Court File and Parties

COURT FILE NO.: CV-17-579516 DATE: 20210210 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Lviv Ltd., Halyna Dmytriv and Roman Dmytriv, Plaintiffs AND: 2240574 Ontario Inc., Defendant

BEFORE: Pollak J.

COUNSEL: Galina Pribytkova for the Plaintiffs Michael Simaan, for the Defendant

HEARD: October 1, 2020

Endorsement

[1] On this motion for summary judgment, the Plaintiffs request:

a) An order allowing amendment of Statement of Claim (unopposed);

b) A Declaration that they are entitled to renew the Lease Agreement for the period from July 1, 2020 until June 30, 2025;

c) If their declaration motion is dismissed on any basis other than the trial of this matter is required to determine the issues of this motion, an Order that they be allowed six months of continuation of the Lease to retrieve and/or sell all of the remaining fuel;

[2] The Defendant requests an Order dismissing the Plaintiffs’ Motion and has not made submissions with respect to the relief requested in subparagraph 1 (c) above.

[3] The Plaintiffs’ allege that the Defendant 2240574 Ontario Inc. acted in bad faith by trying to terminate their lease by “providing fake Agreements of Purchase and Sale of the property on two occasions, by locking the Plaintiffs out of the premises on July 24, 2017, in direct contravention of section 19 of the Commercial Tenancies Act, R.S.O., c. L.7, by withholding vital information, such as the amount of property tax in order to use it against the Plaintiffs to allege breach of the Lease, by failing to pay costs award of $3,000.00, which was ordered to be paid by the Defendant to the Plaintiffs forthwith on June 21, 2018 by Master Mills, and by failing to disclose that the Defendant would oppose lease extension until the end on June 1, 2020”. At this hearing, the Plaintiffs’ have abandoned their claims for punitive damages (unopposed motion for the amendment of the Statement of Claim in this regard is granted) and submit that this action is appropriate for summary judgment as there is no need for credibility assessment because most of the evidence is documentary. They submit that they are entitled to a lease extension for five years and deny the Defendant’s allegation that they have been in breach of the Lease.

[4] The Defendant alleges that the Plaintiffs are not entitled to the extension as a result of their breaches of the Lease and requests an order dismissing the Plaintiff’s motion.

[5] The Defendant agrees that there is no genuine issue requiring a trial, submitting the Plaintiffs have not met their burden of proving that the condition for renewal of the Lease, being in compliance with the terms of the Lease has been met. It is argued that the Plaintiffs have not produced the required evidence, and therefore, have failed to meet their burden of proof in showing that they were not in default of the provisions of the Lease.

[6] The renewal section of the Lease provides:

“Provided the Tenant has not been in material default of any of the covenants contained within the Lease, the Tenant shall be entitled to renew the Lease for ONE (1) additional term of FIVE (5) years, provided written notice is given to the Landlord not less than six (6) months prior to the expiry of the preceding term at a rental rate to be negotiated.” [emphasis added]

[7] The Plaintiff’s argue that because of the use of the mandatory word “shall” in the provision, the burden is on the Defendant to prove that the Plaintiffs were in “material default of any covenants contained in the Lease”. This submission in not supported by our jurisprudence and I do not accept it.

[8] In the case of 1556724 Ontario Inc v Bogart Corp [2011] O.J. No. 1940 (Ont. S.C.J.) (“Bogart”), wherein the tenant did not prove evidence that there had been no material breaches, the Court held that the tenant had the burden of proving it was not in default of the Lease as a precondition to an entitlement for an extension of the Lease.

[9] It is also the Plaintiffs’ position that they did not breach any material terms of the Lease Agreement.

[10] The Technical Standards and Safety Act (“the Act”) and Liquid Fuels Act, govern the safe operation of gas station’s. TSSA Inspectors monitor gas station’s for compliance the Act and its regulations, by imposing and enforcing Safety and Compliance Orders, and by issuing licenses to operators of a gas stations.

[11] The Plaintiff’s gas station had the required license. A TSSA inspector went to the Plaintiffs’ gas station to check for compliance of the required documents before the Plaintiff’s license was renewed. The Act requires the inspectors to check all the pumps, valves, all other equipment and the documents. The Plaintiffs’ submit that their annual license would have not been extended had they been in breach of a compliance or safety Order.

[12] In Hryniak v. Mauldin, 2014 SCC 7, [2014] S.C.R. 87, the Supreme Court of Canada provided a roadmap to follow on a summary judgment motion. At para. 66, the court states:

"On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a).

If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness…”

[13] The procedure is designed to be expeditious and affordable. However, the process must also ensure that the dispute is resolved fairly and justly.

[14] On this motion, I agree with the parties that there are no concerns as raised by our Ontario Court of Appeal in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438. I further find that following the guidance of our Supreme Court of Canada, I can, on the basis of the evidentiary record, reach a fair and just decision.

[15] As stated above, the issue to be decided on this motion for summary judgment is whether the Plaintiffs are entitled to a five-year renewal of a Lease.

[16] The Lease provides that the tenant may not be in any material default of the covenants within the Lease as a precondition for its renewal. A material default of a lease agreement has been held to be a significant failure of a party to perform its obligations. It is more than a minor or technical default.

[17] The Lease provides that the tenant must comply with all Technical Standards and Safety Authority (“TSSA”) requirements. The Defendants submit that the Plaintiffs have not complied with all TSSA requirements as they have not provided and maintained the required daily dip records. These breaches are significant and potentially catastrophic if a problem was to develop that would go undetected. These measurements record the fuel readings in the underground storage tank.

