COURT FILE NO.: CV-21-00659158-0000
DATE: 20210330
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DR. ARNOLD RABIN
Applicants
- and -
2490918 ONTARIO INC.
Respondent
Marco Drudi for the Applicant
A. Paul Gribilas for the Respondent
Application under Rule 14.05 of the Rules of Civil Procedure and Section 23 of the Commercial Tenancies Act, 1990.
HEARD: March 29, 2021
PERELL, J.
REASONS FOR DECISION
A. Introduction
[1] This is an Application pursuant to rule 14.05 of the Rules of Civil Procedure[^1] and s. 23 of the Commercial Tenancies Act, 1990.[^2]
[2] The Applicant, Dr. Arnold Rabin, who is a dentist, is a tenant in a medical office building. His landlord is the Respondent, 2490918 Ontario Inc., a corporation whose principal is Gil Shcolyar. Dr. Rabin wishes to assign his lease, but 2490918 Ontario Inc. has refused to consent to the assignment. Dr. Rabin submits that the refusal is unreasonable. The landlord submits the refusal is reasonable.
[3] For these “is reasonable/isn’t reasonable disputes” the court is the decider. Thus, for the reasons that follow, Dr. Rabin’s Application is dismissed without prejudice to it being re-opened before me at a date to be scheduled by me provided that:
a. by April 9, 2021, Dr. Rabin responds - as he may be advised - to 2490918 Ontario Inc.’s request for information as set out in in its litigation counsel’s letter of March 23, 2021;
b. by April 23, 2021, 2490918 Ontario Inc. does not consent to the assignment of the lease; and,
c. by April 30, Dr. Rabin serves his notice of motion and supporting affidavit to re-open the Application.
B. Law
[4] Section 23 of the Commercial Tenancies Act, 1990 states:
Licence to assign not to be unreasonably withheld
23 (1) In every lease made after the 1st day of September 1911, containing a covenant, condition or agreement against assigning, underletting, or parting with the possession, or disposing of the land or property leased without licence or consent, such covenant, condition or agreement shall, unless the lease contains an express provision to the contrary, be deemed to be subject to a proviso to the effect that such licence or consent is not to be unreasonably withheld. R.S.O. 1990, c. L.7, s. 23 (1).
Application to court where consent to assignment or subletting withheld
(2) Where the landlord refuses or neglects to give a licence or consent to an assignment or sub-lease, a judge of the Superior Court of Justice, upon the application of the tenant or of the assignee or sub-tenant, made according to the rules of court, may make an order determining whether or not the licence or consent is unreasonably withheld and, where the judge is of opinion that the licence or consent is unreasonably withheld, permitting the assignment or sub-lease to be made, and such order is the equivalent of the licence or consent of the landlord within the meaning of any covenant or condition requiring the same and such assignment or sub-lease is not a breach thereof.
[5] Under s. 23 (2) of the Commercial Tenancies Act, where a landlord refuses or neglects to consent to an assignment of a lease, a judge of the Superior Court may make an order determining whether or not the consent is unreasonably withheld, and where the judge is of opinion that the consent is unreasonably withheld, the judge may permit the assignment to be made, and the order is the equivalent to the consent of the landlord.
[6] Usually, the crucial issue in cases involving the right of a tenant to assign or sublease is the issue of determining whether the landlord has been reasonable or unreasonable in refusing to consent. Old case law favoured tenants on this issue, and the older case law limited the landlord to considering only the character of the proposed tenant or the subject-matter of the lease.
[7] The contemporary case law, however, applies a more liberal test that is more favourable to the landlord’s point of view by allowing the landlord to consider a variety of factors in determining whether or not to consent. The modern law does not limit the landlord to any particular criteria and allows the landlord to consider the surrounding circumstances, the commercial realities of the marketplace, and the economic impact of an assignment or sublease. The financial position of the assignee may be a relevant consideration.[^3]
[8] Each case is a question of fact and the onus is on the tenant to show that the consent has been unreasonably withheld.[^4]
[9] In deciding whether the burden has been discharged, the question is not whether the court would have reached the same conclusion as the landlord; the question is whether a reasonable person could have withheld consent.[^5]
[10] In Zellers Inc. v. Brad-Jay Investments Ltd.,[^6] Justice Mesbur stated at para. 26:
- In considering whether the landlord's refusal to consent is unreasonable, the court must first look at the covenant in the context of the lease and ascertain the purpose of the covenant in that context. The court should look at all the circumstances of the case. No rigid rules govern the types of reasons that the court may take into account when deciding the question of reasonableness. The test must always have regard to the contractual matrix, and the test should encompass consideration of the surrounding circumstances, the commercial realities and the economic impact of the change of use on the landlord within the context of a "reasonable person" standard.
