Paschalidis/Stathopulos v 2810856 Ontario Inc., 2021 ONSC 5031

COURT FILE NO. CV-21-00664538-0000

DATE: 20210723

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LEONIDAS PASCHALIDIS CHIROPRACTIC PROFESSIONAL CORPORATION and DENNIS STATHOPULOS CHIROPRACTIC PROFESSIONAL CORPORATION

Applicants

– and –

2810856 ONTARIO INC.

Respondent

Ari A. Lokshin, lawyer for the Applicants

Joseph Figliomeni and Darren Frank, lawyers for the Respondent

HEARD: JULY 15, 2021

REASONS FOR DECISION

G. DOW, J.

[1] The applicants, a chiropractic business, known as Thornhill Family Chiropractic sought urgent relief from this Court in response to receipt from the respondent/landlord of a Notice to Terminate its possession of the premises at 8117 (or 8819) Yonge Street as of June 30, 2021. This was extended to July 31, 2021 given the return date provided to the parties. I was assured by counsel for the respondent it would be further extended for 90 days from the date of my decision if it dismissed this application.

[2] The return date, as an urgent motion requiring two hours or less, , was restricted by Justice Chalmers in Civil Practice Court to determining whether the lease was in effect and whether it had been renewed. The balance of the issues raised were deferred to be determined at a later date, if necessary.

Background

[3] The applicant began its tenancy in July, 2009 on the basis of an “Offer to Lease” document dated January 15, 2009 (Exhibit E to the Affidavit of L. Paschalidis sworn June 30, 2021). The term was based on the commencement of payment of rent which became September 14, 2009. It was for five years. The space included 1138 square feet on the ground floor and 628 square feet in the basement of the premises. The minimum or base rent was $14.00 per square foot plus additional rent for taxes, maintenance and utilities. A personal guarantee by Leonidas Paschalidis and Dennis Stathopulos was given for the first year.

[4] No formal lease document was apparently ever executed. The Offer to Lease included the phrase that it “shall constitute a lease until such time as a lease is executed”.

[5] Finally, the agreement between the applicant and the then landlord (Maio Holdings) provided the applicant with two, five year extensions so long as no default of any covenants or obligations (not further defined) occurred and required written notice of the intention to extend being given not less than six months prior to the expiry of the lease. The rent was to be determined “based on fair market rent prevailing at the time of each renewal”.

[6] In January, 2014 the applicant extended the lease for five years and a letter executed by the then (and subsequent) landlord, Hu Guo Wei on behalf of 1862558 Ontario Inc. It was confirmed the applicants would pay an increased minimum rent of $15.00 per square foot for the first 30 months and $16.00 per square foot for the last 30 months.

[7] The applicants rely on their copy of a letter dated February 1, 2019 (Exhibit G to the Affidavit of L. Paschalidis sworn June 30, 2021) on Thornhill Family Chiropractic letterhead purporting to “extent(sic) their lease (second option) for an additional 5 years as stated in the terms of the lease”. It also requested two additional five year extensions. It was signed by each applicant but not the corporate landlord.

[8] The evidence of the applicants is this notice (along with the February 2019 rent cheque) was picked up on or around that date by the landlord’s property manager, Kelvin. This individual was only known by his first name plus a phone number and no direct evidence from him was tendered.

[9] There is no evidence in the application material that the February, 2019 rent cheque was ever cashed. There is evidence the normal practice of the landlord (or its property manager) was to pick up rent cheques and do so on a sporadic basis.

[10] The applicant relies on the landlord’s conduct subsequently to support the landlord’s receipt of the notice to extend the lease. However, it does not appear any negotiation, change in the amount of rent being paid or contact with the landlord occurred until a meeting on February 26, 2020. This included the applicants, the property manager and Mr. Wei, believed to be residing in China, “via facetime on Kelvin’s phone” (paragraph 21 of L. Paschalidis’ Affidavit sworn June 30, 2021. That meeting was recorded and is part of the evidence before the court. Much of it was in a foreign language and none of it was transcribed (which would identify who was speaking).

[11] The applicant submits the result of the meeting was agreement to a minimum rent of $26.00 per square foot for the 1138 square feet on the ground floor and $16.00 per square foot for the 628 square foot in the basement. That agreement was in writing on 1862558 Ontario Inc. letterhead with higher amounts for rents scratched out and the $16.00 and $26.00 amounts handwritten in their place. It contains the signature of Leonidas Paschalidis and Dennis Stathopulos. It also contains, in handwriting, “July 31, 2024 + 3 yrs”. This is apparently a reference to the applicants’ requesting a further three year extension.

[12] The next event is the landlord delivering a new draft lease on March 16, 2020 to the applicants with terms different than that discussed. The applicants advised the property manager of the problem and did not execute or return the document. The property manager was replaced shortly after and the applicants next heard from a different individual. No progress was made.

[13] The property was apparently put up for sale in December, 2020 as the applicants received a request to execute a tenant acknowledgment form which confirmed the exercise of the second option for the period July 15, 2019 to July 15, 2024 and identified the rent being paid. It also stated the rent regarding the second option was “still under negotiation” (Exhibit P to the Affidavit of L. Paschalidis sworn June 30, 2021).

[14] The applicants refused to execute and return that form on the basis of its purported February 26, 2020 agreement to pay rent at $16.00 and $26.00 per square foot.

[15] The applicants met with the owner of the corporate respondent, also a chiropractor on January 10, 2021. They provided her with copies of their extension and second renewal notice. The sale to the respondent was completed and the May 20, 2021 Notice to Terminate delivered. This application was issued June 23, 2021.

