COURT FILE NO.: CV-20-00000654-0000 DATE: 2022 02 16
SUPERIOR COURT OF JUSTICE - ONTARIO
BETWEEN: MANOFMIZPEH INCORPORATED (Plaintiff) v. MAN-YOK NG and CHEN-KUI CHOO (Defendants)
AND BETWEEN: MAN-YOK NG and CHEN-KUI CHOO (Plaintiffs by Counterclaim) v. MANOFMIZPEH INCORPORATED, DEVON ANTHONY HAMILTON and CARON SIMPSON (Defendants by Counterclaim)
BEFORE: McSWEENEY J.
COUNSEL: T.A. Frederick, for the Plaintiff/Defendants by Counterclaim L. Wong, for the Defendants/Plaintiffs by Counterclaim
HEARD: December 15 and 17, 2021 via zoom videoconference
Endorsement
Overview
[1] This is a commercial tenancy dispute. The landlords, Man-Yok Ng and Chen-Kui Choo, Plaintiffs by Counterclaim (“Landlords”), seek summary judgment against their Tenants, the Plaintiff Manofmizpeh Inc, and its principals Devon Hamilton and Caron Simpson, Defendants by Counterclaim (collectively “Tenants”). In a nutshell, the Landlords want to evict the Tenants, and the Tenants want to stay and to compel the Landlords to make certain repairs to the leased premises.
[2] The Tenants operate a Jamaican restaurant called YumYum at 21 George Street North in Brampton (“the Property”). The Property is a detached, approximately 5,000 square foot two-storey building.
[3] The Tenants commenced this action in the spring of 2020. The Tenants allege that the Landlords have not repaired and maintained the Property as required, and that it has suffered $250,000 in damages as a result.
[4] The Lease began in August 2019. The Tenants renovated the Property in the Fall of 2019 and opened the restaurant in late November 2019.
[5] The first full monthly rent payment was due on January 1, 2020. The Tenants did not pay rent then, nor at any time until ordered to do so by this court in May 2021.
[6] The Landlords defended and issued a counterclaim against the Tenants. They now move for summary judgment on their counterclaim and to dismiss the Tenants’ claim. The Landlords ask the Court to find that the parties’ lease ended in February 2020, due to breaches by the Tenants, including non-payment of rent and locking the Landlords out of the Property.
[7] The Tenants, responding on the motion, seek relief from forfeiture and a mandatory injunction requiring the Landlords to perform repairs to the Property.
Procedural History
[8] On May 11, 2021, Justice Price scheduled this summary judgment hearing. He also made several interim orders, including a requirement that the Tenants pay monthly rent of $12,444.13 into court on the first day of the month commencing June 1, 2021, payment to be made to the credit of the action, pending determination of this summary judgment motion.
[9] Justice Lemay provided case management guidance to the parties from September to November 2021. His various endorsements addressed documentary exchange, filings for the motion, and the Tenants’ compliance with Justice Price’s order, including the outstanding payment of the June 2021 rent into court.
[10] At the beginning of this motion before me on December 15, 2021, Tenants’ counsel admitted that her client had not yet paid its rent into court for December 2021. I instructed the Plaintiff to pay the monies into Court immediately if it intended to proceed to seek equitable relief from the Court. The December 1, 2021, rent payment was made by the end of the day December 15, 2021.
Relief Requested
[11] On this motion, the Landlords are seeking a declaration that the lease between the parties is at an end, an order evicting the Tenant corporation from the Property, payment of rental arrears in the total amount of $298,659.12, and their costs.
[12] The Tenants seek an interim mandatory injunction ordering the Landlords to make certain repairs to the Property and a dismissal of the Landlords’ summary judgment motion. In the alternative, the Tenants request that the Court grant them relief from forfeiture, permit them to remain in the Property, and allow them to set off certain repair costs against their rental arrears.
[13] I will first deal with the Landlords’ motion for Summary Judgment.
