Superior Court of Justice - Ontario
COURT FILE NO.: CV-21-2956
DATE: 2021-12-15
AMENDED: 2021-12-16
RE: 8443220 Canada Inc., Applicant
AND:
V.G.R. Investments Ltd., Respondent
BEFORE: Kurz J.
COUNSEL: Abbas Baig/Sivadanesh Koveerasingham, for the Applicant
Charles Neuwald, for the Respondent
HEARD: December 7, 2021
ENDORSEMENT
Amended: The first sentence of paragraph 29.3 has been amended to read, “For the months of January – April 2022, 844 shall pay the sum of $25,000 per month to VGR, as payment towards current rent and arrears of rent.
Introduction
[1] On February 24, 2014, the parties entered into the lease (“the lease”) for the premises, which are located at 2525 Old Bronte Road, Suite 110, Oakville ON L6M 4J2 (“the premises"). On October 22, 2021, the Respondent landlord, V.G.R. Investments Ltd., (“VGR”) utilized a bailiff to re-enter the premises. It claims the right to re-entry based on the underpayment of rent by the Applicant, 8443220 Canada Inc. (“844”).
[2] 844 moves for a mandatory injunction against VGR, reinstating the terms of the lease and compelling 844 to grant it possession of the premises in the state they were in prior to the Respondent’s exercise of re-entry. 844 argues that VGR was prevented by statute, the Commercial Tenancies Act, R.S.O. 1990, s. L.7 (“CTA”), from re-entering the premises. It must allow 844 back into the premises.
[3] VGR states that it has always acted properly and that it is 844 that has acted wrongly and should not profit from its wrongdoing by obtaining equitable relief from this court.
Unpaid Rent, the Pandemic, and Government Pandemic Subsidies
[4] The parties disagree about the state of 844’s rental account with VGR prior to the advent of the pandemic. 844 says that its rent was in good standing before March 2020 but that 844’s ability to earn money was severely diminished by COVID-19. VGR says that there were rental arrears before March 2020 as well as other breaches of the lease.
[5] When the Canadian government offered its first pandemic commercial rental assistance programme, the Canada Emergency Commercial Rent Assistance programme, the landlord refused to participate. The programme required both landlord and tenant to cooperate in order to distribute relief funds to commercial tenants. 844 asserts that that refusal contributed to its rental arrears. VGR states that the balance of rental arrears were $51,388.82 as of September 2020.
[6] Much, if not all of these arrears arose during a moratorium period imposed by the Ontario government, during which commercial landlords were forbidden from locking out their tenants. The moratorium expired on September 1, 2020. On or about September 3, 2020, VGR locked out 844. On October 1, 2020, the moratorium was retroactively renewed and VGR was obliged to allow 844 back into the premises.
[7] Meanwhile, the Canadian government, through the Canada Revenue Agency (“CRA”), offered a new rental subsidy program, Canada Emergency Rent Subsidy (“CERS”). That program did not require the participation of landlords. 844 applied for the CERS program in August 2020 and was ultimately approved. The terms of CERS allow the federal government to subside 65% of the rent owing by approved commercial tenants to their landlord. The tenant must pay the rest. The tenant must also sign an attestation form in which they agree to pay “the expenses” which VGR says is the full rent, within 60 days.
[8] The problem, VGR says, is that, while 844 was allowed to re-enter to premises and it, as landlord, was forbidden from removing 844, it was falling further and further into rental arrears. In effect, 844 was paying only the subsidy that it was receiving from the Canadian government and not the full rent. By October 6, 2021, VGR says that the rental arrears were $108,325.41. On October 22, 2021, VGR locked out 844 under what it says is the authority offered by the lease.
[9] The fly in that ointment is, as set out below, that s. 79 - 83 of the CTA as well as O. Reg 763/30, enacted pursuant to the CTA, prohibit a commercial landlord from exercising the right of re-entry during a non-enforcement period. That period presently extends from December 17, 2020 until April 22, 2022.