[11] In determining the reasonableness of a refusal to consent, it is the information available to - and the reasons given by - the Landlord at the time of the refusal - and not any additional, or different, facts or reasons provided subsequently to the court - that are material.[^7]
[12] In determining whether to grant or refuse consent, it is appropriate for the landlord to consider its own position and also the position and interests of other tenants in a shopping centre enterprise.[^8]
[13] The financial position of the Assignee and the probability of a default by the proposed Assignee might be reasonable grounds to reject consent.[^9]
[14] A landlord will not be acting reasonably if its refusal to consent is merely capricious or is arbitrary in the sense of being without any reasonable ground.[^10]
[15] The landlord must exercise its discretion to refuse to consent to an assignment or a sublease in good faith and not for a collateral purpose.[^11]
[16] A landlord will not be acting reasonably if its grounds for refusal are seen to be simply opportunism. Thus, a landlord may not use its refusal as a means to secure a collateral or ulterior purpose or a new advantage such as higher rents or a more favourable lease.[^12]
C. Facts
[17] Dr. Rabin is the tenant at a medical office building at 2630 Kipling, Avenue, Toronto. He occupies Unit 8, a medical suite of 1,280 square feet. Dr. Rabin has practised dentistry in this building for over forty years. He now practises through Dr. A. Rabin Dentistry Corporation, a professional corporation.
[18] Dr. Rabin’s current lease, which he signed with the former owner of the medical office building, Humberview Medical Centre Ltd., is dated August 1, 2015. The lease expires on December 31, 2025. There is a five-year option to renew. The minimum rent is $1,287.33 per month. The minimum rent escalates annually.
[19] The lease contains a covenant with respect to assignments of the lease. Article 11 states:
ARTICLE 11 – ASSIGNMENT, SUBLETTING, PARTING WITH POSSESSION AND CORPORATE CONTROL
11.1 Assignment and Subletting
The Tenant will not assign this Lease in whole or in part, nor sublet all or any part of the Leased Premises […] nor suffer or permit the occupation of, or part with or share possession of, all or any part of the Leased Premises by any other person, firm or corporation (all of the foregoing being hereinafter referred to as a “Transfer” without the prior consent of the Landlord in each instance, which consent shall not be unreasonably withheld, subject to the provisions of Section 11.1(a). […] If there is a permitted Transfer of this Lease, the Landlord may collect rent from the assignee, subtenant or occupant (all of the foregoing hereinafter collectively referred to as the “Transferee”), and apply the net amount collected to the Minimum Rent required to be paid pursuant to this Lease, but no acceptance by the Landlord or any payments by a Transferee shall be deemed a waiver of this covenant or the acceptance of the Transferee as Tenant or a release of the Tenant for the further performance by the Tenant of the covenants or obligations on the part of the Tenant herein contained. […] Notwithstanding that any such Transfer is permitted or consented to by the Landlord, the Tenant shall be jointly and severally liable with the Transferee upon this Lease and shall not be released from performing any of the terms, covenants and conditions contained in this Lease.
(a) Landlord’s Option: If the Tenant intends to effect a Transfer of all or any part of the Leased Premises or this Lease, in whole or in part, or of any estate or interest hereunder, then so often as such event shall occur, the Tenant shall give prior written notice to the Landlord of such intent, specifying therein the name of the proposed Transferee and shall provide such information with respect thereto, including without limitation, information concerning the principals thereof and as to any credit, financial or business information relating to the proposed Transferee as the Landlord requires, and the Landlord shall, within fifteen (15) days thereafter, notify the Tenant in writing either, that it consents or does not consent to the Transfer.
(b) Increased Rents: In the event of any subletting by the Tenant by virtue of which the Tenant receives a rental in the form of cash, goods, services or other consideration from the subtenant which is higher than the rental payable hereunder to the Landlord for the premises sublet, the Tenant shall pay any such excess to the Landlord in addition to all rentals and other costs payable hereunder, for the period of the time during which the said sublet remains in possession of the premises sublet to it.
