COURT FILE NO.: CV-22-048700 DATE: 2022 03 08
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: GREEN SOLUTIONS INDUSTRIES INTERNATIONAL INC. v CLARKE HOLDINGS (LONDON) INC.
BEFORE: Fowler Byrne J.
COUNSEL: Christina Bowman, for the Plaintiff Emilio Bisceglia and Battista Frino, for the Defendants
HEARD: March 3, 2022, by videoconference
E N D O R S E M E N T
[1] The Plaintiff seeks immediate relief from forfeiture and that the Defendant restore their commercial tenancy. The Plaintiff also seeks a mandatory injunction prohibiting the Defendant from entering the leased premises without proper notice.
I. Background
[2] The Plaintiff, Green Solutions Industries International Inc. (“Green Solutions”), is a commercial tenant of Unit D at 552 Clarke Road, London, Ontario, which is comprised of approximately 69,000 square feet (“the Premises”). The Defendant, Clarke Holdings (London) Inc. (“Clarke Holdings”), is the owner of the entire property located at 552 Clarke Road (“the Property”), which has another tenant, and is the commercial landlord of Green Solutions.
[3] Green Solutions recycles and processes plastics. It has carried on that business since it became a commercial tenant at the Premises on December 1, 2018. At that time, the Property was owned by Zeubear Properties Inc. The tenancy between Green Solutions and Zeubear Properties Inc. was established and governed by a Lease Agreement dated December 1, 2018 (“the Original Lease Agreement”).
[4] In May 2018, Clarke Holdings entered into an agreement to purchase the Property. This purchase was completed on or about January 14, 2019, and the Original Lease Agreement was assigned to Clarke Holdings. Shortly thereafter, Clarke Holdings and Green Solutions entered into a Lease Amending Agreement, dated January 16, 2019 (“Lease Amending Agreement”). Unless specifically amended in the Lease Amending Agreement, the Original Lease Agreement remained in full force and effect. The Original Lease Agreement and the Lease Amending Agreement (collectively “the Lease Agreement”) is for term of 66 months, ending on May 31, 2024.
[5] Clarke Holdings’ insurance for the Property was up for renewal on January 14, 2022. In anticipation of that renewal, the insurer, Travelers Canada, inspected the Property. Following that inspection, on November 11, 2021, Travelers Canada advised Clarke Holdings that they would not continue to insure the Property following their risk reassessment. While there were a number of concerns, the relevant issues were as follows:
a) Green Solutions utilizes processes which are highly hazardous. The premises is only partially sprinklered and then only for an ordinary hazard, and insufficient for plastics manufacturing.
b) Green Solutions exercises poor housekeeping, with plastic waste and box materials stacked from ceiling to floor, wall to wall which even an appropriate sprinkler could not control in the event of a fire.
[6] In December 2021, Clarke Holdings retained the services of Disano Sprinkler Design Limited (“Disano”) to inspect and review the existing sprinkler system in the Premises. On December 17, 2021, Disano wrote a short report, which stated:
The purpose of this letter is to confirm that the existing sprinkler system cannot adequately protect the commodities which are being stored at the subject location. There are Group “A” plastic commodities being stored up to an average piling height of 15 ft. in this 20 ft. high building. Since exposed expanded plastics are the worst case in this building, this is the sprinkler design that should be used to protect this occupancy.
The existing system is a scheduled type sprinkler system, as no hydraulic plates were present at either of the 2 sprinkler risers. Therefore, as per N.F.P.A. Standard #13, the maximum piling height of Group “A” plastics permitted by this design is only 5 ft. high. Therefore, the piling heights must be lowered or the existing system is to be revamped.
[7] Green Solutions was provided with a copy of this report on December 20, 2021.
[8] In December and early January 2021, Clarke Holdings followed up with Green Solutions wanting to speak about the sprinkler issue. Clarke Holdings confirmed in an email on January 11, 2022, that it was unable to insure the entire Property because of Green Solutions use of the Premises and the inadequacy of the sprinkler system.
[9] Later that same day, Clarke Holdings indicated they contacted approximately thirteen different insurers but had no luck in obtaining replacement coverage because of the noted issues. It also contacted Green Solutions’ own insurance broker, with no success. So, to resolve the issue, Clarke Holdings offered what it considered to be the only solution:
a) Green Solutions would pay the $100,000 premium for this year;
b) Clarke Holdings will install the proper sprinklers;
c) Green Solutions’ rent would immediately increase from $4.90 per square foot to $7.22 per square foot;
d) Green Solutions agrees to exercise their option to renew for 5 years at $9.00 per square foot;
e) That Green Solutions “tighten up” the parking requirements on site for its trucks.
[10] Clarke Holdings advised, in answers to written questions, that the sum of $100,000 was based on a conversation they had with their insurance brokers. The broker advised Clarke Holdings that if they upgraded the sprinkler system, they may be able to obtain a temporary policy during the upgrade for an an additional $100,000. It was an estimate and would have to be reconciled when the policy was put in place. In the meantime, Travelers Canada agreed to extend the insurance on the Property to February 14, 2022.
[11] On or about January 20, 2022, Clarke Holdings delivered to Green Solutions a Notice to Tenant of Breach of Covenant, dated January 14, 2022. The Notice claimed that Green Solutions was in breach of the Lease Agreement, as follows:
ARTICLE 5.01(d): As the Landlord's Insurer provided notice to the Landlord that its insurance would be terminated as a direct result of You, the Tenants actions or use of Premises. You are required to implement an egress/exit plan. This plan will need to show exit routes in case of emergency, as well as limitations on how high items can be stacked, to ensure that all exit/egress signs can be seen clearly to direct to an exit in case of emergency. Further, you are required to upgrade the sprinkler system to be suitable for the plastics processing operations.
[12] Green Solutions then retained the services of Sentinel D.E.C. Systems Inc. (“Sentinel”) to review the Disano letter. On January 28, 2022, Mr. Rocca, the principal of Sentinel, wrote an email to Green Solutions stating:
I have conferred with our sprinkler engineer and unfortunately he agrees with the information stated in this letter. As you are storing Group “A” plastic commodities your choice is to either keep the piles of stored plastics at a maximum 5 feet high, revamp the entire sprinkler system (would be very costly), or move. If I can help in any other way, please let me know.