[10] VGR says that the provisions set out above do not apply to it here because 844 violated the terms of CERS requiring full payment of rent. It adds that 844 also filed false attestations under the CERS programme, to the effect that it was meeting the CERS requirements. Thus, it argues that the principle of ex turpi causa should prevent 844 from relying on its “fraudulent” conduct in seeking to obtain equitable relief. In the alternative, it says that 844 fails to come to the court with “clean hands”; a precondition for equitable relief.
[11] 844 argues that the rent arrears claimed must be set-off by the damages it incurred from VGR’s previous lock-out. It asserts that VGR damaged 844’s fireplace and security system. More to the point, it states that the CTA is clear that VGR acted improperly in locking it out on October 22, 2021. 844 must be let back in to the premises immediately. As a term of the injunction 844 is willing to make monthly payments of $25,000 towards its full rent and rental arrears until the moratorium expires on April 22, 2022.
Test for an Interlocutory Injunction
[12] The test for the granting of an interlocutory injunction is the well known “R.J.R. MacDonald test”: 1) serious issue to be tried; 2) irreparable harm; and 3) balance of convenience: R.J.R Macdonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311, at para. 43. Since the moving party is seeking a mandatory injunction, the first arm of the test is a strong prima facie case rather than a serious issue: Blue Health Consultants v. Blue Health Services Inc. 2021 ONSC 2841 (“Blue Health”), at para. 39 citing R. v. Canadian Broadcasting Corp., 2018 SCC 5, [2018] 1 S.C.R. 196, at para. 15.
Strong Prima Facie Case
[13] Sections 79 - 85 of the CTA ostensibly prohibit commercial landlords from locking out their tenants who are in receipt of CERS benefits for non-payment of rent during the current pandemic moratorium. It also prohibits the courts from ordering the eviction of those tenants. The Applicable provisions regarding that prohibition are as follows:
Non-enforcement period
79 In this Part,
“non-enforcement period” means,
(a) in respect of a tenancy referred to in subsection 80 (1), the period that begins on the day subsection 1 (1) of Schedule 5 to the Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020 comes into force and ends on the prescribed date, and
(b) in respect of a tenancy referred to in subsection 80 (2), the period prescribed for the purposes of this clause. 2020, c. 36, Sched. 5, s. 1 (1).
Application
80 (1) This Part applies to a tenancy in respect of which the landlord satisfies any of the following criteria:
The landlord is or was eligible to receive assistance under the Canada Emergency Commercial Rent Assistance for small businesses program.
The landlord is receiving or has received assistance under the Canada Emergency Commercial Rent Assistance for small businesses program.
The landlord would be eligible to receive assistance under the Canada Emergency Commercial Rent Assistance for small businesses program if the landlord entered into a rent reduction agreement with the tenant containing a moratorium on eviction.
The landlord would have been eligible to receive assistance under the Canada Emergency Commercial Rent Assistance for small businesses program as described in paragraph 1 or 3 if applications under that program were being accepted. This paragraph applies only if applications to the Canada Emergency Commercial Rent Assistance for small businesses program are no longer being accepted or if assistance is no longer available under the program. 2020, c. 36, Sched. 5, s. 1 (1).
Application, prescribed tenancies
(2) This Part applies to a tenancy that satisfies the prescribed criteria. However, sections 83 and 85 apply, with prescribed modifications, in respect of those tenancies only if so provided by the regulations. 2020, c. 36, Sched. 5, s. 1 (1).
Conflict
(3) This Part applies despite any other Part of this Act or any provision in an agreement or any common law rule. 2020, c. 36, Sched. 5, s. 1 (1).
Eviction orders for rent arrears not effective during the non-enforcement period
81 (1) Despite anything in this or any other Act, a judge shall not order a writ of possession that is effective during the non-enforcement period that applies in respect of a tenancy referred to in subsection 80 (1) or (2) if the basis for ordering the writ is an arrears of rent.
Same
(2) Subsection (1) applies in respect of an action or application that was commenced before, on or after the day the applicable non-enforcement period begins. 2020, c. 36, Sched. 5, s. 1 (1).
