Court File and Parties

COURT FILE NO.: CV-19-623795 CV-19-622931

DATE: 20210728

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Professional Court Reporters Inc. Plaintiff/Defendant by Counterclaim

AND: Pistachio Financier Corp. and Real Crowd Capital Inc. o/a R2 Defendants/Plaintiffs by Counterclaim

AND BETWEEN: Pistachio, Real Crowd Capital Inc. o/a R2, and 2291818 Ontario Inc. o/a BeWell Health Clinic Plaintiff’s/Defendants by Counterclaim

AND: Professional Court Reporters Inc. and Parham Fini Defendants/Plaintiff’s by Counterclaim

BEFORE: Pollak J.

COUNSEL: Patrick Bakos, for the Plaintiff Jeremy Sacks, for the Defendant

HEARD: December 1, 2020 and January 18, 2021

ENDORSEMENT

Overview

[1] Professional Court Reporters (“PCR”) moves for summary judgment of its Action (the “PCR Action”) for damages for breach of a lease against Pistachio Financier Corporation (“Pistachio”) and Real Crowd Capital Inc. o/a R2 (“RCCI”) (collectively, the “Responding Parties”).

[2] PCR (the sublandlord) seeks the following relief against Pistachio (the subtenant) and RCCI (the indemnifier):

a. payment of all amounts owing to PCR in accordance with the terms of the commercial Lease PCR entered into, including all rent and all other costs incurred. In the alternative, payment of damages resulting from Pistachio’s default of the Sublease; and

b. pre-judgment and post-judgment interest in accordance with the Lease at a rate equal to the lesser of prime plus five percent per annum and the maximum rate permitted by applicable law, and in the alternative, prejudgment and post-judgment interest in accordance with the Courts of Justice Act, R.S.O. 1990, c. C.43.

[3] PCR also moves for summary judgment dismissing Pistachio, RCCI, and 2291818 Ontario Inc. o/a BeWell Health Clinic’s (“BeWell”) Action against it and others wherein is being claimed that PCR unlawfully terminated the lease and caused other damages (the “BeWell Action”).

[4] For the reasons set out below, the Court dismisses the Responding Parties’ action and grants summary judgment in the PCR Action as follows:

a. damages awarded to PCR of $91,952.58, as well as pre-judgment interest at the contractual rate of prime plus five percent per annum. Post-judgment interest is granted in accordance with the Courts of Justice Act, s. 127.

Background

[5] Before analyzing the legal principles with respect to summary judgments, on an initial review of the pleadings in both Actions, which consist of numerous claims, allegations and contradictory evidence, it appears that the dangers of a partial summary judgment, as continued by our Court of Appeal, may be present on these motions. The length, complexity, and interrelatedness of the pleadings may make it difficult to resolve these disputes. However, after applying the appropriate analysis as set out in our jurisprudence, I agree that it is proper to proceed with these motions for summary judgment in these Actions.

[6] In October of 2017, PCR entered into a commercial sub-tenancy agreement with Pistachio as a subtenant for a lease term of eight years (the “Sublease”).

[7] RCCI indemnified Pistachio’s obligations pursuant to the Sublease.

[8] PCR claims that on June 1, 2019, Pistachio willfully failed to pay rent of $22,988.21, which it was required to pay on the first of every month.

[9] Pursuant to the Sublease, if rent arrears continued for seven days, such would result in a default of the Sublease, allowing PCR to terminate the Sublease. The Responding Parties claim a right of set-off as a result of unlawful actions by PCR as a defence to the PCR Action.

[10] In the BeWell Action, BeWell, Pistachio, and RCCI claim that as a result of PCR’s acts and omissions, they have suffered the following damages:

a. losses of revenue, with respect to loss of potential sales and failure to provide services to clients of BeWell, Pistachio, and RCCI ;

b. being forced to make payments of amounts to PCR in excess of any amounts required to be paid pursuant to the Sublease, resulting in economic duress and the $1,500 payment to PCR’s bailiff;

c. losses arising from PCR’s refusal to return the security deposit;

d. the subsequent loss of reputation with employees, clients, practitioners, and patients as a result of being required to cancel several appointments and meetings with clients; and

e. the costs of attempting to find new space to operate their businesses on an urgent basis, as well as all relocation costs incurred.

[11] In the PCR Action, PCR claims:

a. payment of all amounts owing to PCR in accordance with the terms of the commercial Lease entered into by the sublandlord, PCR, the subtenant, Pistachio, and the indemnifier, RCCI, executed on October 14, 2017, including all rent and all other costs incurred; and

b. payment of damages resulting from Pistachio's default of the Sublease, and the subsequent termination of the Sublease, in the amount of $750,000;

c. pre-judgment and post-judgment interest in accordance with the Lease at a rate equal to the lesser of prime plus five percent per annum and the maximum rate permitted by applicable law, and in the alternative, prejudgment and post-judgment interest in accordance with the Courts of Justice Act.