It the Tenant herein shall receive from any Transferee of this Lease, either directly or indirectly, any consideration for the assignment of this Lease, either in the form of cash, goods or services, the Tenant shall forthwith pay an amount equivalent to such consideration to the Landlord and same shall be deemed to be further Additional Rent hereunder.
In the event of any proposed assignment or subletting of the Leased Premises by the Tenant, the Landlord shall not be obliged to consider such a proposal nor be required to consent to same, unless the Minimum Rent payable by the proposed Transferee is, in the sole discretion of the Landlord, at the then current market rate for similar space in the immediate and surrounding area.
In calculating whether there is any additional consideration payable by a Transferee as hereinbefore provided, no deduction shall be made for any commission payable to any agent or other party.
[20] In 2017, 2490918 Ontario Inc. purchased the plaza in which the medical office building is located for $2.6 million. 2490918 Ontario Inc. is one of many property management corporations owned by Mr. Shcolyar.
[21] From the time of its purchase, Mr. Shcolyar planned to redevelop the medical building on the property. His plan is to construct a mixed residential (condominium) and commercial use building. He has made a land planning application to the City of Toronto for this redevelopment, but it remains to be determined whether the development application will be granted.
[22] Mr. Shcolyar’s interim or short-term plans for the property are passive. Several of the rental units have become vacant, and little has been done to secure new tenancies. There have been some month-to-month tenancies and one new tenancy. Some units have been vacant for some time. Dr. Rabin’s evidence was that the landlord has let the building decline and that there appears to be a plan to secure vacant possession in furtherance of a plan to demolish the building and redevelop the property.
[23] Dr. Rabin believes that 2490918 Ontario Inc. is more a developer than a landlord and property manager.
[24] There is no doubt that Mr. Shcolyar has plans to redevelop the property. However, the evidence suggests that 2490918 Ontario Inc.’s development plans are to proceed more like the proverbial turtle than the rabbit who did not win the race. 2490918 Ontario Inc. has made no effort to secure surrender agreements with the remaining tenants including Dr. Rabin. The one new lease does not contain a demolition clause, which suggests that Mr. Shcolyar is not eager or anxious about redevelopment.
[25] Unless the landlord negotiates surrender agreements with Dr. Rabin and the other tenants, 2490918 Ontario Inc.’s development plans cannot proceed until 2025 or perhaps 2030, if Dr. Rabin exercises his right to renew.
[26] For his part, Dr. Rabin has his own plans for the future use of his leased premises. Several years ago, Dr. Rabin, who is almost seventy-years old decided to reduce his workload and to transition his practice to younger dentists.
[27] In November 2020, Dr. Rabin began discussions with Drs. Gowthami Venishetti and Pavan Kumar Buddi. While it is not clear from the evidentiary record, it seems that Drs. Venishetti and Buddi are in the early years of their professional careers.
[28] In the fall of 2020, Dr. Rabin and the young dentists came to an understanding that the young dentists would purchase Dr. Rabin’s practice for $1.8 million and that Dr. Rabin would work part-time for three years. Drs. Venishetti and Buddi would purchase the shares of Dr. Rabin’s professional corporation and incorporate a new professional dental corporation for the dental clinic.
[29] In the New Year, 2021, to move these plans forward, Dr. Rabin retained Bernie Kleinberg, a real estate lawyer. On February 2, 2021, Mr. Kleinberg wrote Mr. Shcolyar. Mr. Kleinberg’s letter included the draft share purchase agreement by which Drs. Venishetti and Buddi would purchase Dr. Rabin’s practice. In his letter to Mr. Shcolyar, Mr. Kleinberg asked to be advised as to the process required to provide a consent to the assignment of the lease.
[30] In February 2021, Mr. Shcolyar was out of the country where he remained until February 24, 2021, but he was reading his emails. He, however, did not immediately respond to Mr. Kleinberg’s letter.
[31] Receiving no response to his letter of February 2, 2021, on February 18, 2021, Mr. Kleinberg sent an email message to Jack Frymer, whom he knew to be Mr. Shcolyar’s real estate lawyer. Mr. Kleinberg asked for a response to his letter of February 2, 2021 to Mr. Shcolyar.
[32] What followed was a conversation between Mr. Kleinberg and Mr. Frymer on February 19, 2021.
[33] Then, on February 24, 2021, Mr. Frymer sent the following email message to Mr. Kleinberg:
I have finally gotten instructions from my client. We will have no problem providing consent, provided however that the new principal provide his personal guarantee, that the old principal continue with his personal guarantee, and the lease be modified to include a demolition clause upon 24 months' notice, during the balance of the term or any renewal term. If that works, then please advise and we can move forward.
