2734524 ONTARIO INC.
Plaintiffs
– and –
2410077 ONTARIO LTD., WILLIAM MANDELBAUM, THE BASEMENT ON DAVENPORT INC., ALEX NIKTASH and 1435501 ONTARIO INC.
Defendants
Ian N. Roher and Dylan Baker, for the Plaintiffs
Jonathan Piccin, for the Defendants 2410077 Ontario Ltd. and William Mandelbaum
No one appearing for the Defendants, The Basement on Davenport Inc., Alex Niktash and 1435501 Ontario Inc.
HEARD: June 5, 2020
Kimmel J.
REASONS FOR judgment
[1] The plaintiffs’ original motion was for an interlocutory injunction for the return of possession of leased premises that they were locked out of on May 2, 2020 for non-payment of rent, and to prevent the landlord defendants (2410077 Ontario Ltd. and William Mandelbaum) from moving forward with new tenancies with the other defendants (The Basement on Davenport Inc., Alex Niktash and 1435501 Ontario Inc.[^1]).
[2] The plaintiffs’ motion was approved for an urgent hearing by endorsement of Myers J. dated May 12, 2020. Following case conferences with Sanfilippo J. on May 13, 20 and 29, 2020 the parties agreed that the issues raised by the plaintiffs’ motion would be adjudicated on a final basis because of the commercial uncertainty created by their dispute. On agreement, the issue of damages has been bifurcated.
[3] The dispute arises in the context of a commercial tenancy of premises at unit 100, 65 Front Street East in Toronto (the “premises”). On Saturday May 2, 2020, 2410077 Ontario Ltd. (“241”) locked the sub-tenant Second Cup franchisee out and took possession of the premises. A formal notice of termination was sent on Monday May 4, 2020.
[4] The issues to be decided by the court were specified in the May 29, 2020 endorsement of Sanfilippo J. to be as follows:
a. Did the plaintiffs breach the Lease by virtue of the nonpayment of rent?
b. If so, was the Lease lawfully terminated?
c. If so, should the tenant plaintiff be granted relief from forfeiture on such terms as this Court may deem just?
[5] These issues have been translated by the plaintiffs into a request for the following relief:
a. A declaration that the Lease was unlawfully terminated by the landlord and that it was and remains in full force and effect as if the relevant notices of default and termination had not ever been issued;
b. A permanent injunction restraining the landlord defendants from engaging in any conduct that would derogate from the grant or otherwise restrict, limit, reduce, prejudice, damage, or interfere with the rights of the plaintiffs under the Lease;
c. Alternatively, if necessary, a permanent injunction compelling the landlord to permit the plaintiffs to re-enter and remain in the premises and permitting the tenant to carry on business pursuant to the provisions of the Lease;
d. An order reinstating the Lease and restoring the plaintiffs’ rights as they existed prior to the notices of default sent and the termination of the Lease; and
e. In the further alternative, an order granting the plaintiffs relief from forfeiture of the termination of the Lease on such terms and conditions as this Court may find just but reserving to the plaintiffs the right to pursue such additional claims against one of more of the defendants as they may wish.
[6] For the reasons that follow, I find that there was no Act of Default for non-payment of rent under the Lease at the time that the landlord defendants locked the tenant out of the premises and purported to terminate the Lease, the Lease was not lawfully terminated, and there is no need for me to grant relief from forfeiture, but if there was, the plaintiff tenant would be entitled to such.
Events Leading up to the Dispute – Agreed Facts
[7] The parties have very helpfully summarized for the court all of the “agreed” facts based on the materials in the court record. This summary of agreed facts is attached at Schedule “A” and should be read as part of the findings of fact in support of these reasons for decision. I do not find it necessary to repeat these agreed facts verbatim in these reasons, but I will refer to many of them. There are some other facts in the record that are uncontested. Any disputed factual points about which it is necessary for me to make findings of fact in support of these reasons for decision will be addressed as they arise.
[8] Second Cup Ltd. became the tenant under a head lease with the landlord of these premises in July 2010. Second Cup lawfully sublet these premises to a franchisee/operator of the Second Cup café located at those premises. The original term of the lease would have expired on June 30, 2020. 241 became the landlord in 2014. 241 also owned adjacent premises at 15 Church Street, which along with the property in which the premises are situated comprise the “Building Envelope.”
[9] The head lease was twice amended after 241 became the landlord, in 2015, in part as a result of a dispute concerning rent, and most recently in a February 26, 2020 Lease Amendment - Binding Term Sheet that extended the lease term and allowed for the conversion of these premises into a retail cannabis store to be operated by a wholly-owned subsidiary of Second Cup, 273524 Ontario Ltd. (“273”) that had been incorporated for this purpose. The original head lease, together with these amendments, are collectively referred to as the “Lease” in these reasons. Second Cup may sometimes be used to refer to both plaintiffs, or to whichever of them was the tenant of the premises at the relevant time.
[10] The February 2020 lease amendment, in addition to allowing for a new permitted use of the premises, also provided for increased rent (an increase of $4,527.55 per month), the extension of the term of the lease for an additional ten years to February of 2030 (with two further 5-year renewal options), and a non-refundable deposit for exclusivity to be paid by Second Cup of $30,000.00 plus HST. This exclusivity was with respect to the right to operate a cannabis shop in the Building Envelope.
[11] The non-refundable payment of $33,900.00 was made on February 19, 2020. After the February 2020 lease amendment was signed it was lawfully assigned to 273 and 273 applied for a Retail Sales Authorization (“RSA”) under the Cannabis Licence Act for the premises (among six other locations). The franchisee was permitted to continue to operate its Second Cup café at the premises. Its franchise agreement and sub-lease did not expire until June 30, 2020. In the meantime, 273’s RSAs were still being processed by the Ontario government and various other things had to occur before 273 could open for business at the premises.
[12] The higher monthly rent owing for March under the Lease was paid in full at the beginning of March. Second Cup also paid a total of $18,043.41 in additional rent on March 13, 2020 said by the landlord to be due for emergency repairs undertaken in February 2020 and for outstanding water bills dating back to 2018. In February and March 2020, the landlord received a total of $51,943.41from Second Cup in addition to the monthly rent due for each of those months in respect of the premises.
[13] In March 2020 the COVID-19 pandemic hit Ontario. A state of emergency was declared in Ontario on March 17, 2020 and on March 23, 2020 all non-essential businesses in Ontario were ordered to close. As a result, 130 of Second Cup’s 244 cafés temporarily suspended all operations. The remaining 114 locations, including the franchised location at the premises, were limited to take-out and pick-up services.