Availability of Summary Judgment
[14] The availability of summary judgment is governed by Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, O.Reg. 194, and the Supreme Court’s guidance in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87. The law is clear: Summary judgment should be granted where the court is able to determine on the record before it that there is no genuine issue requiring a trial. This will be the case where the evidence enables the court to (1) make the necessary findings of fact, (2) apply the law to the facts, and (3) where the court determines that summary judgment is a proportionate, more expeditious, and less expensive means to achieve a just result on the merits.
[15] In this commercial tenancy dispute, the central questions I must determine are:
- What are the terms of the parties’ Lease;
- Whether the parties breached their respective contractual obligations as alleged by the other; and,
- Based on those findings, whether the relief sought by either party should be ordered.
[16] Certainly, if the record enables me to find the necessary facts and apply the law in this case, summary judgment will be a proportionate, more expeditious, and less expensive means to achieve a just result than for this action and counterclaim to proceed to a trial.
Position of the Parties on Availability of Summary Judgment
[17] The Landlords argue that summary judgment is available because the central facts necessary to find the Tenants in breach of the lease agreement are not in dispute, namely that:
- The parties entered into a lease agreement requiring the Tenants to pay $12,444.13 per month (constituting a basic net rent as well as additional rents for property taxes, maintenance fees, and insurance).
- The lease stipulates that the rent is due on the first day of the month.
- The Tenants failed to pay the requisite rent for every month beginning January 2020. Specifically, their post-dated cheques all bounced.
- The Tenants changed the locks to the Property the day after taking possession on August 3, 2019. They failed to provide a key to the Landlords on request. The Landlords were therefore locked out of the premises until they obtained the court order from Justice Price compelling the Tenants to provide keys to the premises.
[18] The Tenants resist the motion for summary judgment. The Tenants do not dispute that they changed the locks and failed to pay rent. Nevertheless, the Tenants submit that summary judgment is not appropriate in the circumstances. The Tenants argue that a trial is required to determine:
- If the lease agreement between the parties was subsequently modified by a verbal agreement of the parties.
- Whether the Tenants are entitled to set off against any and all rent arrears, the cost of expenditures made to do repairs to the premises which were the Landlords’ responsibility under the lease.
Analysis on the Availability of Summary Judgment
[19] The parties have filed extensive evidence consisting of the parties’ affidavits and transcripts of cross-examination, Agreement to Lease, the subsequent Final Lease, pictures of the Property, repair quotations/estimates, repair bills, tax statements, and insurance claim reports.
[20] I considered the evidentiary record filed and listened carefully to the parties’ submissions. I conclude that I am able to make the necessary findings of fact and to apply the governing law in order to reach a fair and just determination on the merits. Summary judgment is therefore appropriate in this case.
The Lease Agreement
Initial Agreement to Lease
[21] In 2019, the Landlords listed the Property for lease. In June 2019, the Tenants approached the Landlords and toured the Property. Following extensive negotiations, with the assistance of real estate professionals and their lawyers, the parties signed an Agreement to Lease on June 21, 2019.
[22] The Agreement to Lease set out, inter alia, a net monthly rent of $6,250, indexed annually, plus a monthly add-on for Property Taxes, Maintenance Fees, and Insurance (“TMI”), for a total gross monthly rent of $12,444.13. The Tenants were responsible for paying the utilities.
[23] The Agreement to Lease also stipulated for the Tenants to pay an initial down-payment of $25,829.91, constituting first and last month’s rent. However, for the first four months of the tenancy, the Tenants would not pay rent; instead, they would improve and renovate the Property at their own cost in preparation for opening their restaurant.
[24] The Agreement to Lease also stipulated that the Landlords would make certain repairs to the roof that had been damaged by fire the previous year and that the Tenants would be entitled to an abatement in rent if the Landlords failed to do so.
[25] The Agreement to Lease required the parties to execute a final lease. After entering into the Agreement to Lease, the parties and their respective lawyers continued their negotiations for a month. On July 19, 2019, the parties signed a Final Lease Agreement (“Final Lease”).
Terms of Final Lease
[26] The Final Lease refined the terms and obligations of the parties. The Final Lease was characterized by counsel for the Landlords’ as a “no hassle” lease, that is, the Tenants assumed the responsibility to maintain and pay for the interior of the building; the term in the contract was “carefree net lease” (Art. 2, para. 4).