[34] 2490918 Ontario Inc. concedes in its factum for this motion that Mr. Shcolyar saw the tenant’s request for consent to an assignment in the letter of February 2, 2021 as “the opportunity to request a demolition clause by foregoing any financial disclosure.” Further, 2490918 Ontario Inc. concedes in its factum that “if it received a demolition clause as part of any assignment, then [Mr. Shcolyar] did not care about the financial and business information of the purchaser and its principals.”
[35] Mr. Shcolyar deposed that he expected that his instructions to Mr. Frymer would galvanize negotiations between the parties. Mr. Shcolyar’s expectations, however, were disappointed. Instead of negotiating the terms of a lease assignment agreement, Dr. Rabin retained Marco Drudi as litigation counsel to invoke the provisions of the Commercial Tenancies Act.
[36] On March 1, 2021, Mr. Drudi wrote Mr. Frymer the following letter:
We act for Rabin with respect to the above-noted matter.
On the 2nd day of February 2021, the solicitors for Rabin delivered a copy of the Share Purchase Agreement and, in accordance with Article 11 of the Lease, the lessor cannot unreasonably or arbitrarily withhold a Consent to the proposed Assignment. We have been provided with your email of February 24, 2021. Therein the lessor has refused to provide the required Consent on the condition that the Lease be modified to include a demolition clause. Needless to say, the condition is not permitted under the Lease and is commercially unreasonable as the purchaser cannot be expected to conclude the Share Purchase transaction in light of this risk which the lessor wishes to inject into the transaction.
Rabin had requested the Consent on February 2nd and, in accordance with the terms of the Lease, a response was to be provided within 15 days. The delay is prejudicial to Rabin. The outright refusal to Consent without the added condition is in breach of the Lease and, if maintained, will lead to significant damages which damages would include the sale price. If Rabin sustains any damages as a result of the lessor's position, Rabin will look to the lessor for all damages.
As a result of the pressing nature of this matter, we require a formal written response from the lessor no later than 12:00 p.m. on March 2, 2021. Should we not have a response by then, or should the response be negative, I have received instructions to bring an Application on an urgent basis dealing with the conduct of the lessor. If that is the case, please advise whether you or someone in your firm will be acting for the lessor and whether I can send the Application Record to your offices. We look forward to hearing from you.
[37] There was no immediate response to Mr. Drudi’s letter, but meanwhile, there were conversations between the real estate lawyers for the parties.
a. In the afternoon of March 1, 2021, there was a conversation between Mr. Kleinberg and Mr. Frymer. Mr. Frymer told Mr. Kleinberg that Mr. Shcolyar would consider consenting to an assignment if the lease was amended to include a demolition clause just during the renewal term.
b. This modified proposal was unacceptable to Dr. Rabin. In these circumstances, Mr. Shcolyar instructed Mr. Frymer to obtain financial information as a prerequisite to the landlord’s consideration of consenting to an assignment.
c. Mr. Shcolyar instructed Mr. Frymer to send his standard credit application form to Dr. Rabin to be completed by the prospective assignee tenants, which Mr. Frymer did on March 1, 2021.
d. On March 4, 2021, the credit application was signed and returned to Mr. Frymer. The returned form did not provide financial statements for the corporation to be incorporated by Drs. Venishetti and Buddi. The references from the dentists’ family members were unsatisfactory references for Mr. Shcolyar.
e. On March 9, 2021, Mr. Kleinberg emailed Mr. Frymer a signed copy of the share purchase agreement dated March 8, 2021. Mr. Shcolyar deposed that he learned for the first time that closing was scheduled for March 31, 2021. The message again requested the landlord’s consent to the assignment of the lease.
[38] On March 11, 2021, Mr. Drudi sent the following email message to Mr. Frymer:
We understand that you have yet to respond. Please be advised that if we do not have written consent from the Lessor to the requested Assignment by 4:00 p.m. March 12th, 2021, we will be commencing an Application next week to obtain an order with costs. As the Lessor must appreciate, if my client loses the sale, it will be looking to the Lessor for all costs and damages. Should that be the case, please advise if you will be acting for the Lessor and if you can accept service of the Application Record. Kindly advise your client accordingly.