[14] These unprecedented announcements caused senior management at Second Cup to become concerned about the effects that the business interruption due to COVID-19 would have on it, its franchisees and both corporate and franchise employees. In this context and with lease payments for its corporate owned and franchised locations across the country coming due on April 1, 2020, Steve Pelton, the Chief Executive Officer of Second Cup wrote a letter on March 25, 2020 to all of its landlords, including 241, asking for some time to sort out a plan to pay rent for April 2020 and beyond. It advised all of its landlords of the same thing, that: “Unfortunately, as a result of the COVID-19 pandemic, we and our franchisee partners will not be in a position to pay April rent next week.” Second Cup indicated that someone would reach out to follow up shortly.
[15] That same day, the landlord advised Second Cup that it would accept April’s rent in two installments, on the 1st and 15th of the month and provided the following further assurances:
We understand and appreciate the difficulties that we are all experiencing during this unprecedented time.
We are committed to doing everything possible, within our reach, to help ensure that we all make it through this.
[16] Pelton did reach out to the landlord by way of follow up to the March 25, 2020 letter and the request by Second Cup in that letter for the landlord’s co-operation and understanding in anticipation of having “a further, better informed discussion about how to deal with April and future rent payments.” Pelton and Mandelbaum, the principal of 241, exchanged text messages between March 25 and 31, 2020. In response to Pelton’s request for a conversation, Mandelbaum replied: “Don’t need to speak. I’m bleeding, I’m not volunteering to give blood”.
[17] The landlord never communicated to Second Cup that it would no longer honour its statement made on March 25, 2020 that it would accept April rent in two installments, on April 1st and 15th. The franchisee’s post-dated rent cheque for April in the amount of $13,234.92 was cashed on April 1, 2020 by the landlord. The remaining rent due for April then outstanding was $4,527.55 (the approximately 25% deficiency being comprised of the increased monthly rent payable as a result of the February lease amendment).
[18] Apparently unaware of either the landlord’s statement that it would accept rent in two installment payments on the 1st and 15th of April or that the sub-tenant’s post-dated cheque rent cheque for 74.5% of the rent due for April had already been deposited, on April 3, 2020 the landlord’s property manager sent a notice under s. 49 of the Lease that the full rent for the month of April 2020 had not been received when due on April 1st.
[19] Section 49(a) of the Lease provides that an Act of Default occurs when: “The Tenant has failed to pay Rent for a period of ten (10) consecutive days following receipt of notice thereof from the Landlord.”
[20] Twenty (20) days after the April 3 notice, the landlord’s property manager wrote to Second Cup on April 23, 2020 providing a rent statement for the month of May 2020, showing May’s rent of $17,762.47 plus arrears of $4,527.55 for the month of April 2020, and demanded payment of the total amount due before May 1, 2020 of $22,290.02. Acknowledging that the last post-dated cheque had been deposited for April’s rent, this letter also asked for six (6) post-dated cheques for the monthly rent due after May that would have covered the rent up to and including the month of November 2020.
[21] May 1st was a Friday. Second Cup did not pay the $22, 290.02 indicated to be due in the April 23, 2020 statement for May’s rent. On Saturday May 2, 2020 after the franchise closed for the day at 8 p.m., the landlord changed the locks and placed a notice on the front door that it was repossessing the premises.
[22] On Monday May 3, 2020, Second Cup contacted the landlord’s representative Mandelbaum about the repossession of the premises, noting that Second Cup had anticipated more cooperation from him in the circumstances, that the franchisee had limited revenue, that it was expected that government financial assistance would be forthcoming and that, notwithstanding this, the landlord had already received a large portion of April’s rent.
[23] Although there is no evidence about the following sequence of events, counsel for both sides submitted in oral argument that these events took place on May 4, 2020 in the following order:
a. The landlord sent a notice of termination under s. 49 of the Lease relying on the April 3, 2020 notice of non-payment of rent for the month of April (claiming the remaining arrears of $4,527.55) and the non-payment of rent on May 1st.
b. Second Cup offered to pay immediately the entire amount stated to be overdue, of $22,290.02, which offer was rejected by the landlord.
c. The landlord accepted an offer to lease the premises from the defendant The Basement on Davenport Inc. (the “BOD Lease”), with a start date of May 15, 2020 and a gross rent-free period of 4.5 months from May 15 to September 20, 2020.
[24] Although not made aware of the BOD Lease until May 7, 2020, on May 5, 2020, Second Cup put the landlord on notice of its position that the termination of the Lease and repossession of the premises was unlawful and that the April 23, 2020 demand letter from the landlord constituted a waiver of forfeiture. Second Cup’s offer to promptly pay all outstanding arrears was repeated.
[25] After notifying the Alcohol and Gaming Commission of Ontario (“AGCO”) of the termination of Second Cup’s lease on May 6, 2020, on May 7, 2020 the landlord finalized a lease to be used for the operation of a cannabis retail store with the defendant 1435501 Ontario Inc. of other premises within the Building Envelope to be used for the operation of a cannabis retail store, with a term commencing May 15, 2020 and a two-month rent free period until July 14, 2020, (the “143 Lease”). The landlord and the defendant 143 had conditionally entered into the 143 Lease on April 7, 2020. Second Cup was not made aware of the 143 Lease until May 12, 2020.
[26] This action was commenced on May 15, 2020.
Applicable Rules and Legal Framework
[27] This litigation has been moving at a very fast pace. The plaintiffs and landlord defendants agree that the court can and should decide the plaintiffs’ request for an injunction on a permanent rather than interlocutory basis. The other defendants BOD and 143 are aware of this and have filed no materials and chosen not to participate or take any position.
[28] It is agreed by the plaintiffs and landlord defendants that damages will be the only remaining issue once the court decides the injunctive relief. They agree that the determination of the injunctive relief sought will dispose of a significant part of the action and substantially shorten any trial and result in a substantial cost savings to the parties.
[29] This motion is proceeding under Rule 21.01(1)(a) for the determination of certain questions of law before trial, with the parties consent to the admission of evidence, and under Rule 51.06(1) based on the truth of the admitted facts and documents from the affidavits filed which are summarized herein and in the agreed statement of facts detailed in Schedule “A” hereto.
[30] Based on the admitted and uncontested facts, I have found (for reasons set out in more detail hereinafter) that there was no Act of Default by Second Cup under the Lease at the time that the landlord re-possessed the premises and purported to terminate the Lease, and that the termination of the Lease was not lawful.