[13] Green Solutions reduced the height of the piles of their materials. Their lawyer then contacted counsel for Clarke Holdings and indicated as follows:
Further to your correspondence to me of Jan 26/22, my client has conferred with its own sprinkler engineer and reduced the piling height of the plastics to a maximum of five feet, so that exits/rows are visible and eliminating the need for any sprinkler upgrade. An egress plan is on the walls as required. There is no breach and thus no default to cure. The parties should renew their respective insurance policies as required and continue their landlord and tenant relationship in accordance with the lease.
[14] Despite this, Clarke Holdings’ insurer was still not willing to insure the Property. In a letter from its insurance broker, Clarke Holdings was advised:
Further to our conversation and the response forwarded by the tenant (Green Solutions) counsel, I spoke with the current Insurer of the building at 552 Clarke Road, London ON along with a number of Insurers that we are attempting to place the building coverage with (please see attached Marketing Summary), and all require the sprinkler system to be upgraded. The low piling of stock and material should have been done anyways and doesn't alter the Insurer's requirement that the sprinkler system be upgraded for the occupancy.
[15] Green Solutions was provided with a copy of this letter on January 31, 2022, along with a list of 14 other insurers who declined to provide insurance for the whole building in which the Premises was situated, citing the inadequate sprinkler system and the use of the Premises as the main factor. The responses from the various insurers are as follows:
a) From Economical: “given the operations of this tenant (ie. high degree of plastics stored, packaged, processed), I cannot help you with this one;
b) From Aviva: “Unfortunately, due to the type/class of tenant (plastics) we will have to decline this risk.
c) From Royal and Sun Alliance Insurance: “Due to the operations at Green Solutions – afraid I’m going to have to pass quoting this. We have suffered a couple of serious losses due to this operation – so no loner with RSA appetite.”
d) From Intact: “I’m sorry Nick, I have 0 capacity for this type of occupancy.”
e) From Northbridge Insurance: “Unfortunately, we are not able to quote on this one due to the plastics processing involved.”
[16] Mr. Marchese, the insurer broker for Clarke Holdings, also wrote directly to Clarke Holdings, confirming that in his conversations with the various insurers, he was unable to obtain insurance for the Property because everyone required an upgraded sprinkler system. He indicated that reducing the pile height had to be done anyway and did not alter the insurer’s requirement that the Premises’ sprinkler system be upgraded.
[17] In an email exchange with a representative of Northbridge Insurance, it shows that this insurer had no faith that the piling heights will be adhered to, and, in the absence of the upgraded sprinkler system, they would not insure the Property.
[18] As Clarke Holdings could not find an insurer willing to cover the Property, and given that no solution was found, it issued a Notice of Termination of Tenancy, and locked Green Solutions out of the Premises on February 9, 2022. Clarke Holdings entered the Premises on that day and saw that some piles of materials remained over 5 feet high.
[19] In further correspondence dated February 14, 2022, Clarke Holdings advised Green Solutions that they had until February 18, 2022, to remove all their property and possessions from the Premises. If they failed to do so, Clarke Holdings would do so, at cost to Green Solutions.
[20] On February 14, 2022, Green Solutions forwarded a certificate of insurance, dated February 14, 2022, which showed a general commercial liability and environmental coverage from December 4, 2021, to April 25, 2022. This covers Green Solutions and the Premises only and was for a four-month period. Mr. Angelo Mangiardi, Green Solution’s insurance broker, clarified in his answers to written examinations that Green Solutions was actually on a one-year term but that the policy was recently been amended to match up its expiry date with another policy. He admitted that the Contents and Equipment coverage for Green Solutions was set to expire on March 6, 2022. Green Solution’s policy does not cover the entire Property and has a policy limit of $2 million. Mr. Tong, the representative of Green Solutions, indicated that they had a hard time getting insurance coverage because of all the inquiries that Clarke Holdings had already made. Once an insurer provides a quote to one broker, they are hesitant to provide another quote to another broker on the same property.
[21] Since Green Solutions has been locked out, and unable to carry on business, Clarke Holdings has been able to insure the Property. This will not be possible if Green Solutions re-enters and carries on business. Also, if the sprinkler is upgraded, it is not clear whether the Property could be insured. Most of the insurers cited the inadequate sprinkler system, and the use of the Premises and its inherent dangers, as a concern and may still not wish to cover the Property.
[22] In cross-examination, Mr. Marchese indicated that the insurers may be insisting upon a better sprinkler system because they have no faith that Green Solutions will keep the piles to the appropriate height. They feel the upgraded sprinkler system is the best solution. Mr. Marchese stresses though that he is not a representative of the insurer, but only a broker who had had discussions with the various insurers.
II. Issues
[23] Green Solutions maintains that the Lease Agreement was improperly terminated and that they should have immediate re-entry into the building. If it appears that a new sprinkler system is necessary for Clarke Holdings to obtain insurance for the Property, it is a cost that Clarke Holdings should absorb as part of their responsibilities as a commercial landlord.
[24] Clarke Holdings maintains that Green Solutions is in breach of the Lease Agreement, which has not been remedied, and that they were entitled to terminate the Lease Agreement and lock out their tenant under the terms of the Lease Agreement. Clarke Holdings maintains that the responsibility to upgrade the sprinkler system lies with the tenant, Green Solutions, and they failed to remedy the breach.
[25] Accordingly, the following issues must be decided:
a) Does this court have jurisdiction to adjudicate this issue in light of an arbitration clause in the Lease Agreement?
b) If this court does have jurisdiction, did Green Solutions Breach the Lease Agreement?
c) If Green Solutions did breach the Lease Agreement, should it be given relief from forfeiture?
d) Do sections 80 to 83 of the Commercial Tenancies Act prohibit Clarke Holdings from terminating the tenancy at this time?
e) Should this court grant a mandatory injunction prohibiting Clarke Holdings from further entering the Premises without 24 hours notice, an agreement, or court order?
III. Analysis
A. Jurisdiction
[26] The Lease Agreement contains a Dispute Resolution section. Sections 18.01 and 18.02 state as follows:
18.01 In the event of a dispute arising between the parties in connection with this Lease, such dispute shall be promptly referred to a member of senior management of each party who shall attempt to resolve such dispute. If such members of senior management are unable to resolve such dispute within twenty (20) days after referral to them, then the parties shall resolve such dispute in accordance with the remaining provisions of this Article.
18.02 Any dispute, difference or question between the parties hereto under this Lease or any provision hereof shall be determined by reference to arbitration by a single arbitrator, such arbitration to be proceeded with in accordance with provisions of the Arbitration Act, 1991, S.O. 1991, c.17, Ontario.