[27] The relevant terms of the Final Lease include the following:
Financial
a. An initial four-month Rent-Free Period, during which the Tenants were not obliged to pay “Net Rent” but agreed to pay “Additional Rent.” The lease defined “Additional Rent” as including the monthly TMI; the Additional Rent for this period totalled $24,593.28 (Art. 2, paras. 1, 4(a)(iii) – (vii) and Art. 3, para. 2 of the Lease). b. The Tenants agreed to pay for the utilities (Art. 2, para. (4)(i)). c. The Tenants were not entitled to hold back any rent payments or set off against their rent any expenses to fix damage caused by fire, water, or the temporary absence of utilities (Art. 13, paras. 1 and 3).
Condition of the Property & Ongoing Maintenance
d. The Landlords warranted that all equipment and fixtures in the Property were in good working order (Schedule B to Lease, para. 4). e. The Tenants agreed to maintain, at their own cost, the interior of the Property, including above-ground pipes, sewage, and draining systems (Art. 6, para. 1).
Repairs & Renovations
f. The Landlords agreed to repair any existing roof damage, prior to the commencement of the lease (Schedule B to Lease, para. 4). g. The Landlords agreed to repair any subsequent damages to the roof or to the structure of the Property not caused by the Tenants’ negligence (Art. 6, para. 5). h. The Tenants agreed to renovate the interior of the Property at their own expense and obtain the necessary permits prior to doing so (Art. 7, para. 1).
Default & Continuing Obligations
i. The Tenants would be noted in default if they failed to pay rent within 10 days of rent falling due; at that point the Landlords may repossess the premises and terminate the lease (Art. 14, paras 1(a) and 2(b)). j. If the Tenants were in default, but continued to remain in possession of the Property, they would continue to be liable to the Landlords for rent as stipulated in the Final Lease (Art 15, at para. 2).
Post-Contractual Negotiations
[28] The evidence before me confirms that the parties engaged in post-contractual discussions and considered modifying the terms of the Final Lease, specifically regarding the amount of rent payable by the Tenants during the first four months of the lease term.
[29] The Landlords’ evidence is that following direct discussions between themselves and Mr. Hamilton, the parties agreed that in exchange for the Landlords reducing the TMI payable by the Tenants during the first four months from $24,593.28 down to $7,000, the Tenants would assume any of the Landlords’ outstanding repair obligations listed in Schedule B of the Final Lease.
[30] The evidence confirms that the Landlords’ counsel then drafted a “Rider” to the Final Lease to this effect. The Landlords signed the Rider and then sent it to the Tenants for execution. The Tenants did not sign it back.
[31] Mr. Hamilton’s evidence is the Final Lease terms requiring the Tenants to pay anything at all during the first four months of the lease were a “mistake”: he believed the Final Lease should have waived all rent and TMI payments for that initial period.
[32] Mr. Hamilton’s evidence was that following discussions the TMI payments for the first four months in the Final Lease, the Landlords agreed verbally to reduce the TMI owing for the first four months from $24,593.28 to $7,000 for no additional consideration. He denied that the Tenants were to assume Schedule B repair obligations as their part of the bargain.
[33] During argument on the motion, Tenants’ counsel took the position that following the execution of the Final Lease, the parties made an oral agreement at the end of July 2019 to abandon that Final Lease and revert to the terms of the precursor Agreement to Lease. On this basis, she argued that the court should interpret and apply only the terms of the precursor “Agreement to Lease”, not the Final Lease.
Which Lease Applies to the Parties?
[34] The Landlords’ position is that the Final Lease governs the relationship between the parties and was not ultimately modified.
[35] The Tenants argue that it is the Agreement to Lease which binds the parties, not the Final Lease. I have several difficulties with this argument.
[36] First, the parties clearly have some degree of commercial sophistication: Both hired realtors and legal counsel to help them negotiate a comprehensive lease agreement that was signed by the parties and witnessed by their lawyers.