Analysis

[16] At the heart of the dispute is whether the purported delivery of the exercise of the second, five-year option was sufficient, effective and in accordance with a just application of the law. There is the obvious concern for the lack of any clear acknowledgment by the landlord at the time of its receipt. The date of the document, February 1, 2019 is sufficient for the proper exercise of the option agreed to between the tenant and landlord, being six months or more before the “expiry of the Term”.

[17] The Offer to Lease document governing the relationship between the parties is clear as the “Term” of the lease began “on the Rent Commencement Date”. It was not disputed that this was September 14, 2009 (as opposed to occupancy in July, 2009 for a rent free period).

[18] The existence of the meeting on February 26, 2020 cannot be ignored. It is clear that some type of negotiation was occurring over the rent to be paid on an ongoing basis after the first exercised option had concluded on or about September 13, 2019. To that end, I conclude the second option had been exercised.

[19] Thus, to answer the two questions to be addressed on this part of the application, a lease was in effect as it had been renewed.

[20] I also rely on the tenant acknowledgment form dated December 29, 2020 which, at paragraph 5, indicated the second option had been exercised. This document was forwarded during the sale to the current corporate landlord/respondent. In addition, there does not appear to be any dispute as to the existence of these documents as of February 10, 2021 when the applicants met with the representative of the current corporate landlord/respondent, Farah Khanom Karimi Beikabadi.

[21] This is not a situation like that in Bawitko Investments Limited v. Kernels Popcorn Limited, 1991 CanLII 2734 (ON CA), 53 O.A.C. 314 where a complex standard franchise agreement was included in a package of documents that led to a handshake deal. The Court of Appeal concluded, contrary to the trial judge, that a binding agreement had not been reached. Here, a commercial landlord and tenant relationship had been entered into and existed for five years. It had been renewed for an additional five years at a new higher, market rent, as agreed upon.

[22] This situation is much more similar to that in Directors Film Co. v. Vinifera Wine Services Inc., 1998 CanLII 14658 (ON SC), [1998] O.J. No. 1053 where Justice Chapnick found the option to extend the lease had been exercised despite the inclusion in the relevant document raising the whether a reduced notice period to exercise a renewal could occur. Justice Chapnick noted that both “parties represent relatively small unsophisticated enterprises.” Further, it was noted a “landlord may, by conduct, waive its right to strict compliance with the exercise of a renewal option”. I conclude such occurred here as detailed above.

[23] The respondent raised the legitimacy of the initial lease by noting the Offer to Lease stated signed copies were to be forwarded no later than January 30, 2009 and yet the signatures were dated February 3, 2009. In addition, it raised the absence of evidence of the Offer to Lease being properly executed if transmitted by facsimile for the same reason. There was also a discrepancy about the municipal address used in the lease, being 8119 Yonge Street as opposed to 8117 Yonge Street. I reject each of those minor irregularities on the basis, to hold the lease to be invalid in light of a tenancy which existed for more than a decade would be to enforce strict compliance when the conduct of the landlord had not previously relied on same.

[24] The respondent also raised under the events of default the requirement in the Offer to Lease for the tenant to maintain liability, specified perils, business interruption and other forms of insurance and having only produced the most recent (and I would stress) renewal commencing April 1, 2021. I have concluded this is not sufficient to void the right to exercise the second option to extend the lease an additional five years.

[25] The strongest submission by counsel for the respondent dealt with the inclusion in the second renewal notice of the request for two additional five year extensions and caselaw which raises the need to exercise the extension in an unequivocal manner. Counsel relied on the conclusion in 441 Main Inc. v. Silver Pawn Pictures Inc., 2013 MBCA 70 wherein the Manitoba Court of Appeal held the inclusion of the anticipated purchase of the premises in the notice to extend failed to meet the legal requirement of clear, explicit, unambiguous and unequivocal language.

[26] I would distinguish that conclusion on its facts. The situation before me would be very different if there was any evidence the applicants had expressed any interest in purchasing the premises. To the contrary, they were tenants exercising their option to renew, as tenants, and seeking to inquire about preserving their right to remain, as tenants, for an even longer period of time.

Conclusion

[27] The lease is in effect and the applicants properly extended their lease for the period September 14, 2019 to September 14, 2024. If the parties cannot resolve this matter, the balance of the issues raised in the Notice of Application may be determined on a date the parties may obtain in Civil Practice Court.

Costs

[28] The Costs Outline of the applicants set out a partial indemnity claim for $8,400.00 (inclusive of appearing on July 15, 2021) plus HST. The respondent’s Costs Outline detailed partial indemnity fees of $9,560.00 plus HST. Disbursements were not fully detailed as some invoices for cross-examinations and transcripts had yet to be received. Given the amount sought by the successful applicants is less than the claim by the respondent, I would ordinarily award the applicants their partial indemnity fees as claimed plus HST and disbursements, payable forthwith.

[29] However, I was advised the applicants had served one or more Rule 49 Offers to Settle which may entitle it to substantial indemnity costs from the date of its Offer to Settle as provided for in Rule 49. With that guidance, I urge the parties to agree on costs.

[30] Should that not occur, the applicants may submit its written submissions to me on not greater than five double spaced type written pages in a readable size font (not including a copy of the Offer to Settle being relied upon) on or before August 20, 2021. Counsel for the respondent shall respond in writing, identically limited, on or before August 30, 2021.

Mr. Justice G. Dow

Released: July 23, 2021