[27] I am satisfied that section 18.01 was complied with by the parties as they have been attempting to resolve this issue since December 2021, when the insurance issue first came to light. The twenty days has long since passed.
[28] Since that time though, neither party referred the matter to arbitration. Instead, Green Solutions commenced this action and immediately brought an urgent motion seeking relief from forfeiture.
[29] Green Solutions argues that in spite of the arbitration clause, I have authority to grant the relief requested. Clarke Holdings was silent on the issue and has responded to the motion.
[30] The Arbitration Act, 1991, S.O. 1991, c.17 states:
6 No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:
To assist the conducting of arbitrations.
To ensure that arbitrations are conducted in accordance with arbitration agreements.
To prevent unequal or unfair treatment of parties to arbitration agreements.
To enforce awards.
7 (1) 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.
[31] In the case before me, neither party invoked the arbitration clause, nor did anyone seek to stay these proceedings.
[32] Given that there is no motion to stay before me, I see no reason to decline jurisdiction to hear the matter. Both parties, for the purposes of this motion, appear to have waived their right to have the matter determined by way of arbitration.
B. Is Green Solutions in Breach of Lease Agreement?
[33] Both parties agree that the Lease Agreement sets out the rights and obligations of the parties. Unfortunately, they disagree on how the Lease Agreement should be interpreted with respect to their respective obligation to pay for a new sprinkler system if one is required.
[34] The relevant provisions of the Lease state as follows:
DEFINITIONS
“Operating Costs” means any and all costs and expenses incurred by the Owner, acting reasonably, in connection with the operation, insurance, management, maintenance (including without limitation and without duplication, landscaping, snow and hash removal, parking lot maintenance), realty taxes, education taxes and any local improvement charges and repair of the Building and surrounding lands and the amortization of any capital expenditures, but excluding the costs of inherent structural defects and the Owner's financing costs in connection with the Building, together with an administration fee, all as included within Additional Rent;
ARTICLE 2 – PAYMENT OF RENT/SECURITY DEPOSIT
2024 [sic] The Minimum Rent as herein set costs out shall be exclusive of all and expenses including but not limited to real estate taxes, operating and maintenance expenses and utilities for the Premises and common areas, and subject nonetheless to any further adjustments pursuant to Article 6.
2.03 The Tenant shall repair and maintain the Premises in good order and shall make any reasonable and appropriate repairs with due diligence except reasonable wear and tear which does not affect the use and enjoyment of the Premises by the Tenant. Notwithstanding the foregoing, in the event that there is the presence of asbestos or other hazardous materials within the Premises which is required to be removed, such shall be at the expense of the Owner, who shall have access to the Premises for such purposes. The Tenant shall have no responsibility for maintenance or repair with respect to common areas.
ARTICLE 3 – NET LEASE
3.01 The parties acknowledge that it is the intention that this Lease shall be fully net and carefree to the Owner, and that all costs and expenses associated with the Premises, other than the Owner's costs of financing or structural repairs to the Building (not caused by the Tenant), shall be borne by the Tenant in accordance with its Proportionate Share. The Owner warrants and represents to the Tenant that Additional Rent (excluding the cost of utilities and services referred to and as represented in clause 6.01) for the Premises is anticipated to be $1.75 per square foot for the calendar year 2018.
ARTICLE 5 – OBLIGATIONS AND RIGHTS OF THE TENANT
5.01 Tenant shall:
(d) Use the Premises only for the purposes of warehouse, office facility, light manufacturing, blending, mixing, packaging and assembly and no hazardous or flammable materials or substances, except raw plastic materials, shall be located at or in the Premises or used in any of the Tenant’s operations without the prior written consent of the Landlord; the Tenant will provide to the Landlord details of any hazardous or flammable materials or substances located on the Premises and, subject to the Tenant complying with all governmental regulations in respect to such materials and substances, and as long as the Landlord’s insurance remains in full force and effect, the Landlord will consent to such use. If the Landlord’s insurance premium is increased as a result of such use, the Tenant shall pay such increase. If the Landlord’s insurer provides notice to the Landlord that its insurance will be terminated or the coverage materially reduced as a direct result of the Tenant’s actions or use of the Premises and, if the Tenant fails to rectify the matter within ten (10) days of receiving notice from the Landlord, the Landlord, at its option, may terminate the Lease.
5.02 Notwithstanding the foregoing and without limiting the rights and remedies of the Owner, if at any time during the Term of this Lease Tenant defaults in its covenants and obligations with respect to the Premises under this Lease, the Owner may give written notice to the Tenant specifying the default. If, within thirty (30) days from the giving of such notice, the default specified in such notice has not been remedied, or, if the nature of such default reasonably requires more than thirty (30) days to remedy and make right, the Tenant has not commenced, or, having commenced, is not diligently completing the remedying of such default, or if the Tenant’s work is not a type satisfactory to the Owner, the Owner may enter upon the Premises and perform such at work the cost and expense of the Tenant, plus such reasonable additional charges as then may be applicable, in accordance with the policies of the Owner for administration and overhead.
(as added by the Lease Amending Agreement):
5.02 The Tenant hereby covenants with the Owner that from and after the date the Tenant occupies the Premises the Tenant and its employees and agents shall not permit any unlawful use, storage, manufacturing or disposal of materials or substance deemed to be hazardous or dangerous as defined under federal, provincial or municipal environmental health or safety laws. In the event that any such hazardous materials or substances are used in contravention of this Lease by the Tenant, its employees or agents during the term of this Lease or any renewal period, the Tenant and its principals shall be held responsible and liable for the clean up work, remedial actions or capital expenditures required to be taken or incurred in respect of the Premises. The Tenant further acknowledges that an environmental violation will exist during the term or any renewal period when the levels of concentration of hazardous materials or substances in the Building or the ground are found to exceed established governmental decommissioning guidelines in effect. The Tenant agrees to obtain environmental insurance coverage in respect of its operation that is satisfactory to the Owner at the Tenant’s expense.
ARTICLE 7 – OBLIGATIONS AND RIGHTS OF THE OWNER
7.02 The Owner shall:
(a) Provide heating and shall repair at its cost the hearing and ventilating system to ensure such system is in good working condition and adequate for the purposes of the Tenant;
(e) Make available reasonable amounts of electricity, gas and water with respect to the Premises, consistent with the requirements of the Tenant’s permitted use, and
(f) Keep the Building insured against loss or damage by fire, lightning and tempest in accordance with the Owner’s usual commercial practice.