[12] In the BeWell action, BeWell, Pistachio and RCCI claim:

a. A declaration that the Sublease agreement with PCR, which includes oral agreements with respect to BeWell, in relation to Pistachio having the rights of possession at the premises municipally known as 1 University Ave, Suite 1600, Toronto, Ontario, M5J 2P1 (the “Premises”), was a valid and subsisting agreement in full force and effect;

b. A declaration that PCR is in breach of the Sublease;

c. A declaration that PCR is in breach of their common law, contractual, and statutory duties of good faith owed to BeWell, Pistachio, and RCCI;

d. A declaration that BeWell, Pistachio, and RCCI had an equitable interest in the Premises;

e. Additionally or alternatively, an order declaring that BeWell, Pistachio, and RCCI held the beneficial interest in the lease of the Premises;

f. Damages for loss of revenue, loss of reputation, goodwill, loss of business opportunity, intentional or negligent misrepresentation, and losses incurred as result of the business interruption and relocation to BeWell, Pistachio, and RCCI, caused by PCR’s acts and omissions, including PCR’s breach of the agreement, as well as PCR’s liability for unjust enrichment, quantum meruit, conversion, intentional interference with economic relations, breach of contract, economic duress, and breach of the duty of good faith, in the amount $2,000,000;

g. An accounting of all profits earned by PCR in the course of their breaches as described herein, and an order directing that PCR make payment to BeWell, Pistachio, and RCCI of such profits;

h. Special damages for accounting, legal, and other professional fees and expenses that have been or will be incurred, in an amount to be provided prior to trial of this proceeding; and

i. Alternatively, damages \ in an amount to be determined prior to the trial of this action on the basis of quantum meruit and unjust enrichment.

[13] Further, BeWell, Pistachio, and RCCI plead in the BeWell Action that:

a. BeWell, Pistachio, and RCCI notified PCR of the significant damages being caused to their businesses as a result of the lockout. Nevertheless, PCR was not provided the ability to even retrieve their and their representatives’, employees’, clients’, practitioners’, and patients’ belongings and records (collectively, the “Belongings”) until on or about Saturday, June 15, 2019; and

b. BeWell, Pistachio, and RCCI notified PCR and Mr. Fini, the directing mind of PCR, of their urgent need to retrieve the Belongings, and nevertheless, PCR and Mr. Fini failed and/or refused to do so.

c. With respect to BeWell, its property consisted of confidential and sensitive client and patient records, which are heavily protected by privacy laws, regarding which PCR and Mr. Fini were expressly notified.

d. Notwithstanding being provided notice that several of BeWell’s patients were mental health patients under the urgent care of psychiatrists and psychologists, PCR and Mr. Fini maintained their refusal to provide BeWell with timely access or repossession of the Premises.

e. After the lockout, BeWell, Pistachio, and RCCI attempted themselves, and through legal counsel, to obtain repossession of the Premises. However, PCR and Mr. Fini refused to agree to repossession, unless BeWell, Pistachio, and RCCI agreed to onerous and unreasonable terms for the repossession. These were terms PCR were not entitled to carry out at law, or under the terms of the Sublease or the Lease.

f. In the meantime, several requests by BeWell, Pistachio, and RCCI to remove patient and client files were ignored by PCR and Mr. Fini.

g. PCR remains in possession of some of the Belongings, the recovery of which forms part of BeWell, Pistachio, and RCCI’s damages in this Action.

h. BeWell, Pistachio, and RCCI were forced to find new space for each of their respective businesses.

i. Despite their efforts, BeWell, Pistachio, and RCCI have suffered substantial damages as a result.

j. Despite their breaches, PCR continues to improperly hold a security deposit in the approximate amount of $22,099.73.

k. It was entirely unreasonable and clearly in bad faith for PCR to lock BeWell, Pistachio, and RCCI out of the Premises without any prior notice in the midst of the negotiations with respect to the Surrender Agreement, particularly since PCR had sufficient funds from BeWell, Pistachio, and RCCI to cover the rent for the month of June 2019, and since BeWell, Pistachio, and RCCI offered to pay the rent for the month of June 2019, the same day BeWell, Pistachio, and RCCI were locked out by PCR.

l. Since occupying the Premises, BeWell, Pistachio, and RCCI have affected substantial and lasting improvements and renovations to the Premises, which they have now lost the use of.

m. Furthermore, BeWell, Pistachio, and RCCI were to take ownership of a significant amount of furniture at the end of the term of the Sublease and Lease, which includes, without limitation, approximately 120 chairs, ten couches, two sofas, and ten board room tables, with the approximate value in the amount of $50,000.00.

n. PCR has breached the Sublease and Lease, particulars of which include, without limitation:

i. improperly locking out BeWell, Pistachio, and RCCI from the Premises, without any prior notice, and during the negotiations with respect to the Surrender Agreement;

ii. refusing to grant BeWell, Pistachio, and RCCI and their representatives, employees, clients, practitioners, and patients access to the Premises;

iii. improperly purportedly terminating the Sublease and Lease with PCR refusing to provide BeWell, Pistachio, and RCCI repossession of the Premises; and

iv. intentional or negligent misrepresentation regarding the relocation as a result of WeWork moving into the building where the Premises is located, which happened within days of BeWell, Pistachio, and RCCI taking possession of the Original Space. This changed the dynamic of the building from a prestigious and quiet building into a busy and predominately co-working shared space building.

o. At all material times, Mr. Fini, as the directing mind of PCR, was its representative with all its dealings with BeWell, Pistachio, and RCCI.

p. Furthermore, at all material times, Mr. Fini was an employee, agent, or servant of PCR, and was acting in the course of his employment, agency, or service. Specifically, Mr. Fini was acting in the course of his employment or agency when he committed the acts and omissions outlined herein. Accordingly, PCR is vicariously liable for Mr. Fini.

q. Alternatively, BeWell, Pistachio, and RCCI seek an order piercing the corporate veil of PCR and holding Mr. Fini personally responsible for the actions and omissions of PCR as aforesaid, to the extent necessary to trace and recover their damages suffered as aforesaid, in respect of the acts and omissions described herein. Mr. Fini, as a principal, alter ego, and directing mind of PCR, directed it to commit the acts and omissions described herein.

r. Further in the alternative, Mr. Fini intentionally acted in bad faith, and in a malicious, egregious, high-handed, and callous manner, as the alter ego, lawyer, director, and/or officer for PCR, directed it to commit the acts and omissions described herein, justifying Mr. Fini’s personal liability.