No re-entry during the non-enforcement period
82 No landlord shall exercise a right of re-entry in respect of a tenancy referred to in subsection 80 (1) or (2) during the applicable non-enforcement period.
[14] Further, the CTA sets out the landlord’s obligation to restore possession to a tenant against whom a right of re-entry has been improperly exercised during the non-enforcement period. The relevant provisions state:
Restore possession and compensate for re-entry
83 (1) If a landlord exercised a right of re-entry during the period that begins on October 31, 2020 and ends immediately before the day subsection 1 (1) of Schedule 5 to the Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020 comes into force, the landlord shall, as soon as reasonably possible,
(a) restore possession of the premises to the tenant unless the tenant declines to accept possession; or
(b) if the landlord is unable to restore possession of the premises to the tenant for any reason other than the tenant declining to accept possession, compensate the tenant for all damages sustained by the tenant by reason of the inability to restore possession. 2020, c. 36, Sched. 5, s. 1 (1).
Tenancy deemed reinstated
(2) If a landlord restores possession of a premises to a tenant under subsection (1), the tenancy is deemed to be reinstated on the same terms and conditions unless the landlord and the tenant agree otherwise.
No distress during the non-enforcement period
84 No landlord shall, during the applicable non-enforcement period, seize any goods or chattels as a distress for arrears of rent in respect of a tenancy referred to in subsection 80 (1) or (2).
Return goods seized before the non-enforcement period
85 If, during the period that begins on October 31, 2020 and ends immediately before the day subsection 1 (1) of Schedule 5 to the Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020 comes into force, a landlord seized any goods or chattels as a distress for arrears of rent, the landlord shall, as soon as reasonably possible, return to the tenant all of the seized goods and chattels that are unsold as of the day subsection 1 (1) of Schedule 5 to the Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020 comes into force.
[15] As set out above, O.Reg 763/20 under the CTA provides that the non-enforcement period under s. 79 runs from December 17, 2020 to April 22, 2022.
[16] 844 points to the clear words of the statute and regulation to state that VGR was not entitled to re-enter its premises. It adds that VGR does not deny that the facts of this case fall under the CTA provisions set out above, other than in regard to its arguments of non-payment and that 844 is wrongly obtaining CERS funds. Those facts alone, 844 argues, raise a strong prima facie case in its favour.
[17] VGR responds that both the CTA and the regulation assume that full payment of rent is made under the CERS. Further it argues that the common law principle of ex turpi causa prevents 844 from obtaining equitable relief from this court when it is misleading the Canadian government about its use of CERS funds. It also states that rent was not paid at all in July 2021.
[18] While VGR has a point in that the forms signed by 844 imply that full payment will be made by commercial tenants receiving CERS funds, the terms of the CTA and O.Reg 762/20 do not explicitly set out that requirement.
[19] In Livent Inc. (Special Receiver and Manager of) v. Deloitte & Touche, 2016 ONCA 11, Blair J.A., writing for the Ontario Court of Appeal stated, the term, ex turpi causa non oritur action means "from a dishonourable cause an action does not arise". Blair J.A. referred to :
The statement of Lord Mansfield in Holman v. Johnson (1775), 98 E.R. 1120, at p. 1121, [which] has often been cited as authoritative:
No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the Court says he has no right to be assisted. It is upon that ground the Court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff.
[20] Strictly speaking, the doctrine is a defence to a claim by a malefactor, one which seeks to prevent them from profiting from their misconduct. The doctrine is rarely used in Canada, and only in narrow circumstances. As Blair J.A. summarized after reviewing the two key Supreme Court of Canada cases on the doctrine:
The application of the ex turpi causa doctrine has therefore been strictly limited in Canada. It will apply only where allowing a plaintiff's claim would introduce inconsistency into the fabric of the law - by "giving with one hand what it takes away with the other": per McLachlin J. in Hall, 1993 141 (SCC), [1993] 2 S.C.R. 159, at p. 178, quoted with approval by Rothstein J. in Zastowny, 2008 SCC 4, [2008] 1 S.C.R. 27, at para. 22.