[37] Second, the assertion that the parties orally agreed to abandon a lease that was recently negotiated and executed, and to then revert to the previous terms is simply not supported by the evidentiary record, nor did the Tenants point to any change in circumstances that would make such conduct commercially reasonable.
[38] On a motion for summary judgment, the party resisting here the summary judgment is required to “lead trump or risk loosing:” Da Silva v. Gomes, 2018 ONCA 610, at para. 18.
[39] The evidence does not support a finding of agreement to abandon the Final Lease, which was carefully negotiated over many weeks. Given the fact that the parties were represented by counsel in the negotiation of the its terms, I cannot concluded that the rent terms in the Final Lease, which are a central term in any commercial lease, contained a “mistake” as argued by Mr. Hamilton.
[40] Further, following the parties’ post-contractual discussions, the Landlords presented the Tenants with a signed contract amendment “Rider”. The Rider was never signed by the Tenants.
[41] The relevant legal principle articulated by the Court of Appeal for Ontario in Gilbert Steele Ltd. v. University Construction Ltd., 1976 ONCA 672, 12 O.R. (2d) 19 (C.A.), was summarized by Justice Davis in Katz v. Grand Brook Homes, [2008] O.J. No. 3046, at para. 90: “the inference of a mutual rescission was precluded by the fact that one of the parties had, in fact, drafted a new written agreement to which the other party had not agreed.”
[42] The evidence shows that the Landlords approached the Tenants’ principal, Mr. Hamilton, several times to sign the Rider. Mr. Hamilton chose not to sign.
[43] Third, the Tenants, by their own conduct, demonstrated that they did not believe that the Agreement to Lease governed the party’s relationship. The Agreement to Lease did not require the Tenants to make any rent or TMI payments for the first four months. However, in August 2019, the Tenants provided the Landlords with a cheque for $3,500. Clearly, if the Tenants believed at that time that the parties had agreed to rescind the Final Lease and be bound only by the terms of the Agreement to Lease, they would not have paid $3,500 for a period in which they believed nothing was owed.
[44] For the foregoing reasons, I find that the evidence supports a conclusion that there was no meeting of the minds to modify, let alone abandon, any terms of the Final Lease.
[45] Having found that the relationship between the parties is governed by the terms of the Final Lease and was not altered by subsequent agreement, I will now turn to the evidence of each party’s conduct to determine whether either, or both, were in breach of its terms as alleged.
Who breached the Lease?
[46] Based on the evidentiary record before me I make the following relevant chronological findings of fact:
[47] On or about August 1, 2019, the Tenants paid the Landlords $3,500, provided post-dated cheques for monthly rent commencing January 1, 2020, took possession of the Property, and notified the Landlords that there was a skylight in the roof of the Property that was leaky.
[48] On August 2, 2019, the Tenants’ contractors began to renovate the interior of the Property without a building permit.
[49] August 3, 2019, the Tenants changed the locks of the Property and did not provide the Landlords with the key.
[50] On September 16, 2019, the Landlords provided the Tenants with an engineer’s report verifying that the Property had been repaired following the fire.
[51] On September 17, 2019, the Landlords replaced the leaky skylight in the roof of the Property.
[52] By January 2020, YumYum was open for business.
[53] The Tenants' rent cheque for January 2020 was returned for insufficiency of funds. The remaining cheques were subsequently cancelled by the Tenants.
[54] On January 1, 2020, the Tenants did not pay rent.
[55] On February 1, 2020, the Tenants did not pay rent.
[56] On February 5, 2020, the Landlords terminated the lease and sought to repossess the Property with a bailiff. The repossession was resisted by the Tenants. The Tenants remained in possession.
[57] On March 1, 2020, the Tenants did not pay rent or any months since then until the Order of Justice Price dated May 2021.
[58] On January 2021, an above ground pipe burst on the Property.
[59] In May 2021, the Landlords learned that outstanding utility charges accumulated from the Property since August 2019 have been added to their property taxes.
[60] I take judicial notice that on March 17, 2020, Ontario declared its first provincial emergency relating to the COVID-19 pandemic, which was followed by legislative enactments including restrictions on the eviction of commercial Tenants.