[31] The question of relief from forfeiture does not need to be decided. To decide that issue, some findings of fact have to be made. The parties agree that, to the extent that the court is required to make findings of fact (beyond those admitted) to decide any questions of mixed fact and law, that can be done by way of summary judgment pursuant to Rule 20.04(2)(b) as long as the court is satisfied that it is appropriate to do so. The parties have gone to great lengths to satisfy me of this, through their framing and narrowing of the issues to be decided (as outlined in the May 29, 2020 endorsement of Sanfilippo J.) and those that will remain to be decided (damages only), and through their summary of the agreed facts based on the evidence filed.
[32] Of the remaining issues, none is a genuine issue requiring a trial. This would be an appropriate case in which to make the necessary findings of fact to decide those issues. Although pleadings have not yet been exchanged, I would find this to be an appropriate case in which to dispense with that requirement of Rule 20.01, as Rule 2.03 allows for. This is the most expeditious, least expensive and most proportionate manner in which to proceed to a determination on the merits of the issues before me, in the circumstances of this case, consistent with Rule 1.04 and the culture shift that the Supreme Court of Canada urged us to adopt in Hyrniak v. Mauldin, 2014 SCC 7. I would have been satisfied that it was appropriate to grant relief from forfeiture to the plaintiffs by summary judgment, if I had not found, based on the admitted facts, that the termination of the Lease was unlawful.
Analysis
[33] I will deal with each of the agreed upon issues to be decided in turn.
a. Did the plaintiffs breach the Lease by virtue of the non-payment of rent?
[34] It is not disputed that the April rent was not paid in full by April 1st or April 15th or May 1st, nor is it disputed that the May rent was not paid in full on May 1st. The plaintiffs argue, however, that there was no act of default under the Lease. Section 49 of the Lease provides that an Act of Default occurs when:
The Tenant has failed to pay Rent for a period of ten (10) days following receipt of notice thereof from the Landlord.
[35] For an Act of Default to have occurred, rent must be due, the Landlord must give notice of its non-payment and the Tenant must not have paid the rent due for ten consecutive days thereafter.
[36] The landlord told Second Cup that, given the unprecedented circumstances of the COVID-19 pandemic, the April rent would not all be due in full on April 1st and could be paid in two installments. I find that Second Cup was entitled to, and did, rely upon that statement, even while it continued to negotiate for further rent relief from the landlord and from its many other landlords.
[37] The full amount of April’s rent was not due on April 1, 2020. Having received more than the requested amount of the first installment of April’s rent on April 1, 2020, the landlord waived the right to give, and was estopped from giving, any notice of non-payment or demand for payment of the balance of April’s rent until after the second installment of rent was due, on April 16, 2020. It would be unfair for the landlord to be permitted to demand payment of all of April’s rent that was due on April 1 after offering to allow it to be paid in two installments, especially in the extenuating circumstances of a state of emergency having just been declared in Ontario. See Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R 490, at paras. 18-20.
[38] Therefore, the landlord’s April 3 letter purporting to give notice under s. 49 of the Lease for the non-payment of the full amount of rent due for April 2020 was premature and invalid.
[39] The April 23 notice from the landlord included a demand for the balance of the second installment of April’s rent then due. At the earliest, an Act of Default based on that notice could not have occurred until the tenth consecutive day following April 23, which would have been May 3, 2020. Even though Second Cup failed to pay the balance of April’s rent and the rent for May on or before May 1, 2020, an Act of Default had not occurred under the Lease as of that date.
b. Was the Lease lawfully terminated?
[40] The landlord’s right to terminate the Lease under s. 50 is dependent upon the occurrence of an Act of Default.
[41] First, I will address the question of whether the landlord had the right to terminate the Lease on May 4, 2020 as a result of the plaintiffs’ failure to pay the balance of the April rent arrears.
[42] The plaintiffs argue that even technical deficiencies in the landlord’s notices can negate a landlord’s right of forfeiture (termination) of the Lease. For example, where a landlord’s notice overreaches by demanding amounts not yet due, the court can rely upon the technical invalidity of the notice as a whole, to avoid giving effect to the landlord’s forfeiture of the Lease. See Perrett v. Perrett, 1943 CanLII 369 (Ont. S.C.J.) and Arrow Holdings Ltd. v. Lakeview Shopping Centre Ltd., 1991 CanLII 4346 (N.S.S.C.).
[43] Second Cup argues that the landlord overreached in its April 3 notice, which I have found to have been premature and invalid. It is that April 3 notice upon which the landlord purported to rely in its May 4, 2020 notice of termination. The landlord is also said to have overreached in its April 23 demand letter, for example by demanding May rent not yet due and demanding its payment before May 1, when it was due. However, I do not need to resort to technicalities to find in favour of Second Cup.
[44] Second Cup also argues that the April 23 demand constituted a waiver of the landlord’s forfeiture rights because of the landlord’s recognition in that notice of the continuing tenancy relationship, into the month of May and beyond, through the demand for the payment of rent and post-dated cheques for those months despite the then outstanding rent arrears for the month of April. The reasoning behind this principle of a waiver of forfeiture, adopted by Court of Appeal in the case of Malva Enterprises Inc. v. Rosegate Holdings Ltd., 1993 CanLII 8675 (Ont. C.A.), is that a demand or receipt of rent accrued due since the cause of forfeiture and made with knowledge of that cause is an implied waiver because it is evidence of an election to continue the tenancy notwithstanding the breach. There could be no rent due without the continued existence of the lease and the continuation is inconsistent with an election to terminate.[^2] See also Lucas v. 1858793 Ontario Inc. o/a Howard Park, 2020 ONSC 964, at para. 47.
[45] The landlord defendants oppose the application of this principle of a waiver of forfeiture on a number of different grounds. One is that the principle has typically been applied in cases involving actual receipts by the landlord of rent after the cause of the forfeiture, and not just demands for such. However, the reasoning of the Court of Appeal in the Malva case expressly contemplates that a demand for rent accrued due may give rise to an implied waiver.
[46] The landlord defendants also argue that this is not a case of a demand for rent accrued due since the rent for May (and beyond) had not accrued due at the time of this April 23 demand. However, the April 23 demand was also for the balance of April rent that had accrued due as of April 15th. Based on a strict reading of the Lease, if the April 23 letter is simply construed as a notice of default in respect of the remainder of the April rent, an Act of Default would have occurred if those April rent arrears had not been paid within ten days thereafter, on or before May 3.[^3] That is the interpretation that the landlord defendants appear to be asking the court to place on the April 23 letter – that it was simply a notice of default.