s. Such malicious, egregious, high-handed, and callous manner by PCR warrant an award of punitive, aggravated, and exemplary damages is justified in favour of BeWell, Pistachio, and RCCI

t. BeWell, Pistachio, and RCCI’s businesses are highly reputational, and PCR’s actions have and continue to cause significant damage to their reputation.

u. BeWell, Pistachio, and RCCI had placed significant reliance on the Sublease and Lease permitting possession of the Premises.

v. BeWell, Pistachio, and RCCI were forced to cancel several appointments and meetings during the week of June 10, 2019, causing damages to BeWell, Pistachio, and RCCI.

w. PCR forced onerous terms as a condition of the BeWell, Pistachio, and RCCI’s repossession of the Premises.

x. PCR has taken the calculated steps described herein to intentionally cause harm to BeWell, Pistachio, and RCCI’s businesses.

y. In the alternative, in the event PCR suffered any damages as alleged in the Claim, which are not admitted but expressly denied, PCR may not obtain recovery of the damages claimed from BeWell, Pistachio, and RCCI, because of:

i. the doctrine of unclean hands. It would be inequitable under the circumstances for PCR to prevail against or recover from BeWell, Pistachio, and RCCI where PCR acted in bad faith and in breach of the Sublease and Lease; and

ii. the doctrine of economic duress.

z. Further, BeWell, Pistachio, and RCCI purport that they did not cause or contribute to PCR’s alleged damages:

i. the damages are excessive, exaggerated, unmitigated, speculative, and too remote;

ii. PCR failed to take those steps to mitigate its damages, as it was duty bound to do, and is thereby precluded from obtaining all or a portion of its purported damages from BeWell, Pistachio, and RCCI;

iii. PCR has failed to take reasonable steps to conclude the negotiations in relation to the Surrender Agreement, prior to locking BeWell, Pistachio, and RCCI out of the Premises;

iv. BeWell, Pistachio, and RCCI are entitled to a legal and equitable set-off for any and all payments already made to PCR, whether from BeWell, Pistachio, and RCCI or any other party, in relation to the Premises, including without limitation, any new tenant or subtenant;

v. pursuant to s. 111 of the Courts of Justice Act, BeWell, Pistachio, and RCCI claim legal and equitable set-off as a result of the PCR’s economic duress, intentional interference with economic relations, and intimidation, full particulars of which will be provided prior to trial.

Analysis

The appropriateness of a motion for summary judgment

[14] PCR submits that summary judgment is appropriate on these two motions as the adjudication of these issues requires an interpretation of the written Lease(s) and most of the communications between PCR and Pistachio were in writing. The court, therefore, has a full evidentiary record.

[15] PCR further argues that there is no genuine issue requiring a trial in either of the two Actions. The terms of the Sublease are clear with respect to PCR’s rights upon any default of the Sublease by Pistachio.

[16] The Responding Parties submit that these Actions are not appropriate for summary judgment, as there are several genuine material issues requiring a trial.

[17] As well, the Responding Parties submit that there are genuine issues relating to their entitlement to damages for their immediate relocation and the disruption caused by PCR.

[18] It is also submitted that the two Actions are so inextricably linked and intertwined that the BeWell Action is “effectively a counterclaim” to the PCR Action (or vice versa), and that the granting of summary judgment on one action but not the other would be the equivalent to granting partial summary judgment.

[19] The Responding Parties rely on the Court of Appeal cases of Hamilton (City) v. Thier and Curran Architects Inc., 2015 ONCA 64, 45 C.L.R. (4th) 1 and Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561. Here, the Ontario Court of Appeal has provided guidance and caution on the dangers of granting partial summary judgment in circumstances where there is a risk of creating duplicative proceedings or inconsistent findings of fact.

[20] In Butera, the Court of Appeal further noted that in addition to the danger of duplicative and inconsistent findings, partial summary judgment motions may lead to additional issues and identified the following four problems at paras. 30-33:

a. Partial summary judgment motions delay the resolution of the main action (at para. 30):

Typically, an action does not progress in the face of a motion for partial summary judgment. A delay tactic, dressed as a request for partial summary judgment, may be used, albeit improperly, to cause an opposing party to expend time and legal fees on a motion that will not finally determine the action and, at best, will only resolve one element of the action. At worst, the result is only increased fees and delay. There is also always the possibility of an appeal.

b. Partial summary judgment motions may be very expensive (at para. 31):

The provision for a presumptive cost award for an unsuccessful summary judgment motion that existed under the former summary judgment rule has been repealed, thereby removing a disincentive for bringing partial summary judgment motions.

c. Partial summary judgment motions may be a waste of judicial resources (at para. 32):

[J]udges, who already face a significant responsibility addressing the increase in summary judgment motions that have flowed since Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 [the case that promoted the use of summary judgment in appropriate circumstances] are required to spend time hearing partial summary judgment motions and writing comprehensive reasons on an issue that does not dispose of the action.

d. Partial summary judgment motions carry a higher risk of inconsistent findings (at para. 33):

[T]he record available at the hearing of a partial summary judgment motion will likely not be as expansive as the record at trial therefore increasing the danger of inconsistent findings.

[21] Any motion that may result in partial summary judgment should only be granted in the clearest of cases, when the issues on the judgment sought are “easily severable” from the balance of the case, or “there is a very real possibility of a trial result that is inconsistent with the result of the summary judgment motion on essentially the same claim.” (Butera, at para. 26)

[22] In the case of Way v. Schembri, 2020 ONCA 691, at paras. 13-18, Nordheimer J.A. stated:

The respondents contend that summary judgment is appropriate because the only issue before the motion judge was the enforceability of clause 13. That argument might have gained some traction if there had been agreement that the only issue to be decided was the meaning of clause 13 based on its wording alone, without the need for any factual context. That was not the case, however. The factual matrix was a necessary consideration of any decision regarding the application and enforceability of clause 13 because “[c]onsideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47.

