COURT FILE NO.: CV-20-143 (Orangeville File)

DATE: 2021 01 14

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2487261 Ontario Corporation o/a Symphony Banquet Hall

Applicant

– and –

2612123 Ontario Inc.

Respondent

Darryl Singer and Nadia Condotta, Counsel for the Applicant

Peter-Paul Du Vernet and Kaleigh Du Vernet, Counsel for the Respondent

HEARD: December 22, 2020

Justice G.D. Lemon

REASONS FOR JUDGMENT

The Issue

[1] The applicant, Symphony Banquet Hall, brings an application for relief from forfeiture. Symphony has been locked out of its banquet hall business by the respondent, 2612123 Ontario Inc., since October 19, 2020. Symphony seeks to return to its business premises.

[2] The record confirms that Symphony has not paid the full rent under the lease from March 1, 2020 to November 1, 2020. These reasons apply only to the circumstances as of November 1, 2020. This ruling does not affect the landlord’s rights or obligations after that date.

The Background

[3] The lease in issue was originally entered into by two other parties on February 22, 2011. Symphony took an assignment of the tenant’s rights and obligations on June 25, 2015. 261 was assigned the rights and obligations of the landlord on December 21, 2018. The term of the lease is from July 1, 2011, to the 30th day of June 2021.

[4] Under the terms of the lease, currently, Symphony is to pay rent in the amount of $11,865 per month.

[5] There is no dispute that Symphony paid rent each month until March 2020. As a result of the Covid pandemic and Ontario restrictions, Symphony has not operated the banquet hall in any real way since March 2020.

[6] There was no dispute that Symphony has failed to pay any rent in March, October, and November 2020. It has paid 25% of the rent from April to August and the full rent for September 2020.

[7] There are factual disputes on a number of issues:

1. Did 261 agree that March rent would be paid only when Symphony re-opened?

2. Did 261 accept that Symphony would only pay 25% of the rent for the period of April to September 2020?

[8] As framed by Symphony, I am to determine:

1. Did 261 act contrary to the provisions of the Protecting Small Businesses Act 2020 by unlawfully entering the premises on October 19, 2020?

2. Is Symphony entitled to an order relieving it from forfeiture of the lease?

Analysis

[9] Neither party requested a trial of an issue. Both specifically requested that I make the determination on the record as I presently have it.

[10] Representatives of both parties were cross-examined on their affidavits. Preet Dass answered questions on behalf of 261. From the transcript, it is obvious that Ms. Dass was a singularly unimpressive witness. She had not reviewed the necessary documents in advance. She had not spoken to the appropriate witnesses to prepare to answer proper questions. When it assisted her case, she was conversant with all matters; when it did not, she had no information. She was candid that she was not involved “that much in the day-to-day operation”. When asked about important e-mails from a 261 representative, she answered “you would have to ask Megha. It is not within my knowledge”. Given Ms. Dass’ inability to properly respond to her obligations in cross-examination, I have no difficulty in drawing an adverse inference against 261 when I consider the other evidence.

[11] That said, there are a number of documents that do confirm what occurred between the parties.

Rent Abatement Agreement

[12] Symphony submits that there was an agreement between the parties that March rent would be paid when the banquet hall reopened and that 261 had agreed that Symphony would pay 25% of the rent for April to September. 261 submits that all rent is outstanding and there were no agreements with respect to rent abatements.

[13] It is agreed that in April 2020, the Ontario Government introduced the Canada Emergency Commercial Rent Assistance Program. By that program, landlords and qualifying businesses could apply for CECRA which allowed the tenant to reduce rent owed to the landlord to 25% of the monthly rent, and the Ontario Government would subsidize the rest. It is agreed that this program was optional for landlords.

[14] On behalf of Symphony, Ms. Vakil deposed that she assumed that 261 was applying for that benefit and that Symphony was able to reduce the rent to 25% during the months of April to August 2020. She points to a partial application that she was requested to sign by 261 for its application. As the program was extended to the end of September 2020, Symphony says that it was not in arrears for that time period. It submits that Symphony overpaid rent when the program was extended after it paid the full September rent.