[47] The landlord defendants say that they were obviously aware of their rights (to terminate the lease and re-possess the premises upon the occurrence of an Act of Default) but that it has not been demonstrated that they had an unequivocal and conscious intention to abandon those rights by the April 23 letter. They rely on the Saskatchewan River Bungalows case at para. 20 for this requirement of an unequivocal and conscious intention to abandon their rights.
[48] Consistent with the concept of implied waiver that the Court of Appeal adopted in the Malva case, the Supreme Court of Canada affirmed that the necessary intent can be inferred from conduct (see Saskatchewan River Bungalows at para. 19). In this case, I infer and find that the landlord defendants did demonstrate through the April 23 letter an unequivocal and conscious intention to accept payment of rent arrears and future rent, the payment of which would be inherently inconsistent with the Lease being at an end.
[49] Read as a whole, that letter was re-affirming the landlord-tenant relationship by its contemplation of the payment not only of the April rental arrears but also payments of rent for May and beyond, consistent with the continuation of the Lease and inconsistent with an election to terminate the Lease. A brief excerpt from the April 23 letter is instructive:
From June 1st onwards please make the post dated cheques out in the amount of the monthly semi gross rent being $17,762.47.
As we used the last of our post dated cheques in April 2020, please arrange for 6 post dated cheques to be delivered along with May’s rent cheque (total of 7 cheques) to reach our office before May 1st, 2020 [emphasis in original].
Contrasted with the language of the April 3 letter:
We hereby give you Notice under Section 49 of your Lease dated 1 July 2010 (as amended), that the full rent for the month of April 2020 has not been received.
Failure by the Tenant to pay the full rent in the time and manor described in the Lease will leave the Landlord with no alternative but to take all necessary action to enforce the Lease and pursue all remedies available to the Landlord with respect of the foregoing, at law or in equity, including Lease termination or other penalties set out in the Lease [emphasis in original].
[50] The landlord defendants say they were aware of their rights to terminate the Lease and re-possess the premises. Mandelbaum testified that he was hoping that Second Cup would pay the rents demanded. In that context, their demands for future rent and post-dated cheques in the April 23 letter demonstrate an unequivocal and conscious intention to waive the rights of termination and allow for the continuation of the Lease. The April 23 demands for rent are distinct from the comparatively neutral language in the April 3 letter pointing out that failure to pay rent in accordance with the Lease will lead to consequences.
[51] I find that the April 23 demand was a waiver of the landlord’s right of forfeiture in respect of the unpaid balance of the April rent. Unlike the situation in the Saskatchewan River Bungalows case, Second Cup acknowledged receipt of the April 23 demand and thus was aware of it.
[52] A waiver can only be retracted if reasonable notice of retraction is provided. See Saskatchewan River Bungalows, at para. 27. The April 23 demand for payment of rent was not retracted prior to the landlord re-possessing the premises on May 2 and delivering its notice of termination of the Lease on May 4, 2020.
[53] I turn now to address the question of whether the landlord had the right to terminate the Lease on May 4, 2020 as a result of the plaintiffs’ failure to pay May rent.
[54] The May rent was not yet due at the time of the April 23 demand, so that letter could not be a waiver of a right of forfeiture that had not yet arisen in respect of the non-payment of rent for May 2020. Nor could the non-payment of May’s rent on or before May 1, 2020 constitute an Act of Default giving rise to any right of forfeiture or termination on the part of the landlord under the Lease. The landlord cannot get a head start on the ten-day notice period under s.49 of the Lease by sending a notice of non-payment of rent before the rent was due. After the rent came due on May 1, 2020, the landlord would have had to give notice of that default under s. 49 of the Lease, after which an Act of Default would have occurred if the rent amounts due had not been paid within ten consecutive days thereafter. The landlord did not give a notice under s. 49 of the Lease in respect of the rent after it came due on May 1, 2020 and no Act of Default occurred in respect of the rent that became due and owing on May 1, 2020.
[55] I find that the landlord’s re-possession of the premises on May 2, 2020 and purported termination of the Lease on May 4, 2020 were invalid and not lawful. The landlord’s right of forfeiture in respect of the non-payment of the balance of the April rent arrears had been waived by the April 23 letter and no Act of Default had by then occurred in respect of the non-payment of rent for May 2020.
c. Should the tenant plaintiff be granted relief from forfeiture on such terms as this Court may deem just?
[56] In light of my finding that the Lease was not lawfully terminated, there is no need to grant relief from forfeiture to Second Cup. However, even if the Lease had been lawfully terminated, I would have granted Second Cup relief from forfeiture. The court has the discretion to do so under s. 98 of the Courts of Justice Act, R.S.O. 1990 c. c.43 and s. 20 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7
[57] The equities of this case would favour granting relief from forfeiture. In Jungle Lion Management Inc. v. London Life Insurance Company, 2019 ONSC 780, at para. 34, this court considered the following three criteria:
(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.
[58] The circumstances favouring the exercise of the court’s equitable jurisdiction and discretion to grant relief from forfeiture to Second Cup include many of the circumstances described in paragraph 98 of Second Cup’s factum and address all of these three criteria, namely that:
(a) In the midst of an unprecedented pandemic that shut down most of Second Cup’s operations and the country’s economy and had its senior management scrambling to negotiate with multiple landlords and franchisees over a short period of time, the landlord terminated the Lease for failure to pay 25.5% of one month’s rent, totalling $4,527.55 in April 2020 and on the first business day after the May 2020 rent was due.
(b) Second Cup had been a tenant at the premises for 10 years and had recently signed an extension for an additional 10 to 20 years and made payments to the landlord in excess of $50,000.00 in addition to paying rent for the month of March 2020.
(c) The demands of the landlord preceding its re-possession of the premises and termination of the Lease had been focussed on the payment of past and future rent.
(d) The plaintiffs’ uncontested evidence is that the RSA application and the planned cannabis shop at the premises are of the utmost importance to them and the termination of the Lease could jeopardize not only the licence for the premises but the licences for their other proposed locations as well, which they value at well in excess of the rent arrears at issue.
[59] The landlord defendants argue that when a party seeks to be relieved from forfeiture based on a non-payment of rent the court should consider criteria from Michele’s Italian Ristorante Inc. v. 1272259 Ontario Ltd., 2016 ONSC 4888, at paras. 35-36. In that decision, the court set out criteria for relief from forfeiture generally at para. 35, and separate, more specific criteria at para. 36, where the alleged default is based upon the non-payment of rent:
a. the tenant comes to court with clean hands;
b. whether there is an outright refusal to pay rent;
c. the extent of the rental arrears; and
d. whether the landlord has suffered serious loss due to the delay in paying rent.