[39] On March 12, 2021, Mr. Frymer responded with a short email message that stated: “My client, the Landlord has reviewed the credit application previously provided and is not satisfied with same, and therefore respectfully denies consent by the Landlord.” The same day, Mr. Drudi responded with the following email message:
Other than providing a bald rejection, does the Lessor have any reason or grounds for alleging same? If so, do you care to share same? If not, the rejection will likely be seen by the Court as unreasonable and the reason for the rejection as disingenuous. Please advise if you are acting for the Lessor and if you will accept service of the Application Record.
[40] On March 15, 2021, Mr. Drudi sent the following email message to Mr. Frymer:
We enclose herewith an accepted copy of the Share Purchase Agreement between Dr. Arnold Rabin as Vendor and Dr. Gowthami Venishetti in Trust for a corporation to be incorporated as Purchaser. Please note the transaction is scheduled for closing on the 31st day of March, 2021. In accordance with Section 11 of the Lease, we require the landlord’s consent to the proposed Assignment of Lease. This will confirm that we have previously forwarded to you the Retail Credit Application duly executed by the Purchaser. Given that the clock is ticking, it is now imperative that we get a written consent of the landlord to the proposed Assignment of Lease to the Purchaser. Please note that time is of the essence. The landlord has had ample opportunity to review the proposed assignment request and we require a response forthwith.
[41] On March 17, 2021, Mr. Drudi sent a follow-up email message as follows:
[…] Assuming your client has any concerns about the ability to collect rent after the Assignment, as you know, Dr. Rabin continues to be on the covenant so there is no valid concern. If there is any genuine concern, although not required by the Lease nor by the facts of this case, in addition to remaining on the covenant, Dr. Rabin is prepared to acquire a GIC in the amount of the rent during the renewal term of 5 years and pledge the GIC as security to cover the future rent including the rent during the renewal term should the Assignee choose to extend Lease at the end of the first term.
As it presently stands, by rejecting the Assignment, the landlord has the covenant of Dr. Rabin for the balance of the Lease and any renewal term. What the tenant proposes with the Assignment is to keep what the landlord has and provide the landlord with the additional covenant of the new tenant and provide the GIC as security for the 5 years of rent placing the landlord in a much better position. As we expect the landlord to reject the proposal, as we know the landlord is not concerned about the future rent as the landlord wishes to rezone the property and demolish the plaza, please respond by the end of business today as the Application Record is being prepared and we wish to include your response, and possible explanation of the rejection, in our materials.
[42] On March 19, 2021, Dr. Rabin commenced the Application.
[43] On March 23, 2021, Paul Gribilas, the landlord’s litigation counsel sent Mr. Drudi the following email message.
Marco,
The following is a preliminary list of documents/information the Landlord requires to fully consider your client's request:
From the purchaser and its principals
• the name of the proposed corporate tenant
• the shareholders of the proposed corporate tenant and the number and class of shares owned by each
• the directors and officers of the proposed corporate tenant
• financial statements for each of the principals of the proposed corporate tenant for the preceding three (3) years
• personal net worth statement for each of the principals of the proposed corporate tenant
• bank/credit references for each of the principals of the proposed corporate tenant
• credit score for each of the principals of the proposed corporate tenant
• bank account statements for each of the principals of the proposed corporate tenant for the preceding three (3) years
• history with the Royal College of Dental Surgeons of Ontario and a good standing certificate for each of the principals of the proposed corporate tenant
• business tenancy history for each of the principals of the proposed corporate tenant
• a list of any real property owned by each of the principals of the proposed corporate tenant
• personal address history of each of the principals of the proposed corporate tenant
• name of the accountant for each of the principals of the proposed corporate tenant (and their previous business)
• T1 Returns for the preceding three (3) years for each of the principals of the proposed corporate tenant
• allocation of purchase price to the Lease and associated goodwill
From each guarantor
• disclose the nature of the relationship between the guarantors and the principals of the proposed corporate tenant
• personal net worth statement for each of the guarantors
• bank/credit references for each of the guarantors
• credit score for each of the each of the guarantors
• bank account statements for each of the guarantors for the preceding three (3) years
• employment history of each of the guarantors
• a list of any real property owned by each of the guarantors
• personal address history of each of the guarantors
• T1 Returns for the preceding three (3) years for each of the guarantors
Kindly provide all of the requested information at your earliest opportunity for the Landlord's consideration.
Thank you.