[15] The flow of emails in evidence discloses that on Tuesday, March 31, 2020, Symphony wrote to Ms. Das:

Ms. Preeti

I had clearly mentioned Mr. Inderjeet that due to the current situation of the world and all the events being cancelled has not effected the big giants like you but it has totally destroyed small business like us and it will be very difficult form me to pay the rent for the month of March and April which does not mean that we will not pay the rent, in past we had business or not, we had paid the rent in a timely manner but at present the situation is totally different.

Please do not ask anyone to call me and ask for rent again when the situation will be better I will definitely pay, I know that you have a answer to it that you have the bills to pay, but definitely dear you are not a small business owner you have too many business and you can definitely absorb two month rent from Symphony Banquet Hall.

Hope you understand it and I Pray to God that soon everything will be normal.

[16] It is undisputed that an agent of 261 attended at Ms. Vakil’s residence and had her sign a blank rent reduction agreement, apparently in support of 261’s application for rent assistance.

[17] Symphony then continued to pay 25% of its rent without further complaint from 261.

[18] Regardless of Symphony’s assumption, the record discloses that 261 did not, in fact apply for the program. 261 therefore submits that the full amount of rent is owing by Symphony.

[19] The record does not provide any further relevant correspondence until July 2, 2020, when 261's representative wrote:

Hi,

This is a friendly reminder to let you know that rent for the month of July 2020 is past due date.

Request to drop the cheques at the earliest to avoid late payment charges.

If you have already sent the payment, please let us know so that can update accordingly. If not, we would appreciate your prompt attention to this matter.

[20] On July 3, 2020, Symphony replied:

HI Megha,

. . . Regarding rent payment, the Government is compensating July too. Also please send me the signed copies of the earlier rent papers I signed.

[21] On the same date, 261 replied to Symphony:

Hi Samina,

Yes, the extension has been approved. Please send the cheque for 25% of July’s rent. Also, I have forwarded your request for extension. I am waiting for a response from them regarding the same.

[22] Ms. Dass provided an undertaking to ask Megha what the reference to the 25% of rent means. In answer she said:

I requested full rent payment in my July 2 email but Samina replied back by insisting on only paying 25%, so I told her to pay the 25% rent because something is better than nothing. I did not ever indicate to her that rent assistance has been approved or that she is only to pay 25%. See my July 7 email with attachment asking Samina for the $71,755 in rent that is due. Further on August 31, by email I requested her to provide me with a payment plan for the rent that was overdue. Samina was always aware the full rent is owed and due but she only wanted to pay 25%.

[23] On July 7, 2020, 261’s representative emailed to Symphony a list of rental arrears totalling $71,755.

Hi Samina,

Please find the following notice attached for your review. Let me know if you have any questions on the same.

[24] On the same date, 261 also provided a notice to Symphony that:

Your rent was due on 2020-03-01. As of the dates stated below your rent payment is 120 days past due. You currently owe $11,865 in rent. Payment of the amount due for the rent and late fees may be made as provided in the lease.

[25] In response on July 9, 2020 Symphony wrote:

Hi Megha

Thanks for your email, Magha I know that you have recently started your assignment as Property Manager of 959 Derry Road East, and you have been consistent in replies and helping us out, but unfortunately it is becoming hard for me to explain to you what I have spoken and written to Mr. Inderjeet, Ms. Preeti and then Ms. Indey Daas in the past whereas I thought you had been briefed by them. Megha, every time I am getting something new in the email from you. Firstly, you checked the wrong amount and nearly gave me a heart attack by sending an Excel sheet stating Rent overdue of $71,755.00. Now you have sent me a notice of overdue rent for the month of March 2020 which was already discussed with Indey when she came to get the Rent discount papers signed from me in the last week of May 2020.

I did tell her that due to the current covid situation and sudden closure of businesses we do not have any funds to pay the rents and she told me that she will discuss it in the office and will let me know that if they can adjust it from the security deposit and will also let me know about the lease extension. One more thing was discussed and it was regarding the payment plan of the HVAC unit at the roof which Mr. Inderjeet signed that we can deduct $1000.00 every month from rent till the total amount $8500.00 is adjusted (the price of the Unit with installation). I did not get any reply whereas I was informed that you have taken the position and she is not dealing any more.