See also: 2324702 Ontario Inc. v. 1305 Dundas, 2019 ONSC 1885, aff’d 2020 ONCA 353
[60] I have considered these additional factors, and they all favour the plaintiffs.
a. The fact that there was one prior dispute in 2015 about the payment of rent that led to an amendment to the Lease does not suggest a pattern of default or lack of clean hands. The rental arrears were not significant as of the beginning of May, especially when considered in light of what was happening in the world as a result of the COVID-19 pandemic.
b. Nor was the March 25 letter from Second Cup indicating that it and its franchisees would not be able to pay April rent on the first of the month an outright refusal to pay rent as the landlord defendants suggest. It was a reasonable and transparent communication to landlords by a responsible corporate tenant of numerous premises across the country.
c. Further, the landlord defendants claim that they have significant mortgage carrying costs but have not put in any evidence about actual prejudice that they have suffered as a result of not having been paid the balance of April’s rent and May’s rent under the Lease.
[61] The landlord defendants characterize Second Cup’s “non-action” as undeserving of equitable relief, suggesting that COVID-19 surely could not have impeded its ability to pay the balance of April’s rent of $4,527.55, that Second Cup counselled the franchisee not to pay the rent for May and that a text message sent after the termination that began with “ha ha” was contemptuous. They rely on 931576 Ontario Inc. v. Bramalea Properties Inc., [1992] O.J. No. 808 and argue that the plaintiffs had an obligation to pay the rent if that was what was required to avoid termination. Text messages are fraught with risks of mis-construction. The evidence about what the franchisee was told to do about May rent is all hearsay and there are contradictory versions of what was discussed.
[62] I find the landlord’s characterization of the events and inactions of the plaintiffs to be a gross over-simplification of the situation. I find that the equities favour the plaintiffs in this case. The plaintiffs’ lack of immediate responses to the landlord’s notices and demands can be explained by the unprecedented circumstances in which they were operating, with drastically reduced head office staff handling the many demands of franchisees, landlords and employees that had to be managed all at once. It was not unreasonable for them to ask for, and expect, an indulgence from the landlord defendants. Not only was such not forthcoming (beyond the two-week extension for the second half of April’s rent), the landlord appears to have been trying to take advantage of the situation to keep the recently paid non-refundable exclusivity payment received from Second Cup and capitalize on an opportunity to terminate the Lease so it could enter into a new lease (the 143 Lease) in the Building Envelope for another cannabis retail store.
[63] While the landlord’s motivation may not be relevant (see 149777 Ontario Inc. v. Leon’s Furniture Ltd. (2003), 2003 CanLII 50106 (ON CA), 67 O.R. (3d) 206 (C. A.), at para. 74), its conduct may be relevant in the exercise of the court’s equitable jurisdiction to grant relief from forfeiture. The sequence of events indicates that the landlord entered into arrangements with 143 and BOD that disregarded the plaintiffs’ rights in respect of the premises, including that:
a. On May 4, 2020, after Second Cup had offered to bring the Lease into good standing, the landlord instead immediately after receiving that offer signed a lease for the premises with BOD that granted a significant rent-free period.
b. On May 6, 2020, knowing that 273 had an RSA application pending for a cannabis store at the premises and that the plaintiffs were disputing the termination of the Lease, the landlord nonetheless wrote directly to the AGCO to advise of its termination of the Lease. Since there cannot be two licences for the same premises, this would have paved the way for an RSA application by 143 for adjacent premises in the Building Envelope under the 143 Lease that the landlord then proceeded to finalize on May 7, 2020.
c. The landlord had conditionally agreed to the 143 Lease on April 7, only 5 weeks after granting Second Cup exclusive cannabis retail rights at the Building Envelope (and accepting $33,9000 in exchange for said rights). This conditional 143 Lease contemplated cannabis exclusivity being granted to another tenant in the Building Envelope only 4 days after the April 3 notice, when the landlord was in receipt of 75% of April’s rent and days after the province-wide business shutdown due to the COVID-19 pandemic.
[64] I do not accept the suggestion made on behalf of the landlord defendants that these were simply efforts to mitigate the breaches of the Lease, particularly given the rent-free periods that were granted under the BOD Lease and the 143 Lease. To the extent there is any balancing of equities in this case, they certainly do not favour the landlord defendants. The plaintiffs have represented to the court that they remain ready and willing to pay the outstanding rent arrears for April and May, and now for June as well. They are also prepared to pay recently identified further arrears for back water payments, under a reservation of their right to audit them, seek a reconciliation and challenge any that are not found to be legitimately attributable to the premises.
[65] The other defendants 143 and BOD have not put in any evidence of prejudice or harm to them, nor have they opposed the relief sought. According to Mandelbaum, the commencement of the 143 and BOD Leases has been delayed pending the outcome of this proceeding. They have not moved in and thus do not need to be displaced from any premises in the Building Envelope.
Disposition, Costs and Implementation
[66] Conditional upon the payment by the plaintiffs within 5 business days of this judgment of any and all rent due and payable under the Lease for the months of April, May and June, 2020, and for past additional rent due in respect of unpaid water bills in respect of the premises recently claimed by the landlord if supported by invoices (estimated to be $27,000.00), the following relief requested by the plaintiffs flowing from the findings made in its favour is granted:
a. A declaration that the Lease was unlawfully terminated by the landlord and that it was and remains in full force and effect as if the April 3 notice of default and April 23 demand and the May 4, 2020 notice of termination had not ever been issued;
b. An order reinstating the Lease and restoring the plaintiffs’ rights as they existed prior to the notices and the termination of the Lease;
c. An order requiring the landlord to permit the plaintiffs to re-enter and remain in the premises and permit the tenant to carry on business at the premises pursuant to the provisions of the Lease;
d. An order preserving the plaintiffs’ rights in respect of their claims for damages arising from the unlawful termination of the Lease and re-possession of the premises by the landlord and any other conduct of the defendants in furtherance thereof;
e. This judgment is without prejudice to the right of the tenant to request, in the ordinary course, a reconciliation of the approximately $27,000.00 recently claimed as additional rent by the landlord defendants for past water bills in respect of the premises and adjustments if some or all of this was not properly allocable to the premises; and
f. This judgment does not relieve any party from its future obligations, or derogate from the future rights of any party, under the Lease or at law.
[67] Since I have found that the Lease was not lawfully terminated, the damages that the landlord defendants have asked for as a condition of granting relief from forfeiture do not arise. These included the real estate commissions said to have been incurred to re-lease the premises, the locksmith and bailiff fees for re-possessing the premises, and the loss of rent under the 143 Lease which can no longer be used for a retail cannabis store. To be clear, I am not awarding such amounts as damages to the landlord defendants.
