Court File and Parties

COURT FILE NO.: CV-21-10009 DATE: 2021-08-26 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1700349 Ontario Limited, Plaintiff AND: 1732876 Ontario Limited, Defendant

BEFORE: The Honourable Mr. Justice Robbie D. Gordon

COUNSEL: Spencer Ball, Counsel for the Plaintiff Adam Castonguay, Counsel for the Defendant

HEARD: August 24, 2021 via zoom

Endorsement

[1] The plaintiff is a commercial tenant at 887 Notre Dame Avenue in Sudbury under the terms of a written lease. The current lease term began on September 1, 2016 and will expire on August 31, 2021. The defendant is the landlord. The plaintiff seeks an interlocutory injunction restraining the defendant from terminating the lease on August 31.

[2] Section 22 of the lease requires the defendant to renew the lease for a further term of five years provided the plaintiff makes a written request for renewal not less than six months prior to the expiry of the lease and the tenant is otherwise in compliance with its lease covenants.

[3] The defendant takes the position that the plaintiff is not entitled to the lease renewal because it sublet the premises to another related company without consent in contravention of the lease and did not provide written notice requesting the renewal until May 6, 2021, more than two months beyond the February 28, 2021 deadline.

[4] The three-stage test for granting an interlocutory injunction is well-established. First, a preliminary assessment must be made of the merits of the case to ensure there is a serious issue to be tried. Secondly, it must be determined whether the plaintiff would suffer irreparable harm if the injunction were refused. Thirdly, an assessment is to be made of which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits. [See RJR-MacDonald Inc. v. Canada (Attorney General) 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311]. All three facets of the test have been put in issue before me.

Is There a Serious Issue to be Tried?

[5] Typically, for a tenant to have the benefit of a renewal provision in a lease there must be at least substantial compliance with the contractual prerequisites to renewal. Although the plaintiff candidly admits that its written request for renewal was not made in a timely fashion and that it sublet the property without the consent of the defendant, it maintains that it should be granted relief from forfeiture pursuant to s. 98 of Courts of Justice Act or, in the alternative, that the plaintiff should be estopped from relying upon its non-compliance.

[6] It is generally accepted that the power to grant relief against forfeiture is an equitable remedy that is purely discretionary. In considering whether to grant such relief, the court is to consider the conduct of the applicant, the gravity of the breaches, and the disparity between the value of the property forfeited and the damage caused by the breach. [See Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490]. However, when a party seeks to renew a lease but has not complied with the formal requirements or preconditions for doing so, the jurisdiction to grant this equitable relief is narrower and requires as a precondition that the tenant have made diligent efforts to comply with the terms of the lease and been unable to do so through no fault of its own. [See McRae Cold Storage Inc. v. Nova Cold Logistics ULC [2019] O.J. No. 2875 (Ont. C.A.); 2324702 Ontario Inc. v. 1305 Dundas W Inc. [2020] ONCA 353]. In this case there is no evidence that the plaintiff made any effort to comply with the requirement of a written request for renewal until more than two months after the deadline for doing so had passed. Similarly, there is no evidence the plaintiff made any effort to secure the consent of the defendant to the sublease of the property. To the contrary, the sublease was undertaken specifically because the defendant had refused an assignment of the lease to the same party. In these circumstances, the plaintiff is not entitled to equitable relief. The precondition of diligent effort to comply with the lease provisions has not been met. There is no serious issue to be tried on the issue of relief against forfeiture.

[7] The plaintiff has framed its alternate argument as one of estoppel. It argues that the defendant, by its words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on, and that in reliance on that representation it acted to its detriment. This issue is akin to an allegation of waiver: The principle of waiver provides that if one party leads another party to believe that its strict legal rights under a contract will not be insisted upon, intending that the other party will act upon that belief and the other does so, then the first party may not afterwards insist on its strict legal rights when it would be inequitable to do so. [See North Elgin Centre Inc. v. McDonald’s Restaurants of Canada Ltd. [2018] ONCA 71].

[8] Specifically, the plaintiff alleges that in October of 2020, well before the deadline for requesting the renewal, its representative Gerard Lecuyer had a discussion with Marty Kennedy, the representative of the defendant. The substance of that discussion is set out in paragraph 7 of Mr. Lecuyer’s affidavit as follows:

In or around October of 2020, I received a call from Marty Kennedy on behalf of the defendant. This was not out of the ordinary as Mr. Kennedy and I would often communicate verbally rather than in writing. During this telephone conversation, Mr. Kennedy inquired whether we would be interested in ending the lease early. I responded that we did not want to end the lease early and that, on the contrary, I took the opportunity to provide him with notice that 1700349 Ontario Limited would exercise the option to renew to remain in the premises for a further 5 years. Mr. Kennedy acknowledged my response and advised me that that was fine.

[9] Even if I accept that the conversation regarding renewal took place as alleged and that the plaintiff failed to provide its written request because of this discussion, there is no evidence from which I can infer that Mr. Kennedy intended for the plaintiff to rely on that discussion as a waiver of compliance with the renewal provisions of the lease.

[10] With respect to the plaintiff’s sublease of the premises without the consent of the defendant, waiver of that covenant as a prerequisite to renewal would require the plaintiff to prove a course of conduct over an extended period that showed an intention by the defendant not to rely on the strict terms of the lease requiring consent to the sub-lease [See Wittington Properties Limited v. Goodlife Fitness Centres Inc., 2018 ONCA 52]. The plaintiff says the defendant accepted cheques from the sub-tenant for more than four years and must therefore have been aware of the sublease and, having failed to raise it as an issue, been accepting of it. Even if I accept that payment of the plaintiff’s rent was made by the subtenant for more than four years, this does not lead to an inference that the defendant was aware of the sublease or accepting of it. A landlord does not necessarily care who remits rent on behalf of its tenant. Its concern is simply that it be paid. It need not inquire into the accounting practices of the tenant and cannot be expected to read anything into the manner in which it is paid.

[11] The plaintiff has not established a serious issue of estoppel or waiver by the defendant.

The Issue of Irreparable Harm

[12] The plaintiff alleges it will suffer irreparable harm including lost jobs, loss of goodwill, irrevocable damage to reputation and loss of market share. The difficulty with this position is that these losses, if sustained, are not those of the plaintiff but of the subtenant 2573736 Ontario Limited which is not a party to this action.

[13] The plaintiff’s loss will be nothing more than the rent it would have received from 2573736 Ontario Limited had the lease and the sublease continued. That loss should be easily quantifiable and is clearly not irreparable.

The Balance of Convenience

[14] Given there is no serious issue raised by the plaintiff and it will not suffer irreparable harm in the event no injunction is issued it is not necessary to determine the balance of convenience.

Conclusion

[15] The plaintiff’s motion for an interlocutory injunction is dismissed. If the parties are unable to agree on costs, they may make written submissions to me not to exceed three pages plus attachments each, within 45 days.

The Honourable Mr. Justice Robbie D. Gordon

Date: August 26, 2021