Court File and Parties

COURT FILE NO.: CV-20-641644 DATE: 20200609 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Cecilia Bonaventura, Steven Ledoucer and Cici Salon & Boutique Corp., Plaintiffs AND: 1603752 Ontario Inc., Mauro Piperni and Mary Piperni, Defendants

BEFORE: Pinto J.

COUNSEL: Brett D. Moldaver, for the Plaintiffs Brian Pilley, for the Defendants

HEARD: June 5, 2020

Endorsement

[1] The plaintiffs' motion for injunctive relief and access to commercial leased premises was heard by me on June 5, 2020 by Zoom videoconference. At the conclusion of the hearing, I provided my oral decision except with respect to costs, with reasons to follow. These are those reasons, including my decision on costs.

[2] The plaintiffs Bonaventura and Ledoucer operated the Cici Hair Salon, the tenant in a 1350 square foot commercial premises owned by the corporate defendant, with the Pipernis as principals. The 3-year lease expired on May 31, 2020.

[3] The landlord locked-out the tenant on April 25, 2020 by changing the locks. The landlord had entered the premises on April 23, noticed that the tenant appeared to be in the process of moving out, and became concerned about alleged damage caused by the removal of the tenant's chattels.

[4] The parties agree that the rent for the month of April 2020 was late. Starting in March 2020, the principals were in correspondence concerning the tenant's difficult paying rent due to forced closure of the hair salon as a result of COVID-19 protocols. The tenant was in the course of seeking COVID-19 government relief and proposed that the landlord use last-month's rent against April, or work out a payment plan. The landlord refused.

[5] After the landlord changed the locks, it posted a Notice stating that arrears of $16,276 plus costs had to be paid. The parties agree that this amount arises from the landlord claiming the following:

(a) $1,230 on the basis that that the tenants were responsible for a City of Mississauga zoning by-law infraction wherein the corporation was charged and fined $615 for each of two charges; (b) $11,300, being the corporation's legal costs of $10,000 plus HST in disputing the by-law infraction; and (c) Rent arrears for April in the amount of $4,746, being one month's rent of $4,200 plus HST.

[6] The parties agree that, in fact, the total should have been $17,276, however, the landlord erroneously indicated $16,276 on the Notice.

[7] The Notice also advised that the landlord had taken distress against the tenant's goods and chattels for the "rent arrears owing [of] $16,276.00 plus cost of this Action." The Notice stated that despite the notice of distress and the changing of the locks, "this is not a termination of your tenancy."

[8] Landlord's counsel conceded, notwithstanding what was indicated on the Notice, that:

(a) the rent arrears were only $4,746. The landlord could not legally distrain for the costs of the by-law infraction; (b) at law, the lease terminated on April 25, 2020 when the landlord changed the locks.

[9] At the time of the lock-out, the tenants and a third party had several items left on the premises. The tenant estimates the value of their items as $67,000; the third party, an aesthetician, estimates the value of her items as $75,000.

[10] Following a case conference on June 1, 2020, I ordered that the landlord provide immediate access to the third party to retrieve her items, and that the status quo be maintained with respect to the tenant's chattels.

[11] The plaintiffs commenced an action and amended the claim on June 1. By the amended claim, the plaintiffs seek, inter alia:

(a) damages for wrongful re-entry or forfeiture of the lease and for improper distress by the defendants; (b) an order permitting recovery of the tenants' property, or an interim injunction to permit the tenants with reasonable access to secure the tenants' and third-party's property; and (c) punitive, aggravated or exemplary damages for the improper retention of the property.

[12] The plaintiffs now move for injunctive relief or, in the alternative, an order for the recovery of property pursuant to section 44 of the Rules of Civil Procedure (Interim Recovery of Personal Property).

[13] The defendants are prepared to consent to interim relief sought as the lease is now terminated. The defendants do not wish to retain possession of the tenant's chattels. However, due to some of the chattels being allegedly affixed to the defendants' property, they argue that those affixed items should not be removed.

[14] By changing the locks on the rented premises on April 25, 2020, the landlord effected a forfeiture of the lease: Tosomba v Base General Contracting Ltd., 2012 ONSC 1839, at para. 20. However, the landlord also purported to exercise a right of distress at the same time by posting the Notice. Presumptively, this is illegal distraint: 2133048 Ontario Limited v. 1188640 Ontario Ltd., 2020 ONSC 224, at para. 17. However, the defendants argue that since the landlord did not proceed with distraint by auctioning off the items, no distraint occurred.

[15] The plaintiffs argue that if, at law, the lease terminated on April 25, then the tenant had no obligation to pay rent past that date and, to the extent that the landlord has retained last month's rent (i.e. the rent of May 2020), that rent should be set off against April's arrears. The landlord disagrees and suggests that, just because the lease terminated on April 25, it does not mean that the tenant owes no rent since the landlord could not rent the premises due to the alleged damage to the premises, and the tenant's chattels in place.