ARTICLE 10 – INSURANCE
10.1 Throughout the term of the lease, the Tenant shall take out and maintain at its sole cost and expense:
(a) Insurance upon the Tenant’s property normally located within the Premises, including stock in trade, inventory, furniture, fittings, leasehold improvements, and Tenant’s fixtures in an amount equal to the full replacement cost thereof, against at least the perils of fire, sprinkler leakage, theft etc. as included in normal "all risks" coverage.
(b) Liability insurance in the amount of $2,000,000 or such higher limits reasonably required by the Owner against claims for personal injury liability, death or property damage occurring upon, in or about the Premises, including personal liability, liability assumed by contract and Tenant’s legal liability.
ARTICLE 14 – DEFAULT AND RIGHT OF RE-ENTRY
14.01 (a) If and whenever during the Term and any renewal hereof:
(ii) the Tenant fails to perform any other of the terms, covenants or conditions of this Lease to be observed and performed by it (other than the terms, covenants or conditions set out in subparagraphs (iii) to (v) inclusive for which no notice shall be required) and such default shall continue for a period of thirty (30) days (or such longer period as may be reasonably be necessary to cure such default considering the nature thereof) after notice by the Owner to the Tenant specifying with reasonable particularity the nature of such default and requiring the same to be remedied; ...
then and in every such case the Owner, in addition to any other rights or remedies it has pursuant to this Lease or at law, shall have the immediate right of re-entry upon the Premises and it may repossess the Premises and enjoy it as of its former estate without the Owner being considered guilty of trespass, nor liable for any injury or loss to the Premises or Tenant’s property therein, unless caused by the negligence or willful act of the Owner or those for whom it is in law responsible.
[35] In addition, in Article 14.03, the Landlord’s right to distress is preserved upon default under section 14.01.
[36] The Lease is clear. Section 5.01(d), states, “If the Landlord’s insurance premium is increased as a result of such use, the Tenant shall pay such increase. If the Landlord’s insurer provides notice to the Landlord that its insurance will be terminated or the coverage materially reduced as a direct result of the Tenant’s actions or use of the Premises and, if the Tenant fails to rectify the matter within ten (10) days of receiving notice from the Landlord, the Landlord, at its option, may terminate the Lease.”
[37] I am satisfied on the evidence that Clarke Holdings’ insurer elected to terminate its coverage after its own inspection, and not as the result of anything that Clarke Holdings did or said. I am also satisfied that Clarke Holdings tried to find other insurers that would be willing to cover the Property.
[38] In this case, after its inspection, Travelers Canada simply stated they did not wish to insure that type of risk anymore. They pointed to the lack of sufficient sprinklers and the general poor housekeeping of the Premises. There is no obligation for them to continue to insure the property.
[39] The issue of whether the proper stacking of the materials was sufficient in lieu of an upgraded sprinkler system came up when Clarke Holdings hired Disano to inspect the property, for insurance purposes. Admittedly, Disano originally opined that proper stacking was an alternative to an upgraded sprinkler system, but this opinion is not in anyway binding on any insurer who is considering covering this risk. The insurer would have to do their own inspection and make their own decisions.
[40] In Clarke Holdings’ Notice to Tenant of Breach of Covenant, dated January 14, 2022, it was very clear that it was relying on s.5.01(d) of the Lease Agreement and their inability to obtain insurance due to Green Solutions use of the premises. It indicated that there were several demands: (1) to implement an egress/exit plan; (2) to limit how high the piles could be stacked so that all egress/exit signs could be seen, and (3) upgrade the sprinkler system to be suitable for plastics processing operations. Green Solutions was given ten days to resolve the issue.
[41] It appears that Green Solutions made an egress/exit plan and limited most of the material piles to 5 feet, but had some rows left to do by February 9, 2022. They did not upgrade the sprinkler system, as they took the position that it was not their expense to undertake, pursuant to the terms of the lease and thus they have fully remedied the breach.
[42] In determining who is to cover the cost of a sprinkler upgrade, a close review of the Lease Agreement is required.
[43] In the decision of the Court of Appeal for Ontario, in Weyerhaeuser Company Limited v Ontario (Attorney General) 2017 ONCA 1007, the court reviewed the governing principles of contract interpretation. It stated:
[64] The overriding objective of contractual interpretation is to determine “the intent of the parties and the scope of their understanding”: Sattva, at para. 47.
[65] The general principles guiding adjudicators about “how” to interpret a commercial contract were summarized in Sattva, at para. 47, and by this court in two 2007 decisions - Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24, and Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, 85 O.R. (3d) 616, at paras. 52-56. When interpreting a contract, an adjudicator should:
(i) determine the intention of the parties in accordance with the language they have used in the written document, based upon the "cardinal presumption" that they have intended what they have said;
(ii) read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;
(iii) read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and
(iv) read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.
[44] Article 3 of the Lease Agreement states that it is a net lease, carefree to Clarke Holdings, and that all expenses are to be born fully by the tenant, Green Solutions. The exceptions are set out in article 7.02. In that section, Clarke Holdings will provide heating and shall repair or replace at its own cost the heating and ventilation system to ensure it is in good working condition for the Green Solutions. It would also ensure, at its own costs, the common areas, outer walls, and roof remain in structural repair, and to keep the common areas clean, lit, with snow and ice maintenance. Clarke Holdings also agreed to make available reasonable amounts of electricity, gas, and water with respect to the premises, consistent with the tenant’s use.
[45] Under the lease, it is the responsibility of the Tenant to rectify any problems that result from their use of the Premises or its actions. In this context, “use” does not mean how or where they stack their materials, but the overall use of the premises, such as for manufacturing, as specified earlier in that subparagraph. The term “actions” refers to how Green Solutions operates, which would include such things as how they stack their materials.
