Court File and Parties

COURT FILE NO.: CV-21-662018-0000

DATE: 20210910

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jencel 407 Yonge Street Inc.

AND:

Bright Immigration Inc. and Wendy Ramroop a.k.a. Ooma Ramroop

BEFORE: J.T. Akbarali J.

COUNSEL: D. Gordon Bent, for the Plaintiff Colin C.G. Pye, for the Defendants

HEARD: In writing

ENDORSEMENT

Overview

[1] On this motion, the defendants ask me to stay this action in favour of arbitration, in accordance with the terms of the parties’ commercial lease. The plaintiff asks me to exercise my discretion to allow the litigation to proceed notwithstanding the arbitration clause, because the case is a proper one for summary judgment.

Background

[2] On October 11, 2017, the plaintiff landlord and the defendant tenant, Bright Immigration Inc., entered into a commercial lease for the premises at 407A Yonge Street, Toronto, Ontario. The term of lease began on November 1, 2017 and expires on December 31, 2022.

[3] The lease was guaranteed by the defendant Wendy Ramroop. Ms. Ramroop is a director of the tenant, and the mother of the Blayne Kumar, who is the CEO of the tenant, and an affiant on this motion.

[4] The lease requires the tenant to pay monthly base rent, and monthly additional rent, the lease being net and carefree to the landlord. The lease provides that the additional rent shall be payable in monthly installments in advance on the basis of estimates by the landlord, and subject to necessary adjustments.

[5] The problems between the parties began with the onset of the COVID-19 pandemic. The tenant’s major source of business – walk-in traffic – dried up, causing the tenant financial difficulties.

[6] Initial efforts to work together to address the problem had some success. The landlord was prepared to defer some rent, and it worked with the tenant to apply to the Canada Emergency Commercial Rent Assistance Program so that the tenant could obtain some relief.

[7] Subsequently, the tenant determined that it no longer had use for the leased premises. The tenant and landlord began negotiations around the termination of the lease, but without success. The tenant made some rent payments late. It is uncontroverted that no rent has been paid since January 2021.

[8] The tenant complains that in December 2020, the parties agreed that (i) the landlord would deposit the tenant’s December 2020 rent cheque by December 18, 2020, (ii) the landlord would provide a letter for the tenant’s application to the Canada Emergency Rent Subsidy indicating it was in good standing, (iii) the tenant would provide six post-dated rent cheques for January to June 2021, and (iv) the landlord would hold off depositing the January 2021 rent cheque until the opening of the second phase of the Canada Emergency Rent Subsidy program.

[9] The tenant never provided the cheques. The landlord never provided the letter.

[10] The landlord viewed the tenant’s proposals to terminate the lease to be unreasonable. It takes exception to what it alleges is the tenant’s failure to remit any funds the tenant obtained from COVID relief programs towards its rent, at least since 2021. For its part, the tenant alleges the landlord has failed to mitigate its losses, and failed to assist it in its efforts to obtain COVID related relief through government programs, as described above.

[11] The landlord has commenced a claim in this court seeking amounts it claims are owing to it under the lease, comprised of arrears of base rent and arrears of additional rent, including payment of additional rent calculated as owing for the years 2017-2020 inclusive, three months’ accelerated rent, a restoration of the security deposit, interest and payment of costs, together with all future accruing amounts under the lease. The landlord has made no attempt to take possession of the leased premises, but rather has elected to treat the lease as ongoing.

[12] The tenant has responded to the landlord’s claim by serving, but not filing, a Notice of Intent to Defend[^1], and then by bringing this motion, in which it seeks to stay the landlord’s action on the basis of the arbitration provisions contained in the parties’ lease.

Analysis

[13] Under s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17, if a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

[14] Notwithstanding the mandatory nature of s. 7(1), and the statutory presumption in favour of arbitration over litigation, under s. 7(2) of the Act, the court may refuse to stay the proceedings in certain circumstances. The circumstance invoked by the landlord in this case is found in s. 7(2)(5) – “the matter is a proper one for… summary judgment.”

[15] There is no doubt that, unless s. 7(2)(5) applies, this action must be stayed. In Haas v. Gunasekaram, 2016 ONCA 744, at para. 17, the Court of Appeal set out a five-part framework the court must consider when determining whether to grant a stay under s. 7(1) of the Act. The first four parts of the framework support an order staying the action:

a. First, there is an arbitration agreement. The arbitration provisions in the lease, despite not being a stand-alone arbitration agreement, have the effect of an arbitration agreement: s. 5(4) of the Act.

b. Second, the subject matter of the dispute relates to the rent and other amounts owing to the landlord by the tenant under the lease. The defendants describe the “one legal issue” between the parties as being the amount owed under the lease.

c. Third, the scope of the arbitration agreement extends to “any dispute between the parties…which touches upon the validity, construction, meaning, performance or effect of [the lease] or the rights and liabilities of the parties hereto or any matter arising out of or connected with [the lease]…”

d. Fourth, the dispute clearly falls within the scope of the arbitration agreement.