In any event, it is difficult to see what saving of time and expense was accomplished by dealing with this issue separately, when the main parties are locked in other litigation that is still ongoing and has been for some time.

The issue of the enforceability of the contractual clause, by itself, could have been easily dealt with at the trial, if the issue was as narrow as the Responding Parties contend. Purporting to deal with it through a summary judgment motion has only caused further delay, distraction, and expense, all in the context of litigation that has been going on for far too long as it is.

On this point, the appellants say that the motion judge effectively granted partial summary judgment because of the existence of the other action and the factual linkage between the two. The respondents reply that the motion judge granted full summary judgment because it disposed of the appellants’ action.

The respondents are correct, but only in the most technical sense. More importantly, the principles surrounding partial summary judgment are not to be so narrowly construed nor applied. Partial summary judgment is a rare procedure that should be sparingly invoked: Butera, at para. 34. The reasons for that approach are enunciated by Paciocco J.A. in Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 146 O.R. (3d) 135, at para. 14:

There is also the risk that partial summary judgment can frustrate the objective of using summary judgment to achieve proportionate, timely and affordable justice. If used imprudently, partial summary judgment can cause delay, increase expense, and increase the danger of inconsistent findings at trial made on a more complete record.

Those concerns regarding partial summary judgment are fully engaged in this case because, as the appellants correctly point out, the two actions are factually intertwined. Indeed, the motion judge acknowledged the overlap in the facts of the two cases numerous times in the course of his reasons. The motion judge also relied on that overlap in reaching the costs decision that he did.

As a result, there is the very real possibility that conclusions reached by the trial judge could conflict with the result reached by the motion judge. There is also the possibility that the trial judge will reach a better understanding of the relationships between the parties that would give a more informed view of the meaning and purpose of the lease. This was the very concern that Lauwers J.A. expressed in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, when he said, at para. 37:

In the complex situation in this case, it is therefore entirely possible that the trial judge who hears the trial of the issue on the validity of the promissory notes will develop a fuller appreciation of the relationships and the transactional context than the motion judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motion judge's finding that the third release is fully valid and effective, even though the parties would be bound by that finding. The process, in this context, risks inconsistent findings and substantive injustice.

[23] This court must rule on whether it is appropriate to decide the PCR Action and the BeWell Action in these motions for summary judgment in accordance with the principles that have been established by our Supreme Court in the case of Hryniak and the Court of Appeal decisions referenced above and most recently in Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98, 154 O.R. (3d) 561.

[24] As I have stated above, it appears that the dangers of a partial summary judgment may arise as a result of the complexity of the pleadings. Even though it may be possible for this Court to rule on the interpretation of the Sublease, the relevant facts to determine the numerous claims and defences are interrelated, which may make it difficult for the court to resolve these disputes by way of summary judgment.

[25] However, notwithstanding first impressions of the potential dangers of summary judgment in these Actions, I find that when I apply the analysis set out by the Supreme Court of Canada and our Court of Appeal to the facts in these cases, I can fairly adjudicate these Actions by summary judgment.

[26] PCR relies on the Responding Parties obligation to put their best foot forward on these motions, and submits that based on the evidence filed, their claims should be dismissed as they have not set out any evidentiary or legal support for their damages claimed as a set-off in the PCR Action nor for their claims in the BeWell Action.

[27] The Responding Parties claim that their financial documents in evidence show that they lost income after the termination of the Sublease and lockout. There is no evidence that a loss was incurred as a result of the actions of PCR. Such does not meet their burden of proving the damages claimed. Such lack of evidence does not create a genuine issue for trial. The Responding Parties are required to adduce their evidence to support and quantify their damages claimed on these motions, but did not do so.

[28] I agree that the Responding Parties on these motions have not adduced evidence to quantify or support the various claims made for alleged damages caused by PCR either in the claim for set-off in the PCR Action or in the Claim in the BeWell Action. On this basis alone, I find that the BeWell Action must be dismissed as it can not be successful without evidentiary proof of the damages claimed.

[29] The only exception where damages are quantified in evidence is the Claim for reimbursement of a payment made to the bailiff in the amount of $1,500 and the claim for the value of furniture remaining in Premises of $50,000.

[30] The BeWell Action Plaintiffs claim, in part, that pursuant to the Sublease, Pistachio and RCCI were to take ownership of a significant amount of furniture at the end of the term of the Sublease, including approximately 120 chairs, ten couches, two sofas, and ten board room tables, with the approximate value in the amount of $50,000.00. This Claim is dealt with below.

[31] Otherwise, I agree with the submissions of PCR that the damages claimed by the Responding Parties can not be awarded as a result of such lack of evidence. Similarly, on these motions, PCR also has the obligation of proving its damages claimed.

[32] As the obligation to adduce evidence on damages is on each claiming party in these motions, the court, it is submitted, can adjudicate on the issues without finding that such lack of evidence leads to a conclusion that there are genuine issues requiring a trial with respect to such alleged damages.

[33] I agree with this analysis and find that I can dismiss all of the BeWell Action claims and the PCR defence for set-off damages where there is no evidence of damages claimed and there is no other remedy requested. This leaves nothing for the court to adjudicate with the exception of the claims that I have referred to above.

[34] The only claims remaining to be analyzed are the breach of the lease in the PCR Action, the claim with respect to the furniture, and the claim for reimbursement of the bailiff payment.

Breach of the Lease in the PCR Action

[35] PCR submits that the Sublease was lawfully terminated after Pistachio deliberately refused to pay rent, and the default continued for seven days after the due date. PCR relies on clause 19.03 of the Lease to support their proposition.