[46] In 1645111 Ontario Limited v. 1169136 Ontario Inc., 2008 ONSC 32820, Justice DiTomaso was asked to determine whether a tenant had to share with the other tenants, the cost of a roof over an entire strip mall. The Landlord argued the lease was a “carefree net lease”. Relying on Justice Caswell in Hardwick & Hardwick Meats Ltd. v 471477 Ontario Ltd. [1991] O.J. No. 2057, Justice DiTomaso agreed that a “carefree lease” was the equivalent to a net lease and accordingly, the Landlord could pass on to the Tenant any and all expenses that were incurred in the operation of the plaza. In the case before him though, he distinguished that case, as the lease before him had an explicit clause that indicated the landlord alone would be responsible for the roof expense. Justice DiTomaso indicated that one still had to look at the lease in its entirety to determine each party’s respective rights and responsibilities. The requirement to review the lease itself, despite what it is called, was also reiterated in 400 Wentworth Inc. v. Waterjet Machining Inc. (2007), 55 R.P.R. (4th) 298, at para. 24 and in OGT Holdings Ltd. v. Startek Canada Services Ltd., 2009 ONSC 68830, at para. 14.
[47] Applying this case to the one before me, I have reviewed the lease in its entirety and do conclude that it is a net lease. With very few exceptions, the tenant is to cover all expenses either through the basic rent, or through additional rent. Nowhere in the Lease Agreement does it carve out that the Landlord is specifically responsible for sprinkler systems. Of importance in this case, is that the sprinkler system that needed to be upgraded, was specific to the Premises. The upgrade was not necessary for the other tenant on the Property and was not necessary at all for the Premises if Green Solutions utilized the Premise for a less hazardous use. This type of expense is not in the same vein as a heating system or ventilation system, which would be throughout the entire Property, and necessary to maintain a commercial building through a Canadian winter. As per the Lease Agreement, the Landlord was obligated to provide the water, but it says nothing about a sprinkler system.
[48] I agree that this is also not a situation of wear and tear. The current sprinkler system did not need to be repaired or maintained. It had to be upgraded completely, which I interpret to be a greater level of change than just maintenance. This degree of change though, was directly attributable to the use of the Premises by Green Solutions. If they were not a tenant and using the Premises as they did, the upgrade would not be necessary, and the building would be insurable.
[49] Also of note, is that in an Agreement to Lease, which was attached as Schedule A to the Lease Agreement, a schedule was attached outlining what work the Landlord would do on the Premises. There was a provision for modifying the sprinkler system in Area 11, which is one part of the Premises, but this provision was struck off and initialled by Green Solutions and the original owner of the Property. While this agreement merged on closing, it provides context of the surrounding circumstances when the original Lease Agreement was signed.
[50] Green Solutions relies on Alderman Holdings Inc. v. McCutcheon (1997), 42 O.T.C. 354, in support of the proposition that the replacement of a roof, rather than its repair, was a capital expenditure, not contemplated as coming within “additional rent” which referred to repairs only. In addition, Green Solutions relies on RioCan Holdings Inc. v. Metro Ontario Real Estate Limited, 2012 ONSC 1819, in which the court found that repairs to a parking lot were substantial enough to be considered a capital expense, and, therefore, not chargeable as additional rent.
[51] Also, Green Solutions relies on Parsons Precast Inc. v Sbrissa, 2012 ONSC 6098, where the complete replacement of a parking lot was beyond what was contemplated when the tenants agreed to pay on a monthly pro-rata basis for repairs or maintenance. In that decision, Justice Glithero found at paras. 13-15 that to require a tenant to be responsible for its proportionate share of an entire paving project, with a life expectancy of 20 years, when it only had 14 months left on its lease, was unfair and unjust.
[52] These cases are distinguishable in that the replaced roof and replaced parking lot were to benefit the entirety of the property, and not just the unit referrable to the tenant. This is similar to the situation in 1163133 Ontario Ltd. v. Lazer Mania Inc., [2005] O.J. No. 2179. There, the tenant terminated the tenancy when the landlord refused to repair the heating and air conditioning units in their premises. In his decision, Justice Festeryga noted that a replacement was not required, but also, that the two HVAC units were dedicated to the demised premises only, and not used for a common area. The Tenants were, therefore, responsible for that expense.
[53] Unfortunately, neither party provided evidence of the extent of work required to upgrade the sprinkler system as required. Perhaps it would just entail new sprinkler heads, or more sprinkler heads. On the other hand, perhaps walls would have to be ripped out, new pipes run or a change in size of pipe from the city services. It is difficult to determine if the required “upgrade” is, in fact, a repair or a capital expense that would benefit the Property as a whole.
[54] In the end though, whether the sprinkler system is a capital replacement or an expense, I am guided by the wording of the Lease Agreement. Clause 2024 [sic] states that, “[t]he Minimum Rent [payable by the tenant] as herein set out shall be exclusive of all and expenses including but not limited to real estate taxes, operating and maintenance expenses and utilities for the Premises and common areas, and subject nonetheless to any further adjustments pursuant to Article 6” (emphasis mine). In addition, s.7.02(a) provides what the Landlord will pay for, at its own expense, and it does not include sprinkler systems. It covers heating and ventilation, and the supply of water, outer walls, common areas, and the roof. It does not in any way include expenses that are for the sole benefit of the tenant or that are required only because of the tenant’s use of the Premises.
[55] Therefore, keeping in mind the wording of the Lease Agreement as a whole, and the surrounding circumstances and factual matrix in which the Lease Agreement was reached, I find that the upgrade of a sprinkler system, in the Premises alone, is a cost that Green Solutions has the responsibility to cover. Having failed to remedy the breach by installing the upgraded system, Green Solutions was in breach of s.5.01(d) of the Lease Agreement and Clarke Holdings properly exercised their right under s.5.01(d) to terminate the lease.
C. Should Green Solutions have Relief from Forfeiture?
[56] Section 20(1) of the Commercial Tenancies Act, R.S.O. 1990, c.L.7, (“Act”) states that when a commercial landlord is enforcing a right of re-entry or forfeiture, whether for non-payment of rent, or for any other cause, the commercial tenant may apply to this court for relief, “… having regard to the proceeding and conduct of the parties under section 19 and to all the other circumstances, the court thinks fit, and on such terms as to payment of rent, costs, expenses, damages, compensation, penalty, or otherwise, including the granting of an injunction to restrain any like breach in the future as the court considers just.”
[57] Section 19 states,
(2) A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease, other than a proviso in respect of the payment of rent, is not enforceable by action, entry, or otherwise, unless the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.
[58] In addition, I have authority to grant relief against forfeitures on such terms as to compensation or otherwise as are considered just, pursuant to s.98 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
a. Application of s.20(8) of the Act
[59] Of particular importance to this matter, s.20(8) of the Act states:
(8) Where the right of re-entry or forfeiture is in respect of a breach of a covenant or condition to insure, relief shall not be granted if at the time of the application for relief there is not an insurance on foot in conformity with the covenant or condition to insure except, in addition to any other terms that the court may impose, upon the term that the insurance is effected.