[61] In oral argument, the Tenants’ counsel focused on the Landlords’ alleged failure to make the necessary repairs to the Property, and the Landlords focused on the Plaintiff’s conceded non-payments of rents.
[62] However, with respect to the Tenants lock-out of the Landlords upon taking possession of the Property in August 2019, I note that the Tenants did not deny taking this unilateral step, which was prohibited by the Final Lease. As stated earlier, the Tenants did not provide the Landlords with a set of keys until ordered so by Justice Price in 2021.
[63] I find that this act by itself amounted to such a fundamental breach of the lease agreement that the Landlords were, as of August 2019, entitled to consider the lease forfeited. The Landlords, while protesting the Tenants’ failure to give them keys, did not take any steps to repossess the property at that time. As a result, therefore, the Final Lease continued to be in effect.
[64] The Court notes also that by locking the Landlords out of the Property, the Tenants made it more difficult Landlords to make any independent assessment of the state of alleged damages reported by the Tenants. Notwithstanding the Tenants’ refusal to provide them with keys to the Property, the Landlords replaced the roof skylight in accordance, with its Final Lease obligation, in September 2019.
Non-payment of Rent
[65] The Tenants concede that they paid no rent to the Landlords on January 1, 2020 or anytime thereafter. The only rent monies paid after that date were paid into Court as a result of the Landlords seeking relief which was ordered on an interim basis by Price J. over a year later, in May 2021.
[66] I conclude that the Tenants breached the rental payment obligations under the terms of the Final Lease.
Are the Tenants entitled to Withhold Rent for Non-Repairs?
[67] The Tenants submit that they are entitled to withhold rent payments on the basis that the Defendants had failed to provide an Electrical Safety Authority approval certificate, as required pursuant to schedule B of the Lease, and failed to adequately repair the Property prior to the commencement of the lease.
[68] The Tenants submit when they entered the premises on August 1, 2019, they saw that there were outstanding repairs on the roof. Similarly, the Tenants alleges that the Landlords failed to complete subsequent necessary repairs in January 2020 when a pipe burst, and again in January 2021 when the Property partially flooded due to another burst pipe.
[69] The Landlords take the position that they had completed all necessary repairs to the building by August 2019, and that any subsequent repairs fell within the scope of the Tenants’ responsibility under the Final Lease. Therefore, the Landlords argue, they did not breach the Final Lease and the Tenants were not entitled to withhold any rent.
[70] The evidentiary record confirms that the Landlords had repaired damage caused to the Property by the 2018 fire and took steps to repair the leaking roof. The record shows that in July 2019, as the parties were negotiating, the Landlords repaired the fire damage to the roof.
[71] After the Tenants took possession of the Property on August 2, 2019, they reported another issue with the roof, and the Landlords’ contractors again attended the Property. On September 17, 2019, the Landlords’ contractors repaired the roof by installing a new skylight and expanding the drainage system on the roof. The Landlords paid for these repairs.
[72] The Tenants’ evidence does not support their argument that these repairs were faulty or insufficient. The evidence establishes that the leaking skylight was reported by the Tenants promptly upon taking possession in August 2019, and that the Landlords completed the skylight replacement and associated repairs in September 2019. I conclude that by January 1, 2020, when the first full rental payment was due, the Landlords had fulfilled their repair obligations under the Final Lease. There was no basis at that time for the Tenants to “hold back” any rent.
[73] In oral argument, the Tenants alleged that in late January 2020, the Property sustained water damage. Both parties provided evidence of their counsel’s correspondence between January and February 2020. In that correspondence, Tenants’ counsel states that the damage to the Property caused by the 2018 fire had not been repaired. However, counsel makes no mention of any recent damage caused by a broken pipe. Significantly, nowhere in the Tenants’ Statement of Claim issued in May 2020, nor in their written submissions on this motion, do they allege that the Landlords failed to repair any new issue that arose in January of 2020.