[18] It is submitted that contrary to paragraph 5 of the Lease, the repeated failures on the part of the Plaintiffs to properly measure the daily levels of gas in the underground tanks is a significant and a material default.

[19] The Lease specifically provides that:

“Tenant will be responsible for all day to day maintenance of pumps and above ground equipments (sic). Landlord/tenant will comply with all TSSA requirements.”

[20] The Defendant submits that the Plaintiffs have provided proper evidence that they have complied with all TSSA requirements as they have not provided evidence with respect to their compliance with this requirement. The TSSA requires that daily dip records must be maintained for safety reasons. They submit that the evidence of Mr. Dmitriv, with respect to these records, is self-serving and does not prove that the Defendant has complied with this TSSA requirement.

[21] At Mr. Dmitriv’s cross-examination, he was asked to produce the dip book for 2016 and 2017. These questions were refused by counsel as not being relevant. He also refused to produce the dip record books for 2018-2020, a period of time there were citations by the TSSA for his failures to keep appropriate records. He testified that he faxed the required dip book reconciliation reports to the TSSA and that he received a response from the TSSA, but did not produce such evidence. He testified that he no longer has possession of the 2018 records because he only keeps them for one year. He stated he had the 2019 and 2020 dip books, but he refused to produce them. It is submitted that because at the time of the Lease renewal on June 2020, there were no outstanding compliance orders by the TSSA and because they had a valid license to operate a gas station, such proves that the Plaintiffs were in compliance with all TSSA requirements as the license would not have been renewed if they were in breach of the TSSA requirements.

[22] The Defendant, however, submits that contrary to paragraph 5 of the Lease, the evidentiary record supports a finding of failures of the Plaintiffs to properly measure the daily levels of gas in the underground tanks and maintain the records is significant and disentitles the Plaintiff’s to the relief they seek and at a minimum, raises a genuine issue requiring a trial.

[23] On the basis of the evidentiary record, I agree that the Plaintiff’s have not met their burden of proving that they were not in breach of the Lease with respect to complying with TSSA requirements.

[24] The Defendant also produced information on June 17, 2020 from the TSSA, which detailed relevant infractions in the past two-plus years. The affidavit evidence of Mr. Dmitriv did not state that he corrected the defaults or provided information to the TSSA, and he did not provide any evidence that he has rectified breaches of TSSA regulations.

[25] The Defendant’s also rely on another alleged breach of the requirement in the Lease that the Property be used for a gas station only. The provision in the Lease is in block letters. Section 2 provides that:

“The premises shall be used by the tenant for a GAS STATION AND FOR NO OTHER PURPOSE WHATSOEVER.”

[26] Mr. Dmitriv’s admits that he was renting spots to trucks on the Property in his affidavit. He testified that he stopped renting parking spots in September of 2017. However, at his cross-examination, he claimed that such admission was a mistake and that he did not know renting spots was a contravention of the lease.

[27] In A and B Auto Leasing and Car Rentals Inc v Amer Al-Dabbas, 2018 ONSC 4383 (“Auto Leasing”), it was held that the tenant’s continued use of the premises for purposes other than what was set out in the lease agreement, was a continuing breach and the Court did not renew the Lease.

[28] On the basis of the evidence, I find that the Plaintiffs have not produced evidence that they were not in default of the Lease, with respect to using the premise for no other purpose other than a gas station. However, the evidence is that this breach was not continued. In this regard, the Defendant relies on the case of 1383421 Ontario Inc v. Ole Miss Place Inc., wherein the Court of Appeal held that material defaults disentitle the Plaintiffs from renewing the Lease.

[29] I therefore find that as the Plaintiffs have failed to produce the required evidence that they were not in default of the Lease, they have not met their burden of proof to show that they were not in default of the Lease. With respect their request for equitable relief. I find that the following reasoning of this court in 1556724 Ontario Inc. v. Bogart Corporation 2011 ONSC 2204 is applicable:

“I agree that this is not an appropriate case for the equitable remedy of relief from forfeiture since it does not involve a loss of right in respect of land, but a failure to crystallize a right.”

[30] I therefore decline to grant equitable relief to the Plaintiff’s.

[31] On the basis of the evidentiary record, I also find that the Plaintiffs have failed to prove that there is no genuine issue requiring a trial with respect to whether they have satisfied the condition for renewal of the Lease, which is being in compliance with its Lease. As stated above, I find that the Plaintiffs have not produced evidence that they were not in default of the Lease, with respect to using the premise for no other purpose other than a gas station and that they complied with TSSA requirements on maintaining proper dip records. The motion for summary judgment is therefore dismissed as the Plaintiff’s have not met their burden of proving entitlement to the relief sought.

[32] On this motion, the Defendants have not requested a dismissal of the Plaintiff’s action, only that the motion for summary judgment be dismissed.

[33] Should the parties not be able to agree on the relief sought by the Plaintiff’s with respect to how much time they should be given to vacate the Property, the parties may request an additional hearing by January 25, 2021, via zoom in this regard.

Costs

[34] For the above noted reasons, I grant the relief requested by the Defendants and dismiss the motion for summary judgment. In accordance with the agreement of the parties, the Defendant is awarded $10,000 in costs on a partial indemnity basis.

Pollak J. Date: February 10, 2021