[60] In the case of Tauro v Yu, 2018 ONSC 7319, at 80-81, the court recognized that it did not have the power to relieve a commercial tenant of its obligation to maintain insurance, and relief from forfeiture shall not be granted if at the time of the application for relief, there is not insurance in place in conformity with the covenant or the condition in the lease to insurer, except upon the term that the insurance is effected. Nonetheless, the court exercised its discretion and gave the tenant an additional chance to obtain insurance and satisfy some other conditions in order to regain entry.
[61] It is clear that there should be no relief from forfeiture if the tenant fails to obtain the insurance that it is required to obtain. It appears on the evidence though, that Green Solutions does have the requisite insurance. The question then remains whether s.20(8) of the Act extends to a situation where the tenant’s use of the leased premises prevents the Landlord from being able to obtain insurance for the entirety of its property.
[62] I do not think it does. Section 20(8) applies to situations where the tenant is in breach of a covenant to insure. It does not state anything about the use of the premises preventing the landlord from being insured. While that may result in the breach of another covenant, it is not the covenant that s.20(8) speaks to.
b. Relief from Forfeiture in General
[63] In the Supreme Court of Canada case of Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, at page 504, it states:
The power to grant relief against forfeiture is an equitable remedy and is purely discretionary. The factors to be considered by the Court in the exercise of its discretion are 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.
[64] The three-element test for relief from forfeiture requires the court to consider and balance all three elements to determine whether equitable relief should be granted: Monk v. Farmers’ Mutual Insurance Company (Lindsay), 2019 ONCA 616, at par. 93.
[65] The power to relieve a party from forfeiture is predicated on the existence of circumstances in which enforcing a contractual right of forfeiture, although consistent with the terms of a contract, visits inequitable consequences on the party that breached the contract. Relief from forfeiture is particularly appropriate where the interests of the party seeking enforcement by forfeiture can be fully vindicated without resort to forfeiture call: Ontario (Attorney General) v. 8477 Darlington Crescent, 2011 ONCA 363, 269 C.C.C. (3d) 159, at para. 87.
[66] A party who seeks to obtain relief in equity, must come to the court with “clean hands”. To determine if a person has “unclean hands,” for the purposes of a claim in equity, the impugned conduct must have an immediate and necessary relation to the equity sued for. The court does not concern itself with the parties conduct generally, but only the conduct that relates directly to the very transaction concerning which the complaint is made: 2324702 Ontario Inc. v. 1305 Dundas Inc., 2019 ONSC 1885, at para. 17-23.
[67] The first factor, namely the reasonableness of the breaching party's conduct lies at the heart of the relief from forfeiture analysis. The review of the conduct of the breaching party, requires an examination of the reasonableness of the breaching party's conduct as it relates to all facets of the contractual relationship, including the breaching issue and the aftermath of the breach. The court will look at what caused the breach and what, if anything, the breaching party attempted to do about it: A party whose conduct is not seen as reasonable will face great difficulty in obtaining relief from forfeiture: Monk, at par. 93; 8477 Darlington, at para. 89-90.
[68] The second factor looks at both the nature of the breach itself and the impact of that breach on the contractual rights of the other party: 8477 Darlington, at para. 91.
[69] The third factor engages in a kind of proportionality analysis. If there is a large difference between the value of the property to be forfeited and the amount owing as a result of the breach, equity will favor relief from forfeiture: 8477 Darlington at para. 92.
[70] In general, in exercising discretion, the court can and should consider all the circumstances including: the history of the relationship, breaches of other covenants of the lease by the tenant, the gravity of the breaches, the tenant’s conduct or misconduct, their good faith or bad faith or want of clean hands, whether the object of the right of forfeiture in the lease was essentially to secure the payment of money, and the disparity or disproportion between the value of the property forfeited and the damage caused by the breach. The ultimate question is whether the court should exercise equitable jurisdiction to relieve against the forfeiture imposed by common law because it is an excessive remedy in all the circumstances: Michele’s Italian Ristorante Inc. v 1272259 Ontario Ltd., 2016 ONSC 4888, at para. 35.
i. Reasonable of Green Solution’s Conduct
[71] I find that, in all the circumstances, Green Solutions conducted itself reasonably.
[72] It must be remembered that Green Solutions was, for all intents and purposes, a good tenant until this issue arose. Travelers Canada’s decision not to renew its coverage was made independently from anything Green Solutions did. Green Solutions continued to use the Premises in accordance with the uses permitted under the Lease Agreement. It was not until Travelers Canada determined that they no longer wished to cover that use, that the issue arose.
[73] It took almost a month after Clarke Holdings was told of the coverage issue, before it notified Green Solutions. To its credit, in that time it did its own internal investigation with the assistance of Disano. When Clarke Holdings notified Green Solutions, it was able to provide a copy of the letter from Disano. Granted, Green Solutions did not respond in a timely manner, but this was over the Christmas holiday period. When Clarke Holdings provided a solution, whereby they would upgrade and then pass on the cost to Green Solutions, Green Solutions was considering what to do. The proposal did not appear to be necessary given what Disano had said. After Green Solutions received the Notice of Default from Clarke Holdings, it reviewed the Disano letter again, and then retained their own consultant to review the Disano letter and the situation. Sentinel agreed with Disano, which confirmed that proper stacking was an alternative to an upgrade sprinkler system. They set out reducing the stacking height of their materials, which they believed remedied the breach.
[74] Unfortunately, the various insurers consulted did not agree with the opinion of Disano or Sentential and insisted on the upgrade of the sprinkler system. Accordingly, Clarke Holdings determined that the breach was not remedied and then locked out Green Solutions on February 9, 2022.
[75] Given that Green Solutions tried to remedy the breach, and even followed the recommendations of two companies in the fire safety field, it cannot be said that Green Solutions acted unreasonably in trying to remedy the default.
ii. Gravity of Breach
[76] Having found that it was Green Solution’s responsibility to upgrade the sprinkler system, and has failed to do so, I should consider the gravity of the breach and the impact of that breach on Green Solutions and Clarke Holdings.
[77] Obviously, the breach by Green Solutions has had a tremendous impact on its own operations. They have been locked out of the Premises for approximately one month. They have been unable to operate, satisfy their contracts, and, therefore, pay their expenses. They are prevented from using or even accessing their specialized equipment. The impact is serious.