[16] The question is thus whether the fifth part of the framework – whether there are grounds on which the court should refuse to stay the action – applies because, as the landlord alleges, the case is a proper one for summary judgment.

[17] In MDG Kingston Inc. v. MDG Computers Canada Inc., 2008 ONCA 656, at paras. 36-37, Feldman J.A., for the court, held that one must consider the purpose of s. 7(2) when considering whether to allow litigation to proceed in the face of an arbitration clause. The exceptions s. 7(2) creates to a stay of litigation in favour of arbitration all arise where it would be unfair or impractical to refer the matter to arbitration. She held that a case is appropriate for summary judgment where there are no genuine issues for trial. MDG was decided prior to Hryniak v. Mauldin, 2014 SCC 7. Given the changes to the threshold for summary judgment in r. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and the Court’s decision in Hryniak, I conclude that litigation may only be allowed to proceed in the face of an arbitration clause where the case is a proper one for summary judgment because there are no genuine issues requiring a trial.

[18] The tenant relies on Apotex Inc. v. Virco Pharmaceuticals (Canada) Co., 2007 CarslwellOnt 7895 (S.C.J.), at para. 19, where Patillo J. held that the summary judgment exception should only be exercised “in the simplest and clearest of cases where it is readily and immediately demonstrable on the record that the responding party to the proposed summary judgment motion has no basis whatsoever for disputing the claim or claims of the moving party.”

[19] Apotex was decided prior to MDG and Hryniak. In my view, it is MDG and Hryniak that I must follow to determine whether I should exercise my discretion to decline to stay the proceeding because it is a proper one for summary judgment. I thus conclude that the question is not whether the responding party to the summary judgment motion has no basis to dispute the claim, but rather whether the responding party has raised genuine issues requiring a trial. If so, the matter is not a proper one for summary judgment and should proceed to arbitration.

[20] The tenant’s Notice of Arbitration raises two main issues. The first relates to the arrears of additional rent. The second relates to mitigation. The tenant has not very clearly argued why these issues make the case one that is not proper for summary judgment. However, having regard to the defendants’ motion record, factum, and its Notice of Arbitration, I consider each of these in turn.

[21] With respect to the question of arrears of additional rent, the Notice of Arbitration states that the tenant disputes the claim of additional rent “as it has not been advised of the basis for same and such was not claimed until March 2021.”

[22] The record indicates that, in March of 2021, the tenant sought an accounting of additional rent, which it was entitled to do under the lease. It clearly knew this, as it invoked the relevant clause of the lease when asking for the accounting. In response, the landlord provided an accounting with receipts for each of the years 2017-2020 on March 10, 2021.

[23] In the motion materials before me, the tenant raises no issues with respect to the accuracy of the accounting. If there are any issues with respect to the correctness of the accounting, I see no reason why these require a trial. They could easily be resolved on a summary judgment motion.

[24] Equally, if the tenant’s argument will be that the terms of the lease do not allow a demand to be made for additional rent at the time at which the demand was made, that is a question of contract interpretation which can also be addressed efficiently on a summary judgment motion, and does not require a trial.

[25] The tenant, in its factum, raises the question of whether the plaintiff is estopped from claiming additional rent under the lease. The parties do not disagree about the history of discussions between them. As a result, I see no reason why an estoppel argument requires a trial. Moreover, the tenant points to no communication(s) that might form the basis for an estoppel. I thus have serious doubts about whether this argument has an air of reality.

[26] I also note that the tenant argues in its factum that it disputes its liability for arrears of base rent, but it does not articulate a factual or legal argument why. It sets out a detailed history of negotiations between the parties, but it does not explain why the negotiations between the parties would lead to a conclusion that the arrears of base rent owing under the lease are not payable. Bald assertions of defences are not enough; if there are truly genuine issues requiring a trial, the tenant ought to be able to articulate what they are.

[27] I thus conclude that the arguments about the arrears of base rent and additional rent do not require a trial, but can properly be resolved on a summary judgment motion.

[28] The tenant’s argument regarding mitigation is not particularized. Rather, the tenant raises the spectre of mitigation, but does not specifically indicate (i) why the landlord had a duty to mitigate; or (ii) what the landlord should have done, that it did not do, to mitigate.