[68] I am not seized of the plaintiffs’ bifurcated damages claims, which shall be prosecuted in the ordinary course of the action if the plaintiffs choose to pursue them. If there are future disputes in respect of the non-payment of rent or other alleged Acts of Default under the Lease, those disputes may be brought before me, subject to any scheduling constraints at the time.
[69] The parties asked to defer their costs submissions until after the outcome of the motion was known. They were directed to exchange their costs outlines with each other by June 8, 2020 and I assume that exchange has taken place. I would encourage the parties to try to reach an agreement on costs. However, if they are unable to do so, I will allow them an opportunity to make written cost submissions.
[70] If an agreement on costs is reached, counsel are asked to advise the court of such by June 26, 2020. Failing agreement, each counsel may serve upon the other side and submit to the court a written cost submission (not to exceed 3 pages double spaced) together with their respective costs outlines by July 7, 2020 and each may deliver a written responding cost submission to each other (not to exceed 1.5 pages double spaced) to be submitted to the court by July 21, 2020. These may be submitted to the court by email to my assistant: Linda.Bunoza@ontario.ca.
[71] Notwithstanding Rule 59.05, this judgment is effective from and after the date indicated below and it is enforceable without any need for the entry and filing of a formal judgment. In accordance with Rule 1.04, no formal judgment is required unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party may nonetheless submit a formal judgment for original signing, entry and filing when the Court returns to regular operations.
Kimmel J.
Released: June 11, 2020
SCHEDULE “A”
Court File No. CV-20-00641129-0000
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
THE SECOND CUP LTD. and 2734524 ONTARIO INC.
Plaintiffs
and
2410077 ONTARIO LTD., WILLIAM MANDELBAUM, THE BASEMENT ON DAVENPORT INC., ALEX NIKTASH and 1435501 ONTARIO INC.
Defendants
AGREED STATEMENT OF FACTS AND POSITIONS AND COMPENDIUM
AGREED POSITIONS
- The parties to this motion, the Plaintiffs and the Defendants 2410077 Ontario Ltd. and William Mandelbaum (hereinafter, the “Parties”), hereby agree as follows:
a. This motion’s issues require an urgent resolution and, therefore, the Parties request a final determination of these issues;
b. To facilitate a final resolution of the issues being rendered at this motion, the Parties agree that this Honourable Court should liberally interpret and apply the rules of practice, including but not limited to rules 1.04, 2, 3, 20, 21, and 51.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended.
AGREED STATEMENT OF FACTS
- The Parties agree upon the facts set out in the below chronology and upon the authenticity of the referenced documents, which are attached hereto.
Reference Legend:
MR = Amended Motion Record dated June 1, 2020
RMR = Responding Motion Record dated May 25, 2020
RepMR = Reply Motion Record dated May 25, 2020
1DC = Damon Conrad Affidavit sworn May 18, 2020
2DC = Damon Conrad Affidavit sworn May 27, 2020
WM = William Mandelbaum Affidavit sworn May 25, 2020
Ex = Exhibit
| Tab | Date | Event | Reference |
|---|---|---|---|
| 1. | July 2010 | The Plaintiff The Second Cup Ltd. (“Second Cup”) enters into a lease to rent Unit 100 (the “Premises”) of 65 Front Street East, Toronto, Ontario (the “Property”) with the Property’s former owner. (This lease, and the amendments thereto described below are hereinafter collectively referred to as the “Lease”.) Section 49(a) of the Lease provides that an Act of Default (as defined) occurs when: The Tenant has failed to pay Rent for a period of ten (10) consecutive days following receipt of notice thereof from the Landlord Since the Lease was entered, a Second Cup franchisee has operated a Second Cup franchise out of the Premises. The current franchisee has operated out of the Premises since 2017. |
MR, Ex 7 MR, Ex 6 |
| 2. | June 2014 | 2410077 Ontario Ltd. (the “Landlord”) purchases the Property and takes an assignment of the Lease. The Landlord also owns 15 Church Street, Toronto, Ontario, which along with the Property comprises one adjoining “Building Envelope”. |
MR, Ex 8 RMR, WM, para 2 |
| 3. | October 2015 | Landlord and Second Cup amend the Lease, in part as a result of a dispute concerning rent, which arose around September 6, 2015. | MR, Ex 8 |
| 4. | April 2018 | Second Cup announces its intention to explore opportunities in the retail cannabis industry. | MR, Ex 9 |
| 5. | December 2019 | The Government of Ontario announces that it will begin accepting applications for retail store authorizations (“RSAs”) for the sale of recreational cannabis on March 2, 2020. | MR, Ex 10 |
| 6. | December 30, 2020 | Second Cup incorporates 2734524 Ontario Inc. as a wholly-owned subsidiary. | MR, Ex 1 |
| 7. | January 1, 2020 | Second Cup does not exercise its option to renew the Lease. | MR, 1DC, para 22 RMR, WM, para 10 |
| 8. | January-February 2020 | Second Cup and the Landlord conduct negotiations regarding the possibility of leasing premises, including the Premises, for the purpose of operating one or more retail cannabis store. | MR, 1DC, para 23 RMR, WM, para 13 |
| 9. | February 19, 2020 | Second Cup pays the Landlord $33,900 in connection with the Lease Amendment - Binding Term Sheet. | MR, 1DC, para 34 RMR, WM, para 15 |
| 10. | Late February, 2020 | Second Cup and the Landlord agree to the Lease Amendment – Binding Term Sheet, which, among other things: a. Permitted Second Cup to assign the Lease to a subsidiary corporation; b. Permitted a change to the permitted use to that of a retail store selling cannabis; c. Extended the term to February 2030; d. Increased the monthly rent as of March 1, 2020 by $4,527.55 (the “Rent Delta”); and e. Granted Second Cup the exclusive right to operate a cannabis shop in the Building Envelope. |
MR, Ex 13 RMR, WM, paras 13 & 14 |
| 11. | Late February, 2020 | Second Cup assigns the Lease to 273. | MR, Ex 17 |
| 12. | March 2, 2020 | 273 applies for an RSA at the Premises. 273 applied for 7 RSAs total. Each RSA application is tied to a specific property. Pursuant to the Cannabis Licence Act, if an RSA application is rejected, the applicant’s outstanding applications may also be rejected and the applicant may be barred from applying for any new RSA for two years. |
MR, Exs 18 & 42 RepMR, Ex 5 |
| 13. | March 1, 2020 | Second Cup pays rent at the old rate of $13,234.92. | MR, 1DC, para 46 |