Megha, I was under the impression that you were briefed about the above mentioned. I am not denying that I owe the rent for March 2020 but unfortunately cannot pay at this time. At present, I can only pay the 25% Rent for July 2020 which is $2966.25. Whereas the rent for March I will pay your company in four equal installments after 90 days once the businesses are allowed to reopen and function properly. You also have to take in consideration the deposit that I have given to the HVAC guy of $2000 and the balance of $6500 has to be paid to him.

It will be appreciated if you please go through it with your management so both of us can be on the same page. At this time it is very hard to absorb more stress.

Thanks and looking forward to meeting with you.

[26] On July 9, 2020, Symphony wrote:

Hi Megha,

As per announcement regarding rent relief please send someone on Monday to collect the 25% rent cheque. Due to our Eid we will not be at Hall Today and Tomorrow, If your office is closed on Monday due to Civic Holiday let me know please or if you need to pick up today also message me and allow me sometime will arrange to be there.

[27] On July 24, 2020, Symphony wrote:

HI Megha,

Thanks for the reminder one week before, I will keep the rent cheque ready. Can you send someone to pick it up next Saturday the 1st August 2020 between 1:00PM to 4:00pm. Again to remind you that all the Commercial Tenants are depending on Government support and we will pay you 25% of the rent at the moment. Hoping to get help continued by the Government.

[28] On July 24, 2020,261 replied to Symphony:

Hi Samina,

I will coordinate with you on Friday, will mostly send someone on Monday i.e 3rd August. Also, rent relief has not extended further. If it does before 1st August, you can pay the 25%, if not you will have to pay full amount. Let me know if you have any further questions. Also, request you to keep monthly installments cheques ready for the outstanding March’s rent on the 3rd August as well.

[29] On the same date, 261 wrote to Symphony:

Hi Samina,

Sure, you can let us know once you start operating!

Have a wonderful weekend!

[30] On August 31, 2020, Symphony wrote to 261:

Hi Megha,

Can you please send someone to collect September 25% cheque as I am in the office and tomorrow I might not be available, I am sure you know that the Government is also providing Commercial Rent help for September too.

[31] In reply, 261 said:

Hi Samina,

There has been no news of rent relief extension by the government. Hence, we will be collecting full amount. I can send someone day after tomorrow to pick up the cheque. Let me know the timings.

Also, request you to send me a payment plan for the past months since business has started to operate and reservations have started again.

Apologies for delay caused because of Andrew but I will get you an update on the roof soon.

[32] To which Symphony responded:

Hi Megha, the GTA Banquet Hall Association is working hard with the government to solve the issues and problems of Banquet Halls and we are hoping that we will be granted funds and ren subsidies from them. Please let your management know that I will not be able to pay the full rent not the arrangement of the instalments for a few more weeks. Whereas I have arranged and kept 25% rent for September 2020, I am not denying not to pay the rent. If we do not get any help I have no choice but to pay the full amount which I have to arrange and it will take me some time.

[33] A month later, on October 6, 2020, 261 provided a “past due notice” that indicated:

Our records for your rent account indicate that the past due amount has not been paid. The total outstanding rent for the month of March and October is $23,730.

[34] On October 7, 2020, 261 wrote:

Hi Samina,

Just following up on the rent notice already put in your mailbox yesterday. I wanted to get an update on the same?

You immediate attention is required in this matter. Please find an attached copy for your records.

[35] Symphony responded the same day:

Thanks Megha for the letter, I do not understand why you people want to threaten me all the time. You think I will be scared and run away. Please read all the emails between us carefully as everything is mentioned in the letter/emails. Whereas October rent is concerned can you please reimburse me the September 2020 rent as I paid in full and it was supposed to be 25%.

October rent is already pending with the Government decision. I have spoken to our CEVA Association and was told it will be announced soon and this issue was already mentioned in the previous emails.