[36] The Lease provides the following regarding the rights and remedies available to the landlord in the event of tenant default:

Clause 19.03: Events of Default

If and whenever:

The Rent hereby reserved is not paid in full when due, and such default continues for seven (7) days after the due date;

then and in such events, the full amount of the current month’s and the next ensuing three (3) months’ installments of Rent shall immediately become due and payable and … the Landlord may terminate this Lease by giving notice thereof, and landlord may without notice or any form of legal process whatsoever forthwith re-enter the Premises …, however, that such termination shall be wholly without prejudice to the right of Landlord to recover arrears of Rent and damages for any default by Tenant hereunder. Should landlord at any time terminate this Lease by reason of such event, then in addition to any other remedies it may have, it may recover from Tenant all damages it may incur as a result of such termination.

[37] There is a dispute between the parties on the interpretation of the default provisions of the sublease. Pistachio submits that the Sublease provides its own terms with respect to payment of rent as follows:

Sublease Agreement

[T]he Subtenant agrees to be bound by all terms and conditions contained in the Head Lease, subject and except to provisions agreed to and contained in this Offer to Sublease, as approved by the Head Landlord.

If acceptable to the Head Landlord and the Sublandlord, this Offer to Sublease shall act as the Sublease Agreement. The Subtenant covenants with the Sublandlord as follows:

(a) To pay the Basic Rent and Additional Rent as provided for herein.

(b) To perform and observe all covenants to be observed and performed by the Sublandlord under the Head Lease other than the covenant to pay rent thereunder [Emphasis added].

Sublease Default

If the Subtenant defaults in the performance of any of its obligations hereunder, the Sublandlord shall have the same rights and remedies against the Subtenant as the Head Landlord has against the Sublandlord as Subtenant under the Head Lease.

In the event of termination of this sublease by the Sublandlord as a result of any default by the Subtenant of any of the covenants and obligations to be observed and performed by it hereunder, the Subtenant shall remain liable for all Basic Rent and Additional Rent and other sums due under this Offer to Sublease for the remainder of what would have been the Sublease Term (less the amount of any net rentals collected upon a reletting for any part of such period), for all reasonable and direct damages arising out of its default including damages for the loss of the benefit of the sublease for the unexpired balance of the Term and for all reasonable and direct costs incurred in connection with the reletting of the Premises.

[38] Pistachio submits that as the Sublease provides that its provisions with respect to the payment of rent must be followed, the payment of rent, and the default provision in the Lease, do not form part of the Sublease.

[39] I do not accept that such an interpretation of the Lease is reasonable and find that the default provisions of the Lease relied on by PCR, are applicable. The reference to the Exclusion of the covenant to pay rent, is included to differentiate the amount of rent that is paid pursuant to the Sublease.

[40] The Responding Parties submit that if this Court finds that the Lease rental default provisions apply, PCR waived its right to insist on strict performance of the payment of rent, or is estopped from relying on those strict positions as a result of its history of accepting habitually late rent payments, without providing notice that it would insist on strict compliance with the Lease with respect to the payment of the June 2019 rent.

[41] Pistachio relies on Mr. Fini’s admission that Pistachio almost never paid its rent on the first of the month. The rent would not be paid at the beginning of each month and Mr. Fini would attend the premises later to get the rent cheque and never noted Pistachio in default which, it is submitted, raises a genuine issue for trial.

[42] PCR objects, noting that the estoppel defence has not been plead, which precludes this defence from being raised. I agree.

[43] Further, the Responding Parties rely on the fact that PCR was holding a security deposit greater than the amount due for rent in June of 2019.

[44] The evidence, which includes email evidence, supports PCR’s submission that the failure to pay rent was an intentional act by Pistachio’s principal, Mr. Nijjar, who was upset that his surrender terms in their negotiations were not accepted by PCR. On May 31, 2019, Mr. Nijjar advised PCR by email, that Pistachio would be refusing to pay June rent, and that Pistachio would be vacating the premises by the end of June 2019. PCR submits that the refusal to pay June rent was a “strong-arm tactic” intended to gain leverage over PCR in the negotiation of the surrender of the Sublease.

[45] On the basis of the evidence, I find Pistachio’s failure to pay rent was intentional and its default was unrelated to its late payment of rent.

[46] It is also emphasized by the Responding Parties that the termination of the sublease was done during ongoing negotiations between the Responding Parties, BeWell, PCR, and the head landlord, for the surrender of the Sublease and Lease. The Sublease and Lease were to be surrendered at the end of either June or August 2019, as per the surrender proposals exchanged between the parties. Further, PCR did not share the head landlord’s surrender proposals with the Responding Parties and included much more onerous terms in their version of the surrender proposal.

[47] The Responding Parties also plead that PCR breached its duty of good faith by terminating the Lease without notice, in the midst of the surrender negotiations to exert pressure on the Defendants. This, it is argued, is also a genuine issue requiring a trial. They rely on the Supreme Court of Canada’s holding in Bhasin v. Hrynew, 2014 SCC 7, [2014] 3 S.C.R. 494. They submit that PCR was not dealing fairly by purporting to terminate the Sublease without notice, when the June 2019 rent was readily available.