| 14. | March 10, 2020 | The Landlord demands payment totalling $22,570.96 for the March Rent Delta, an emergency repair to the Premises in February 2020, and outstanding water bills dating back to 2018. | RMR, Ex 13 |
| 15. | March 13, 2020 | Second Cup pays $22,570.96 to the Landlord in accordance with the March 10th demand. | MR, 1DC, paras 47-48 RMR, WM, para 18 |
| 16. | March 17, 2020 | Premier Doug Ford announces a state of emergency in response to the COVID-19 pandemic. | MR, 1DC, para 50 RMR, WM, para 20 |
| 17. | March 18, 2020 | As part of the RSA application approval process, a notice was posted at the Premises alerting the public to 273’s RSA application and inviting public comment before April 1, 2020 (the “Public Notice”). | MR, Ex 21 |
| 18. | March 23, 2020 | Premier Ford orders the closure of all non-essential business in Ontario. | MR, 1DC, para 51 |
| 19. | Late March 2020 | In response to COVID, 130 of 244 of Second Cup’s cafés temporarily suspend all operations. The rest of the cafés were limited to pick up and takeout services. | MR, Ex 25 |
| 20. | 11:27 a.m. on March 25, 2020 | Second Cup’s President and CEO, Steven Pelton, sends a letter to all of its landlords, including the Landlord, which reads as follows: Since opening its first cafe in 1975 in Toronto, Second Cup has become a proud coffee retailer and meeting place in communities across Canada. During those 45 years, we have always valued our relationships with our many partners, including our franchisees and landlords. We are now in an unprecedented time of uncertainty and interruption due to the COVID-19 pandemic. Government actions to address this pandemic, including the declaration of states of emergency, have severely impacted most businesses. We recognize that your business, like most others, is also being impacted. At Second Cup, we have tried to lead the way during this crisis, with the safety of our franchisees, employees, guests, partners and all Canadians being at the forefront of our concerns. Many of our franchised and corporately owned cafes have closed completely, and those that remain open are seeing significant sales declines with our dining rooms closed and only being able to offer take-out/delivery until further notice. In recognition of the difficult situation faced by our franchisees, Second Cup has chosen not collect the upcoming accrued royalties and cooperative advertising fund payments from our franchisees for the period of February 23, to March 21, 2020, while we continue to understand and assess the impact of the COVID-19 pandemic. We have also made very difficult decisions at our corporate head office resulting in the reduction of personnel costs by approximately 33%. Unfortunately, as a result of the COVID-19 pandemic, we and our franchisee partners will not be in a position to pay April rent next week. If you normally withdraw rent payments by EFT or post-dated cheques, please do not do so for April rent. We are continuing to monitor government assistance offered to businesses and to lobby with industry groups like the CFA, Restaurants Canada, CFIB and RCC for additional government support and aid, including potential assistance for both tenants and landlords. We ask for your cooperation and understanding during this time. We are hopeful that federal and provincial governments will address this shortly and we can then have a further, better informed discussion about how to deal with April and future rent payments. A member of the Second Cup Team will reach out to you shortly to follow up on this message. Your ongoing partnership and cooperation is greatly appreciated during this time of national and international crisis. |
MR, Ex 26 |
| 21. | 1:55 p.m. on March 25, 2020 | The Landlord sends an email to Second Cup advising that it is willing to accept April’s rent in two equal payments, on the 1st and 15th of the month. | MR, Ex 28 |
| 22. | March 25-31, 2020 | Second Cup’s CEO and the Landlord’s principal, William Mandelbaum (“Mandelbaum”), exchange text messages regarding the payment of April rent, but no resolution is reached. | MR, Ex 27 |
| 23. | April 1, 2020 | $13,234.92 of April’s rent is paid, leaving the April Rent Delta of $4,527.55 as outstanding rent. | MR, 1DC, para. 60 RMR, WM, para. 30 |
| 24. | April 2, 2020 | The Public Notice is removed. | MR, 1DC, para 43 |
| 25. | April 3, 2020 | The Landlord’s representative Mark Goldberg (“Goldberg”), sends Second Cup a notice, that reads as follows: Dear Damon et al I am writing on behalf of your Landlord 2410077 Ontario Ltd. We hereby give you Notice under Section 49 of your Lease dated 1 July 2010 (as amended), that the full rent for the month of April 2020 has not been received. Failure by the Tenant to pay the full rent in the time and manor described in the Lease will leave the Landlord with no alternative but to take all necessary action to enforce the Lease and pursue all remedies available to the Landlord with respect of the foregoing, at law or in equity, including Lease termination or other penalties set out in the Lease. Please act accordingly. Yours Truly Mark Goldberg For and on behalf of 2410077Ontario Ltd. [Emphasis in original.] Second Cup confirms receipt of this notice as emailed. |
MR, Ex 30 |
| 26. | April 7, 2020 | The Alcohol and Gaming Commission of Ontario (the “AGCO”), the government agency responsible for RSAs, announces that it was temporarily pausing the issuance of new RSAs in light of COVID. | MR, Ex 22 |
| 27. | April 7, 2020 | The Landlord and the Defendant 1435501 Ontario Inc. (“143”) enter into a conditional offer to lease premises within the Building Envelope with the intended use of a Legal Cannabis Dispensary. | MR, Ex 5 |
| 28. | April 10, 2020 | The Landlord sends a “Rental Statement” to Second Cup describing the outstanding April Rent Delta. | MR, Ex 31 |
| 29. | April 22, 2020 | The AGCO announces that it is resuming issuing RSAs. | MR, Ex 22 |
| 30. | April 23, 2020 | Goldberg sends Second Cup an email that reads, in part, as follows: Dear Damon etal I am writing on behalf of your Landlord 2410077 Ontario Ltd. Please find attached your rent statement for the month of May 2020. It shows May’s semi gross Rent of $17,762.47 along with the arrears from April 2020 (as emailed to you on April 10th) of $4,527.55, making a total due before May 1, 2020 of $22,290.02. From June 1st onwards please make the post dated cheques out in the amount of the monthly semi gross rent being $17,762.47. As we used the last of our post dated cheques in April 2020, please arrange for 6 post dated cheques to be delivered along with May’s rent cheque (total of 7 cheques) to reach our office before May 1st, 2020. We can collect the cheques from you or from the store at 65 Front Street East if that is easier for you. Please acknowledge receipt of this email Yours Truly Mark Goldberg For and on behalf of 2410077Ontario Ltd. |