Regarding March Rent It will not be issued as the business is already in a loop hole. I have mentioned to you that I do not deny the March Rent but will pay in 25% when the business is fully operated. It is not my mistake as this was told to one of your management lady Ms. Indy who when personally visited me. Whereas she never came up with an answer and then everything was mentioned to you.

Your management has time to sign the papers but he has not given me an appointment which I am asking for more than one month to talk to him about my Unit.

Lastly I am also waiting for reimbursement for the HVAC unit which I have paid as agreed by Mr. Inderjeet to the contractor. The HVAC has to be fixed as winter is approaching.

I think your company management also has banquet business and is already aware of this situation.

[36] On October 8, 2020, Ms. Dass wrote on behalf of 261 to say, “The rent for the past couple of months is now due…”.

[37] Finally, on October 12, 2020 a “past due notice second request”, stated that, “the rent is outstanding for the months of March to October”.

[38] In assessing all of the evidence, I find that Symphony was entirely reasonable in assuming that an agreement had been reached with respect to the March to September rent payments. 261’s emails accept the 25% payments. In those emails, there is no express rejection of Symphony’s statements about agreements.

[39] While I agree with 261 that each of the arrears notices may, in fact, be factually accurate, they certainly make it unclear what the landlord is expecting in payment. It appears that only March’s rent was outstanding in July. That would support the belief that 25% rent had been accepted for April, May, June and July. The notice of October 6 refers only to the rent of March and October. That too supports Symphony’s assertion that 261 agreed to accept less rent. Symphony completed 261’s application to seek government assistance. There is nothing from 261 that suggested otherwise.

[40] On October 8, 261 is writing about “rent for the last couple of months” but within four days, 261 is asking for all rents.

[41] While Ms. Dass and Megha deny any such agreement, I do not accept their evidence. As set out above, Ms. Dass was not fully informed in December; there is no reason to think that she was informed during the important summer months. I accept her evidence that she was not involved “that much in the day-to-day operation”.

[42] Megha may say that she did not agree but her emails say otherwise:

Hi Samina, Yes, the extension has been approved. Please send the cheque for 25% of July’s rent.

Your rent was due on 2020-03-01. As of the dates stated below [July 7, 2020] your rent payment is 120 days past due. You currently owe $11,865 in rent.

Also, rent relief has not extended further. If it does before 1st August, you can pay the 25%, if not you will have to pay full amount. Let me know if you have any further questions. Also, request you to keep monthly installments cheques ready for the outstanding March’s rent on the 3rd August as well.

The total outstanding rent for the month of March and October is $23,730.

[43] The lease contains a waiver term which includes that:

No covenant, term or condition of this Lease shall be deemed to have been waived by the Landlord unless such waiver is in writing and signed by the Landlord.

[44] On these facts, I am satisfied that 261’s agent has provided that written and signed waiver with respect to the rents for March and the months in which Symphony paid 25% of the rent. It also applies to September rent when Symphony paid the full amount. Symphony is owed a credit for 75% of that payment.

Was the Re-Entry Unlawful?

[45] Pursuant to s. 83(1) of the Protecting Small Businesses Act 2020, no landlord shall exercise a right of re-entry during the nonenforcement period for failure to pay rent. It is agreed that the legislation was extended to October 30, 2020.

[46] With respect to rent arrears between March and October 1, 2020, 261 entered the premises on October 19, 2020. Accordingly, there is no doubt that pursuant to s. 83(1), 261 must restore possession of the premises to Symphony.

[47] 261 submits that it entered with respect to other breaches of the lease. Symphony denies those breaches and alleges others against 261. On this record, I cannot make a determination of those matters. If either party wishes to litigate those matters, they will have to do so on a better record.

Is Symphony Entitled to Relief from Forfeiture?

[48] As of the date of argument, Symphony was admittedly in arrears of rent for October and November. For this analysis, I will presume, without finding, that the insurance policy does not name 261 as required of the tenant by the lease and that there is no maintenance contract for the HVAC systems as required of the tenant by the lease.

[49] Pursuant to s. 20 of the Commercial Tenancies Act, 1990, c. L.7, I may grant relief from forfeiture as I think fit.