[44] Mr. Gribilas’ email message was promptly followed by a letter sent as an email attachment. The letter to Mr. Drudi stated:
Further to my e-mail sent to you today at 1:34 p.m. please provide the requested financial and other information as soon as possible so that my client might fully consider your client's request for the assignment of the Lease.
In addition, I wanted to draw your attention to paragraph 11.1(3) of the Lease, and in particular the second subparagraph thereof, which reads:
One of the requests in my referenced e-mail is for the allocation of the purchase price agreed to by the parties, and most importantly the allocation for the value of the Lease and associated goodwill. We expect your client to provide a reasonable and defensible allocation from his accountant. Given the clear importance of the location both to your client and the purchasers of his practice together with the approximately four (4) years remaining on the Lease plus a five (5) year renewal option, one can only conclude that there is great value to the Lease, the demised premises and the location to the parties, otherwise the purchasers would only be buying a patient list, presumably for a substantially smaller purchase price. Assuming the Court orders this transaction to proceed on March 31, 2021, then my client will expect payment in full of this amount on closing, as a condition of any assignment.
I also draw your attention to the third subparagraph of paragraph 11.1(b) of the Lease, which reads:
Be advised that my client has engaged a brokerage to provide an assessment of the current fair market rental of the subject unit. If the fair market rental is higher than that reserved by the Lease, then, if the transaction does proceed, the Lease will need to be amended accordingly, as a condition of any assignment. A copy of any opinion indicating a higher fair market rental rate which will be relied upon by my client will be provided to you in advance of the hearing and will be put before the Judge.
If I am not in receipt of the required information (per my referenced e-mail) sufficiently in advance of the hearing date that it may be reasonably examined and considered by my client, then I will be requesting an adjournment of the Application to allow you time to produce this documentation. Please also advise me if/when you learn if the purchasers' lender will agree to extend the financing.
[45] On March 24, 2021, Mr. Drudi sent the following email message to Mr. Gribilas:
I have reviewed the Landlord’s financial demands in your email of yesterday as well as your letter also of yesterday. Regarding the demands in the email, we are of the view that the Landlord has no right, after the rejection was already announced to make the demands, which appear intrusive, at this time. He cannot find new reasons to reject. Moreover, sending a preliminary list just days before the hearing is not practical as the Landlord must know the proposed Assignee cannot comply. They will therefore not be responded to.
As for the terms of the Letter and the issues therein, if the Assignment occurs, those issues can be dealt with. I see that your client may be seeking an adjournment to obtain an opinion on fair market rent. We will not agree to an adjournment and the issue of the fair market rent only arises once the Assignment is concluded.
D. Discussion
[46] When Mr. Kleinberg wrote Mr. Shcolyar on February 2, 2021, his letter was a request by Dr. Rabin for consent to an assignment of the lease.
[47] I disagree with 2490918 Ontario Inc.’s argument that it was not obliged to respond within fifteen days to Mr. Kleinberg’s letter because there was no signed agreement between the tenant and its proposed assignee. Pursuant to Article 11.1 (Assignment and Subletting) of the lease “if the tenant intends to effect a Transfer … the Tenant shall give prior written notice to the Landlord of such intent”. That notice from the Tenant was given by Mr. Kleinberg’s letter. The assignment provision of the lease could be triggered by an intention to assign and did not require an agreement to assign.
[48] In accordance with the terms of the Article 11.1, the Landlord had fifteen days to notify the Tenant in writing that it consents or does not consent to the assignment. This did not occur, but it does not follow that 2490918 Ontario Inc. had unreasonably refused to consent to an assignment. Nor does it follow that the landlord breached the lease. The conduct of the parties rather reveals that the fifteen-day period for a decision from the landlord was waived. In this regard, it should be recalled that in his letter to Mr. Shcolyar, Mr. Kleinberg asked to be advised as to the process required to provide a consent to the assignment of the lease. There is no insistence here that the landlord was on the clock.
[49] What followed Mr. Kleinberg’s letter was that the landlord made two proposals between February 19, 2021 and February 24, 2021. The landlord indicated that it would consent to an assignment if the lease was modified to include a demolition clause. These proposals were not a refusal to consent to an assignment, and they were not a consent conditional on securing a collateral advantage.
[50] I, therefore, disagree with the proposition in Mr. Drudi’s letter of March 1, 2021 that the landlord had refused to provide a consent.