MR, Ex 32 |
| 31. | April 24, 2020 | Damon Conrad (“Conrad”) of Second Cup confirms receipt of the April 23, 2020 email. May 1, 2020 Second Cup does not pay May rent or the outstanding April Rent Delta. |
RMR, Ex 21 |
| 32. | After 8:00 p.m. on May 2, 2020 | The Landlord retakes possession of the Premises and places a Default Notice on the front door of same that reads, in part, as follows: PLEASE BE ADVISED EFFECTIVE IMMEDIATELY THAT THESE PREMISES AT 65 FRONT ST. EAST, TORONTO HAVE BEEN REPOSSESSED DUE TO DEFAULT BY TENANT AS PER THE COMMERCIAL TENANCIES ACT, R.S.O. 1990, c. L. 7 and SECTION 49 OF LEASE DATED JULY 1ST, 2010 BETWEEN FRONT CHURCH PROPERTIES LIMITED ( the Original Landlord) as assigned to 2410077 Ontario Ltd., (the LANDLORD) AND THE SECOND CUP LTD. (the TENANT). ANYONE FOUND TRESSPASSING AND/OR ENTERING THESE PREMISES WITHOUT WRITTEN CONSENT OF THE LANDLORD, WILL BE SUBJECT TO CIVIL AND OR CRIMINAL CHARGES. FOR FUTHER INFORMATION, PLEASE CONTACT LANDLORD’S MANAGEMENT OFFICE AT 647-296-5864 [Bold capital letters in original.] |
MR, Ex 33 RMR, Ex. 22 |
| 33. | May 3, 2020 | Conrad texts Mandelbaum regarding the Landlord locking out Second Cup from the Premises. | RepMR, Ex 4 |
| 34. | May 4, 2020 | *There is no evidence before the Court regarding the order in which the below-described events occurred, but the parties agree that they all took place on May 4, 2020. The Landlord sends a “Notice of Termination” with regards to the Premises, which reads in part as follows: Further to our notice of non payment of Rent delivered to you on April 3, 2020, the Landlord has not received from the Tenant Rent (as such term is defined in the Lease) due and payable under the Lease in the amount of $22,290.02 (the “Total Overdue Amount”), comprised of $ 17,762.47 (the current overdue Rent) plus $4,527.55 owing from April 1, 2020 (the previous overdue Rent). This letter is to serve notice of termination of the Lease, as provided for in section 49 and 50 of the Lease. Second Cup offers to pay all outstanding rent arrears in exchange for the Landlord rescinding the Lease termination and returning possession of the Premises. The Landlord rejects this offer. The Landlord accepts an Offer to Lease the Premises from the Defendant The Basement on Davenport Inc (the “BOD Lease”). The BOD Lease defines a term start date of May 15, 2020, and a gross rent free period of 4.5 months from May 15 to September 30, 2020. |
MR, 1DC, para 67 RMR, WM, para 41 MR, Ex 34 RMR, Ex 4 |
| 35. | May 5, 2020 | Second Cup’s counsel writes to the Landlord’s then counsel advising, inter alia, of Second Cup’s position on the Lease termination. | MR, Ex 35 |
| 36. | May 6, 2020 | The Landlord sends the AGCO a letter, signed by Mandelbaum, which reads in part as follows: We are the Landlord of the Premises known as 65 Front Street East, Toronto. Our tenant, Second Cup Ltd. advised us that they would be applying to the AGCO for a Cannabis license at this location, and we understand from reviewing the AGCO website that the application is in process. We are writing to advise you that due to a default under the lease, the lease between the Second Cup Ltd. and 2410077 Ontario Ltd. was terminated on May 2, 2020. We therefore request that the application be withdrawn for this location, as the lease is no longer valid. Should you need further information, please do not hesitate to contact me at 416-605-4144. The Landlord did not send a copy of this letter to Second Cup. |
MR, Ex 36 |
| 37. | May 7, 2020 | The Landlord and 143 formally enter into a lease permitting 143 to operate a retail cannabis shop within the Building Envelope (the “143 Lease”). This lease defines a term start date of May 15, 2020, and a rent free period of 2 months from May 15 to July 14, 2020. | MR, Ex 5 |
| 38. | May 7, 2020 | The Landlord’s then counsel discloses to Second Cup a redacted version of the BOD Lease, with the identity of BOD redacted. | MR, Ex 3 |
| 39. | May 8, 2020 | The Landlord’s then counsel, at the request of Second Cup’s counsel, discloses that BOD is the tenant under the BOD Lease. | MR, Ex 3 |
| 40. | May 12, 2020 | The Landlord’s then counsel discloses the identity of 143 and the 143 Lease are disclosed to Second Cup. | MR, 1DC, para 80 |
| 41. | Ongoing | There are two mortgages on the Property, in a total amount of $12,000,000, requiring monthly mortgage payments of $63,677.03. | RMR, WM, para 22 MR, 1DC, para 95, and Exs 1 & 49-50 |
COURT FILE NO.: CV-20-641129
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE SECOND CUP LTD. and 2734524 ONTARIO INC.
Plaintiffs
– and –
2410077 ONTARIO LTD., WILLIAM MANDELBAUM, THE BASEMENT ON DEVENPORT INC., ALEX NIKTASH and 1435501 ONTARIO INC.
Defendants
REASONS FOR JUDGMENT
Kimmel J.
Released: June 11 2020
[^1]: The June 1, 2020 endorsement of Sanfilippo J. indicates that it was agreed that these remaining defendants would not participate in this motion, although they are on notice of it and are aware that determinations made on this motion may affect their interests in the action. They filed no materials and took no position on this motion.
[^2]: A landlord’s actions amounting to waiver of forfeiture have been found to override even express provisions in a lease that state that a demand for future rent or the acceptance of subsequently accrued rent does not amount to a waiver of forfeiture rights. See Fitkid (York) Inc. v. 1277633 Ontario Inc., 2002 CanLII 9520 (Ont. S.C.), [2002] O.J. No. 3959 at paras. 33-35. (There was no such proviso in this Lease.) [Note: the paragraph numbers are in error in the citation. The correct paragraph numbers can be found in the O.J. citation.]
[^3]: I note that on June 8, 2020, after this motion was argued, the Ontario government announced proposed amendments to the Commercial Tenancies Act. If applicable, these legislative changes might have had retroactive implications in respect of the actions taken by the landlord defendants. I am not aware of the amendments having been enacted as of the date of the release of these reasons and have not invited any submissions from counsel about them, nor have I taken them into account in my decision.