[16] I do not have to rule on the legality or reasonability of the distraint, the reconciliation of rental arrears or the respective damage claims at this time. At the hearing, the interim relief sought was conceded. In any event, distraint (distress) based on arrears of rent is only possible while the lease continues. Here the lease terminated on May 31, 2020. There are no grounds to permit the distraint, if any, to continue.

[17] This only leaves the landlord's submission about affixed items to be addressed. Based on the motion material before me, I find that the defendants' concern about damage caused by removing affixed items to be speculative. The items of concern appear to be trade fixtures: 889267 Ontario Ltd. v. Norfinch Group Inc. at paras. 28 and 29. If damage is occasioned by their removal, this will become part of the overall damages claimed in the action.

Costs

[18] The plaintiffs seek substantial indemnity costs of $16,448.48. They argue that there are extenuating circumstances warranting departure from the partial indemnity scale. They argue that, given my ruling ordering the defendants to grant immediate access to the tenants, they have been wholly successful on the motion and that, as per Rule 57.03 of the Rules of Civil Procedure, costs should be fixed, but paid forthwith, given the lock-out of the tenants and the other circumstances of this case.

[19] The defendants maintain that the determination of costs should be deferred until at least the time the plaintiffs have moved out and damages, if any, can be assessed. They argue that there are no egregious circumstances to warrant the higher substantial indemnity scale.

[20] Costs on a substantial indemnity basis should only be awarded "where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties": Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239, citing Young v. Young, [1993] 4 S.C.R. 3, at p. 134.

[21] I find that the defendants locked out the tenants on the basis of speculative damage and to extract payment for more than just the April rent, when the tenant and third-party were at their most vulnerable due to COVID-19. The landlord was playing hardball and holding the chattels hostage, as this would pressure the tenant and third party to pay the amount the landlord demanded. The landlord's outrageous behaviour warrants costs on the substantial indemnity scale.

[22] The evidence indicates that the defendants were well-aware of the plaintiffs' financial distress due to the closure of hair salons forced by the COVID-19 shutdown. On the record, there is no history of rental arrears other than in April 2020. The landlord refused to work out any payment plan with the tenant or apply last months' rent.

[23] The defendant Mauro Piperni admitted that he changed the locks and posted a Notice of Distress as a result of being concerned about the "damage that had been done and what might be done in the future". There is no evidence that Mr. Piperni called a third party or expert to assess the alleged damage, nor did he bother to contact the plaintiffs about the alleged damage before locking them out and posting a Notice of Distress.

[24] The defendants combined April's late rent, with the much greater costs (including legal costs) related to a By-Law infraction required to be paid by the landlord and described this as rent arrears in the Notice of Distress. There was no basis in the lease to do so.

[25] The defendants did not bother to reply to a May 1, 2020 letter from a paralegal retained by the plaintiffs.

[26] On May 15, the defendants replied to Mr. Moldaver's May 14 letter by stating that his letter had been forwarded to their legal counsel. Mr. Moldaver's office had to follow up again on May 20. On May 21, Mr. Piperni responded that a friend was reading Mr. Moldaver's letter "because if I give it to my lawyer I will be going after the cost of malicious damages done by your clients."

[27] By June 1, the lease had expired and the defendants had retained legal counsel. They knew or ought reasonably to have known that their refusal to permit the tenant access to the premises was improper. Still, the plaintiffs were forced to proceed with the contested June 5 motion.

[28] Without prejudice to any determination of whether the distraint was excessive, I note that the monetary dispute was over approximately $17,000 at best, yet the tenant and third-party were deprived of premises and equipment worth over a hundred thousand dollars representing their livelihood at a time of extreme vulnerability due to COVID-19.

[29] For all the above reasons, I order as follows:

(1) The defendants shall provide reasonable access forthwith to the plaintiffs to attend the premises, remove their chattels and affect repairs, if any, with access ending on Friday, June 19, 2020 at 5:00 p.m. (2) The defendant shall provide its statement of defence and counterclaim, if any, to the amended claim by Monday, July 13, 2020 at 4:00 p.m. (3) A case conference, pursuant to Rule 50.13 of the Rules of Civil Procedure shall be held on Monday, July 20, 2020, arranged via the Motions Coordinator, to discuss, inter alia, the scheduling of a hearing of an application under the Commercial Tenancies Act, or proceeding with the next steps in the action. (4) A copy of this endorsement shall be provided by the plaintiffs and defendants to the third party, Iram Bilal, forthwith. (5) Costs of the motion on a substantial indemnity scale are fixed in the amount of $16,448.48 and are payable by the defendants forthwith. (6) The terms of the Order of Myers J. dated May 28, 2020 regarding, inter alia, the immediate enforceability of orders in this proceeding applies.

Pinto J.

Date: June 9, 2020