[51] Mr. Shcolyar was candid to admit that he was indeed attempting to secure a demolition clause, but his attempt was not an ultimatum, and it was not a refusal to a consent. Mr. Shcolyar did not press the matter of a demolition clause when Dr. Rabin sensibly and reasonably indicated that he was not prepared to negotiate a demolition clause. His new tenants obviously would object to this amendment to the lease they were purchasing as part of a multi-million dollar transaction.
[52] When Dr. Rabin declined to negotiate a demolition clause, Mr. Shcolyar instructed Mr. Frymer to proceed to obtain information so that the landlord could properly exercise its right to consent or to refuse the consent to an assignment of the lease. It was at this juncture that the landlord responded to Mr. Kleinberg’s request to advise about the process for an assignment.
[53] At this juncture, Dr. Rabin’s lawyers were sending mixed and inconsistent messages in response to the landlord’s conduct. Mr. Kleinberg responded to the landlord’s request for credit information with information. At the same time, Mr. Drudi had issued an ultimatum that the landlord had until March 2, 2021 to provide a response to the request for a consent to the assignment, failing which Dr. Rabin would seek court approval for the assignment.
[54] I disagree that because of its plans to develop the property, the landlord no longer had its normal interest in managing the rental property it owned. It is notable that when Mr. Frymer sought credit information from the new tenants, it was provided on March 4, 2021, several days past Mr. Drudi’s ultimatum deadline. In other words, some of Dr. Rabin’s lawyers were not treating the landlord as having refused to consent to an assignment and Dr. Rabin was providing some information about the proposed new tenants.
[55] The commercial lawyers for the parties were attempting to address the request for a consent to an assignment in a normative way. From the perspective of the conveyancing lawyers, 2490918 Ontario Inc. was not refusing to consent. It was asking for information.
[56] I disagree with Dr. Rabin’s submission that because Mr. Shcolyar planned to redevelop the property, he was being disingenuous in asking for information about the proposed new tenants. I can take judicial notice that it is not uncommon for landlords and tenants to negotiate lease assignment agreements between a landlord, the old tenant, and a new tenant. Dr. Rabin, for instance, might have negotiated a release of his personal covenant to pay rent.
[57] From Mr. Shcolyar’s perspective, there was no harm in asking for a demolition clause just as there would have been no harm had Dr. Rabin responded by asking for favourable terms in an assignment agreement.
[58] This all said, on its face, Mr. Frymer’s letter of March 12, 2021 reads as a denial of any consent by the landlord with the explanation that the landlord was not satisfied with the information being provided.
[59] However, Mr. Drudi’s email messages of March 12, 2021, March 15, 2021, and March 17, 2021 muddle the matter, because on the one hand, these messages appear to accuse the landlord of an unreasonable refusal to consent, while on the other hand, the messages renew the demand for the landlord’s consent and specify that time is of the essence because of the scheduled closing on March 31, 2021. Thus, placed in context Mr. Frymer’s letter reads as a request for information to satisfy the landlord’s inquires.
[60] The parties did not trust one another and were pre-judging one another, and unfortunately after March 4, 2021, the litigation lawyers and the conveyancing lawyers continued to send mixed and confusing messages. Each side was making tactical and strategic maneuvers.
[61] After March 4, 2021, the landlord obtained a litigation lawyer too, and the landlord’s request for information was designed for litigation purposes more than it was for commercial purposes.
[62] It is also the case that the landlord’s request for information was ham-fisted from the outset. The credit form was an inapt document for the circumstances of an assignment of a lease. The landlord was not clear about what information it required, and some of its late-arriving requests were overreaching and unreasonable. For instance, asking for financial statements from a corporation to be incorporated makes no sense.
[63] The demand for information became grossly overreaching after Dr. Rabin’s Application was commenced and a litigation lawyer was retained. In my opinion, some but certainly not all of the information requested by Mr. Gribilas in his post-litigation letter of March 23, 2021 was reasonable. However, some of the information requested was just a pretense to show that the landlord had concerns about the financial viability of the young dentists.
[64] In my opinion, neither the landlord nor the tenant addressed the request for a consent to the assignment in good faith, and there was the problem of too many lawyers spoiling a brewing legal stew.