[29] The landlord notes the body of law that indicates that a landlord may elect to treat the lease as ongoing after an event of default. Where a landlord sues or distrains for arrears of rent, the landlord treats the lease and the tenant’s property interest as continuing, and the landlord has an ongoing claim for rent. The landlord has no claim for damages for loss of the benefit of the bargain and no duty to mitigate: Highway Properties Ltd. v. Kelly Douglas & Co., 1971 123 (SCC), [1971] S.C.R. 562, at p. 716; 7Marli Limited v. Pet Valu Canada Inc., 2017 ONSC 1796, at paras. 13, 17, 21, 22. The tenant has not addressed this long-standing law in its argument.

[30] Moreover, the record indicates that the landlord consented to the tenant’s efforts to sub-lease the leased premises. I see no factual basis – and the tenant has not articulated one – to support a mitigation argument.

[31] I wondered whether the tenant’s mitigation argument relates to its assertion that the landlord failed to assist it to obtain COVID-19 relief through government programs, but it has not alleged mitigation in connection with the facts it asserts about the landlord’s failure to provide it with a letter that it was in good standing. In any event, the record also indicates that the landlord had earlier assisted the tenant with its application for COVID-19 relief, and also that the tenant was not in good standing in January 2021, and had failed to furnish the agreed-upon rent cheques for January to June 2021. I am not satisfied that this factual issue raises a genuine issue requiring a trial, if the tenant even intended to rely on it for that purpose.

[32] In my view, mitigation is not a genuine issue requiring a trial.

[33] For these reasons, I exercise my discretion to dismiss the defendants’ motion to stay the litigation. The case is a proper one for summary judgment.

[34] For these reasons, I exercise my discretion to dismiss the defendants’ motion to stay the litigation. The case is a proper one for summary judgment. Arbitration would be an impractical alternative in these circumstances.

[35] Although not determinative of my decision, I also note that the arbitration provision in the lease is onerous, in that it requires three arbitrators, which seems an unnecessary and disproportionate expense for the parties in the context of this dispute. This factor lends support to my conclusion that arbitration is an impractical alternative in the circumstances.

Costs

[36] I directed the parties to file costs outlines and any relevant offers to settle. No offers were filed, so I assume none were made.

[37] The landlord’s costs outline indicates it seeks costs on a full indemnity scale, all inclusive, in the amount of $13,150.38. The defendants’ costs outline supports costs of $3,416.20 all inclusive, on a substantial indemnity scale.

[38] The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.

[39] Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The court exercises its discretion taking into account the factors enumerated in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants’ Council for the Province of Ontario, 2004 14579 (Ont. C.A.), 71 O.R. (3d) 291, at paras. 4 and 38. A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.

[40] In this case, in seeking full indemnity costs, the landlord relies on a provision in the lease that grants the landlord the right to take any and all necessary steps to rectify any or all acts of default of the tenant and to charge the costs of such rectification to the tenant and recover the costs as rent.

[41] The landlord is the successful party. Under the terms of the lease, it is entitled to its full indemnity costs.

[42] However, full indemnity does not mean whatever the landlord was charged. Full indemnity costs ordered by the court must be fair and reasonable, having regard to the factors relevant to assessing the quantum of costs. Here, the landlord’s full indemnity costs are significantly greater than the tenant’s, even once a gross-up is added to reflect the difference between the defendants’ claimed substantial indemnity costs to a full indemnity scale. The disparity in the parties’ costs is an indication that the landlord’s costs are outside of the defendants’ the reasonable expectations.

[43] In considering the appropriate quantum of costs, I note that the plaintiff’s counsel is a very senior member of the bar, and it can be expected that his hourly rate would be higher than that charged by defendants’ counsel. The issues on the motion were not complex, and the law easy to ascertain. The motion was heard in writing, and both parties prepared concise materials.

[44] In these circumstances, I calculate that landlord’s all inclusive, fair and reasonable full indemnity costs are $5,000. The defendants shall pay this amount to the landlord within thirty days.

Conclusion

[45] The defendants’ motion to stay the action is dismissed. The defendants shall pay the plaintiff costs of $5,000, all inclusive, within thirty days.

J.T. Akbarali J.

Date: September 10, 2021

[^1]: Although the defendants argue that service of the Notice of Intent to defend does not constitute attornment to the jurisdiction of the court, the plaintiff does not rely on the service of the Notice of Intent to Defend in its argument that the litigation should proceed. Thus, I do not address that argument.