[50] The parties agree that the necessary principles for me to apply with respect to granting such relief are set out in Jungle Lion Management Inc. v. London Life Insurance Company, 2019 ONSC 780 and Michele’s Italian Ristorante Inc. v. 1272259 Ontario Ltd., 2016 ONSC 4888. That is to say that I should consider:

1. The conduct of the applicant and gravity of the breaches;

2. Whether the object of the right of forfeiture in the lease was essentially to secure the payment of money;

3. The disparity or disproportion between the value of the property forfeited and the damage caused by the breach;

4. Whether the tenant comes to court with clean hands;

5. Whether there has been an outright refusal to pay rent;

6. Whether the rent has been in arrears for a short or long time; and

7. Whether the landlord has suffered a serious loss by reason of the moving party's delay in paying rent.

[51] Given those factors and the circumstances in total, I find that Symphony is entitled to relief from forfeiture. I find that forfeiture would be an excessive remedy. I take into consideration the following factors.

[52] Symphony was reasonable in assuming that 261 was not expecting full payment of rent and was making application pursuant to the outstanding process. 261 was unreasonable in lulling Symphony into thinking that the rent was in abeyance or reduced.

[53] While 261 was within its rights to not apply for the program, it was unreasonable to lull Symphony into thinking otherwise. Those circumstances were compounded by the inconsistent notices in early October. While I have no evidence of whether 261 was eligible for the program, in hindsight, it might have been well to do so. Even if I am wrong with respect to my finding above, if 261 did not agree, it showed bad faith in not making its intentions clear. In any event, Symphony showed good faith in making the payments it did in a time of pandemic.

[54] The lease, pursuant to its present term, is to be completed later this year; however, the lease allows for a renewal:

Provided the Tenant is not and has not during the Lease been in breach or default under the Lease, the Tenant shall have the option to renew the within Lease for a further term of Five (5) years, upon the expiration of the herein Ten (10) year term.

[55] 261 declares that there will be no renewal. Symphony holds out hope that there will be. The short time remaining on the lease favours a forfeiture, but I cannot be sure of the future. I place little weight on the length of the lease one way or the other.

[56] There are substantial rental payments outstanding. If they are paid up to date, there is little damage to the landlord. If they are not, or there are other outstanding payments, the lease will be shortly terminated on other grounds. Granting relief to the tenant now may benefit the landlord and will certainly not make things any worse. Symphony alleges that they have considerable good will in the premises; that loss will be substantial if forfeiture is allowed to proceed.

[57] The parties allege that the other is in breach of other terms of the lease. Symphony appears to have breached a number of terms of insignificance but the failure to name 261 as a named insured is the only significant one. Otherwise, I am satisfied that Symphony comes to court with clean hands.

[58] Symphony has never denied owning rent. Given the conduct of 261, the rent had only been owing for about three weeks when 261 took its steps under the lease.

Result

[59] Accordingly, Symphony’s application is granted, and it is allowed to re-enter the premises to carry on pursuant to the terms of its lease.

Costs

[60] If costs cannot be agreed upon, Symphony shall provide its costs submissions within the next 15 days. 261 shall provide its response within 15 days thereafter.

[61] Each submission shall be no more than three pages, not including any Bills of Costs or Offers to Settle. No reply submission will be accepted unless I request it. If I have not received any submissions within the time frames set out above, I will assume that the parties have resolved the issue and I make no order as to costs.

[62] Neither party need include the authorities upon which they rely so long as they are found online and the relevant paragraph references are included.

[63] Any costs submissions shall be forwarded to my office in Guelph by electronic transfer to GuelphOffice.SCJ@ontario.ca or by mail to Guelph Superior Courthouse, 74 Woolwich St., Guelph, N1H 3T9.

“Justice Lemon”

Justice G. D. Lemon

Released: January 14, 2021

COURT FILE NO.: CV-20-143 (Orangeville File)

DATE: 2021 01 14

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2487261 Ontario Corporation o/a Symphony Banquet Hall

Applicant

– and –

2612123 Ontario Inc.

Respondent

REASONS FOR JUDGMENT

Justice G.D. Lemon

Released: January 14, 2021