[48] To support this breach of duty of good faith, they rely on the following evidence:

a. the purported termination in the midst of the surrender negotiations;

b. Mr. Fini’s personal vendetta and anger with Mr. Nijjar, as evidenced through Mr. Fini’s conversations with Robert Sweeney (Mr. Nijjar’s real estate agent at CBRE);

c. Mr. Fini relying on the provisions of the head lease (the binding effect of which is not admitted, but denied), to terminate the Sublease and lock the Responding Parties out without notice, when Mr. Fini admitted that rent was habitually paid late throughout the course of the sub tenancy and that he had to constantly request rent cheques be made available for his retrieval from the Premises;

d. Mr. Fini refusing to get the June 2019 rent cheque when it was made available for him. Instead, he refused to get it, did a deal with landlord without the Responding Parties, and now seeks damages from the Responding Parties;

e. the Sublease was going to be terminated by either August 31 or September 30, 2020 – and it was in fact terminated on September 30, 2020. PCR was also holding a security deposit in the amount of $22,110.06, which effectively covered the June 2019 rent; and

f. PCR did not provide opportunity to re-enter the premises until the work week was over.

[49] PCR submits that Mr. Nijjar’s claims of bad faith on behalf of PCR and Mr. Fini are not supported by the evidence. All communications between Mr. Fini and Mr. Nijjar were in writing and demonstrate no bad faith. PCR was trying to negotiate a deal that made commercial sense for PCR. PCR was not willing to agree to terms of a surrender that would place PCR in a worse financial position compared to if the Sublease continued in force and effect.

[50] PCR argues that the only evidence regarding the allegation of bad faith is hearsay evidence about discussions between Mr. Fini and Mr. Sweeney when attempting to negotiate the surrender of the Sublease. Mr. Fini has provided direct evidence regarding those discussions that demonstrate no bad faith. The Responding Parties did not adduce any evidence from Mr. Sweeney, despite conducting other Rule 39.03 examinations from the Rules of Civil Procedure, R.R.O. 1990, Reg 194. PCR submits that an adverse inference should be taken by the Court that the evidence of Mr. Sweeney would not have been favourable to the Responding Parties’ case.

[51] I accept these submissions of PCR on the allegation of bad faith and cannot find that the Responding Parties have proven their bad faith allegations.

[52] PCR also submits that the “good faith doctrine” has no application to the facts of this case given PCR did not have a contractual obligation to negotiate a surrender of the sublease in the first place. I do not necessarily accept this submission, but do not find it necessary to adjudicate on this point in light of my finding that the Responding Parties have not met their burden of proving PCR’s breach of duty of good faith.

[53] Further, PCR submits that the terms of the Sublease are clear. The Deposit is not prepaid rent, but is actually an amount held by PCR as:

[S]ecurity for the faithful performance by the Subtenant of all of the terms, covenants and conditions of this Sublease by the Subtenant to be kept, observed and performed, and otherwise to be returned to the Subtenant within thirty (30) days’ of expiration of the Sublease Term of other terms, covenants and conditions in full without deduction [Emphasis added].

[54] Pistachio claims for the return of its deposit. PCR submits it has no obligation to give up its security and therefore had no obligation to apply the deposit to the outstanding June 2019 rent.

[55] The Lease provides for the return of the deposit after the expiration of the Lease. As the Lease did not expire there is no right of Pistachio for the return of the deposit. I agree with the submissions of PCR.

[56] I find that pursuant to the Sublease, PCR had the right to retain the deposit as security for those additional amounts owing as well as security for all future breaches.

[57] PCR admits it has not reimbursed the amount of $802 for Pistachio’s deposit to the bailiff.

[58] Neither party made legal submissions on this Claim of Pistachio for the return of the $802 deposit. As I have found that PCR had the right to lock out the Responding Parties. I do not find that Pistachio should be reimbursed for this amount.

[59] The Responding Parties also include a request for relief from forfeiture, urging this Court to consider that PCR suddenly enforced a remedy of strict compliance to terminate the Sublease without notice in the midst of negotiations, while they had the June 2019 rent cheque available for pickup.

[60] The Responding Parties also argue that it did not make economic sense to bring an urgent motion from relief from forfeiture application when the Sublease and Lease were to be surrendered within the two to three months.

[61] As noted above, the evidence supports a conclusion that the default was deliberate and a negotiating tactic. The relief from forfeiture is equitable relief, which I find would not have been appropriate in this case as a result of the conduct of Pistachio.

[62] Relief from forfeiture is discretionary, with the burden of proof being on Pistachio to convince the court that enforcing PCR’s contractual right of forfeiture would lead to an inequitable consequence. I must consider the conduct of Pistachio, the gravity of the breach, the disparity between what is forfeited, and the damage caused by the breach.

[63] PCR’s evidence is also that after the litigation was commenced, PCR learned that Pistachio had no intention of honouring the Sublease until the end of the term regardless of whether or not PCR agreed to a surrender of the Sublease. Pistachio and RCCI had already found a new premises at 55 York Street and were expecting the “sign back” from the landlord by the end of May 2019, which was not known to PCR at the time. Pistachio and RCCI expected to move to the New Premises by the end of June 2019, and advised the Head Landlord of this on June 5, 2019 (five days prior to the Sublease being terminated by PCR), which was also not known to PCR at the time.

[64] I have found that Pistachio intentionally refused to pay rent. The evidence is that Pistachio intended to vacate the premises at the end of June 2019. The termination by PCR was 21 days earlier than Pistachio planned to leave. Pistachio is no longer operating and BeWell has moved to a different location with a long-term lease. No motion for relief from forfeiture has been brought.

[65] On the basis of such evidence, I find that the Responding Parties’ claim for relief from forfeiture is not a “genuine issue requiring a trial”, emphasizing as well that it is no longer possible to claim such relief.

[66] As Pistachio had failed to pay the June 2019 rent, such default triggered the obligation to pay three months accelerated rent pursuant to Clause 19.03 of the Lease.

[67] After Pistachio failed to correct its default, on June 9, 2019, PCR provided Pistachio with notice it was terminating the Sublease and re-entered the Premises in accordance with the terms of the Sublease.

[68] PCR submits that the Sublease was lawfully terminated after Pistachio knowingly refused to pay rent, and said default continued for seven days after the due date.