[74] The evidence does not establish that the Tenants notified the Landlords of any broken pipe damage in January of 2020, nor that there was in fact any damage caused by a broken pipe at that time. The Landlords were, therefore, not in breach of any repair obligations as of January 2020.
[75] The Tenants further allege that in January 2021 the Property flooded again and that the Landlords failed to repair the resulting damage. The Tenants presented evidence of the flooding and the extent of the damage. I find that there was a flood. The evidence provided by the Landlords shows that the source of the flooding was a broken pipe situated on the second floor of the Property. Per the terms of the Final Lease, it was the Tenants’ obligation to maintain the above ground pipes; the repair of this damage was therefore the Tenants’ responsibility. I find that the Landlords did not breach the Lease by not attending to the January 2021 flood.
Termination of the Lease
[76] On February 5, 2020, after the Tenants had failed to pay the rent for January 2020, the rent for February 2020, and the outstanding TMI payments for the first four months, the Landlords engage a bailiff and posted the Property advising the tenants of the termination of the Final Lease.
[77] The notice posted by Sterling Bailiffs Inc. on behalf of the Landlords, stated that the tenancy was terminated, that the Tenants owe $53,276.48 (for non-payment of rents, including eviction fees and accelerated rents due), that the Tenants had five days to vacate the Property, and that the Landlords reserved their rights to sue for the totality of arrears owing pursuant to the Final Lease.
[78] At the time of the Bailiffs attendance, the Tenants were present in the Property and rebuffed the Landlords’ attempt to reclaim possession. As a result of the Tenants actions, the Landlords were not able to re-enter the Property at that time.
[79] The evidence supports a finding that on February 5, 2020, the Tenants’ non-payment of rent amounted to a breach of the Final Lease. The Final Lease came to an end on that date.
[80] To summarize on this point, I find as a matter of fact, that as of February 5, 2020, the Landlords had fulfilled their repair obligations to the Tenants under the Final Lease. However the Tenants’ failure to pay rent brought the lease to an end on February 5, 2020, when the Landlords exercised their entitlement to post the Property and sent the bailiff to re-enter the premises.
[81] The Tenants continued to occupy the Property after February 5, 2020. Pursuant to its terms, the Final Lease continued to apply to the terms of the Tenants occupancy thereafter. The Tenants therefore owe the Landlords outstanding rent at the rate stipulated in the Final Lease for all months of their continuing occupancy of the Property.
[82] Having found that the Lease between the parties is at an end and that the Tenants must surrender possession of the Property, it is not necessary for me to assess the Tenants’ prayer for a mandatory interim injunction requiring repairs.
Set-Off & Relief from Forfeiture
[83] The Tenants submit that in the event I find that the Landlords are entitled to the rents outlined in the Lease, which I have, the Tenants are entitled to set off costs they incurred in repairing the Property against its rent arrears. The Tenants also seek relief from forfeiture, so that they may continue to operate their restaurant at the Property notwithstanding their breaches of the Final Lease.
Do the Tenants have a Right to Set-Off?
[84] I conclude that there is no entitlement to a set-off for several reasons. First, the parties’ Final Lease is express there is no set-off. Second, the Tenants claimed to have spent in excess of $240,000 in repairs. However, the evidence before me does not support this claim. The total of the invoices filed by the Tenants was closer to $25,000 than $240,000. More significantly, the invoices concern repairs that fall within the Tenants’ responsibility pursuant to the Final Lease. I note further that the Tenants’ alleged expenditures for repairs do not distinguish renovations from repairs – renovations are expressly the Tenants’ responsibility under the Final Lease.
[85] The Tenants are for these reasons not entitled to a set-off. Their set off claim is denied.
Should the Tenants be Granted Relief from Forfeiture?
[86] The Tenants have also requested that in the event I find that they must pay their outstanding rent, I should grant relief from forfeiture.
[87] The Court of Appeal for Ontario, explained in 1497777 Ontario Inc. v. Leon's Furniture Limited et al., 2003 ONCA 50106, 67 O.R. (3d) 206 (C.A.), that
[w]e should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition […] The word "appropriate" involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach.