[78] On the other hand, the impact on Clarke Holdings is also serious. Green Solutions is using the Premises in a manner that prevents Clarke Holdings from insuring the entire Property. This leaves Clarke Holdings, the other tenant, Green Solutions, and I presume the mortgagee of the Property, at risk for serious losses in the event of a fire. While it is hard to determine how likely a fire is, note should be taken that the use of the Premises is considered hazardous and high risk enough that numerous insurers decided that they simply were not interested in insuring that type of business, no matter what sprinkler system was in place. It is safe to assume that if a fire were to break out, the financial repercussions would be significant and irreparable. That, no doubt, is the reason that s.5.01(d) was included in the Lease Agreement.
iii. Proportionate Losses
[79] As indicated, I am required to compare the value of the property forfeited and the amount that maybe owing because of the breach. This factor is particularly helpful when the breach is failure to pay rent. For example, the seizure of machinery valued at $50,000 may seem excessive in the face of a tenant’s failure to pay $5,000 in rent.
[80] This situation though, is not so straight forward. I have no evidence of the value of the property of Green Solutions that may be seized. I can assume it is expensive, given the nature of the business, but I have no evidence on that point. The equipment could be leased, it could be owned, it could be highly leveraged – I have no information on it at all. Also, I have no evidence on any business losses that may be suffered by Green Solutions for every day they are locked out.
[81] I also have no evidence on what it would cost to install an upgraded sprinkler system. As indicated herein, it could be a quick fix, or an extensive undertaking. I have no evidence on that point. The cost to upgrade the system could be minimal to Green Solutions, as compared to their daily losses of being locked out. Had that evidence been provided by either party, it would have been of assistance to the court.
iv. General Analysis
[82] In general, I find that Green Solutions came to this situation with clean hands. While at first it appears that they did not even have their own insurance, this situation was clarified in the written interrogatories. The situation was foisted upon both itself and Clarke Holdings by the insurer. Both have been trying to sort it out on very tight timelines but have a fundamental disagreement as to who should pay the expense.
[83] Relief from forfeiture is an excessive remedy. If I were to exercise my discretion in that regard, I would, in essence, force Clarke Holdings to continue its operations uninsured, which is extremely grave to all parties involved, including the other tenant.
[84] Given my finding though, that Green Solutions must assume the expense of the upgraded sprinkler system, the parties should be given an opportunity remedy the situation themselves, in a way that reduces the risk to all involved. Accordingly, I will exercise my discretion and grant relief from forfeiture, but only for a brief period of time, allowing the parties with an opportunity remedy the situation if they so wish. Green Solutions should have 30 days to decide whether to invest in an upgrade sprinkler system by itself or through additional rent to Clarke Holdings, or simply decide to find an alternate location. In that time, if they decide to upgrade the system, Clarke Holdings can present the plan to insurers, and it can be determined if any insurer is willing to insure the building. No operations by Green Solutions will take place until the new system in place and has been approved by the insurer. That will ensure that Clarke Holdings is protected.
D. Application of Part IV of Commercial Tenancies Act
[85] As a result of the pandemic, the Ontario government enacted Bill 229, Protect, Support and Recover from COVID-19 Act, 2020, S.O. 2020, c. 36, Sched. 5, which received Royal Assent on December 8, 2020. Schedule 5 of Bill 229 re-enacted Part IV of the Commercial Tenancies Act, to provide temporary protection for certain commercial tenants.
[86] In these amendments, a “non-enforcement period” was proclaimed which started on the day that Schedule 5 of Bill 229 came into force (which was December 8, 2020) until a prescribed date, which has now been set as December 8, 2022.
[87] The applicable sections of Part IV are as follows:
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.
(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.
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.
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).
(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. 2020, c. 36, Sched. 5, s. 1 (1).
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). 2020, c. 36, Sched. 5, s. 1 (1).
[88] Sections 80(1) of the Commercial Tenancies Act, indicates that the provisions in sections 81 to 84 only apply to landlords who received, is receiving, or was eligible to receive assistance under the Canada Emergency Commercial Rental Assistance for small businesses. Section 80(2) states,
80(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).
[89] In section 2 of Ontario Regulation 763/20, Non-Enforcement Period – Prescribed Tenancies, further criteria are prescribed for the purposes of s.80(2) of the Act. They are that the tenant has been approved to receive the Canada Emergency Rent Subsidy, that the tenant provided proof of that approval to their landlord, and that more than 12 weeks have passed since the tenant was approved. The tenant may be approved more than once.
[90] Both parties cite the case of 2487262 Ontario Corporation v. 2612123 Ontario Inc., 2021 ONSC 336, but each maintains it supports their respective positions. In that case, the landlord argued that the tenant was in arrears with its rent and was in breach of other terms of their lease agreement. Justice Lemon would not opine on the other alleged breaches, as there was insufficient evidence before him, but he found clearly that the landlord should not have re-entered due to rental arrears, pursuant to s.83(1) of the Commercial Tenancies Act. A review of this case reveals that it does not stand for the proposition, as alleged by Green Solutions, that s.83(1) is a “blanket prohibition” against re-entry for any reason.
[91] Both s. 81 and s. 84 of the Act refer to arrears in rent. Section 83, the relevant section for re-entry, makes no reference to the tenant being in arrears of rent. That being said, utilizing the general rules of statutory interpretation as set out in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, at para. 117-118, the court must apply a “modern principle” of statutory interpretation. That requires me to read the statute in its entire context and in its grammatical and ordinary sense, harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. Legislative intent can only be understood by reading the language chosen by the legislature in light of the purpose of the provision and the entire relevant context.
[92] A reading of Schedule 5 of Bill 229 shows that it was geared towards rent relief for commercial landlords and tenants. In order to qualify, the landlord must have received, is currently receiving, or is eligible to receive rent assistance under the Canada Emergency Commercial Rent Assistance programme. With respect to s. 83, which is of particular importance to Green Solutions, the applicable regulations refer again to rent subsidies that benefit the tenant. Other non-rent related issues are not addressed in the applicable statutes or regulations.
[93] The Explanatory Note provided by the Legislative Assembly of Ontario that accompanied Bill 229, highlights that these provisions are geared towards rental payment issues. While this commentary is admittedly not part of the law, it highlights the objective and intention of the legislature. It states, with respect to the amendments to the Commercial Tenancies Act, that:
Judges are prohibited from ordering a writ of possession that is effective during the applicable non-enforcement period if the basis for ordering the writ is an arrears of rent. As well, the amendments prohibit landlords from exercising a right of re-entry and from seizing any goods or chattels as a distress for arrears of rent during the applicable non-enforcement period.