[69] In accordance with the clause 19.03 of the Lease, PCR gave its notice of termination and re-entered the Premises.

[70] On the basis of all of the above noted evidence and applying the Hryniak analysis, I find that PCR properly exercised its rights and remedies upon default by Pistachio that are clearly set out in the Head Lease, and that there is no obligation to apply the Deposit towards June 2019 rent. PCR acted within its rights under the Sublease by following the procedure set out in the Head Lease.

The claim with respect to the furniture

[71] Another issue for this court to resolve is Pistachio’s claim regarding the furniture.

[72] The Sublease states the following with respect to the furniture:

Furniture

The subtenant shall have the right to use the existing furniture in the Premises (see attached Inventory of Furniture) for the duration of the Term of the Sublease, with ownership of the furniture being transferred to the Subtenant upon expiration of the Sublease Term. Should the Subtenant exercise the right to early termination, then the furniture shall remain property of the Sublandlord and not become property of the Subtenant [Emphasis added].

[73] I have found that PCR properly exercised its right to terminate the Lease. Pistachio, therefore, pursuant to this provision does not fulfill the condition that the Lease has “expired” so that ownership can be transferred to it. This Claim is therefore, dismissed.

The claim for reimbursement of the bailiff payment

[74] The final issue to be resolved, is whether the Responding Parties should be reimbursed for a bailiff payment of $1,500. As I have found that PCR properly exercised its right to lock out pursuant to the Sublease, this Claim must also be dismissed.

[75] There are no remaining claims of the Responding Parties. This Court therefore dismisses the BeWell Action and grants PCR summary judgment of its Action.

[76] I dismiss all of the defences plead by the Responding Parties and find that pursuant to the terms of the Sublease, PCR was entitled to terminate the Lease as a result of the breach of the Lease by Pistachio.

Calculation of damages

[77] The Sublease provides that:

In the event of termination of this sublease by the Sublandlord as a result of any default by the Subtenant of any of the covenants and obligations to be observed and performed by it hereunder, the Subtenant shall remain liable for all Basic Rent and Additional Rent and other sums due under this Offer to Sublease for the remainder of what would have been the Sublease Term (less the amount of any net rentals collected upon a reletting for any part of such period), for all reasonable and direct damages arising out of its default including damages for the loss of the benefit of the sublease for the unexpired balance of the Term and for all reasonable and direct costs incurred in connection with the reletting of the Premises.

[78] PCR relies on the Supreme Court of Canada’s decision in Highway Properties Ltd. v. Kelly, Douglas & Co., 1971 123 (SCC), [1971] S.C.R. 562 where it was held that a landlord may, after a tenant is in fundamental breach of the lease or has repudiated it entirely, terminate the lease and sue for damages for future loss as well as for accrued loss.

[79] I agree that PCR is also entitled to claim damages for its losses notwithstanding that it has exercised its right to accept the Responding Parties breach of the Lease as a repudiation of the Lease contract.

[80] PCR relies on the following for its calculation of damages:

“The Base Rent calculation is set out in the Sublease:

Basic Rent: The Subtenant agrees to pay the landlord a net rent on the first day of each calendar month during the Sublease Term as follows (the “Basic Rent”):

Months 1 to 60: $27.00 per rentable square foot per annum

Months 61 to 96: $28.50 per rentable square foot per annum

The square feet of the relocated Premises is set out in the Lease Amending Agreement of the Lease at p. 147 of the Motion Record:

Landlord and Tenant have agreed to relocate Tenant, on the terms and conditions more particularly set out in this Lease Amending Agreement to an area in the building comprising of approximately 4,384 square feet of space on the 16th floor.

The Base rent is therefore calculated as $27.00 x 4,384 = $118,368 per annum, which is $9,864 per month.

Mr. Fini’s affidavit at para. 14 states that parking per month is $400.00.

The operating cost and realty taxes is based on the Rent statements from the property management company that were paid by PCR. The Rent statement from the property manager identifies the operating cost and realty taxes portion of the rent.

The operating cost and realty taxes portion of the rent can also be calculated by deducting the head lease base rent from the total paid by PCR to the Head Landlord.

Thus, the calculation is as follows:

Jun-19 Jul-19 Aug-19 Sep-19 TOTALS

Base Rent: $9,864.00 $9,864.00 $9,864.00 $9,864.00 $39,456.00

Operating costs (Additional Rent):

$6,407.95 $6,407.95 $6,407.95 $6,407.95 $25,631.80

Realty Taxes (Additional Rent):

$3,671.60 $3,671.60 $3,671.60 $3,671.60 $14,686.40

Parking: $400.00 $400.00 $400.00 $400.00 $1,600.00

Subtotal: $20,343.55 $20,343.55 $20,343.55 $20,343.55 $81,374.20

HST (13%) $2,644.66 $2,644.66 $2,644.66 $2,644.66 $10,578.65

Total $22,988.21 $22,988.21 $22,988.21 $22,988.21 $91,952.85

After the surrender of the Lease, PCR’s damages are calculated based on the profit it would have otherwise earned for the remainder of the Sublease term, based on the difference in base rent received from Pistachio relative to the base rent being paid by PCR.

The Lease was surrendered effective September 30, 2019 as per the surrender agreement at p. 323 of the Record, and therefore the loss of profit calculation is the following:

Loss of profit calculation

October 1, 2019 to May 31, 2021

June 1, 2021 to November 30, 2022

December 1, 2022 to November 20, 2025

Base rent payable by PCR to Head Landlord

$9,374.45

$9,725.17

$9,725.17

Base rent payable by Pistachio to PCR

$9,864.00

$9,864.00

$10,412.00

Per month loss

$489.55

$138.83

$686.83

Number of months

20

18

35

Subtotal

$9,791.00

$2,498.94

$24,039.05

HST

$1,272.83

$324.86

$3,125.08

Total

$11,063.83

$2,823.80

$27,164.13

Totals

$36,328.99

$4,722.77

$41,051.76

PCR submits that the Sublease also entitles PCR to its costs on a solicitor and client scale, as well as interest at the rate of prime plus five percent per annum.”