[88] Relief from forfeiture is an equitable remedy. As a preliminary matter, therefore, the party seeking equitable relief must come to court with “clean hands.”
[89] I cannot find that the Tenants come to Court with clean hands: their property tax bill.
[90] The Tenants’ ongoing failure to pay rent amounted to a fundamental breach of the Final Lease. The total failure to pay rent by itself amounts to a repudiation of the agreement. Changing the locks to the property constituted another serious breach as it effectively prevented the Landlords from exercising their right to distress.
[91] Other inaction of the Tenants supports my conclusion that the breaches of the lease were blatant. For example, the Final Lease expressly required the Tenants to pay the cost of utilities at the Property during their tenancy. The evidence showed that the Tenants took no steps to open an account with the utility providers, nor to advise the Landlord that they did not do so. The Landlords, did not learn of the Tenants inaction until they received a letter in May 2021 from the municipality informing them that two years of outstanding utility charges were being added to the Landlords’ property tax bill for the Property.
[92] I should note, for clarity, that the equitable relief sought by the Tenants was not based on allegations of breach of their lease obligations due to the COVID pandemic: in this case, their defaults under the lease predated the March 2020 lockdown by several months, when the restaurant was open and operating.
[93] When considering the disparity between the value of the Property of which forfeiture is claimed compared to the damage caused by the breach, I conclude that it would be profoundly unfair to further defer the return of the Property to the Landlords. Until May 2021, when forced by court order to do so, the Tenants paid no rent from January 2020 to May 2021, a period of 16 months. Throughout this period the Landlords were required to pay all carrying costs for the property without the contribution from the Tenants, and for utilities which were being used and for which the Tenants failed to pay.
[94] The Tenants’ request for relief from forfeiture is therefore dismissed.
Damages Quantum
[95] Based on the evidence filed on the motion, I assess the Tenants’ liability at $330,869.32. This figure consists of:
- $186,920.82 for the Tenants outstanding net rent payments, as set out in article 2, section (2)(b) of the Lease at an annual rent of $75,000 per annum at the first and second year and $80,000 per annum for the third year, plus applicable HST.
- $142,875.00 for the Tenant’s additional rent payments fixed at $11.43 per square foot per annum per article 2, section (5) of the Lease. The parties agreed that the size of the property was 5,000 square foot.
[96] The Landlords have limited their claim for damages to $298,659.12. Judgment to go accordingly.
[97] The defendants by counterclaim, Mr Hamilton and Ms Simpson, signed the lease both as principals for Manofmizeph Inc. and as indemnifiers. Consequentially, I find that Mr Hamilton and Ms Simpson are each jointly and severally liable to the Landlords for the damages awarded.
Conclusion
[98] The Tenants are to vacate the premises no later than 4:00 p.m. on March 31, 2022.
[99] With respect to the timing on which the Tenants are to vacate the Property, Landlords’ counsel suggested three months from the motion date. The Tenants asked for a six further months.
[100] In the circumstances between these parties, in which three months from December 2021 is more than reasonable.
[101] Providing they have paid their monthly rent by the 1st of January, February and March 2022, the Tenants may remain in possession of the Property until 4:00 p.m. on March 31, 2022. On or before that date, the Tenants shall fully vacate the premises, in a manner compliant with their obligations upon end of tenancy set out in the Final Lease.
[102] Draft Judgment as amended by me signed and to issue.
Costs
[103] The Defendants/Plaintiffs by Counterclaim are fully successful and are entitled to their costs. If the parties are unable to agree on costs, they may exchange and file submissions to my attention via my judicial assistant Sherry McHady, at sherry.mchady@ontario.ca on the following timetable:
- Defendants/Plaintiffs by Counterclaim may file submissions not to exceed 3 pages, this total not including relevant Offers to Settle and Costs Outline, within two weeks from the release of this decision.
- Plaintiffs/Defendants by Counterclaim may file submissions not to exceed 3 pages, this total not including relevant Offers to Settle and Costs Outline, within two further weeks.
- Reply, if any, limited to 2 pages only, within a further week.
McSWEENEY J RELEASED: February 16, 2022