[65] The landlord was overreaching in its late-arriving “preliminary list of documents/information” it required as set out in Mr. Gribilas’ letter of March 23, 2021. The tenant, however, was not acting in good faith in providing no financial information. The tenant could have responded to the landlord’s information requests that were normal and reasonable. Instead, Dr. Rabin’s lawyers responded with a new proposal to provide security so that the landlord’s request for financial information arguably could be shown to be a specious or an unnecessary request. Unfortunately, this response had the effect of making 2490918 Ontario Inc. suspicious that the old or the new tenants had something to hide. Why not just provide the information that it was reasonable to ask for?
[66] Once again, Dr. Rabin’s lawyers were sending mixed messages. After the litigation had commenced, Dr. Rabin was prepared to acquire a GIC in the amount of the rent during the renewal term of 5 years and pledge the GIC as security to cover the future rent including the rent during the renewal term should the Assignee choose to extend the Lease at the end of the first term. The GIC offer, however, is ironic because it is inconsistent with Dr. Rabin’s assertion that the landlord had no genuine concern about the financial wherewithal of the new tenants and the landlord’s request for financial information was a façade for refusing to consent to the assignment.
[67] The case law establishes that the measure of the reasonableness of the landlord’s conduct in refusing a consent to an assignment is a question of the facts of each case, and the case law establishes that in determining the reasonableness of a refusal to consent, it is the information available to and the reasons given by the Landlord at the time of the refusal and not additional or different facts provided subsequent to the court that are material.
[68] The difficulty of applying this law in the immediate case, is that the conduct of the landlord - and of the tenant - has obscured the circumstances that the landlord has neither consented nor refused to consent to an assignment and the tenant has been equivocal about whether or not to provide information or financial comfort to the landlord about the financial viability of the new tenants.
[69] The difficulty of applying this law in the immediate case is further confounded by the circumstance that the reasonableness of the landlord’s and the tenant’s conduct was an ongoing matter that started before the litigation and continued through the cross-examinations that were conducted three days before the argument of the Application.
[70] I suspect, but do not know, that if Dr. Rabin had responded with some financial information about the tenants, then Dr. Rabin would have called the landlord’s bluff and exposed an unreasonable refusal to consent. I do know that Dr. Rabin did not call what might have been a bluff.
[71] In any event, I do know that Dr. Rabin’s answer of a GIC in the amount of the rent was not only ironic, it was also inadequate to show that the landlord was acting unreasonably.
[72] How was access to this GIC to be triggered was never addressed. A letter of credit might have been better, but even a letter of credit is not easy to trigger. Further, a landlord and tenant relationship is much more than the payment of rent. There is a legal relationship and a co-ownership of the leased premises. Metaphorically, they are married to the land with obligations one to the other. Thus, it was not necessarily unreasonable for the landlord to wish to know something about the character of those with whom it was going to have a legal relationship until 2030.
[73] The onus is on Dr. Rabin to establish that the landlord has unreasonably refused its consent. The peculiarity of the immediate case is that Dr. Rabin has not established that the landlord has refused at all. The oddity in the immediate case is that the landlord denies that it has refused or will refuse a consent to an assignment. Both parties appear to be rolling the dice in bringing and in responding to Dr. Rabin’s Application for a court-ordered consent.
[74] I am sympathetic to Dr. Rabin’s plight, but I am not persuaded that he has made the case for a court-ordered assignment of the lease.
[75] In these circumstances, in my opinion, the appropriate order is to dismiss his Application on terms that will test whether the landlord has in fact refused to consent to an assignment and if so whether that refusal is reasonable.
[76] Therefore, for the above reasons, Dr. Rabin’s Application is dismissed without prejudice to it being re-opened before me at a date to be scheduled by me provided that:
a. by April 9, 2021, Dr. Rabin responds - as he may be advised - to 2490918 Ontario Inc.’s request for information as set out in in its litigation counsel’s letter of March 23, 2021;
b. by April 23, 2021, 2490918 Ontario Inc. does not consent to the assignment of the lease; and,
c. by April 30, Dr. Rabin serves his notice of motion and supporting affidavit to re-open the Application.
E. Conclusion
[77] The Application is dismissed on terms as set out above.
[78] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with 2490918 Ontario Inc.’s submissions within twenty days of the release of these Reasons for Decision, followed by Dr. Rabin’s submissions within a further twenty days.
Perell, J.
Released: March 30, 2021
COURT FILE NO.: CV-21-00659158-0000
DATE: 20210330
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DR. ARNOLD RABIN
Applicant
- and -
2490918 ONTARIO INC.
Respondent
REASONS FOR DECISION
PERELL J.
Released: March 30, 2021
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