[21] Here there is, at the very least, a real ambiguity regarding the obligations of a tenant receiving benefits under CERS, that is whether it is prohibited from receiving further benefits when it is unable to pay its full rent. I have been pointed to no authority in that regard.
[22] I also point out that it is not the Canadian Revenue Agency, which is raising this argument, it is the landlord, VGR. To the best of my knowledge, CRA still considers 844 to be eligible for the CERS programme. It has not appointed VGR to act as its agent in enforcing the programme.
[23] I add that when one looks to improper conduct, and the doctrine of ex turpi causa, that VGR’s own conduct violates the clear terms of the CTA. It knew that a moratorium on re-entry was in place, yet it chose to exercise a dubious right of re-entry. It can only be assumed that it felt that the evicted tenant, 844, would not fight back. Or as, the cliché has it, it is better to ask forgiveness than permission. If VGR felt that it had a right to re-entry based upon the arguments it raises in this motion, it could have brought an application to this court, seeking that relief. Instead it resorted to self-help. Having done so, it hardly lies in its mouth to complain about 844’s conduct regarding CERS.
Irreparable Harm
[24] There is little argument against the notion that 844 would suffer irreparable harm if the requested injunction is not granted. It would be out of business. By way of example, Pattillo J. found a similar result to amount to irreparable harm in Blue Health, above.
Balance of Convenience
[25] 844 argues that the balance of convenience favours it. First, it argues that it is the victim of its landlord’s improper behaviour in locking it out of the premises. Second, it refers to its irreparable harm argument. Third, it points to the terms to which it is willing to agree, which would substantially close the gap on any unpaid rent, to the benefit of the landlord.
[26] VGR argues that it is the aggrieved party who has been losing unpaid rent each month. If 844 intended to repay outstanding rent, it would have done so already as the issue has been on the table for over a year. It should not have to forebear any more of its tenant’s conduct. It asserts as well that at one point 844 chained some furniture to the front door, violating fire safety rules. But it did not say that that was a long-standing problem.
[27] The CTA pandemic amendments cited above were put into place to protect commercial tenants from the type of unilateral conduct to which VGR resorted during the pandemic. Without being allowed back into the premises, 844 will lose its business. But it is willing to pay an amount far greater than its rent each month to help make up for rental shortfalls.
[28] VGR has offered no evidence that it had re-let the premises since it re-entered them. If 844 were to pay the rent, including payments towards arrears, that it offers, the interests of the landlord, VGR would be substantially met without having to attempt to re-let the premises.
Conclusion
[29] For the reasons cited above, I grant 844 a mandatory interlocutory injunction upon the following terms:
844 shall immediately pay to VGR the sum of $25,000 less the amount of costs set out below, payable towards the arrears of any rent that it owes to VGR.
Upon the payment of that amount set out above, which is $10,875 net of costs:
i. VGR’s termination of the lease is revoked and the lease’s terms are reinstated except as set out herein;
ii. VGR shall change the locks on the premises back to the state at which they existed before its October 22, 2021 re-entry. It shall ensure that 844 has all the keys necessary to access those locks.
iii. VGR shall returns to 844 all goods and chattels which it had seized upon its October 22, 2021 re-entry.
For the months of January – April 2022, 844 shall pay the sum of $25,000 per month to VGR, as payment towards current rent and arrears of rent. That amount is payable on the first day of each month;
Commencing May 1, 2022 and continuing for the terms of the lease, 844 shall pay to VGR the full amount of rent called for in the lease.
If either party breaches the terms of this injunction, the other party may return this matter to this court for relief upon seven days’ notice.
VGR shall not re-enter the premises during the term of the present moratorium under the CTA or any extension thereof, or within 10 days of the expiry of any such moratorium.
[30] 844 is entitled to costs of $12,500 plus HST, for a total of $14,125. That amount may be deducted from the $25,000 that it must pay to VGR prior to having the premises restored to it.
“Marvin Kurz J.”
Electronic signature of Justice Marvin Kurz
Date: December 15, 2021
Amended: December 16, 2021