Court File and Parties

COURT FILE NO.: 31-2601563 DATE: 2020-10-22 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: In the Matter of the Notice of Intention to Make a Proposal of Durham’s Sports Barn Inc. of the City of Oshawa in the Regional Municipality of Durham

BEFORE: C. Gilmore, J.

COUNSEL: Philip Cho and Max Skrow, for the company, Durham’s Sports Barn Inc. Todd Storms and Zach Flemming-Giannotti, for the Landlord, 1213423 Ontario Inc.

HEARD: In Writing

ENDORSEMENT on Costs

OVERVIEW

[1] This motion was brought by Durham’s Sports Barn Inc. (“the Tenant”) for various relief against 1213423 Ontario Inc. (“the Landlord”) including an Order setting aside a distress sale, the lease termination and an Order relieving the Tenant from paying rent during COVID-19 lockdowns when they were prevented from lawfully operating.

[2] The motion was heard on September 11, 2020 and the decision rendered on October 2, 2020. In the result, the Notice of Termination, the Notice of Default and the distress sale were all set aside. However, the Tenant was required to pay all post NOI rental payments including prorated rent for January 2020. The time for the Tenant to file a proposal under s.50.4 of the BIA was extended to October 31, 2020.

[3] Written costs submissions were requested if the issue of costs could not be resolved. Those submissions have now been received.

THE POSITIONS OF THE PARTIES ON COSTS

The Tenant

[4] The Tenant seeks all inclusive substantial indemnity costs of $50,381.55 or all-inclusive partial indemnity costs of $38,905.84.

[5] The Tenant submits that the issues were of significant importance as without a decision in its favour, it would be unable to make a viable proposal to its creditors and would be deemed bankrupt. Bankruptcy would mean a loss of jobs and an important service to the community.

[6] While the Court commented at the conclusion of its Endorsement that success had been divided, the Tenant does not agree. First, the time expended to prepare and argue the main issues greatly exceeded the time and argument on the COVID-19 rent issue, which was the only issue on which the Landlord had success. Further, the COVID-19 rent issue was a novel one for which the parties were not able to find any case law directly on point. As such, there should be no deviation from the principle that the successful party should be awarded costs.

[7] The Tenant also submits it made substantial efforts to settle this matter. It was originally scheduled to proceed in March 2020 but due to the COVID-19 adjournment protocols the matter had to be rescheduled. The Tenant used this time effectively, making comprehensive Offers in both January and July 2020.

[8] Finally, the Tenant requests that any costs awarded in its favour not be set off against rents. If the Tenant company does assign itself into bankruptcy, allowing the Landlord to set off costs against rent would be allowing the Landlord a preference over other creditors contrary to the priorities established in the BIA.

The Landlord

[9] The Landlord seeks all inclusive partial indemnity costs of $38,262.22 or all-inclusive substantial indemnity costs of $56,540.08. The Landlord submits that the parties should bear their own costs because the parties had equal success and the Landlord would have been entitled to substantial indemnity costs in relation to the COVID-19 issue as per section 20.5 of the Lease. Further, if the Tenant is awarded costs, they should be offset against the outstanding rental arrears.

[10] In the alternative, the Landlord’s substantial indemnity costs on the COVID-19 rent issue ($16,183.06) should be offset against the Tenant’s partial indemnity costs on the other issues ($31,513.73).

[11] The Landlord argues that any costs award should be offset equally against pre NOI arrears ($642,064) and post-NOI arrears ($407,541). The Landlord rejects that doing so would be treating the Landlord as a preferred creditor as the Tenant offered to treat the Landlord as a preferred creditor when attempting to resolve the dispute between the parties.

ANALYSIS AND ORDERS

[12] This Court is still of the view that the parties’ success was divided. Relieving the Tenant from paying rent during the lockdown and from paying a proportionate amount of rent during Phase 2 would have had a significant effect on the Landlord. While the area of the law was novel, considerable time was spent on it during argument given the potential financial impact on both parties.

[13] It would be a difficult leap for this Court to make to order the Landlord to pay costs in the face of continued significant default in rent payments notwithstanding my Order, the date of the demand, any pending appeal and where the Tenant is demanding that there be no set off due to the potential of a preference payment under the BIA.

[14] Given all of the above, there shall be no costs payable by either party.

C. Gilmore, J.

Date: October 22, 2020