[81] When the court asked PCR to identify the evidence it relies on to support the method it had used to calculate damages claimed, counsel advised as follows:

“PCR is entitled to be put back into a position that it otherwise would have been if:

i. not for the default and termination of the Sublease.

ii. not for the default/termination, PCR would have been entitled to receive full rent (Base and Additional Rent) and parking, plus HST, during the period from June 2019 to the surrender of the Lease in September 2019.

iii. not for the default and termination of the Sublease, PCR would have been making a monthly profit from the Premises until November 30, 2025 because the monthly rent received by PCR from the Subtenant exceeded the monthly rent paid by PCR to the property management company.”

[82] PCR relies on the following provision in the Sublease:

“In the event of termination of this sublease by the Sublandlord as a result of any default by the Subtenant of any of the covenants and obligations to be observed and performed by it hereunder, the Subtenant shall remain liable for all Basic Rent and Additional Rent and other sums due under this Offer to Sublease for the remainder of what would have been the Sublease Term (less the amount of any net rentals collected upon a reletting for any part of such period) for all reasonable and direct damages arising out of its default including damages for the loss of the benefit of the sublease for the unexpired balance of the Term and for all reasonable and direct costs incurred in connection with the reletting of the Premises [Emphasis added].

Sublease Term:

The sublease term shall be Eight (8) years, beginning on the Commencement Date and ending on the Expiration Date of November 29, 2025.

Additional Rent:

The Subtenant agrees to pay its proportionate share of Real Estate Taxes, Operating Expenses, all Utilities and Management and Administrative Fee(s), as defined in the Lease, from and after the Commencement Date. The Additional Rent estimate for 2017 is $26.89 per rentable square foot. The Basic Rent and the Additional Rent shall be referred to as Rent.”

[83] PCR also relies on the following from the Lease:

Clause 3.01 Term

“Notwithstanding Article 3.03, the Term of this Lease shall be ten (10) years, six (6) months, beginning on the 1^st day of June, 2015 and ending on the last day of the month of November, 2025, unless terminated earlier as provided in this Lease.”

[84] The Responding Parties have also made supplemental submissions as requested by this Court. They submit that PCR only relies on provisions of the Sublease and Lease, and does not refer to any evidence from any of its representatives proving PCR’s alleged damages and any evidence on the effect of these Sublease and Lease provisions, or whether PCR incurred any of these alleged damages. PCR’s representative, Mr. Fini, deposed expressly that there was no profit component to the Sublease rent payments. I agree with these submissions, which is why the court asked PCR to advise on which evidence it relies on to support their damages claims.

[85] With respect to PCR’s Claim for rent due after the termination of the Sublease, there is evidence that PCR continued to make payments to the property manager until the Lease was surrendered in accordance with the Surrender Agreement. Payments from the beginning of June to the end of September 2019, were equal to $91,952.85 (inclusive of HST) for Base Rent, Additional Rent, and parking. I agree that the Responding Parties are liable to pay PCR for such amounts.

[86] However, with respect to the damages claimed for the loss of benefit for the unexpired balance of the term, there is no supporting evidence from a PCR witness. Counsel relies on the payment terms in the Sublease and on the costs of PCR set out in the Lease(s). Counsel concludes on the basis of those documents that PCR would have been making a profit until November 30, 2025, because the monthly rent of PCR would be below that received from Pistachio. Mr Fini , the only affiant on behalf of PCR, does not address this issue in his evidence. The burden of proof is on PCR to provide proper evidence of loss of benefit. The documents attached to Mr. Fini’s affidavit do not satisfy this burden of proof. As a result, PCR’s claim for loss of benefit from the Lease is denied, as PCR has not met its burden of proving these damages.

[87] Further, it is submitted that PCR did not try to relet the premises but signed the surrender agreement terminating the head lease as of September 30, 2019, when the property owner was prepared to terminate as of August 31, 2019. The Responding Parties therefore claim that PCR failed to mitigate their damages and that PCR should have taken the June 2019 rent cheque and continued the surrender negotiations. This would have resulted in no damages. PCR signed the surrender agreement terminating the head lease as of September 30, 2019, where the property owner was even prepared to terminate as of August 31, 2019.

[88] PCR submits that it mitigated its losses after termination by negotiating a surrender of the Head Lease with the Head Landlord, which PCR submits was reasonable. The burden of proof is on Pistachio to prove that PCR acted unreasonably.

[89] I agree with PCR’s submissions and find that Pistachio has not met its burden of proving that PCR has not acted reasonably by mitigating its damages by negotiating a surrender of the Lease in this regard.

[90] As the Court has dismissed all of the claims of the Responding Parties in both actions, the Court grants judgment in the PCR Action as follows:

a. Damages to PCR of $91,952.58, as well as pre-judgment at the contractual rate of prime plus five percent per annum. Post-judgment interest is granted in accordance with s.127 of the Courts of Justice Act.

Costs

[91] The parties both submitted their bills of costs at the commencement of these motions. The costs of PCR were, in my view, reasonable having regard to the factors as set out in the Boucher case and in the Rules of Civil Procedure. I find that the successful party, PCR, is therefore awarded its costs on a partial indemnity basis requested of $57,566.44 inclusive of HST and disbursements, payable by the Pistachio Defendants.

Pollak J.

Date: July 28, 2021