[94] My interpretation of these provisions is that they create a category of tenancy arrangements between qualifying landlords and tenants that remains intact in the event of non-payments of rent. In order words, if a landlord receives or can receive government assistance to make up the difference between what it is owed and what is paid, it cannot then end the tenancy for the tenant’s failure to pay rent. Accordingly, I find that s.83 is also limited to situations when the tenant is in arrears of its rental obligations.
[95] In addition, in this case I have received insufficient evidence that either party qualifies for the assistance of ss. 80 to 84 of the Act. While it appears that Clarke Holdings and Green Solutions did enter into a rent reduction agreement in September 2020, I have received no evidence that Clarke Holdings received assistance through the Canada Emergency Commercial Rental Assistance programme, and that question was not asked of it in their written interrogatories. In addition, I have received no evidence that Green Solutions received any benefits pursuant to the Canada Emergency Rent Subsidy programme, although they have relied on the applicable provisions of the Act.
[96] Finally, Clarke Holdings has never taken the position that Green Solutions was being locked out due to rent arrears. Their notice of termination makes no reference to rental arrears. Accordingly, these provisions of the Act do not assist Green Solutions.
E. Is Green Solutions Entitled to a Mandatory Injunction?
[97] Green Solutions seeks a mandatory injunction prohibiting Clarke Holdings from entering the Premises. For the reasons set forth herein, this relief is denied.
[98] This court has the jurisdiction to grant a mandatory injunction under s.101 of the Courts of Justice Act, R.S.O. 1990, c. C.43. Such relief should be brought pursuant to r.40 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[99] Pursuant to r.40.03, a party seeking injunctive relief “shall, unless the court orders otherwise, undertake to abide by any order concerning damages that the court may make…”. No such undertaking was given by the Plaintiff, and the Plaintiff did not seek that this court dispense with this requirement. Given the facts herein, and my finding with respect to the breach of the Lease Agreement, I see no reason to dispense with this requirement.
[100] More importantly, the Plaintiff has failed to satisfy the legal test for the granting of injunctive relief.
[101] As set out in R.J.R. MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 at 83-85, a three-part test must be satisfied before injunctive relief is granted:
a) Is there a serious issue to be tried?
b) If the injunction is not granted, would the applicant suffer irreparable harm? Irreparable harm is harm that cannot be quantified in a monetary term or which cannot be cured;
c) Which party would suffer greater harm from the granting or refusal of the remedy pending a decision on its merits; (“balance of inconvenience”)
[102] Given that the Plaintiff seeks a mandatory injunction, the first part of the test changes and the Plaintiff is required to show that it has a strong prima facie case: R. v. Canadian Broadcasting Corp., 2018 SCC 5 at para. 15.
[103] The Plaintiff fails on the first two parts of this test. First of all, given my finding that Green Solutions breached the Lease Agreement, it cannot be said that the Plaintiff has a strong prima facie case. In addition, no evidence has been provided showing that the Plaintiff will suffer irreparable harm. Irreparable harm is harm that cannot be cured or quantified: R.J.R. at para. 64. In the case before me, neither is applicable. The Plaintiff has sought damages, and I have given it an opportunity to cure the harm suffered.
[104] Accordingly, the request for a mandatory injunction is denied.
IV. Costs
[105] While an opportunity will be given to the parties to provide written submissions, and absent any offers to settle that may be provided, I find that Clarke Holdings was more successful in this matter. While Green Solutions was given temporary relief, in the end they did breach the Lease Agreement and Clarke Holdings was within their rights to lock the Premises. They have not been granted the right to re-enter in the next thirty days, except in narrow circumstances, and their request for injunctive relief was denied.
[106] Hopefully the parties will take advantage of the next 30 days and craft a resolution that will be in both their interests.
V. Conclusion
[107] For the foregoing reasons, I make the following orders:
a) Green Solutions’ request for a mandatory injunction is dismissed;
b) Green Solutions motion for relief from forfeiture is granted for 30 days, on the following terms:
Within 30 days, Green Solutions shall remedy the default in s.5.01(d) of the Lease Agreement by either: i. Arranging to install an upgraded sprinkler system, at its own cost; or ii. Allow Clarke Holdings to install an upgraded sprinkler system, the cost of which will be spread over the remainder of the Lease Agreement, or over a longer period, if the parties otherwise agree;
Any upgraded sprinkler system that installed must be approved by at least one insurer who will agree to insure the Property for Clarke Holdings once it is installed;
Green Solutions shall be granted entry to the Premises in order to obtain quotations or facilitate the installation of the sprinkler system only, and accompanied by a representative of Clarke Holdings, but shall not be permitted to carry on operations or remove its equipment or other possessions;
In the event that the sprinkler system is to be upgraded, and Clarke Solutions has found an insurer that will cover Green Solutions’ use, Green Solutions may be permitted entry to the Premises, so as to reduce the height of any piles of their materials only, as required by any insurer, or as otherwise agreed by the parties herein;
No operations by Green Solutions shall be carried on until which time an upgraded sprinkler system is installed and approved by an insurer, and sufficient insurance coverage is in place;
If any additional insurance premiums are payable as a result, they are to be passed on to Green Solutions as additional rent;
in the event that Green Solutions elects to not upgrade the sprinkler system, or in the even that no insurer will cover the Property, even with an upgrade sprinkler system, the tenancy will be deemed terminated on the 30th day from herein, or earlier if agreed to by the parties, and Clarke Holdings may exercise its remedies under the Commercial Tenancies Act and the Lease Agreement;
c) Nothing in this order excuses Green Solutions from its rental obligations under the Lease Agreement;
d) The parties are encouraged to resolve the issues of cost themselves; if they are unable, Clarke Holdings shall serve and file their written costs submissions, limited to 2 pages, double spaced and single sided, exclusive of Costs Outline, on or before April 11, 2022; Green Solutions shall serve and file its responding submissions, with the same size restrictions, and its Costs Outline, on or before April 25, 2022; Clarke Holdings may serve and file reply submissions, no more than one page, on or before May 2, 2022; and
e) The remainder of the relief sought by Green Solutions is dismissed.
Fowler Byrne J. DATE: March 8, 2022